Holdings Limited
Investing made easy
Annual Report and Financial Statements 2017
Contents
Strategic report
Highlights
Chairman’s statement
Chief Executive Officer’s report
Financial review
The AJ Bell Way
Our product propositions
Easiest platform to use
First class service
Brand awareness
Our people and corporate social responsibility
Principal risks and uncertainties
Governance
Board of Directors
Executive Management Board
Directors’ report
Statement of directors’ responsibilities in respect of the Strategic report,
Directors’ report and the financial statements
Independent auditor’s report to the members of AJ Bell Holdings Limited
Financial statements
Consolidated income statement
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Company statement of financial position
Company statement of changes in equity
Notes to the Company financial statements
Unaudited five-year summary
Other information
Definitions
Company information
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Highlights
Key performance indicators
Assets under administration
£39.8 bn
25%
£23.3bn
Total number of retail customers
164,557
17%
£30.9bn
141,207
117,169
£8.5bn
£8.9bn
23,282
23,350
2016
Platform
2017
Non-platform
2016
Platform
2017
Non-platform
Key financial information
17%
30 September 2016
£64.5m
14%
30 September 2016
£53.8m
30%
30 September 2016
32.73p
Profit before tax
£21.7m
30 September 2017
Return on assets
28%
30 September 2017
Total ordinary
dividend
28.25p
30 September 2017
29%
30 September 2016
£16.8m
3%
30 September 2016
25%
10%
30 September 2016
25.75p
Revenue
£75.6m
30 September 2017
Net assets
£61.4m
30 September 2017
Diluted earnings
per share
42.60p
30 September 2017
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Chairman’s statement
Les Platts
Chairman
I am pleased to present our
annual report for the year
ended 30 September 2017,
highlighting another year
of double-digit growth for
the Group with record levels
of both revenue and net
new customers acquired.
This strong performance is
underpinned by our award-
winning service, the quality
of our product propositions
and a robust, scalable and
efficient operating model.
At AJ Bell we help people invest and our customers remain
at the heart of everything we do. Our aim is to become the
easiest platform to use and, in a market that is constantly
evolving, our continued investment in innovative technology
is critical in delivering this ambition.
Overview of the year
The Group continues to grow strongly, with total retail
customers increasing by 17% from 140,451 to 164,557 during
the financial year and Assets under Administration (AUA)
growing by 25% from £31.8bn to £39.8bn. The growth in
AUA was largely attributable to the record customer inflows,
supported by favourable market movements. The underlying
growth in the customer base and efficiency of our operating
model saw the Group’s profit before tax rise by 29% this year
from £16.8m to £21.7m.
We continued to develop our product propositions during the
year and launched the first AJ Bell funds for our customers.
The five VT AJ Bell Passive funds within the range have a
simple, transparent charging structure, are among the lowest-
cost in the market for a comparable product and are designed
to make investing easier for customers. The VT AJ Bell
Passive fund range has been well received by our customers
and we aim to provide further simple, low-cost investment
solutions in the future.
Governance
The Board is committed to developing the corporate
governance structures of the Group to ensure they meet
best practice. There were no changes to the composition
of the Board or its responsibilities during the year, and it
continues to provide strong support and suitable challenge
to the Executive Management Board (EMB) in order to
ensure the Group’s strategy is appropriate, achievable and
ultimately delivered.
The Board has met ten times during the year and
is supported by four sub-committees: Audit, Risk &
Compliance, Remuneration and Nominations. The Audit and
Risk & Compliance Committees both met four times, the
Remuneration Committee three times and the Nominations
Committee once. The Board and its sub-committees
achieved 100% attendance for all meetings.
Responsibility for the day-to-day management of the
business remains with the EMB. During the year Louis
Petherick was appointed as Chief Risk Officer, replacing
Richard Taylor who will remain within the business in a
consultancy capacity.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Chairman’s statement
Shareholder returns
The Board has declared a final dividend of 15.5p per share,
taking the total dividend for the year to 28.25p per share,
compared to 25.75p in the previous year. The 10% increase
in dividend reflects the strong growth in the financial
performance of the Group. The Board continues to adopt a
progressive dividend policy, which is balanced with holding
sufficient funds for future investment and our regulatory
capital requirements.
Earlier this year, like many others across the industry, we
were advised by the FCA as part of their Supervisory Review
and Evaluation Process (SREP), that we are required to
hold additional regulatory capital. The increase for the Group
was significantly lower than the comparable average across
the industry over the last four years as reported in KPMG’s
October 2017 benchmarking survey. The benchmarking
survey also indicates that the Group’s surplus, above its
regulatory requirements, continues to be considerably higher
than the average across the industry. Our strong financial
position and prudent approach to managing the balance
sheet, ensure we are well placed to absorb increases in
regulatory capital requirements, whilst having sufficient
funds available for further investment in the business.
Conclusion
We have enjoyed strong financial growth during the year
and, with a record level of net new customers acquired,
our advised and execution-only platform propositions are
among the fastest-growing in their respective markets.
Over the last 5 years, the average annual growth rate of
our platform customer base and AUA has been in excess of
20%. Our focus on delivering strong product propositions,
scalable infrastructure and excellent customer service
through innovative technology ensure we are ideally placed
to capitalise on the further opportunities created within
the expanding platform market. Our solid capital base,
financed entirely from equity, ensures we have sufficient
funds to continue investing in the future of the business. We
look forward to next year with confidence to build on our
successes and deliver further progress.
Les Platts
Chairman
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Chief Executive Officer’s report
Andy Bell
Chief Executive Officer
I am pleased to report that
our continued strategy of
placing our customers at
the heart of our business,
supported by ongoing
investment in technology
and innovation, has
formed the basis of another
successful year at AJ Bell.
The key drivers of our
performance, our customers
and AUA, grew by 17% and
25% respectively, with PBT
increasing by 29% for the 12
months ended 30 September
2017.
2017 Highlights
The value of asset inflows from incoming transfers,
contributions and subscriptions totalled £7.7bn (2016:
£4.5bn) for the year, which was further enhanced by
favourable market movements, with the FTSE All Share
rising by 8% in the period. Asset outflows remained low, with
the customer retention rate of our two core platform product
propositions remaining high at 95%.
Revenue grew by 17% during the year with all our income
streams benefiting from the underlying growth in our
customer base and AUA.
Easiest platform to use
Our aim is to become the easiest platform to use. The
Group’s digital strategy and investment in innovative
technology are critical to success in the digital era. We
are tireless in our efforts to develop new ideas and new
enhancements that will give the best possible customer
journey and experience. To help implement the Group’s
strategy, we created an innovation group earlier this
year with the sole focus of generating new ideas and
technological solutions to ensure our products remain
market-leading.
We are currently working on a number of initiatives for our
adviser-based proposition AJ Bell Investcentre, including an
improved new business application process and a brand-
new customer area. This year, we have also introduced
straight-through cash transfer processing and transfer case
tracking, making our service more efficient for advisers.
AJ Bell Youinvest, our ‘direct to customer’ execution-only
proposition, has also been significantly enhanced this
year, with a simplified application process, the launch of a
Lifetime ISA (LISA), new dividend reinvestment functionality
and longer opening hours to support US dealing. We also
developed an online filtering tool that lists the AJ Bell
‘favourite funds’ to help customers find the solution that best
meets their investment goal. The favourite funds are a ‘best
of breed’ selection of funds, assessed by their value for
money, track record with the market and the quality of the
management team.
It has been over a year since we first ventured into the
investment management market and launched our Managed
Portfolio Service (MPS). We have been delighted with how
well the MPS has been received, and it has become clear
that there is growing demand for simple low-cost, passive
investment solutions. Earlier this year we launched our first
fund range, the VT AJ Bell Passive funds, which comprise of
five passive funds, ranging from cautious to adventurous. In
line with our philosophy of making investing easy, the funds
have a clean, transparent and highly competitive charging
structure.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Chief Executive Officer’s report
During the year we completed a review of our operating
model to identify how we could increase the efficiency of
our operations, improve our customer service and further
enhance our scalability. It was concluded as part of this
review that a centralised operational team in Manchester
would be the best solution to achieve these aims and to
support the future growth of the business. These plans were
announced to the business during September and we will
be relocating our stockbroking and investment services from
Tunbridge Wells during 2018.
People
We aim to become one of the best companies to work
for and our staff engagement framework focuses on the
eight measures used within the Best Companies survey;
the largest of its kind in the UK. In 2017 we recorded our
highest-ever engagement score, moving closer to a coveted
two star accreditation. This is testament to the on-going hard
work and commitment of all our staff to work together in an
effort to improve the work place.
We have continued to strengthen our team with three key
recruits this year. Peter Hopkins joins us as Technical
Director, having previously worked at the Department for
Work and Pensions and HMRC, where he led the pension
simplification project that gave rise to A–Day. In his new
role, Peter oversees our Technical Resources team and is
helping us build on our lobbying activity with regulatory and
government bodies.
I am also delighted to welcome Gary Dale, who joins us
as Sales Director for AJ Bell Investcentre. Gary’s thorough
understanding of packaged investment solutions will be
invaluable as we look to build on the success we have
experienced in recent years. We have also strengthened
the Investment Management Team with the appointment of
Kevin Doran as Chief Investment Officer. Kevin brings with
him a wealth of knowledge and experience and will help us
develop our offering of straightforward, low-cost investment
solutions. We have a robust and thorough selection process
to ensure we only recruit the best people with the right skills
and behaviours for AJ Bell, ensuring they have a can-do
attitude and the drive to succeed as our business grows and
further opportunities arise.
On a sombre note, it is with great sadness that I report
the tragic death of Mike Morrison, our Head of Platform
Technical, in November 2017. His contribution to the
business was enormous both on a professional and
personal level. As one of the most respected men in his
field, Mike was in great demand, but he always remained
warm, approachable and generous with his time. He will be
greatly missed by us all and our immediate priority has been
to provide Mike’s wife and young daughter with as much
support as possible.
Market developments
The absence of any significant changes to the pension tax
rules in the November 2017 UK Budget was pleasing and
we continue to campaign for stability and simplicity in the
saving industry, in the view that it will benefit our customers
and the industry alike in the long term.
It has been over two years since the pension freedoms
reforms were launched and they continue to be very popular,
with customers using the flexibility to take income from their
pensions as and when they need. We have always believed
that the reforms were positive for the industry and that
retirement incomes will continue to be managed sensibly by
the overwhelming majority of savers.
The FCA’s consultation paper ‘17/16 – Advising on Pension
Transfers’, has been expected for some time, and the
body’s acceptance that the defined benefit transfer rules
are no longer relevant to today’s market is welcome.
Defined benefit pension scheme members who have left
their employer have been offered previously unseen high
multiples of their deferred pension, so many people have
seen transferring as a sensible option. We continue to
believe that advisers should have the choice to assess what
is right for a customer from a neutral starting position.
The final report of the FCA’s Asset Management Market
Study report was published in June 2017 and whilst well
intended has resulted in a lack of specific immediate
actions. The FCA expects the cost of active management
to reduce as part of its proposed reforms, but there will be
limited changes in the short term, with a further round of
consultations proposed. There are measures in the final
report which are aimed at improving the transparency
of charges and making it easier for investors to review
performance. These measures are positive for the industry
and investors, but further clarity is required to understand
how long the additional consultation will take and how
quickly the reforms will be implemented.
We operate in a highly regulated environment that continues
to evolve. The Markets in Financial Instruments Directive II
(“MiFID II”) comes into effect on 3 January next year, with
the aim of protecting investors and improving transparency
in financial markets. Additionally, the General Data
Protection Regulations (GDPR) will come into force from
May 2018. We have invested significant time and effort to
ensure we will be ready for both these changes.
As part of its SREP on the Group, the FCA recently informed
us that we are required to hold an additional amount of
regulatory capital. In comparison to many of our peers, the
additional capital requirement was relatively low and we
were able to absorb it without impacting our dividend policy
or future investment plans. This is testament to the strength
of our financial position and prudent approach to managing
risks in the business.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Chief Executive Officer’s report
The application of the Capital Requirements Directives IV
will continue to evolve for investment firms, following the
publication of a number of recommendations by the EBA
on 29 September 2017. Whilst the timing and process for
implementing any changes is uncertain, we are confident
that the Group is well positioned to meet the challenges of
an evolving capital requirements regime in its sector.
Outlook
The platform market and UK saving industry continues to
grow and the outlook remains very positive. We are well
positioned to capitalise on this growth, with the strength of our
product propositions, award-winning customer service and
scalable infrastructure.
We will continue to focus on our core aim to become the
easiest platform to use, investing in our digital strategy to
improve the customer journey and to develop simple, low-cost
investment solutions in-house. Over the next 12 months we
plan to launch a brand new iPad application, a simplified
illustration system and richer reporting functionality - all
designed to enhance our customers’ experience.
Our target operating model for customer services will also be
implemented next year, when the stockbroking operations
will be relocated from Tunbridge Wells and centralised at
our Manchester Head Office. The project will allow certain
processes to be streamlined and synergy gains will be
targeted across the business once complete.
Continued market volatility and uncertainty are likely in the
run-up to Brexit, and in addition the UK base rate is projected
to increase further next year following the first hike for ten
years in November 2017, when it increased from 0.25% to
0.50%. We believe these macro-economic conditions will
present both challenges and opportunities in the market place
and that our business model, combined with our forward-
looking and innovative approach to meeting our customers’
needs, means we are well placed to succeed in our market.
Finally, I would like to offer my thanks to all the staff at
AJ Bell, for their on-going commitment and for delivering
another successful year for the business. We successfully
relocated our head office to Exchange Quay during the
year, providing our staff with a vibrant and modern office
environment, with space to facilitate our ambitious growth
plans.
Andy Bell
Chief Executive Officer
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Michael Summersgill
Chief Financial & Operating Officer
The number of retail
customers in the year
increased by 24,106,
representing a 17%
increase on the prior year.
This strong flow of new
business increased our
total number of customers
to 164,557 and AUA to
£39.8bn at 30 September
2017 (2016: £31.8bn). The
record growth in net new
customers acquired was
predominantly due to the
Group’s two core platform
product propositions, AJ Bell
Investcentre (AJBIC) and
AJ Bell Youinvest (AJBYI).
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Financial performance
Revenue
Revenue increased by 17%, from £64.5m to £75.6m for the
year ended 30 September 2017. All revenue streams grew
year-on-year with the exception of Media Services, due to
the transition of Shares magazine to a digital publication with
a slight reduction in subscription fees.
Investment administration fees were up 8% at £41.3m
(2016: £38.1m), driven by the underlying growth in SIPP
customers and AUA. Interest income continued to grow,
despite a lower rate earned on cash deposits following the
cut to the UK base rate in August 2016.
Dealing and custody fees were up 37% at £30.6m (2016:
£22.3m). Dealing revenue increased by 24% due to the
growth in the AJBYI and AJBIC customer base, coupled with
high levels of customer dealing, a trend that has been seen
since the UK made a decision to leave the EU in June 2016.
Custody fees increased by 41% due to the growth in the
AJBYI and AJBIC customer base and higher asset values,
which benefitted from a rise in global stock markets.
Investment management service fees increased by 38%
to £1.1m (2016: £0.8m), reflecting the additional revenue
generated from the AJ Bell range of investment solutions.
This growth has partially been offset by a reduction in
revenue derived from legacy funds, inherited as part of the
acquisition, that have been discontinued in the year.
Administrative expenses
Administrative expenses increased by 13% to £53.8m (2016:
£47.7m). Staff costs remain our largest expense, increasing
by 12% to £28.1m (2016: £25.1m) with the average number
of staff rising to 656 (2016: 607) reflecting the growth in the
customer base and continued investment in our people.
Non-staff costs totalled £25.7m, an increase of £3.1m in
comparison to the prior year (2016: £22.6m). Property costs
included an additional £1.4m for unoccupied property costs
with the lease on the old office expiring in August 2017. In
addition, two provisions were raised during the year, the first
for £0.5m relating to the restructuring costs associated with
moving the stockbroking operations from Tunbridge Wells to
Manchester. The second for £1.1m related to a one-off tax
liability.
Total capitalised expenditure was £3.6m this year (2016:
£0.7m) of which £2.7m related to our new premises at
Exchange Quay.
Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Profit before tax (PBT)
PBT increased by 29% to £21.7m for the year ended 30
September 2017, compared to £16.8m in the prior year. The
increase in profitability is due to the strong growth in our
customer base and operational efficiencies gained across
the business. This has been enhanced by favourable trading
conditions, with high customer dealing activity and increased
asset balances on which our ad valorem fees are charged.
Tax
The effective tax rate for the year was 19.5% (2016: 20.7%).
It is expected that the ongoing effective rate will continue to
approximate the standard UK Corporation Tax rate.
Earnings per share
Diluted earnings per share (DEPS) increased by 9.87p per
share, from 32.73p per share last year to 42.60p per share
in the current year, reflecting the Group’s strong trading
performance.
Financial position
Capital and liquidity
The Group’s financial position remains strong, with net
assets totalling £61.4m at 30 September 2017 (2016:
£53.8m). We benefit from a short working capital cycle
that enables the majority of our profits to be converted to
cash within the same financial year. Our cash balance was
£42.1m at the year-end, an increase of 7% compared with
the prior year (2016: £39.5m). This cash surplus ensures
that we have a significant liquidity buffer and funds available
to invest in the business. We also hold a significant surplus
of regulatory capital at all times. Further details can be found
under our Capital Requirement Regulation (CRR) part eight
disclosures (see page 33 on the Directors’ report for more
information).
Dividends
The Board has declared a final dividend of 15.5p per share,
taking the total dividend for the year to 28.25p per share;
a 10% increase when compared to the 25.75p payment in
the previous year. This reflects the financial strength of the
Group, the Board’s commitment to a progressive dividend
policy and its positive outlook for the long-term prospects of
the business.
Michael Summersgill
Chief Financial & Operating Officer
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report t
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The AJ Bell Way
AJ Bell has never provided
financial or personal investment
advice. It operates exclusively on
an execution-only basis - whether
directed by the customer, their
adviser or by its institutional
customers.
Our aim is to be a market-leading
provider of investment products
and administration services in
the adviser and execution-only
platform markets. This includes
providing white labelling,
dealing, custody and investment
administration services for other
financial services firms.
We help people to invest
Our primary objective is to help people invest and we aim
to do this by thinking like our customers, making investing
easier and leading our markets. Informed by our guiding
principles, the AJ Bell Way is a framework we have
developed to ensure our strategy is driven by our passion
to help people invest.
12
Our people and corporate
social responsibility
Our success is built on delivering a first class
service through the skills and passion of our
people who bring our values to life across
the business.
At AJ Bell we have a strong social
conscience. We encourage staff to ‘give
something back’ through charitable and
voluntary activities, and we have introduced
company initiatives to help raise the profile of
local charities.
First class service
Over the years we have developed a
market-leading reputation for delivering
excellent customer service, and our
guiding principles ensure customers
remain at the heart of everything we do.
Our customer service, like our platforms
are designed to make investing easier,
we aim to respond to customers quickly
and accurately, and by giving them the
education content they need to make
informed investment decisions.
Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report
Easiest platform to use
Our strategic aim is for AJ Bell’s platforms to be the
easiest to use. We plan to achieve this by delivering
a rolling programme of changes and initiatives to
improve the customer journey and experience.
In the digital age, we believe the ability to generate
and implement ideas at speed is paramount to
achieving success and with this in mind, we created
an innovation group earlier this year. This innovation
group’s sole focus will be on creating new ideas and
technologies to ensure our products remain at the
cutting edge of the market.
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FINANCE & ASS U R A N C E
Principal risks and
uncertainties
The Board is committed to a continual process
of improvement and embedment of the risk
management framework within the Group. This
ensures that the business identifies both existing
and emerging risks, and continues to develop
appropriate mitigation strategies.
Brand awareness
AJ Bell’s aim is to become one of the
best-known names in its markets. In
2017 we sought to further this aim by
increasing both our public relations
and sponsorship activities.
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Our product propositions
Our platform product propositions
Assets under administration
£30.9 bn
33%
£30.9bn
£23.3bn
Total number of retail customers
141,207
21%
141,207
117,169
2016
2017
2016
2017
AJ Bell Investcentre
AJ Bell Investcentre is an online investment product distributed by financial advisers. It offers award-winning SIPPs, ISAs,
and GIAs, together with a market-leading range of investments and a highly competitive charging structure.
AJ Bell Investcentre is one of the largest and fastest-growing advised products in the platform market.
AJ Bell Youinvest
AJ Bell Youinvest is an online product designed to provide an easy and cost-effective way for execution-only investors
to take control of their investments. This award-winning product provides SIPPs, ISAs, Junior ISAs, LISAs and Dealing
Accounts. It has a wide range of different investment types and a comprehensive research centre. AJ Bell Youinvest is one
of the fastest-growing execution-only products in the platform market.
AJ Bell Securities Custody Solution (formerly IMAS)
AJ Bell Securities Custody Solution is a fully integrated investment custody administration solution that allows wealth
managers to focus on delivering a high quality service without the distraction of administering the assets.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Our non-platform product propositions
Assets under administration
£8.9 bn
5%
Total number of retail customers
23,350
0%
£8.5bn
£8.9bn
23,282
23,350
2016
2017
2016
2017
AJ Bell Platinum
AJ Bell Platinum is a bespoke service that provides expert technical support, backed by a dedicated team of administrators.
Distributed by UK financial advisers but also available on a DIY basis, AJ Bell Platinum offers SIPPs and SSASs.
Third party administration
AJ Bell’s third party administration service provides white label SIPP administration to a number of leading financial
services companies.
Institutional
AJ Bell’s Institutional service provides dealing, settlement and custody services to institutional investment businesses.
AJ Bell Investments
AJ Bell Investments provide a range of investment and multi-asset fund management solutions to retail, professional and
institutional customers. These include the Managed Portfolio Service and our five risk-rated VT AJ Bell Passive funds.
AJ Bell Media
AJ Bell Media is an award-winning specialist financial digital publishing company that supports the platform products
by providing high quality investment content via a variety of media channels. It also publishes Shares (a weekly digital
investment publication), hosts investment conferences and events, and provides stock market data and independent news
content to a wide range of corporate and retail customers.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Easiest platform to use
Our AJ Bell Youinvest product proposition has also benefited
from the development of a simplified application process
during the year, which includes the ability to quickly verify
photographic identity documents if required using our
mobile application. This has significantly improved access
for customers wishing to apply for accounts via their tablets
or mobile phones. Our mobile apps remain an important
area of focus and ongoing development in recognition of
the number of active daily users more than doubling in the
last year. Other developments include the introduction of a
brand-new LISA, dividend reinvestment functionality and
longer opening hours to support US dealing.
We have extended our support of voice assistant
technologies with the introduction of an application for
Google Home. Similar to our support of Alexa, this enables
our users to request updates on their investments on
supported speakers and an increasing number of devices
such as the FireTV.
Investment management
The VT AJ Bell Passive fund range was launched earlier
in the year, following the success of our first investment
solution in 2016, the MPS (Managed Portfolio Service). The
funds range from ‘cautious’ to ‘adventurous’ according to
risk appetite. All have the same simple, transparent charging
structure and benefit from the same 0.5% OCF cap. This
range of five risk-targeted funds uses a long-term, global,
multi-asset approach and keeps costs low by focusing on
passive investments. Both the MPS and the VT AJ Bell
Passive funds have been well received by the market
and we believe that there is growing demand for simple,
transparent, low-cost investment solutions.
AJ Bell Investments plans to build on this initial success with
the appointment of its new Chief Investment Officer, Kevin
Doran, who is confident that clear opportunities exist for
a new investment proposition capable of delivering active
returns at passive prices.
Our strategic aim is to become the
easiest platform to use. We plan
to achieve this by delivering a
rolling programme of changes and
initiatives to improve the customer
journey and experience.
In the digital age, we believe the
ability to generate and implement
ideas at speed is paramount to
achieving success and with this in
mind, we created an innovation
group earlier this year. The
innovation group’s sole focus will
be on creating new ideas and
technologies to ensure our products
remain market-leading.
Digital strategy
Our digital strategy continued to gain momentum during
2017, with work focusing on our AJ Bell Investcentre product
proposition. A new client dashboard was developed, the
application process was streamlined and a straight-through
cash transfers process was introduced, which has the
capability to track cases. We also successfully launched
a new BETA site with a re-designed user interface and a
new Capital Gains Tax (CGT) tool which will help advisers
to model different scenarios for their clients. In addition,
other refinements were made to our websites, improving
navigation and introducing search and filtering tools.
Looking ahead we plan to launch a brand new iPad
application, a new integrated simplified illustration system,
better reporting functionality and clients should soon be
able to trade directly on their own accounts via the Funds &
Shares Service’s new XO (execution-only) option. We will
continue to work during the forthcoming year to replace all
legacy screens and functionality to deliver a faster and more
efficient client experience.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report 17
Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report First class service
Over the years we have developed
a market-leading reputation for
delivering excellent customer
service, and our guiding principles
ensure customers remain at the
heart of everything we do.
Efficiency gains
Following a review of our operating model in 2017 we have
decided to centralise our operations at our Manchester Head
Office. The migration will complete during 2018 and the
Tunbridge Wells office will close by October 2018.
As well as helping us to support the planned growth of the
business, this reorganisation will also streamline certain
processes, to ensure efficiencies are maximised and to
enhance our customer service.
Our customer service, like our
investment platform, is designed
to make investing easier. We aim
to respond to customers quickly
and accurately, and to give them
the educational content they
need in order to make informed
investment decisions.
Speed of response
Time is always of the essence in our industry, so it is
essential that key processes are carried out promptly, and
that all our customers’ queries or requests for action are
handled as quickly as possible.
…You’ve been brilliant... I appreciate your
efforts, I appreciate the speed you’ve
dealt with this and I appreciate you
taking the time to phone me…
AJ Bell customer
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report …From the very start, the level of
understanding and speed of response
was outstanding. Your team made it
really easy to do business and we will
certainly be looking to use AJ Bell again…
AJ Bell customer
We set challenging targets for completing all our key
processes and communications to ensure we respond without
delay. These targets are monitored on a regular basis and
corrective action is taken where we fail to meet them.
Accuracy
We have a functional operating structure in place to ensure
that queries are directed to the appropriate team and
answered swiftly by staff with the required expertise and
knowledge.
All of our customer services staff undertake rigorous training
when they join the business, and this is supported by
annual refresher courses. We also have an internal Quality
Assurance Team, which regularly listens to phone calls and
reviews written correspondence to ensure that our high
standards are maintained.
… I am truly impressed by your efficient
and professional service. You have
answered my questions straight away
and responded very swiftly to my
enquiries. Thank you very much. It has
been a refreshing pleasure…
AJ Bell customer
Investment content
AJ Bell Youinvest customers with more than £4k in their
portfolios automatically receive free access to the weekly
online magazine ‘Shares’. This provides them with expert
analysis and a wealth of market information to help guide
their investment decisions.
Advisers are also well catered for, with everything from
large-scale investment conferences like ‘Investival’, to
smaller regional seminars and workshops. In 2017 we also
created a Due Diligence Hub, which is full of resources to
help advisers tackle the all-important due diligence process.
Recognition
The awards we win demonstrate our continued
commitment to providing a first-class service. We are
proud to have won the following accolades this year:
Professional Adviser Awards 2017
Best Platform for D2C 2017
Boring Money
Gold Best Buy 2017
City of London Wealth Management
Awards
Best ISA provider 2017
Best Junior ISA provider 2017
Professional Paraplanner Awards 2017
Best Full ISA Provider
Your Money Awards 2017
Best Online Direct to Consumer Investment Platform
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Brand awareness
AJ Bell’s aim is to become one
of the best-known names in its
markets. In 2017 we sought to
further this aim by increasing
both our public relations and
sponsorship activities.
Public relations
Our spokespeople are now well established as ‘go-to’
experts for the media on pension and investment themes
generally, and we have also continued to emphasise some
specific key issues this year - namely pension scams,
pension death benefits, point of sale disclosure and pension
tax relief.
Our presence in the financial media increased by 44%
during 2017, building on the increase we achieved
during 2016. Our primary focus has been to increase the
mainstream national media coverage and we were delighted
to accept an invitation for Russ Mould to appear on BBC
Breakfast for the first time earlier this year.
Nick Matthew
Commonwealth
Gold Squash
Winner
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Sports sponsorship
Our strategic sponsorship partnerships with sporting teams,
events, venues and individuals has once again delivered
good exposure to a number of media channels, including
national television.
AJ Bell London Triathlon
2017 saw our third year as sponsors of the AJ Bell London
Triathlon, which once again proved to be a huge success.
Over 22,000 spectators cheered on 8,000 competitors,
104 of whom raced as part of Team AJ Bell. Highlights
included the incredible achievement of Corinne Hutton, who
became the first ever quadruple amputee to complete the
event. Once again we benefited from enormous branding
opportunities around the course, which was covered by
Channel 4, All 4 and Sky Sports.
AJ Bell Stadium
Featuring unmissable AJ Bell rooftop signage, this fantastic
sporting venue is a prominent local landmark, seen by
thousands of sports fans and a constant stream of motorists
on the nearby M60. 2017 looks set to be the start of an
exciting period for resident team Sale Sharks.
AJ Bell British Squash Grand Prix
Our sponsorship of the AJ Bell British Squash Grand Prix
reached its third consecutive year in 2016, building on
what is already a firm association between our brand and a
sport that continues to grow in popularity. We are delighted
to remain so closely associated with top level squash in
Manchester, with the event being won by Nick Matthew.
Nick has announced that the 2017/18 season will be his
last on the PSA World Tour, however we are delighted to
continue our support for him as he builds towards the World
Championships in Manchester and the Commonwealth
Games in Australia’s Gold Coast.
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Our people and corporate social
responsibility
Our people
Our success is built on delivering a first class service
through the skills and passion of staff who bring our values
to life across the business.
People strategy and talent management
Our people strategy focuses on staff engagement and talent
management.
We believe strongly in giving our staff the ability to progress
their career at AJ Bell as our workforce continues to
grow and promotion opportunities are created. Our talent
management strategy ensures we nurture our staff and
give them the correct training, development and support to
ensure they can progress with the business.
In September 2017 we welcomed our very first group of
AJ Bell Apprentices. After receiving an initial tailored training
and induction package they will rotate within our Client
Services Teams, including the Transfers and Investments
Administration teams, over the course of the programme.
The training programme will provide them with the
necessary skills to attain the CISI Investment Operations
Certificate (IOC) at the end of the course.
We recruit the best people with the right skills and
behaviours for AJ Bell, ensuring they have a can-do attitude
and the drive to succeed as our business grows and further
opportunities arise.
Our staff engagement framework focuses on the eight
measures used within the Best Companies survey; the
largest of its kind in the UK. We take part in the survey
each year to independently measure our staff engagement
and in 2017 we are delighted to record our highest-ever
engagement score, moving closer to a coveted two star
accreditation. This is testament to the on-going hard work
and commitment of all our staff to work together in an effort
to improve the work place.
In May 2017 we were delighted to move to our new office
headquarters, 4 Exchange Quay, which is located in Salford
Quays. It has excellent training and social facilities, including
an on-site gym and a rooftop terrace bar. There is significant
space to accommodate the future needs of the business as
we aim to execute our ambitious growth plans in the coming
years.
Employee engagement
It is fundamental that our people understand our guiding
principles and are engaged in the development and growth
of our business.
AJ Bell’s success depends on us having the right people
ready at the right time to meet our customers’ needs. We
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know that our people want opportunities to learn, gain new
skills and to progress their career. Our staff are provided
with ongoing technical training and support, together with
crucial personal skills workshops, to ensure they have the
appropriate knowledge and skills to perform their roles. We
also provide training to keep staff informed of significant
changes in regulation, legislation and updates within the
company.
To engage and develop our people, we continue to invest in
new technology, and this year we launched our new learning
and performance portal. This is an integrated, cloud-based
solution which enhances the way we manage objective
setting, performance reviewing, training, e-learning and the
tests which accompany our core training programmes.
Diversity and equality
AJ Bell is committed to eliminating discrimination and
promoting equality and diversity in its policies, procedures
and processes.
We strive to provide an inclusive workplace where everyone
is valued for who they are and what they contribute. Our
policies and procedures support a culture that is sensitive
to the needs of all employees. We intend to treat everyone
equally and with the same attention, courtesy and respect,
regardless of their age, caring responsibilities, disability,
ethnicity, gender, religion, or sexual orientation.
We believe in creating a working environment that
empowers all individuals, allowing them to flourish in a fast-
paced, dynamic organisation.
Corporate social responsibility
At AJ Bell we have a strong social conscience. We
encourage staff to ‘give something back’ through charitable
and voluntary activities, and we have introduced company
initiatives to help raise the profile of local charities. Here is a
brief summary of the activities that were undertaken in 2017.
Charity fund raising
During the year staff across all three offices took part in
quiz nights, raising money for various charities including the
Alzheimer’s Society.
The Alzheimer’s Society also benefited from several other
staff fundraising initiatives during the year, including a Friday
fun day in Tunbridge Wells, a Christmas Jumper Day in
Manchester and bake offs across all three offices.
Staff took part in the AJ Bell London Triathlon in August,
many of them raising funds for charities in the process.
In addition, we also had several staff who completed
marathons, 10km runs and various other challenges, raising
money for charities close to their hearts.
Volunteering
In May staff from our Manchester office headed to Trinity
House in Rusholme over several lunch times to help out at
their weekly Link Good Neighbours lunch club. The charity
works to reduce social isolation and loneliness in the over 50s
and to support vulnerable adults in the local community.
Staff in London enjoyed giving something back in their local
community over seven weeks in the summer by helping out at
their local Age UK centre in Bermondsey. They also helped to
raise funds for the Grenfell Tower fire victims through a cake
bake sale.
In September staff from our Tunbridge Wells office
volunteered through their local Hospice in the Weald charity
shop to take part in a ‘Beat the Mountain’ initiative, where
volunteers go to the Hospice warehouse in Sevenoaks to sort
through clothes which will then get distributed to shops.
AJ Bell Stadium - North Stand
Each year we offer the naming rights for AJ Bell Stadium’s
North Stand to a charity free of charge. The chosen charity
can put its branding on the stand for two years, in order to
raise awareness of their work and hopefully gain additional
funds over the period of the deal.
Following a public vote via social media, the naming rights
are currently with ‘Wooden Spoon’, which uses the power of
rugby to fund life-changing projects for disadvantaged and
disabled children across the UK and Ireland.
23
Principal risks and uncertainties
The Board is committed to a continual process of improvement and
embedment of the risk management framework within the Group. This
ensures that the business identifies both existing and emerging risks,
and continues to develop appropriate mitigation strategies.
The directors believe that there are a number of potential risks to the Group that could hinder the successful implementation
of their strategy. These risks may arise from internal and external events, acts and omissions. The directors are proactive
in identifying, assessing and managing all risks facing the business, including the likelihood of each risk materialising in the
short or longer term.
The principal risks and uncertainties facing the Group are detailed below, along with potential impacts and mitigating actions.
Risk
Potential impact
Mitigations
Industry risks
Regulatory risk including litigation risk
• Potential consumer
detriment
Risk that AJ Bell does not comply with the
relevant requirements and standards of
the regulatory framework.
• Enforcement action
• Tax liabilities
• Litigation
Strong Compliance Policy and Technical teams responsible
for ensuring all new rules and regulations, as well as
changes to industry practice is captured, interpreted and
implemented appropriately. Group Board is supported by a
Risk and Compliance Committee and a Risk Management
Committee where all regulatory changes are reported and
scrutinised.
Taxation law change risk
Risk of taxation legislation or regulatory
restriction severely reducing the
attractiveness of core products.
• Loss of competitive
advantage
• Severe financial loss
The directors are not expecting any change in legislation
over the coming year that would make the Group’s products
significantly less attractive.
The introduction of Lifetime ISAs in April 2017 is expected
to increase the appeal of ISAs and the directors remain
optimistic about the prospects for continued growth in
saving into tax-advantaged wrappers.
The Group regularly reviews its products against
competitors, in relation to pricing, functionality and service,
and actively seeks to make enhancements where necessary
to maintain or improve its competitive position in line with the
Group’s strategic objectives. The changes to the pricing for
the AJ Bell Youinvest and AJ Bell Investcentre products, with
effect from October 2016 were implemented successfully,
and continues to ensure these products remain competitive
in their target markets and are sustainable, taking into
account the changing regulatory and economic environment.
The Group continues to focus on enhancements to its risk
management framework, in relation to the identification,
monitoring and mitigation of risks of poor customer
outcomes, and to its product management process to
reduce the potential for customer detriment.
All developments are assessed for potential poor consumer
outcomes and mitigating actions are delivered alongside the
developments as appropriate.
Competitor or market risk
Risk of products and services becoming
out of date or uncompetitive in peer
group, increased competitor activity, lack
of marketing focus and spend to keep
pace with competitors.
• Loss of competitive
advantage
• Severe financial loss
• Reputational loss
Conduct risk
Risk that the fair treatment of customers
is not central to AJ Bell’s corporate
culture leading to significant customer
detriment.
• Potential for poor
consumer outcomes
• Reputational loss
• Regulatory risk
• Severe financial loss
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Strategic reportGovernanceFinancial statementsOther informationOther informationFinancial statementsGovernanceStrategic report Risk
Potential impact
Mitigations
Economic and capital market
fluctuations risk
Risk that a significant and prolonged
capital market or economic downturn
has an adverse effect on consumer
confidence.
• Decreased contribution
levels
• Decreased transactional
activity
• Reduction in asset values
• Financial loss
Counterparty credit risk
• Risk of market/client default on
settlement.
• Risk of concentration of large
individual exposures or significant
exposure with single counterparty.
• Unintended market
exposure
• Customer compensation
Increased future capital
•
requirements
Operational risks
Technology risk
The reliance on evolving technology
remains crucial to the Group’s effort
to develop its services and enhance
products. The risk exists that either the
Group’s technology fails to operate
correctly in some way or that the Group
fails to take advantage of any emerging
technologies.
• Reduced performance of
key systems
• System and website
downtime
• Single point of failure
• Failure of technology
third party services
Although the immediate impact of the Brexit vote was not
as dire as many of the predictions, there is considerable
uncertainty over the longer term impact on the UK economy
and this is likely to remain until, at least, exit terms are
agreed. The Group’s products are targeted at UK residents
and we do not do business in any other countries and
have relatively few customers outside the UK. However,
in the event that the economy falls back into a prolonged
recession, this may impact contribution levels and
confidence generally in the savings and investment markets.
The directors believe that the Group’s overall income levels
and in particular the balance between the different types of
assets and transactions from which that income is derived,
provide a robust defensive position against any economic
downturn.
Capital market fluctuations can have an effect on customer
transactional activity and the value of assets under
administration. The Group has a variety of transactional and
recurring revenue streams, some of which are monetary
amounts while others are ad valorem. This mix of revenue
types helps to limit the Group’s exposure to capital market
fluctuations.
There is a risk that unexpected losses may arise as a result
of our customers, market counterparties or banks used by
the Group failing to meet their financial obligations.
The Group carries out initial and ongoing due diligence
on the market counterparties and banks that it uses and
regularly monitors the level of exposure. The Group holds an
appropriate amount of capital against the materialisation of
this risk.
In 2015 the Board approved a revised technology strategy
for the Group, covering a period of 3-5 years, and good
progress has been made over the last two years in the
implementation of this strategy.
Progress and priorities are reviewed on a regular basis by
the Board with a more detailed roadmap agreed for the next
12-18 months.
Focus remains on the increasing risk posed by the activities
of ‘cyber’ criminals and the actions required to ensure our
controls continue to mitigate this ever-evolving risk and to
protect our customers’ data.
In addition, following a review of our IT hosting arrangements
a number of changes have been implemented during 2017.
The Group continues to invest in its IT infrastructure, to
ensure that it is capable of supporting the planned growth in
the business and to protect customers’ personal data.
The Group’s business continuity and disaster recovery
framework is continually tested and assessed to ensure the
Group could continue to provide services to customers in the
event of an unforeseen event.
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Principal risks and uncertainties
Risk
Potential impact
Mitigations
Financial control environment risk
This includes the risk of loss to the
business, or its customers, because of
either the actions of an unassociated third
party or the misconduct of an employee.
• Reputational loss with
customers or regulators
• Compensation payments
• Financial loss
•
Increased capital
requirements
The Group’s financial control and fraud prevention policies and
procedures are designed to ensure that the risk of fraudulent
access to customer or corporate accounts is minimised.
Fraud training is provided to all members of staff to facilitate
early detections of potential fraudulent activity.
Third party reliance risk
The Group undertakes its dealing,
custody, settlement and administrative
activities in-house and is therefore
exposed to risk as a consequence of its
reliance on third party software suppliers.
• Loss of third party service
• Potential market exposure
• Potential customer
detriment
• Reputational loss
• Financial loss
Strong technology controls to identify potential money
laundering activity or market abuse.
To mitigate the risk posed by third party software suppliers,
the Group maintains a strong partnership relationship with
the key suppliers and monitors their performance to ensure
their continued commitment to service, financial stability and
viability.
Operational processing risk
There is a risk that the Group’s
operational processes are subject to
errors or inefficiencies, which would be
exacerbated by an unexpected increase
in business volumes.
Strategic project and project overload
risk
There is a risk of failing to deliver on
a major strategic project, or trying to
complete too many projects or business
change initiatives too quickly, leading to a
failure to deliver the anticipated benefits.
Litigation risk
There is a risk of liability related to
litigation from customers or third parties.
• Loss of earnings
• Opportunity cost
• Reputational loss
The Group focuses on increasing the effectiveness of
its operational procedures and, through its business
improvement function, aims to improve and automate more
of its processes and, by doing so, reduce the need for
manual intervention and the potential for errors.
•
Inability to deliver
regulatory projects on
time
• Opportunity cost
• Disruption to BAU
• Reputational and financial
loss
The Group has implemented a process designed to improve
the management and delivery of business improvement
initiatives, alongside more significant projects, with members
of the Executive Management Board meeting on a regular
basis to monitor progress, re-prioritise or approve additional
resource, as necessary to ensure delivery of the Group’s
strategic objectives.
• Opportunity cost
• Reputational loss
• Financial loss
The Group has robust systems and controls and maintains
an appropriate level of professional indemnity insurance
cover against these potential liabilities.
Business continuity management risk
There is a risk of disruption to the
Group’s business in the event of a loss of
access to any of the Group’s properties
or in the event of a catastrophic systems
failure.
• Loss of services
• Potential customer
detriment
• Financial loss
•
Increased capital
requirements
The Group has agreements in place with specialist suppliers
for geographically remote disaster recovery facilities for all of
its operations, including separate offsite IT recovery facilities.
There is a rolling programme of testing of business continuity
plans.
• Reputational loss
• Potential customer
detriment
• Financial loss
The Group maintains succession plans for key members of
management and has also sought to mitigate this risk by
facilitating equity ownership for senior employees through
various share schemes and the development of a staff
engagement strategy.
Key people risks
The loss of key personnel within the
Group, an increase in staff turnover or an
inability to find appropriately qualified
new or replacement employees,
particularly in periods of sustained
growth, may have a materially adverse
impact on the Group’s performance.
By order of the Board
Mr Christopher Bruce Robinson (Company Secretary)
for and on behalf of AJ Bell Holdings Limited
4 Exchange Quay, Salford Quays,Manchester M5 3EE
12 December 2017
26
Governance
Board of Directors
Les Platts
Chairman
Les joined AJ Bell in September 2008 having retired as an Audit Partner and practice Senior
Partner for the north-east with a leading international professional services firm. Over a
period of 33 years, Les gained extensive UK and international experience across all industry
sectors, including FTSE 100, FTSE 250, smaller listed PLCs, large private companies and
private equity investments. He has advised at Board level on a wide range of financial,
commercial and governance issues, and is also Vice Chairman of a major Building Society.
Andy Bell
Chief Executive Officer
Andy co-founded AJ Bell in 1995, having spent a number of years working within the
financial services sector. Graduating from Nottingham University in 1987 with a first class
degree in Mathematics, he qualified as a Fellow of the Institute of Actuaries in 1993 and
has built AJ Bell into one of the largest providers of low-cost, online investment platforms
and stockbroker services in the UK.
Michael Summersgill
Chief Financial & Operating Officer
Michael joined AJ Bell in July 2007 and was appointed to the Board in June 2011 as
Chief Financial Officer. In his current role as Chief Financial & Operating Officer he is
responsible for all operational functions within the business and for providing financial
oversight across the Group. Michael graduated from the University of Sheffield with a
degree in Economics and began his career as an accountant in public practice, gaining
experience with a broad portfolio of clients.
John Tomlins
Non-executive Director
John joined AJ Bell with a wealth of experience, having spent his entire full time career
working in the IT and financial services sectors. Career highlights include pioneering work
on new client investment solutions, and helping to develop a customer proposition that
grew one start-up platform’s assets under administration from zero to £40 billion. John
also co-founded the Institute of Customer Services, and is presently the Non-executive
Chairman of a major technology and software supplier to investment platforms.
Simon Turner
Non-executive Director
Simon joined the Board with strong experience in the retail, consumer electronics and
IT industries, thanks to his time as Group Managing Director at a leading UK electrical
retailer, and his appointment to the boards of several large internet businesses. No
stranger to the financial services industry, he has also enjoyed an eight-year spell on the
board at one of Britain’s biggest building societies, and currently sits on the UK board of a
major bank.
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Executive Management Board
The EMB is the decision-making body that is responsible for the execution of the strategy
agreed with the Board of Directors. It is charged with the day-to-day management of the
Group, within the confines of the matters reserved to the Board of Directors. The EMB meets
regularly to review the performance of the Group and to agree corrective action where
issues arise.
The EMB consists of the Chief Executive Officer, the Chief Financial & Operating Officer and
the following members of senior management:
Fergus Lyons
Managing Director, AJ Bell Investcentre
Fergus worked at a major bank for over 20 years before joining AJ Bell in August 2000.
Since then he has worked in many areas of the business, and is currently Managing
Director of AJ Bell Investcentre. Fergus is also responsible for AJ Bell Investments and our
Platinum SSAS/SIPP products.
Charles Galbraith
Managing Director, AJ Bell Youinvest
Charles joined AJ Bell Securities in 2006 as Managing Director. He has worked in a number
of stockbroking firms over the past 20 years, concentrating on both private and institutional
clients. Previously he was Managing Director of a well-known stockbroker, and was also
responsible for the stocks and shares ISA business of a major high street bank. Charles has
overall responsibility for our institutional stockbroking business, AJ Bell Youinvest platform
and media business.
Louis Petherick
Chief Risk Officer
Louis joined AJ Bell in September 2016 as the Group Risk and Compliance Director
before taking on the role of Chief Risk Officer in July 2017. Louis has worked for a number
of financial services firms over the past 20 years, holding various senior risk, compliance
and conduct roles across the insurance, wealth management and banking sector. He is
responsible for the risk, compliance and financial crime functions within AJ Bell.
Roger Stott
Group Finance Director
Roger qualified as a Chartered Accountant in 1990 and has worked in retail stockbroking
since 1999. He spent seven years as Finance Director at a well-known stockbroker, joining
the company at start-up and seeing it through an MBO and sale. With AJ Bell since 2008,
Roger is responsible for overseeing the finance department, the treasury function, the
commercial management of supplier relationships and our third party products.
Christopher Bruce Robinson
Group Legal Services Director and Company Secretary
Bruce joined AJ Bell in October 2012, having previously acted as one of the company’s
external legal advisers. Before joining AJ Bell, Bruce spent 20 years in private practice as
a corporate and commercial lawyer.
31
Strategic reportGovernanceFinancial statementsOther information
Directors’ report
For the year ended 30 September 2017
The directors present their annual report on the affairs of the Group, together with the consolidated financial statements and
auditor’s report, for the year ended 30 September 2017.
Principal activity
The principal activity of the Group is to provide investment administration, dealing and custody services.
Business review
A review of the Group's activities over the financial year is described in the Chairman's statement on pages 5 to 6 and the
Chief Executive Officer's report on pages 7 to 9.
Directors
The directors, who served throughout the year, are disclosed on page 30.
Directors’ interests
The directors who held office at 30 September 2017 had the following interests in the share capital of the Company:
Ordinary
A non-voting
B non-voting
C non-voting
D non-voting
X non-voting
30 Sept 2017
30 Sept 2017
30 Sept 2017
30 Sept 2017
30 Sept 2017
30 Sept 2017
Les Platts
Andy Bell
50,305
-
11,459,783
104,093
Michael Summersgill
-
20,000
John Tomlins
Simon Turner
Total
31,578
25,800
-
-
-
44,451
13,281
-
-
-
38,948
14,517
-
-
-
50,118
34,714
-
-
-
-
66,330
-
-
11,567,466
124,093
57,732
53,465
84,832
66,330
No director held the Ordinary non-voting class of shares at 30 September 2017, 30 September 2016 or at any time during
the period between these dates.
Directors’ share options
At 30 September 2017, the directors who held office held the following share options:
Director
M Summersgill
M Summersgill
M Summersgill
Number
Exercise price £
Date of grant
of option
Earliest date
of exercise
10,000
2,500
1,000
1.90
3.00
3.50
1 Aug 09
1 Oct 10
19 Dec 11
1 Jul 18
1 Jul 18
1 Jul 18
There are no performance criteria attached to any of the three tranches of share options.
No options were exercised by the directors during the year, or during the previous year.
32
Other informationFinancial statementsGovernanceStrategic report
Directors’ report
For the year ended 30 September 2017
FCA Remuneration Code
The Group is subject to CRD IV requirements and therefore the FCA Remuneration Code.
The Group maintains remuneration policies and practices in accordance with the applicable principles of the Remuneration
Code, which are overseen by the Remuneration Committee, comprised of the Non-executive Directors of the Board. Material
decisions in relation to the remuneration of staff whose actions have a material impact on the risk profile of the firm and in
relation to individuals in control functions are overseen by the Remuneration Committee. The Group’s remuneration policies
provide for variable remuneration to be linked to performance.
Key performance indicators
Key performance indicators in relation to the Group’s activities are reviewed continually by senior management and
presented on the highlights page, given at page 4.
Dividends
The Company has declared a final dividend of 15.50p (2016: 13.00p) per share, to be paid on 15 December 2017. This,
together with the interim dividend of 12.75p (2016: 12.75p) paid on 22 May 2017, makes a total dividend in respect of the
financial year ended 30 September 2017 of 28.25p per share (2016: 25.75p).
Capital management
The Group is subject to CRD IV requirements and therefore has a consolidated regulatory capital requirement. The capital
held to meet this requirement comprises share capital, share premium and retained earnings. The directors ensure that the
level of capital held in the Group:
• meets the regulatory capital requirements;
•
•
provides a strong base for ongoing trading activities; and
is sufficient to support the Group’s long-term strategy.
The Group’s regulatory capital requirement and details can be found under our CRR Part Eight (Pillar 3) disclosures; this can
be found on the Group’s website at www.ajbell.co.uk. The Group continue to hold a significant amount of capital above its
regulatory capital requirement.
Country by Country Reporting
AJ Bell Securities Limited and AJ Bell Investments LLP are regulated under CRD IV and CRR. Regulation requires
disclosure of certain financial information on a country by country basis. The following table demonstrates how we comply
with the country by country reporting requirements of CRD IV, by showing where the relevant information can be found within
the financial statements. The Company has taken the exemption permitted under CRD IV to provide this information on a
consolidated basis.
Jurisdiction
Number of
employees
Turnover
Profit (or loss)
before tax
UK
See note 7
See income
statement
See income
statement
Cash tax paid on
profit or loss
(£’000)
See
statement of
cash flows
Public subsidies
received
None received
33
Strategic reportGovernanceFinancial statementsOther information Directors’ report
For the year ended 30 September 2017
Financial risks
Interest rate risk
Risk of market, commercial or
regulatory pressures on interest
rate margins
• Reduction in revenue
The Group has a variety of transactional and recurring
revenue streams, some of which are monetary amounts
while others are ad valorem. This mix of revenue types
helps to limit the Group’s exposure to interest rate
fluctuations. In addition, the Group does not have any
external borrowings.
Liquidity risk
This is the risk that the Group
may be unable to meet its
liabilities as and when they fall
due. These liabilities arise from
the day-to-day activities of the
Group and from its obligations
to customers.
Credit and bank default risk
The Group's credit risk
extends to its principle
financial assets. These are
cash balances held with
banks and trade and other
receivables.
• Loss of reputation
• Potential customer detriment
The Group is a highly cash generative business and
maintains sufficient cash and standby banking facilities to
fund its foreseeable trading requirements.
• Financial loss
• Financial loss
The Group's credit risk extends to its principal financial
assets. These are cash balances held within banks and
trade and other receivables. The directors continually
monitor the strength of the banks used by the Group.
The banks currently used by the Group are detailed in
note 16. With regards to trade receivables, the Group has
implemented procedures that require appropriate credit or
alternative checks on potential customers before business
is undertaken. This minimised credit risk in this area.
Political contributions
There were no political contributions in the current year or prior year.
Charitable donations
During the year, the Group made charitable donations of £109,125 (2016: £85,279).
Disabled employees
Applications for employment by disabled persons are considered bearing in mind the aptitude of the applicant concerned.
In the event of employees becoming disabled every effort is made to ensure that their employment with the Group continues
and that appropriate facilities and training are arranged. It is the policy of the Group that the training, career development
and promotion of disabled persons must, as far as possible, be identical to that of other employees.
34
Other informationFinancial statementsGovernanceStrategic report Directors’ report
For the year ended 30 September 2017
Employee consultation
The Group places considerable value on the involvement of its employees. It has continued to keep them informed on
matters affecting them as employees and arising from the various factors affecting the performance of the Group. This is
achieved through formal and informal meetings and internal publications. Employee representatives are consulted regularly
on a wide range of matters affecting their current and future interests. Employee share schemes have operated since June
2005. These schemes have promoted wider employee involvement in the Group.
The directors believe that the incentivisation of senior management and key employees by equity participation is an
important factor in the continuing success of the Group. This policy aligns the interests of management with those of the
wider shareholder base.
Internal control
The Board has overall responsibility for the maintenance of the internal control system established by the Group and places
considerable reliance on a strong control environment. However, such a system is designed to manage rather than eliminate
the risk of failure to achieve business objectives. It can only provide reasonable and not absolute assurance against
material misstatement or loss. Compliance with internal control procedures is monitored by the directors through the Risk
and Compliance Committee and the Audit Committee, which are responsible for overseeing the Group’s Risk Management,
Compliance and Internal Audit functions.
Going concern
The consolidated financial statements have been prepared on a going concern basis. After making enquiries, the directors
believe that they have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. The going concern basis of preparation is discussed in note 2.1 of the consolidated financial
statements.
Events after the date of the consolidated statement of financial position
Details of events occurring after the end of the reporting period are given in note 26.
Disclosure of information to auditor
Each of the persons who are a director at the date of approval of this annual report confirms that:
•
•
so far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any
relevant audit information and to establish that the Company’s auditor is aware of that information.
Auditor
Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will
therefore continue in office.
Approved by the Board on 12 December 2017 and signed on its behalf by:
Mr Christopher Bruce Robinson (Company Secretary)
for and on behalf of AJ Bell Holdings Limited
4 Exchange Quay, Salford Quays, Manchester M5 3EE
12 December 2017
35
Strategic reportGovernanceFinancial statementsOther information Statement of directors’ responsibilities in respect of the Strategic
report, Directors’ report and the financial statements
The directors are responsible for preparing the Annual Report and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent company financial statements for each financial year.
Under that law they have elected to prepare the Group financial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected
to prepare the parent company financial statements in accordance with UK accounting standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 101 (Financial Reporting Standard 101) ‘Reduced Disclosure
Framework’.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing
each of the Group and parent company financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant, reliable and prudent;
•
•
•
•
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the
EU;
for the parent company financial statements, state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to
cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
36
Other informationFinancial statementsGovernanceStrategic report Independent auditor’s report to the members of AJ Bell Holdings Limited
Opinion
We have audited the financial statements of AJ Bell Holdings
Limited (“the Company”) for the year ended 30 September
2017, set out on pages 40-83, which comprise the
consolidated income statement, consolidated and company
statement of financial position, consolidated and company
statement of changes in equity, consolidated statement
of cash flows and related notes, including the accounting
policies on pages 44-51 and page 80.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the
state of the Group’s and of the parent company’s affairs
as at 30 September 2017 and of the Group’s profit for
the year then ended;
the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European
Union;
the parent company financial statements have been
properly prepared in accordance with UK accounting
standards, including FRS 101 Reduced Disclosure
Framework;
the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006.
Basis of opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled
our ethical responsibilities under, and are independent of the
group in accordance with, UK ethical requirements including
the FRC Ethical Standard. We believe that the audit
evidence we have obtained is a sufficient and appropriate
basis for our opinion.
Going concern
We are required to report to you if we have concluded
that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for
a period of at least twelve months from the date of approval
of the financial statements. We have nothing to report in
these respects.
Strategic report and directors’ report
The directors are responsible for the strategic report and
the directors’ report. Our opinion on the financial statements
does not cover those reports and we do not express an audit
opinion thereon.
Our responsibility is to read the strategic report and the
directors’ report and, in doing so, consider whether, based on
our financial statements audit work, the information therein
is materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that work:
• we have not identified material misstatements in the
strategic report and the directors’ report;
•
•
in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Matters on which we are required to report
by exception
Under the Companies Act 2006, we are required to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
Directors’ responsibilities
As explained more fully in their statement set out on page
36, the directors are responsible for: the preparation of the
financial statements and for being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
37
Strategic reportGovernanceFinancial statementsOther information Independent auditor’s report to the members of AJ Bell Holdings Limited
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s
report 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 this report, or for
the opinions we have formed.
Alexander Simpson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
12 December 2017
38
Other informationFinancial statementsGovernanceStrategic report Financial statements
Consolidated income statement
For the year ended 30 September 2017
Revenue
Administrative expenses
Operating profit
Investment income
Finance costs
Profit before tax
Taxation
Profit for the year
Profit/(loss) for the financial year attributable to:
Equity holders of the parent company
Non-controlling interests
Earnings per ordinary share:
Basic (pence)
Diluted (pence)
Notes
5
6
8
9
11
11
2017
£’000
75,576
(53,800)
21,776
3
(82)
21,697
(4,223)
17,474
17,571
(97)
17,474
42.85
42.60
2016
£’000
64,466
(47,717)
16,749
73
(43)
16,779
(3,466)
13,313
13,440
(127)
13,313
32.85
32.73
All income, profit and earnings are in respect of continuing operations.
There were no other components of recognised income or expense in either year and consequently no statement of other
comprehensive income has been presented.
The notes on pages 44 to 74 form an integral part of these financial statements.
40
Other informationFinancial statementsGovernanceStrategic report Consolidated statement of financial position
As at 30 September 2017
Assets
Non-current assets:
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Current assets:
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities:
Trade and other payables
Current tax liabilities
Obligations under finance leases
Provisions
Non-current liabilities:
Obligations under finance leases
Provisions
Other payables
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Equity attributable to owners of the company
Non-controlling interests
Total equity
(as restated)
(as restated)
Notes
2017
£’000
2016
£’000
2015
£’000
12
13
14
17
16
16
18
19
21
19
21
20
22
3,660
3,841
3,994
227
11,722
22,172
42,138
64,310
76,032
(10,115)
(1,857)
(75)
(1,587)
(13,634)
(68)
(790)
(178)
3,660
5,016
1,268
49
9,993
17,738
39,510
57,248
67,241
(9,554)
(1,701)
(75)
(363)
(11,693)
(34)
(754)
(972)
(1,036)
(1,760)
(14,670)
(13,453)
61,362
53,788
40
2,806
58,516
61,362
40
2,229
51,918
54,187
-
(399)
1,957
6,796
1,204
54
10,011
15,913
36,318
52,231
62,242
(7,370)
(1,843)
(106)
(53)
(9,372)
(109)
(398)
(90)
(597)
(9,969)
52,273
40
1,913
50,320
52,273
-
61,362
53,788
52,273
The notes on pages 44 to 74 form an integral part of these financial statements.
Approved by the Board on 12 December 2017 and signed on its behalf by:
Mr Michael Summersgill (Director)
for and on behalf of AJ Bell Holdings Limited
4 Exchange Quay, Salford Quays, Manchester M5 3EE
12 December 2017
41
Strategic reportGovernanceFinancial statementsOther information Consolidated statement of changes in equity
For the year ended 30 September 2017
Balance at 1 October 2016
40
2,229
51,918
(399)
53,788
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Non-
controlling
interests
£'000
Total
equity
£'000
Total comprehensive income for the year:
Profit/ (loss) for the financial year
Transactions with owners,
recorded directly in equity:
Issue of share capital
Dividends
Equity settled share-based payment transactions
Purchase of own share capital
Deferred tax effect of share-based payments
Tax relief on exercise of share options
Purchase of non-controlling interest
Total contributions by and distributions to owners
Balance at 30 September 2017
Balance at 1 October 2015
Total comprehensive income for the year:
Profit/ (loss) for the financial year
Transactions with owners,
recorded directly in equity:
Issue of share capital
Dividends
Equity settled share-based payment transactions
Purchase of non-controlling interest
Total contributions by and distributions to owners
Deferred tax effect of share-based payments
Tax relief on exercise of share options
-
-
-
-
-
-
-
-
-
40
40
-
-
-
-
-
-
-
-
-
17,571
(97)
17,474
577
-
-
-
-
-
-
-
-
(10,564)
107
(165)
88
57
(360)
(136)
2,806
58,516
1,913
50,320
-
-
-
-
-
-
360
136
-
-
577
(10,564)
107
(165)
88
57
-
-
61,362
52,273
-
13,440
(127)
13,313
316
-
-
-
-
-
-
-
(11,763)
69
-
(212)
(8)
72
-
-
-
(484)
212
-
-
316
(11,763)
69
(484)
-
(8)
72
Balance at 30 September 2016
40
2,229
51,918
(399)
53,788
The notes on pages 44 to 74 form an integral part of these financial statements.
42
Other informationFinancial statementsGovernanceStrategic report Consolidated statement of cash flows
For the year ended 30 September 2017
Cash flows from operating activities
Profit for the financial year
Adjustments to cash flows from non-cash items:
Investment income
Finance costs
Income tax expense
Depreciation and amortisation
Impairment of intangible assets
Share-based payment expense
Net increase in provisions and other payables
Loss on disposal of property, plant and equipment
Operating cash flows before movement in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Income tax paid
Interest paid
Notes
(as restated)
2016
£’000
2017
£’000
17,474
13,313
(3)
82
4,223
2,057
-
107
466
48
24,454
(4,434)
561
20,581
(4,100)
(82)
(73)
43
3,466
2,086
345
69
666
4
19,919
(1,607)
819
19,131
(3,498)
(43)
Net cash flow from operating activities
16,399
15,590
Cash flows from investing activities
Purchase of other intangible assets
Purchase of property, plant and equipment
Interest received
Net cash paid to acquire subsidiary
Net cash flows from investing activities
Cash flows from financing activities
Payments of obligations under finance leases
Proceeds from issue of share capital
Proceeds from settlement of part-paid shares
Payments for purchase of own shares
Dividends paid
13
14
(44)
(3,476)
3
-
(3,517)
(102)
556
21
(165)
(115)
(604)
73
(199)
(845)
(106)
316
-
-
10
(10,564)
(11,763)
Net cash flows from financing activities
(10,254)
(11,553)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Total cash and cash equivalents at end of year
2,628
39,510
42,138
The notes and information on pages 44 to 74 form an integral part of the consolidated financial statements.
3,192
36,318
39,510
43
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
1. General information
AJ Bell Holdings Limited (“the Company”) and its subsidiaries (together the “Group”) provide investment administration,
dealing and custody services. The nature of the Group’s operations and its principal activities are set out in the Strategic
report and the Director’s report.
The Company is a private limited company limited by shares and incorporated in the United Kingdom. The Company's
number is 04503206 and the registered office is 4 Exchange Quay, Salford Quays, Manchester M5 3EE. A list of
investments in subsidiaries, including the name, country of incorporation, registered office, and proportion of ownership is
given in note 4 of the Company's separate financial statements.
The consolidated financial statements for the Company and its subsidiaries were approved by the Board on
12 December 2017.
2. Significant accounting policies
Basis of accounting
The consolidated financial statements of AJ Bell Holdings Limited have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC interpretations and those parts of the
Companies Act 2006 applicable to Companies reporting under IFRS.
The financial statements are prepared on the historical cost basis and prepared on a going concern basis as noted on page
45. They are presented in sterling, which is the functional and presentational currency of the Group, rounded to the nearest
thousand.
The directors have elected to prepare the parent company’s financial statements in accordance with the provisions of
the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulation 2008 and have prepared them
in accordance with FRS101. This UK GAAP standard allows the use of EU-adopted International Financial Reporting
Standards (IFRS) with reduced disclosures, where allowed, by the Companies Act and associated legislation. As permitted
by Section 408 of the Companies Act 2006, no profit and loss account is presented for the Company; the notes and
information for the Company are presented on pages 78 to 83.
The accounting policies have been applied consistently to all periods presented in these financial statements and by
all Group entities, other than for those discussed in note 3, which have changed revenue, financial assets and financial
liabilities.
44
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
Changes to International Reporting Standards
Interpretations and standards which became effective during the year:
The following accounting standards and interpretations that are relevant to the Group became effective during the year:
IAS 1
Disclosure Initiative
IAS 16 and 38 Clarification of Acceptable Methods of Depreciation and Amortisation
Annual Improvements 2012-2014 Cycle
Effective from
1 Jan 2016
1 Jan 2016
Interpretations and standards which have been issued and are not yet effective:
At the date of authorisation of these financial statements the following standards and interpretations have been issued but
are not yet effective and have not been applied in preparing the financial statements.
IAS 7
IAS 12
IFRS 9
IFRS 2
IFRS 15
IFRS 16
Disclosure Initiative
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments)
Financial Instruments
Effective from
1 Jan 2017
1 Jan 2017
1 Jan 2018
Classification and Measurement of Share Based Payment Transactions (Amendment)
1 Jan 2018
Revenue from Contracts with Customers
Leases
1 Jan 2018
1 Jan 2019
The directors anticipate that the adoption of these standards and interpretations in future periods will not have a material
impact on the financial statements when they come into effect other than IFRS 16 Leases. The directors are currently
reviewing the impact of adopting this standard on the financial statements of the Group in future periods.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 30 September each year. The Group controls a subsidiary when it has power over
an investee, is exposed, or has rights to variable returns from its involvement with the subsidiary and has the ability to
affect those returns through its power over the investee.The Group reassesses whether it controls an investee if facts and
circumstances indicate there are changes to one or more elements of control. The results of a subsidiary undertaking are
included in the consolidated financial statements from the date the control commences until the date that control ceases.
All intercompany transactions, balances, income and expenses are eliminated on consolidation.
2.1 Going concern
The Group’s business activities, together with its financial position and the factors likely to affect its future development
and performance are set out in the Strategic report on pages 4 to 26 and the Directors’ report on pages 32 to 35. Within
the Directors’ report, the financial risks section on page 34 includes the Group’s policies and processes for managing
exposure to credit and liquidity risk. The Group’s forecasts and objectives, taking into account a number of potential changes
in trading performance, show that the Group should be able to operate at adequate levels of both liquidity and capital for
the foreseeable future. The directors have performed a number of stress tests on capital and liquidity and these provide
assurance that the Group has sufficient capital to operate under stressed conditions.
Consequently, after making reasonable enquiries, the directors are satisfied that the Group has sufficient resources to
continue in business for the foreseeable future and therefore have continued to adopt the going concern basis in preparing
the financial statements.
45
Strategic reportGovernanceFinancial statementsOther information
Notes to the consolidated financial statements
For the year ended 30 September 2017
2.2 Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of acquisition is measured as the
aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss
as incurred. The acquiree’s identifiable tangible and intangible assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date.
2.3 Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of
the identifiable assets and liabilities of the subsidiary, associate or jointly-controlled entity at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment
losses. Goodwill that is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised
immediately and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to one or more of the Group’s CGUs (Cash Generating Units)
expecting to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are reviewed
annually or more frequently when there is an indication that the goodwill relating to that CGU may have been impaired. If
the recoverable amount from the CGU is less than the carrying amount of the assets present on the consolidated statement
of financial position forming that CGU, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the assets forming that CGU and then to the assets of the CGU pro-rata on the basis of the carrying amount of
each asset in the CGU.
On disposal of a subsidiary, associate or jointly-controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
2.4 Revenue recognition
In recognising revenue, the directors follow the principles contained in IAS 18 ‘Revenue’ to determine appropriate revenue
recognition policies. Revenue is recognised to the extent that it is probable that the economic benefits associated with the
transaction will flow into the Group.
Revenue is measured at the fair value of the consideration received or receivable net of discounts, VAT and other sales-
related taxes, for goods sold and services provided in the year.
Administration and custodian fees are recognised in the period in which the service is rendered using the percentage
completion method. The extent to which a service is complete is determined by the different work activity profiles of the
associated individual services.
Services rendered at the inception of a fixed-term contract are recognised over the life of that contract.
Asset-based commissions are accrued on a time basis by reference either to the principal and effective interest rate or the
due date for payment.
Transaction-based commissions are recognised when received in accordance with the date of settlement of the underlying
transaction.
Investment revenue comprises interest income receivable on cash balances held within the Group. Interest income is
recognised in the income statement as it accrues, using the effective interest rate method.
46
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
2.5 Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is
included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining
balance of the liability.
Rental payments under operating leases are charged to the income statement on a straight-line basis over the term of
the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a
straight-line basis over the lease term.
2.6 Investment income
Investment income comprises interest received on bank deposits. Investment income is recognised in profit or loss as it
accrues, using the effective interest rate.
2.7 Finance costs
Finance costs comprise interest payable and finance charges on finance leases. Finance costs are recognised in the income
statement using the effective interest rate method.
2.8 Retirement benefit costs
The Group makes payments into the personal pension schemes of certain employees as part of their overall remuneration
package. Contributions are recognised in the income statement as they are payable.
The Group also contributes to employees’ stakeholder pension schemes. The assets of the scheme are held separately
from those of the Group in independently administered funds. Any amount charged to the income statement represents the
contribution payable to the scheme in respect of the period to which it relates.
Alternatively, the Group will pay contributions to an employee’s AJ Bell Youinvest SIPP, if they wish, instead of the
stakeholder pension.
2.9 Taxation
The tax expense represents the sum of the current tax payable and deferred tax. Tax is recognised in the income statement
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax
payable or receivable in respect of previous years, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are generally recognised on all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available in the future, against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises (other than in a business combination) from:
• The initial recognition of goodwill; or
•
Investment in subsidiaries to the extent that they will probably not reverse in the foreseeable future; or
• The initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting
profit.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
47
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
2.10 VAT
Revenues, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a
purchase of assets or services is not recoverable in whole or in part from the taxation authority.
Where the sales tax is not recoverable in whole or in part from the taxation authority, it is expensed through the income
statement, except in the case of a capital asset where the irrecoverable proportion is capitalised as part of the capital cost of
that asset.
2.11 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment losses.
Depreciation is provided, where material, on all property, plant and equipment at rates calculated to write off the cost, less
estimated residual value, of each asset evenly using a straight-line method over its estimated useful economic life as follows:
Leasehold improvements
Over the life of the lease
Office equipment
Computer equipment
4 years
3 - 5 years
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or,
where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the income statement immediately.
2.12 Intangible assets (excluding goodwill)
Intangible assets comprise computer software, customer contracts and non-contractual customer relationships and
the Group’s Key Operating System (KOS). These are stated at cost or fair value less amortisation and any recognised
impairment loss. Amortisation is provided, where material, on all intangible fixed assets excluding goodwill at rates calculated
to write off the cost or valuation, less estimated residual value, of each asset evenly using a straight-line method over its
estimated useful economic life as follows:
Computer software
KOS
3 - 4 years
10 years
KOS enhancements
Over the remaining life of the KOS
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the income statement immediately.
2.13 Internally-generated intangible assets
An internally-generated asset arising from work performed by the Group is recognised only if all the following conditions are
met:
• An asset is created that can be identified (such as software).
•
It is probable that the asset created will generate future economic benefits.
• The development costs of the asset can be measured reliably.
Where such an asset is under construction at the end of a reporting period, the costs involved that meet the relevant
recognition criteria are disclosed as a separate class of asset. As these assets are not available for use by the business they
are not depreciated or amortised, instead they are reviewed for impairment. Typically, such projects consist of a mixture of
tangible and intangible components and these are disclosed separately in the financial statements.
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Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
2.14 Impairment of tangible and intangible assets (excluding goodwill)
At each reporting date of the directors review the carrying amount of the Group’s tangible and intangible assets to determine
whether there is any indication that those assets have suffered impairment. If such an indication exists then the recoverable
amount of that particular asset is estimated.
An impairment test is performed for an individual asset unless it belongs to a CGU, in which case the present value of the
net future cash flows generated by the CGU is tested. A CGU is the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or of groups of other assets. An
intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the
asset may be impaired.
Recoverable amount
The recoverable amount of a tangible or intangible asset is the higher of its fair value less costs to sell and its value-in-
use. In assessing its value-in-use, the estimated net future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU in which the asset sits is estimated to be lower than the carrying value, then
the carrying amount is reduced to the recoverable amount. An impairment loss is recognised immediately in the income
statement as an expense.
Reversals of impairment
An impairment loss is reversed on tangible and intangible assets only if subsequent external events reverse the effect of
the original event which caused the recognition of the impairment. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised. An impairment reversal is recognised in the income statement
immediately.
2.15 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks and other short-term highly liquid
investments with original maturities of three months or less. Where appropriate, bank overdrafts are shown within borrowings
in current liabilities in the consolidated statement of financial position. For the purposes of the consolidated cash flow
statement, cash and cash equivalents are defined as above, net of outstanding bank overdrafts if the Group has the right of
set off.
2.16 Financial instruments
Financial assets and liabilities are recognised in the consolidated statement of financial position when a member of the
Group becomes a party to the contractual provisions of the instrument.
Financial assets
All financial assets are classified as loans and receivables.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables. Loans and receivables are measured at fair value, less any impairment.
Other receivables represent client money required to meet settlement obligations. No interest income is recognised as all
loans and receivables are short-term receivables and the recognition of interest would be immaterial.
49
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting date. These assets are impaired where there is
objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been affected.
For financial assets objective evidence of impairment could include:
• default or delinquency in interest or principal payments; or
•
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually
are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables
could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in
the portfolio past the average credit period of 30 days, as well as the observable changes in national or local economic
conditions that correlate with default on receivables.
The carrying amount of the financial assets is reduced by the use of a provision. When a trade receivable is considered
uncollectable, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited
against the provision. Changes in the carrying amount of the provision are recognised in the income statement.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered
into.
An equity instrument is any contract that evidences a residual interest in the assets in which the investment is made after
deducting all of its liabilities.
Other financial liabilities
All financial liabilities are classified as other financial liabilities.
Other financial liabilities, including any borrowings, are initially measured at fair value, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest rate method.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating the
interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash flows
through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they
expire.
50
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it
is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of
the consideration required to settle that obligation at the reporting date and are discounted to present value where the effect
is material.
2.18 Share-based payments
The Group applies the requirements of IFRS 2 ‘Share-based Payment’. For the purposes of this financial information, IFRS 2
has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2006.
The Group issues equity-settled share-based payments to certain employees. These are measured at fair value (excluding
the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the directors’
estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. Where a grant
of equity-settled share-based payments is not subject to vesting conditions, the fair value determined at the grant date is
expensed immediately.
Fair value is measured by use of the Black-Scholes model. The expected life applied in the model has been adjusted based
on the directors’ best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. As
the Company’s shares are not listed on a recognised stock exchange and therefore no readily available market price exists
for the shares, the share price has been estimated using a generally accepted business valuation method. Share price
volatility has been estimated as the average of the volatility applying to a comparable group of listed companies.
2.19 Dividends
Dividend distributions to the Company’s shareholders are recognised in the period in which the dividends are paid. Final
dividends declared after the reporting period are not included as a liability in the financial statements but are disclosed in the
notes to the financial statements.
2.20 Levies
The Group applies the guidance provided in IFRIC 21 to levies issued under the Financial Services Compensation Scheme.
The interpretation clarifies when an entity recognises a liability for a levy imposed by government in accordance with
legislation (other than taxes and fines or other penalties).
51
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
3. Change in accounting policy
The prior period figures have been restated to reflect the impact of moving to settlement date accounting for all trades
in accordance with IAS 39: Financial Instruments. In the prior year the Group recognised client and market counterparty
receivables and payables balances on the balance sheet as financial instruments at trade date on the basis that there was a
contractual obligation between the parties.
During the year the Group changed the contractual arrangements with their clients following which it was concluded that
settlement date accounting better reflected the substance of the commercial position.
The change in policy has effectively removed the client and market receivables and client and market payables from the
balance sheet and moved the revenue recognition date from trade date to settlement date. The resulting impact on the
income statement is not material and so no adjustment has been made as part of the restatement, in the current or prior
periods.
The client money requirement for client trading placed but not yet funded, has been reclassified under ‘other receivables’.
The impact of applying the above is as follows:
As reported at 1 October 2015
Restatement of client settlement balances
Reclassification of client money requirements
Balance as restated at 1 October 2015
As reported at 30 September 2016
Restatement of client settlement balances
Reclassification of client money requirements
Balance as restated at 30 September 2016
Client and market
payables
£’000
(38,598)
38,598
-
-
(68,009)
68,009
-
-
Client and market
receivables
£’000
41,788
(38,598)
(3,190)
-
71,459
(68,009)
(3,450)
-
Other
receivables
£'000
-
-
3,190
3,190
-
-
3,450
3,450
There has been no impact on the income statement or statement of comprehensive income as a result of this restatement in
the current and prior periods.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 2, the directors are required to make
judgements, estimates and assumptions to determine the carrying amounts of certain assets and liabilities. The estimates
and associated assumptions are based on the Group’s historical experience and other relevant factors. Actual results may
differ from the estimates applied.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
52
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
Critical judgements in applying the Group’s accounting policies
The following critical judgements have been made by the directors in applying the Group’s accounting policies.
Impairment reviews of non-current assets
At each reporting date, the Group’s non-current assets are reviewed for impairment where there are indicators of impairment
or a review is specifically required by IAS 36. As it is not possible to test the Group’s assets for impairment on an individual
basis, impairment reviews are carried out on a CGU basis. In order to determine an asset’s recoverable amount, the
directors review the expected future cash flows of the CGU to which the asset is allocated.
There are a number of estimations that the directors have used to forecast the expected future cash flows of the CGUs that
have been reviewed. Key judgements in arriving at these estimations include:
• The revenue generated by the future demand for the Group’s products and services;
•
•
the anticipated future costs attributable to the supply of the Group’s products and services; and
the level of ongoing maintenance expenditure required on the Group’s assets in order to generate the expected level of
cash flows.
Capitalisation of internally-generated intangible assets
The Group’s accounting policy in relation to internally-generated intangible assets is given at section 2.13 in the notes to the
consolidated financial statements.
Management judges whether incremental cash flows attributable to each project can be reliably measured. For projects
where it is deemed probable that the asset will generate future economic benefits that can be measured, expenditure is
capitalised. Examples of this are the delivery of a new product or service and the development of a new operating system.
For projects that do not meet this expenditure criteria, such as the maintenance of an asset or new functionality for an
existing product, the cost is expensed to the income statement as incurred.
Provisions
The Group recognises a provision where it has entered a legal or constructive obligation, there is probable economic
outflow and the amount can be measured reliably. By their nature any provisions recorded are done so on a best estimate
basis given the information available at the point in time and therefore require an element of management judgement and
estimation.
Restructuring costs
During the year a restructuring provision of £0.5m (2016: £Nil) has been recognised to cover the estimated costs associated
with the closure of the Tunbridge Wells office by October 2018 when the lease expires. The provision represents the best
current estimate and is based upon a number of key variables for the staff affected, including grade and remuneration
package. As a result there is some uncertainty around the value and timing of the liability. It is expected that all costs will be
incurred within the next financial year.
Other provision
During the year a provision of £1.1m (2016: £Nil) has been recognised to cover the settlement of a one-off tax liability that
has arisen during the year. There is some uncertainty regarding the amount of the outflow required to settle the obligation;
therefore a best estimate has been made by assessing a number of different outcomes considering the potential areas
and time periods at risk and any associated interest. The timing of the outflows are uncertain but the Group expects that
settlement will be within the next 12 months.
53
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
5. Revenue
An analysis of the consolidated revenue is as follows:
Investment administration services
Dealing and custody services
Media services
Investment management services
2017
£’000
2016
£’000
41,293
30,648
2,490
1,145
75,576
38,129
22,287
3,202
848
64,466
The total revenue of the Group has been derived from its principal activities undertaken in the United Kingdom.
6. Operating profit
Profit for the financial year has been arrived at after charging:
Amortisation of intangible assets
Depreciation of tangible assets
Impairment of intangible assets
Loss on disposal of tangible assets
Operating lease rentals - property
Restructuring cost
Staff costs
Fees payable to the company’s auditor for the audit of the
company’s annual accounts
Fees payable to the company’s auditor and its associates for other services:
Audit of the accounts of subsidiaries
Audit-related assurance services
Other assurance services
2017
£’000
2016
£’000
1,219
838
-
48
3,185
492
28,103
22
57
91
-
1,550
536
345
4
1,216
-
25,101
23
76
60
9
During the year the Group incurred unoccupied property costs of £1,434,000 (2016: £180,000) in respect of rent and
rates following the Head Office move. The office move has been completed this year and no further unoccupied costs are
expected.
54
Other informationFinancial statementsGovernanceStrategic report
Notes to the consolidated financial statements
For the year ended 30 September 2017
7. Employee benefit costs and employee numbers
The average number of employees (including Executive Directors):
Administrative functions
656
607
The aggregate employee costs for the continuing operations of the Group were as follows:
2017
No.
2016
No.
Short-term employee benefits
Social security costs
Retirement benefit costs
Termination benefits
Total
Remuneration of key management personnel
Key management personnel are represented by the Board of Directors as shown on
page 30 and the EMB as shown on page 31.
Short-term employee benefits (excluding NI)
Retirement benefit costs
Total
Remuneration of directors
The following costs relate to the Board of Directors as shown on page 30:
Short-term employee benefits (excluding NI)
Retirement benefit costs
Total
Remuneration of highest paid director
Short-term employee benefits
2017
£’000
23,810
2,633
1,119
541
28,103
2016
£’000
21,566
2,345
1,013
177
25,101
2017
£’000
2016
£’000
2,586
61
2,647
2017
£’000
1,315
4
1,319
2017
£’000
863
2,499
66
2,565
2016
£’000
1,141
1
1,142
2016
£’000
720
55
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
8. Finance costs
Obligations under finance leases
Other finance costs
9. Taxation
Tax charged in the income statement
Current taxation
UK Corporation Tax
Adjustment to current tax in respect of prior periods
Deferred taxation
Origination and reversal of temporary differences
Adjustment to deferred tax in respect of prior periods
Effect of changes in tax rates
2017
£’000
2016
£’000
16
66
82
20
23
43
2017
£’000
4,375
(63)
4,312
(98)
17
(8)
(89)
2016
£’000
3,552
(240)
3,312
(69)
217
6
154
Tax expense per the consolidated income statement
4,223
3,466
Corporation Tax is calculated at 19.5% of the estimated assessable profit for the year to 30 September 2017 (2016: 20%).
In addition to the amount charged to the income statement, certain tax amounts have been credited directly to equity as
follows:
Deferred tax relating to share-based payments (see note 17)
Current tax relief on exercise of share options
2017
£’000
(88)
(57)
(145)
2016
£’000
8
(72)
(64)
It is expected that the ongoing effective tax rate will remain at a rate approximating to the standard UK Corporation Tax rate
in the medium term except for the impact of deferred tax arising from the timing of exercising of share options. The standard
UK Corporation Tax rate was reduced to 19% (from 20%) on 1 April 2017 and accordingly the Group’s profits for this
accounting year are taxed at an effective rate of 19.5%. Deferred tax has been recognised at 17%, being the rate at which
the deferred tax assets are expected to reverse.
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Other informationFinancial statementsGovernanceStrategic report
Notes to the consolidated financial statements
For the year ended 30 September 2017
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax
Profit before tax multiplied by a pro-rata rate of Corporation Tax
in the UK of 19.5% (2016: 20.0%)
Effects of:
Adjustments to current tax in respect of prior periods
Expenses not deductible for tax purposes
Effect of the exercise employee share options
Change in recognised deductible temporary differences
Effect of rate changes to deferred tax
Income not taxable
Effective tax rate
10. Dividends
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 30 September 2016 of 13.00p (2015: 16.00p)
per share
Interim dividend for the year ended 30 September 2017 of 12.75p (2016: 12.75p)
per share
Ordinary dividends paid on equity shares
Proposed final dividend for the year ended 30 September 2017 of 15.50p
(2016: 13.00p) per share
2017
£’000
2016
£’000
21,697
16,779
4,231
3,356
(47)
57
(15)
5
(2)
(6)
(13)
110
-
9
5
(1)
4,223
3,466
19.5%
20.7%
2017
£’000
2016
£’000
5,327
6,546
5,237
10,564
5,217
11,763
6,370
5,373
Dividends are payable on all classes of issued, fully or partially paid up ordinary shares, except B, C and D non-voting
shares as disclosed in note 22.
57
Strategic reportGovernanceFinancial statementsOther information
Notes to the consolidated financial statements
For the year ended 30 September 2017
11. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent company by the
weighted average number of ordinary, non-voting ordinary and A and X non-voting ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the weighted average number of shares in all classes to assume
exercise of all potentially dilutive share options.
Earnings for the purposes of basic and diluted earnings per share being profit
attributable to equity holders of the parent company
Number of Shares
Weighted average number of ordinary shares (for the purpose of basic earnings per
share) in issue during the year
Effect of potentially dilutive share options
2017
£’000
2016
£’000
17,571
13,440
Number
of shares
2017
Number
of shares
2016
41,009,036
40,914,184
240,433
148,193
Weighted average number of ordinary shares for the purposes of fully diluted
earnings per share
41,249,469
41,062,377
58
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
12. Goodwill
Cost
At 1 October
Additions
At 30 September
Accumulated impairment losses
At 1 October and 30 September
Carrying value at 30 September
2017
£’000
2016
£’000
3,772
-
3,772
112
3,660
2,069
1,703
3,772
112
3,660
In accordance with note 4, the directors test goodwill annually for impairment or more frequently if there are indications that
goodwill might be impaired.
Goodwill arising on acquisition of AJ Bell Securities Limited
Goodwill of £532,000 recognised in the statement of financial position arose on the acquisition of AJ Bell Securities Limited
during the year ended 30 September 2008.
For the purposes of impairment testing, goodwill arising on the acquisition of AJ Bell Securities Limited is allocated to the
dealing and custody CGU.
Goodwill arising on acquisition of AJ Bell Media Limited
Goodwill of £1,537,000 recognised in the statement of financial position arose on the acquisition of AJ Bell Media Limited
during the year ended 30 September 2013.
For the purposes of impairment testing, £380,000 of goodwill arising on the acquisition of AJ Bell Media Limited is allocated
to the investment administration CGU, with the remaining £1,157,000 being allocated to the dealing and custody CGU.
Goodwill arising on acquisition of Indexx Markets Limited (now part of AJ Bell Asset Management Limited)
Goodwill of £1,588,000 recognised in the statement of financial position arose on the acquisition of Indexx Markets Limited
during the year ended 30 September 2016.
For the purposes of impairment testing, £1,143,000 of goodwill arising on the acquisition of Indexx Markets Limited is
allocated to the investment administration CGU, with the remaining £445,000 being allocated to the dealing and custody
CGU.
Goodwill arising on acquisition of AJ Bell Investments LLP
Goodwill of £115,000 recognised in the statement of financial position arose on the acquisition of AJ Bell Investments LLP
during the year ended 30 September 2016.
For the purposes of impairment testing, £83,000 of goodwill arising on the acquisition of AJ Bell Investments LLP is allocated
to the investment administration CGU, with the remaining £32,000 being allocated to the dealing and custody CGU.
59
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
Calculation of value-in-use of CGUs
Dealing and custody CGU
The recoverable amount of the assets contained within the dealing and custody CGU is determined by estimating its value-
in-use; the discounted future cash flows attributable to the CGU are projected over the four years based on the most recent
forecasts approved by the Board.
Investment administration CGU
The recoverable amount of the assets contained within the investment administration CGU is determined by estimating its
value-in-use; the discounted future cash flows attributable to the CGU are projected over the remaining four-year life of the
key operating system, which was deemed to have a useful life of ten years when it was brought into use six years ago, and
was deemed the most prominent asset in the CGU, based on the most recent forecasts approved by the Board.
The directors have exercised the following key judgements in estimating the future cash flows:
Revenue
A rate of 15% has been used, which is considered to be a moderate rate of growth, to extrapolate cash flow projections
beyond the most recent budget approved by the Board for the investment administration and dealing and custody CGUs.
Administrative expenses
Economies of scale are expected to be gained in the medium- to long-term, although there are not expected to be any
significant changes to the nature of administrative expenses.
Asset maintenance
Modest ongoing maintenance expenditure is required on the assets in the CGUs in order to generate the expected level of
cash flows.
Discount rate
A pre-tax discount rate of 5% has been applied to the forecast cash flows in order to estimate the value-in-use of the CGUs.
Based on these key judgements, the estimated value-in-use of the CGUs comfortably supports the carrying values of the
assets held within them.
In addition to the impairment review carried out as described above, the directors have performed sensitivity analysis on
their calculations, with key assumptions being revised adversely to reflect the potential for future performance being below
expected levels. Changes to revenue are the most sensitive as they would have the greatest impact on future cash flows.
However, even with nil growth in revenue, there would still be sufficient headroom to support the carrying value of the assets
under the CGUs.
Following their review of both the dealing and custody CGU and investment administration CGU, the directors are satisfied
that goodwill is not impaired.
60
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
13. Other intangible assets
Key operating
system
£’000
Contractual
customer
relationships
£’000
Computer
software
£’000
Cost
At 1 October 2015
Additions
At 30 September 2016
Additions
Disposals
8,657
-
8,657
-
-
2,135
-
2,135
-
-
At 30 September 2017
8,657
2,135
Amortisation
At 1 October 2015
Amortisation charge
Impairment
At 30 September 2016
Amortisation charge
Amortisation eliminated on
disposals
At 30 September 2017
Carrying amount
30 September 2016
30 September 2017
Average remaining
amortisation period
2,919
1,056
-
3,975
1,057
-
5,032
4,682
3,625
1,516
274
345
2,135
-
-
2,135
-
-
3 years
6 months
4 months
6,593
115
6,708
44
(370)
6,382
6,154
220
-
6,374
162
(370)
6,166
334
216
Total
£’000
17,385
115
17,500
44
(370)
17,174
10,589
1,550
345
12,484
1,219
(370)
13,333
5,016
3,841
61
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
14. Property, plant and equipment
Cost
At 1 October 2015
Additions
Disposals
At 30 September 2016
Additions
Disposals
At 30 September 2017
Depreciation
At 1 October 2015
Charge for the year
Eliminated on disposal
At 30 September 2016
Charge for the year
Eliminated on disposal
At 30 September 2017
Carrying amount
At 30 September 2016
At 30 September 2017
Leasehold
improvements
£’000
Office
equipment
£’000
Assets under
construction
£’000
Computer
equipment
£’000
677
-
-
677
1,452
(548)
1,581
536
17
-
553
66
(548)
71
124
1,510
1,405
36
(12)
1,429
762
(631)
1,560
1,042
170
(12)
1,200
231
(609)
822
229
738
-
-
-
-
163
-
163
-
-
-
-
-
-
-
-
163
2,576
568
(136)
3,008
1,235
(916)
3,327
1,876
349
(132)
2,093
541
(890)
1,744
915
1,583
Total
£’000
4,658
604
(148)
5,114
3,612
(2,095)
6,631
3,454
536
(144)
3,846
838
(2,047)
2,637
1,268
3,994
During the year, additions of property, plant and equipment under finance leases totalled £136,000 (2016: £Nil).
The carrying amount of the Group’s office equipment includes an amount of £138,000 (2016: £99,000) in respect of assets
held under finance leases.
At the year-end, the Group had no commitments (2016: £Nil) to purchase any tangible fixed assets.
15. Subsidiaries
A list of the investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest is
given in note 4 to the Company’s separate financial statements.
The financial statements for the year ended 30 September 2017 of AJ Bell EBT Limited have been exempted from audit
under s479C of the Companies Act 2006 by way of parent guarantee from AJ Bell Holdings Limited.
62
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
16. Other financial assets
Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
2017
£’000
(as restated)
2016
£’000
6,248
10,831
5,093
22,172
6,287
8,001
3,450
17,738
The directors consider that the carrying value of trade and other receivables approximates to their fair value. Other
receivables represent client money required to meet settlement obligations and are payable on demand.
The maturity profile of the Group’s trade receivables was as follows:
Neither past due nor impaired
31 to 60 days
61 to 90 days
91 days and over
Provision for impairment
The movement in the provision for impairment of trade receivables is as follows:
At 1 October
Amounts charged to the income statement as irrecoverable
Amounts recovered
At 30 September
2017
£’000
5,245
106
154
1,155
6,660
(412)
6,248
2017
£’000
164
300
(52)
412
2016
£’000
4,451
87
82
1,831
6,451
(164)
6,287
2016
£’000
208
40
(84)
164
The directors have reviewed the collectability of all receivables and are satisfied that those balances not otherwise provided
against are recoverable.
Cash and cash equivalents
Cash and cash equivalents
2017
£’000
2016
£’000
42,138
39,510
63
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
Cash and cash equivalents comprise cash held by the Company and any of its operating subsidiaries. It also includes short-
term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to
their fair value.
Financial assets
Financial assets consist of cash and cash equivalents and trade and other receivables and total £53,479,000
(2016: £49,247,000) (restated).
Risks arising from financial assets
Credit and bank default risk
The Group’s credit risk extends to its principal financial assets. These are cash balances held with banks and trade
receivables.
As regards trade receivables, the Group has implemented procedures that require appropriate credit or alternative checks
on potential customers before business is undertaken. This minimises credit risk in this area.
The directors continue to monitor the strength of the banks used by the Group. The banks currently used by the Group are
Bank of Scotland plc, Barclays Bank plc, Lloyds Bank plc, HSBC Bank plc, The Royal Bank of Scotland plc, Santander UK
plc, BNP Paribas Securities Services, Close Brothers plc and Brown Brothers Harriman & Co. Bank of Scotland plc, the
Group’s principal banker, is substantial and is 100% owned by Lloyds Banking Group. All of the banks currently used by the
Group have long-term credit ratings of at least A (Fitch), apart from The Royal Bank of Scotland plc which has a rating of
BBB+ (Fitch), or Baa3 (Moody’s). Where the services of other banks are used, the Group follows a rigorous due diligence
process prior to selection. This results in the Group retaining the ability to further mitigate the counterparty risk on its own
behalf and that of its customers.
Embedded derivatives
In accordance with IAS39, ‘Financial Instruments: Recognition and Measurement’, the Group has reviewed all contracts for
embedded derivatives that are required to be separately accounted for if they do not meet certain requirements set out in the
standard. The directors are satisfied that there are no material embedded derivatives held by the Group.
64
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
17.
Deferred tax asset
Deferred tax asset
Deferred tax liability
Net deferred tax asset
2017
£’000
319
(92)
227
2016
£’000
159
(110)
49
Certain deferred tax assets and liabilities have been offset in accordance with the offset criteria in the standard.
The movement on the deferred tax account and movement between deferred tax assets and liabilities are as follows:
Accelerated
capital
allowances
£’000
Share-based
payments
£’000
Short-term
timing
differences
£’000
Losses
£’000
Total
£’000
(4)
(106)
-
(110)
18
-
(92)
96
38
(8)
126
31
88
245
(38)
49
-
11
-
-
11
-
22
-
22
41
-
63
54
3
(8)
49
90
88
227
At 1 October 2015
(Charge)/credit to the
income statement
(Charge)/credit to equity
At 1 October 2016
Credit to the income statement
Charge to equity
At 30 September 2017
The current year deferred tax adjustment relating to share-based payments reflects the estimated total future tax relief
associated with the cumulative share-based payment benefit arising in respect of share options granted but unexercised as
at 30 September 2017.
Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets where
it is probable that these assets will be recovered. As at 30 September 2017, deferred tax assets have not been provided on
trading losses of £1,914,069 (2016: £1,869,565).
65
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
18. Other financial liabilities (restated)
Trade and other payables
Trade payables
Accruals and deferred income
Social security and other taxes
Other payables
2017
£’000
817
7,514
1,411
373
10,115
2016
£’000
1,283
6,568
1,408
295
9,554
Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing
costs. The directors consider that the carrying amount of trade payables approximates to their fair value.
Financial liabilities
Financial liabilities consist of trade payables and obligations under finance leases.
The following details the Group’s remaining contractual maturity for its non-derivative financial liabilities.
Less than
1 month
£’000
1 to 3
months
£’000
3 to 12
months
£’000
1 to 5
years
£’000
701
-
701
718
-
718
-
-
-
51
-
51
116
75
191
514
75
589
-
68
68
-
34
34
Total
£’000
817
143
960
1,283
109
1,392
2017
Trade payables
Obligations under finance leases
2016 (restated)
Trade payables
Obligations under finance leases
Risks arising from financial liabilities
Liquidity risk
This is the risk that the Group may be unable to meet its liabilities as and when they fall due. These liabilities arise from the
day-to-day activities of the Group and from its obligations to customers. The Group is a highly cash generative business and
maintains sufficient cash and standby banking facilities to fund its foreseeable trading requirements.
66
Other informationFinancial statementsGovernanceStrategic report
Notes to the consolidated financial statements
For the year ended 30 September 2017
19. Obligations under finance leases
2017
Within one year
In two to five years
2016
Within one year
In two to five years
Financial leases
Minimum lease
payments
£’000
Less finance
charges
£’000
Present value of
lease obligations
£’000
82
72
154
79
35
114
(7)
(4)
(11)
(4)
(1)
(5)
75
68
143
75
34
109
It is the Group’s policy to lease certain items of office equipment under finance leases. The average lease term is between
three and five years. All lease obligations are denominated in sterling. The fair value of the Group’s lease obligations
approximates to their carrying amount.
20. Other payables
Non-current loans and borrowings
Unsecured debentures
Other payables
Non-current payables
2017
£’000
-
178
178
2016
£’000
848
124
972
The unsecured loan debenture of £848,000 bearing interest at 5% per annum was settled in full on 7 April 2017.
67
Strategic reportGovernanceFinancial statementsOther information
Notes to the consolidated financial statements
For the year ended 30 September 2017
21. Provisions
At 1 October 2016
Additional provisions
Provisions used
At 30 September 2017
Included in non-current liabilities
Included in current liabilities
Office dilapidations
Office
dilapidations
£’000
FSCS
levy
£’000
Other
provision
£’000
Restructuring
costs
£’000
1,081
-
(291)
790
790
-
36
-
(36)
-
-
-
-
1,095
-
1,095
-
1,095
-
492
-
492
-
492
Total
£’000
1,117
1,587
(327)
2,377
790
1,587
The Group is contractually obliged to reinstate its three leased properties to their original state and layout at the end of the
lease terms. The office dilapidations provision represents the directors’ best estimate of the present value of costs which will
ultimately be incurred in settling these obligations.
Other provision
During the year a provision of £1.1m (2016: £Nil) has been recognised to cover the settlement of a one-off tax liability that
has arisen during the year. There is some uncertainty regarding the amount of the outflow required to settle the obligation;
therefore a best estimate has been made by assessing a number of different outcomes considering the potential areas
and time periods at risk and any associated interest. The timing of the outflows are uncertain but the Group expects that
settlement will be within the next 12 months.
Restructuring costs
During the year a restructuring provision of £0.5m (2016: £Nil) has been recognised to cover the estimated costs associated
with the closure of the Tunbridge Wells office by October 2018 when the lease expires. The provision represents the best
current estimate and is based upon a number of key variables for the staff affected, grade and remuneration package. As a
result there is some uncertainty around the value and timing of the liability. It is expected that all costs will be incurred within
the next financial year.
68
Other informationFinancial statementsGovernanceStrategic report
Notes to the consolidated financial statements
For the year ended 30 September 2017
22. Share capital
Issued, fully-called and paid:
38,654,846 (2016: 38,650,070) ordinary shares of 0.1p each
38,655
38,650
2017
£
2016
£
75,000 (2016: 75,000) ordinary non-voting shares of 0.1p each
955,484 (2016: 846,081) A non-voting ordinary shares of 0.1p each
767,465 (2016: 773,994) X non-voting ordinary shares of 0.1p each
Issued, partly-called and paid:
104,000 (2016: 74,000) A non-voting ordinary shares of 0.1p each
– 0.2% partly-called and paid
221,104 (2016: 221,104) A non-voting ordinary shares of 0.1p each
– 0.3% partly-called and paid
158,890 (2016: 167,102) B non-voting ordinary shares of 0.1p each
194,633 (2016: 201,631) C non-voting ordinary shares of 0.1p each
275,317 (2016: Nil) D non-voting ordinary shares of 0.1p each
117,037 (2016: 121,956) X non-voting ordinary shares of 0.1p each
– 0.2% partly-called and paid
57,597 (2016: 57,597) X non-voting ordinary shares of 0.1p each
– 10% partly-called and paid
143,863 (2016: 143,863) A non-voting ordinary shares of 0.1p each
– 0.3% partly-called and paid
75
955
767
75
846
774
40,452
40,345
-
-
-
8
10
-
7
-
25
-
-
-
8
-
-
7
-
15
Total value of fully or partly-paid shares
40,477
40,360
69
Strategic reportGovernanceFinancial statementsOther information
Notes to the consolidated financial statements
For the year ended 30 September 2017
The following share transactions that have had an impact on share premium during the year:
Transaction type
Share class
Number of
shares
Premium
£’000
New issue under OTB
A non-voting ordinary shares of 0.1p each, 0.2% partly-paid
New issue under OTB
D non-voting ordinary shares of 0.1p each
Exercise of EMI options
A non-voting ordinary shares of 0.1p each
Exercise of CSOP options
Ordinary shares of 0.1p each
New issue
Full payment
A non-voting ordinary shares of 0.1p each
X non-voting ordinary shares of 0.1p each
Repurchase and cancellation
A non-voting ordinary shares of 0.1p each
Repurchase and cancellation
C non-voting ordinary shares of 0.1p each
Repurchase and cancellation
Ordinary shares of 0.1p each
Repurchase and cancellation
X non-voting ordinary shares of 0.1p each
Repurchase and cancellation
B non-voting ordinary shares of 0.1p each
30,000
275,317
42,545
23,011
76,923
4,919
(6,998)
(11,308)
(16,927)
(11,448)
(8,212)
-
55
42
59
400
21
-
-
-
-
-
577
The ordinary non-voting shares, A non-voting shares and X non-voting ordinary shares have the same rights as to dividend
and on winding-up as to the ordinary shares except they cannot vote at meetings of shareholders.
The B non-voting, C non-voting and D non-voting shares do not have the same rights to a dividend and on winding-up as the
ordinary shares and cannot vote at meetings of shareholders.
70
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
23. Operating leases
Lessee:
The Group has future minimum lease payments under non-cancellable operating leases as follows:
Within one year
In the second and fifth years inclusive
After five years
Property
2017
£’000
2,615
9,496
20,436
32,547
2016
£’000
2,112
5,743
15,936
23,791
Presented below are the minimum lease payments to which the Group would be contractually obligated if all break options
were removed:
Within one year
In the second to fifth years inclusive
After five years
Property
2017
£’000
2,615
9,748
20,875
33,238
2016
£’000
2,173
5,764
16,580
24,517
Operating lease payments represent rentals payable by the Group for its office properties, under non-cancellable operating
lease agreements. At original inception, office property leases are negotiated for an average term of ten to fifteen years and
rentals are fixed for an average of three years.
71
Strategic reportGovernanceFinancial statementsOther information
Notes to the consolidated financial statements
For the year ended 30 September 2017
24. Share-based payments
Equity-settled share option schemes
During the year there have been two HMRC-approved share option schemes in operation, an EMI scheme and CSOP.
Following amendments to the EMI thresholds, the Group ceased to qualify as an eligible participant and the EMI scheme
was closed to new entrants in July 2008. The CSOP was created in July 2009 to replace the EMI scheme, and to ensure that
equity ownership for all levels of employees within the organisation continued to be facilitated.
All remaining unexercised EMI options were exercised during the year. There were no unvested EMI scheme options in
existence during the current or prior year. Therefore, there was no share-based payment expense in respect of the EMI
scheme in either the prior year or current year, nor will there be any expense in future accounting periods.
Options granted under the CSOP vest between three and ten years after the date of grant and are usually forfeited if
the employee leaves the Group before the option expires. The expense for share-based payments under the CSOP is
recognised over the respective vesting period of these options. The expense recognised in the year to 30 September 2017
was £44,903 (2016: £30,040).
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes method,
taking into account the terms and conditions upon which the options were granted.
During the period, a total of 104,896 options were granted under the CSOP. The fair value of these options has been
estimated using the Black-Scholes method.
The inputs to that model for this new issue of options are listed below:
Grant date
Number of shares under option
Fair value of share option from generally accepted business model (£)
Exercise price of an option (£)
Expected volatility
Expected dividend yield
Risk-free interest rate
Expected option life to exercise (months)
15/12/2016
13/03/2017
07/04/2017
93,358
5.20
5.20
25%
4.95%
0.24%
36
5,769
5.20
5.20
25%
4.95%
0.24%
36
5,769
5.20
5.20
25%
4.95%
0.22%
36
Options are exercisable at a price equal to the market value of the Company’s shares on the date of grant. As the Company
is unlisted, it has no readily available share price and so its share value is calculated using dividend and earnings-
based models to determine a range of valuations. The average price indicated by these valuations is assumed to be the
approximate market value at the date of grant. This is discounted to represent the minority value of one share and is agreed
with HMRC prior to the granting of options. The expected life of the options is based on the minimum period between the
grant of the option, the earliest possible exercise date and an analysis of the historical exercise data and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that historical volatility is
indicative of future trends, which may also not necessarily be the case.
We have estimated the value of Growth shares using the Black-Scholes method, taking into account the terms and
conditions upon which the options were granted. The expense recognised in the period was the fair value of the growth
shares less the 20 pence issue price. This resulted in a charge to the income statement of £62,102 (2016: £38,617), relating
to the issue of 261,855 Growth shares in December 2016 and 13,462 Growth shares in April 2017.
72
Other informationFinancial statementsGovernanceStrategic report Notes to the consolidated financial statements
For the year ended 30 September 2017
The inputs to that model for this new issue of options are listed below:
Grant date
Number of shares granted
Fair value of share from generally accepted business model (£)
Expected volatility
Expected dividend yield
Risk-free interest rate
Expected time to reach growth target (months)
15/12/2016
07/04/2017
261,855
5.20
25%
4.95%
0.15%
19
13,462
5.20
25%
4.95%
0.22%
15
The fair value of the shares has been based on a whole company basis and has been provided independently by our tax
advisers. The dividend yield, volatility and risk-free interest rates are consistent with those used for CSOPs. The expected
time period has been based on the assumed date that the growth target threshold will be met using a three year forecast
approved by the Board.
Details of the aggregate share options (EMI and CSOP) outstanding during the year are as follows:
Reconciliation of the movement in the number of share options:
Outstanding, start of period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding, end of period
Exercisable, end of period
2017
Number
566,936
104,896
(15,579)
(130,101)
2016
Number
529,902
113,984
(26,480)
(50,470)
526,152
566,936
194,900
254,438
The movements in the weighted average exercise price of share options during the year were as follows:
Outstanding, start of period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding, end of period
Exercisable, end of period
2017
(£)
3.28
5.20
3.37
1.22
4.17
3.48
2016
(£)
2.89
5.00
2.99
3.18
3.28
2.94
The Company is unlisted; therefore no quoted price is available for its stock.
The lowest exercise price for share options outstanding at the end of the period was 190p (2016: 22p) and the highest
exercise price was 520p (2016: 500p). The weighted average remaining contractual life of share options outstanding at the
end of the period was seven years (2016: five years).
73
Strategic reportGovernanceFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 30 September 2017
25. Related party transactions
Subsidiaries
The Company has a related party relationship with its subsidiaries. Transactions between the Company and its subsidiaries
and between subsidiaries have been eliminated on consolidation.
Key management personnel
The Group has a related party relationship with its directors and members of the senior management team (the ‘key
management personnel’). Remuneration of key management personnel is disclosed in note 7. During the year there were no
material transactions or balances between the Group and its key management personnel or members of their close families,
other than noted below.
Directors
Remuneration of the directors is disclosed in note 7.
Charitable donations
During the year, the Group made donations totalling £109,125 (2016: £85,279) to the AJ Bell Trust, a registered charity of
which Mr A J Bell is a trustee.
EQ Property Services Limited
The Group is party to a lease with EQ Property Services Limited for rental of the Head Office premises, 4 Exchange
Quay, Salford Quays, Manchester M5 3EE. Mr A J Bell and Mr M T Summersgill are directors and shareholders of both
AJ Bell Holdings Limited and EQ Property Services Limited. The 15 year lease was signed for rental of the building on
17 August 2016, at a market rate of £1,593,582 per annum. No amount was outstanding at year end.
26. Events after the date of the consolidated statement of financial position
At the date of approval of these consolidated financial statements, the directors are not aware of any material events after
the date of the consolidated statement of financial position.
74
Other informationFinancial statementsGovernanceStrategic report Financial statements Company statement of financial position
as at 30 September 2017
Assets
Non-current assets
Investments
Current assets
Trade and other receivables - due within one year
Trade and other receivables - due after one year
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Net assets
Equity
Share capital
Share premium
Retaining earnings
Total equity
Notes
2017
£’000
2016
£’000
4
5
5
6
7
10,102
10,130
788
3,694
10,569
15,051
(1,236)
(62)
(1,298)
1,226
5,806
15,068
22,100
(585)
(1,089)
(1,674)
23,855
30,556
40
2,806
21,009
23,855
40
2,229
28,287
30,556
Approved by the Board on 12 December 2017 and signed on its behalf by:
Mr Michael Summersgill (Director)
for and on behalf of AJ Bell Holdings Limited
4 Exchange Quay, Salford Quays, Manchester M5 3EE
12 December 2017
78
Other informationFinancial statementsGovernanceStrategic report Company statement of changes in equity
for the year ending 30 September 2017
Balance at 1 October 2016
Total comprehensive income for the year:
Profit for the financial year
Transactions with owners, recorded directly in equity:
Issue of share capital
Dividends
Purchase of own share capital
Equity settled share-based payment transactions
Deferred tax effect of share-based payments
Tax relief on exercise of share options
Share
capital
£’000
40
Share
premium
£’000
Retained
earnings
£’000
2,229
28,287
Total
equity
£'000
30,556
-
-
-
-
-
-
-
-
3,199
3,199
577
-
577
-
-
-
-
-
(10,564)
(10,564)
(165)
107
88
57
(165)
107
88
57
Balance at 30 September 2017
40
2,806
21,009
23,855
Balance at 1 October 2015
Total comprehensive income for the year:
Profit for the financial year
Transactions with owners, recorded directly in equity:
Issue of share capital
Dividends
Equity settled share-based payment transactions
Deferred tax effect of share-based payments
Tax relief on exercise of share options
Share
capital
£’000
40
Share
premium
£’000
1,913
Retained
earnings
£’000
30,811
Total
equity
£'000
32,764
-
-
-
-
-
-
-
9,107
9,107
316
-
316
-
-
-
-
(11,763)
(11,763)
69
(8)
72
69
(8)
72
Balance at 30 September 2016
40
2,229
28,287
30,556
79
Strategic reportGovernanceFinancial statementsOther information Notes to the Company financial statements
for the year ended 30 September 2017
1. Significant accounting policies
Basis of accounting
AJ Bell Holdings Limited ("the Company") is a private company limited by shares and is incorporated and domiciled in the
UK. The address of the registered office is stated within 'Company information'. The financial statements are presented in
sterling, which is the Company's functional and presentational currency.
The financial statements are prepared in accordance with Financial Reporting Standard FRS101 Reduced Disclosure
Framework ("FRS 101"). The amendments to FRS101 (2014/15 cycle) issued in 2015 have been applied.
In preparing these financial statements the Company applies the recognition, measurement and disclosure requirements
of International Financial Reporting Standards as adopted by the EU ("Adopted IFRS's”) but makes amendments where
necessary in order to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101
disclosure exemptions have been taken. Shareholders were notified of, and did not object to, the use of the EU-adopted
IFRS disclosure exemptions.
Disclosure exemptions
The Company is included in the consolidated financial statements of AJ Bell Holdings Limited, a company incorporated in
the United Kingdom, whose consolidated financial statements are publicly available. Consequently, the Company has, in
compliance with FRS101, taken advantage of the exemption from preparing the following disclosures that would otherwise
have been required by IFRS:
•
•
•
•
•
•
IAS 7 Presentation of a cash flow statement;
IAS 8 Disclosures in respect of new standards and interpretations that have been issued but which are not yet effective;
IAS 24 Disclosure of key management personnel compensation and the disclosure of transaction with group companies;
IAS16 and IAS 38 Comparative information in respect of the reconciliation of net carrying value;
IFRS 7 Disclosure in respect of financial instruments, provided that equivalent disclosures are included in the
consolidated financial statements of the Group in which the entity is consolidated; and
IFRS 13 Fair Value Measurement paragraphs 91 to 99, provided that equivalent disclosures are included in the
consolidated financial statements of the Group in which the entity is consolidated.
Investments
Investments in subsidiary undertakings are shown at cost less provision for impairment.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised
directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided
for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by
the year end and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the temporary difference can be utilised.
80
Other informationFinancial statementsGovernanceStrategic report Notes to the Company financial statements
for the year ended 30 September 2017
2. Profit for the financial year
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and
loss account for the year. The Company reported a profit for the year ended 30 September 2017 of £3,199,000 (2016:
£9,107,000). This profit was generated from the Company’s principal activity which is that of a holding company.
The auditor’s remuneration for the audit and other services is disclosed in note 6 to the consolidated financial statements.
3. Charitable donations
During the year, the Company made charitable donations of £109,125 (2016: £85,279).
4.
Investments
Cost
At 1 October
Additions
Capital reduction
At 30 September
Accumulated impairment losses
At 1 October
Impairment in the year
At 30 September
Carrying value
2017
£’000
2016
£’000
10,532
3,772
-
14,304
402
3,800
4,202
18,412
2,120
(10,000)
10,532
402
-
402
10,102
10,130
81
Strategic reportGovernanceFinancial statementsOther information Notes to the Company financial statements
for the year ended 30 September 2017
The Company has investments in the ordinary share capital of the following subsidiaries at 30 September 2017:
Proportion
of ownership
interest and
voting rights held
Name of subsidiary
Principal activity
Country of incorporation
2017
2016
AJ Bell Limited *
Investment / Group administration
England and Wales
100%
100%
AJ Bell Trustees Limited
Ashby London Trustees Limited
AJ Bell Platinum Limited*
Ashby London Actuarial Services Limited*
Dormant
Dormant
Dormant
Dormant
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
AJ Bell Management Limited*
Investment administration
England and Wales
100%
100%
Sippdeal Trustees Limited
AJ Bell (PP) Trustees Limited
Whitehead Trustees Limited
Ashby London (PP) Trustees Limited
Sippdeal Limited
MSM Media Limited*
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
AJ Bell Securities Limited*
Dealing and custody
England and Wales
100%
100%
Lawshare Nominees Limited
AJ Bell EBT Limited*
AJ Bell Media Limited*
MoneyAM Limited
Dormant
Dormant
Media
Dormant
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
AJ Bell Asset Management Limited*
Investment management services
England and Wales
100%
75%
AJ Bell Investments LLP
Investment management services
England and Wales
100%
75%
Indexx Markets Limited
AJ Bell Capital Limited
Dormant
Dormant
England and Wales
100%
75%
England and Wales
100%
75%
* indicates direct investment of AJ Bell Holdings Limited
The financial statements for the year ended 30 September 2017 of AJ Bell EBT Limited have been exempted from audit
under s479C of the Companies Act 2006 by way of parent guarantee from AJ Bell Holdings Limited.
AJ Bell Capital Limited and Indexx Markets Limited are now wholly owned subsidiaries of AJ Bell Asset Management Limited
following the acquisition of the 25% minority interest during the year ending 30 September 2017.
The registered office of all subsidiaries is 4 Exchange Quay, Salford Quays, Manchester, M5 3EE.
82
Other informationFinancial statementsGovernanceStrategic report Notes to the Company financial statements
for the year ended 30 September 2017
5. Trade and other receivables
Due within one year:
Amounts owed by Group undertakings
Prepayments and accrued income
Due after one year:
Deferred tax asset relating to share-based payments
Amounts owed by Group undertakings
2017
£’000
1
787
788
245
3,449
3,694
2016
£’000
371
855
1,226
126
5,680
5,806
Amounts owed by Group undertakings falling due after one year relate to loans issued to AJ Bell Limited by the Company
in relation to costs incurred by AJ Bell Limited in renewing IT infrastructure and administration systems in order to enhance
products and services for the Group.
6. Trade and other payables
Trade payables
Amounts owed to Group undertakings
Accruals and deferred income
7. Called-up share capital
The Company’s share capital is disclosed in note 22 to the consolidated financial statements.
2017
£’000
8
1,228
-
1,236
2016
£’000
-
570
15
585
83
Strategic reportGovernanceFinancial statementsOther information Unaudited five-year summary
For the year ended 30 September 2017
IFRS
Results
Revenue
Profit from operations
Profit before tax
Profits attributable to equity
holders of AJ Bell Holdings
Limited
Assets employed
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Long-term provisions
Net assets
Financed by
Equity
Key statistics
Earnings per share (pence)
Fully diluted earnings per share
(pence)
Dividends paid in year
(pence per share)
Dividend declared with respect to
profits generated in year
(pence per share)
(restated)
(restated)
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
75,576
21,776
21,697
64,466
16,749
16,779
57,038
15,387
15,469
53,493
15,914
16,117
57,043
23,725
23,902
17,571
13,440
12,329
12,523
18,164
11,722
64,310
9,993
57,248
10,011
52,231
11,487
88,034
11,863
83,908
(13,634)
(11,693)
(9,372)
(49,309)
(48,420)
(246)
(790)
(1,006)
(754)
(199)
(398)
(428)
(398)
(358)
(315)
61,362
53,788
52,273
49,386
46,678
61,362
53,788
52,273
49,386
46,678
42.85
42.60
25.75
32.85
32.73
28.75
30.23
30.17
25.25
30.87
30.76
25.00
45.08
44.82
24.75
28.25
25.75
25.50
25.25
25.00
84
Other informationFinancial statementsGovernanceStrategic report Other information
Definitions
The following definitions are used throughout the annual report and financial statements:
AJBIC
AJBYI
AUA
BAU
Board
CGT
CGU
CRD IV
CRR
CSOP
DEPS
DIY
EBA
EMB
EMI
FCA
FRC
FRS
FTSE
GDPR
GIA
HMRC
IAS
IFRIC
IFRS
IOC
ISA
KOS
LISA
MBO
AJ Bell Investcentre
AJ Bell Youinvest
Assets Under Administration
Business as Usual
The Board of Directors of AJ Bell Holdings Limited
Capital Gains Tax
Cash Generating Unit
The Capital Requirements Directive IV
Capital Requirement Regulation
Company Share Option Plan
Diluted Earnings Per Share
Do It Yourself
European Banking Authority
Executive Management Board
Enterprise Management Incentives
Financial Conduct Authority
Financial Reporting Council
Financial Reporting Standards
The Financial Times Stock Exchange
General Data Protection Regulations
General Investment Account
Her Majesty's Revenue and Customs
International Accounting Standard
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Investment Operations Certificate
Individual Savings Account
Key Operating System
Lifetime ISA
Management Buy Out
MiFID II
Markets in Financial Instruments Directive II
MPS
OCF
OTB
PBT
PLC
PSA
SIPP
SREP
SSAS
Managed Portfolio Service
Ongoing Charges Figure
Option To Buy
Profit Before Tax
Public Limited Company
Professional Squash Association
Self-Invested Personal Pension
Supervisory Review and Evaluation Process
Small Self-Administered Scheme
UK GAAP
UK Generally Accepted Accounting Principles
VT
XO
88
Valu-Trac
Execution Only
Other informationFinancial statementsGovernanceStrategic report Company information
Company number
04503206
Company Secretary
Mr Christopher Bruce Robinson
Registered office
4 Exchange Quay
Auditor
Bankers
Salford Quays
Manchester
M5 3EE
KPMG
1 St Peter’s Square
Manchester
M2 3AE
Bank of Scotland plc
1 Lochrin Square
92 – 98 Fountainbridge
Edinburgh
EH3 9QA
89
Strategic reportGovernanceFinancial statementsOther information AJ Bell Holdings Limited, 4 Exchange Quay, Salford Quays, Manchester M5 3EE
0345 40 89 100
www.ajbell.co.uk
Company registration number 04503206