INVESTING
FOR SUCCESS
Annual Report and Financial Statements 2018
Holdings Limited
Contents
Strategic report
3 Group highlights
4 Chairman's statement
6 Chief Executive Officer's report
8 Financial review
10 About us
12 The AJ Bell Way
16 Brand awareness
18 Our people and Corporate Social Responsibility
21 Principal risks and uncertainties
Governance
26 Board of Directors
27 Executive Management Board
28 Directors' report
31 Statement of directors’ responsibilities in
respect of the Strategic report, Directors’
report and the financial statements
32
Independent auditor’s report to the members
of AJ Bell Holdings Limited
Financial statements
34 Consolidated income statement
35 Consolidated statement of financial position
36 Consolidated statement of changes in equity
37 Consolidated statement of cash flows
38 Notes to the consolidated financial statements
74 Company statement of financial position
75 Company statement of changes in equity
76 Notes to the Company financial statements
82 Unaudited five-year summary
Other information
83 Definitions
84 Company information
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.
As one of the largest investment
platforms in the UK, based
on the value of our AUA, we
operate successfully in both the
advised and D2C areas of the
platform market through our
flagship platform propositions;
AJ Bell Investcentre and AJ Bell
Youinvest.
For more information visit:
www.ajbell.co.uk/investor-relations
Group highlights
Key performance indicators
Non-financial highlights
Financial highlights
Assets under administration
Revenue
£89.7m
19%
£38.6bn
(30 September 2017: £75.6m)
£30.9bn
£46.1bn
16%
£8.9bn
£7.5bn
Platform
Non-platform
2017
£39.8bn
2018
£46.1bn
Profit before tax
£28.4m
(30 September 2017: £21.7m)
31%
Number of retail customers
PBT margin
31.6%
2.9ppts
183,213
(30 September 2017: 28.7%)
141,207
197,912
20%
23,350
14,699
Platform
Non-platform
2017
164,557
2018
197,912
Revenue per £AUA*
21.0bps
(30 September 2017: 21.1bps)
0.1bps
Customer retention rate*
95.1%
(30 September 2017: 94.4%)
0.7ppts
Diluted earnings per share
54.05p
(30 September 2017: 42.60p)
27%
*for definitions see page 83
Chairman's statement
"It is pleasing to report a further year of significant growth for the Group,
during which we have delivered record levels of revenue, profit 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."
Les Platts
Chairman
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 and our core infrastructure is
critical in delivering this ambition.
Overview of the year
The Group continues to show strong growth, with
total retail customers increasing by 20% from 164,557
to 197,912 during the financial year and assets under
administration (AUA) growing by 16% from £39.8bn to
£46.1bn.
Profit before tax for 2018 increased by 31% from £21.7m
to £28.4m. The underlying growth in the customer base
and efficiency of our operating model continue to deliver
earnings growth, with diluted earnings per share of
54.05p for the year – an increase of 27% from the 42.60p
reported in the prior year.
It has been both a challenging and rewarding year that
has seen us deliver significant enhancements to our
operational infrastructure, systems and processes whilst
continuing to develop our product propositions. During
the year we successfully completed the relocation of
our stockbroking operation from Tunbridge Wells to
our head office in Manchester and implemented the
regulatory changes required ahead of MiFID II and
GDPR. The business is also preparing for a listing on the
London Stock Exchange in 2018 Q4, subject to market
conditions, and we are currently progressing with this
preparation in line with expectations.
Governance
The Board is committed to developing the corporate
governance structures of the Group to ensure they
meet best practice. The Board continues to provide
strong support and suitable challenge to the Executive
Management Board (EMB) in order to ensure the Group’s
strategy is delivered in an appropriate and controlled
manner.
The Board welcomed Eamonn Flanagan and Laura
Carstensen as new independent Non-executive Directors
of the Group during the first half of the year. Eamonn
chairs both the Audit and Disclosure Committees,
with Laura chairing the Remuneration Committee and
acting as the Senior Independent Director of the Group.
Both bring with them valuable industry knowledge
4
and expertise which will complement our existing
management team as we plan for the next phase of
growth in the business.
As previously announced, John Tomlins stepped down
from the Board in March this year after serving over
four years as a Non-executive Director. On behalf of
the Board, I would like to thank John for his valuable
contribution to the Group and we wish him well for the
future.
The Board has met ten times during the year and
is supported by five sub-committees: Audit, Risk
& Compliance, Remuneration, Nominations and
Disclosure. The Disclosure Committee has been
formed in preparation for our proposed listing and has
delegated responsibility for overseeing compliance
with obligations under the Listing Rules and the
Disclosure Guidance and Transparency Rules. It is also
responsible for the implementation of the governance
procedures associated with the assessment, control and
disclosure of Inside Information. The Risk & Compliance
Committee met five times, the Audit Committee four
times, the Remuneration Committee three times and
the Nominations and Disclosure Committees once. The
Board and its sub-committees achieved 100% attendance
for all meetings, with the exception of one Risk &
Compliance meeting where the attendance was 75%.
Responsibility for the day-to-day management of the
business remains with the EMB (see page 27).
Shareholder returns
The Board continues to adopt a progressive dividend
policy, which is balanced with holding sufficient funds
for future investment and our regulatory capital
requirements. The Board has declared a final ordinary
dividend of 21.50p per share for the year-end which,
including the interim ordinary dividend of 14.00p per
share, takes the total ordinary dividend for the year to
35.50p per share, compared to 28.25p in the previous
year. In addition to our ordinary dividends, the Board
declared and paid a special dividend of 19.50p per
share during September 2018, reflecting confidence in
our financial performance and also our commitment
to distribute excess cash to our shareholders. The
total dividend, including the special dividend, gives a
combined 55.00p per share. I am pleased to report that
we have increased our ordinary dividend every year since
we paid our first dividend in 2004.
Outlook
A changing macroeconomic environment presents
both opportunities and challenges for the business and
we expect further market volatility for the foreseeable
future with the backdrop of the UK’s exit from the EU.
The business has experienced a variety of economic
conditions during its twenty-plus years of history, and it
has always operated profitably during that time.
The platform market continues to demonstrate strong
growth and we are well placed to capitalise on the
further opportunities as they arise. We approach the
forthcoming year with a clear strategy, supported by our
strong platform propositions, scalable infrastructure and
an ambitious, founder-led management team.
Our commitment to growth and delivering value to our
shareholders and wider stakeholders is as strong as
ever. We are a well-capitalised, highly profitable and
cash generative business and look to the future with
confidence as we aim to build on these strong results
and deliver further success for the business.
Les Platts
Chairman
5
GovernanceFinancial statementsStrategic reportOther information Chief Executive Officer's report
"I am pleased to report another year of significant progress for AJ Bell. In the
12-month period to 30 September 2018 we have attracted a record number of
new retail customers and delivered the most profitable trading period in our
history. The success of the business is driven by our customer acquisition and
retention rates, which are in turn underpinned by our award-winning, scalable,
easy- to-use platform, quality of service and competitive pricing. Put simply,
at AJ Bell we help people invest and our aim is to be the easiest investment
platform to use."
Andy Bell
Chief Executive Officer
Overview
The key drivers of our business, customers and AUA,
grew by 20% and 16% respectively during the 12-month
period. This growth led to revenue increasing by 19%
from £75.6m to £89.7m and profit before tax rising by
31% from £21.7m to £28.4m.
The number of net new retail customers increased
by 33,355 during the period to a total of 197,912. This
increase is predominantly due to the strong growth
in our two platform propositions, AJ Bell Investcentre
and AJ Bell Youinvest, with customer numbers for each
growing by 16% and 46% respectively.
The £4.4bn net AUA inflows for the period were driven
by incoming transfers, contributions and subscriptions,
helping to increase AUA from £39.8bn to £46.1bn. This
included gross inflows of £8.0bn and outflows of £3.6bn
which were significantly increased by our decision
to discontinue two of our third party administration
contracts. The customer retention rate of our platform
propositions remained high at 95.1%. The impact from
market movements, return on investments and other
movements was £1.9bn, with the FTSE All Share closing
at the end of September 2018 marginally higher than a
year earlier. Many of the world’s largest stock markets
reached a record high during the year, but asset values
have been volatile throughout the year and have fallen
since the year-end.
Our preparations to list on the London Stock Exchange
are entering the final stage and we remain on track to
list in 2018 Q4, subject to market conditions. A listing
will enhance our brand and increase the profile of the
business and I believe it is the next natural step, having
operated as a successful and highly profitable private
company for over 23 years. A listing will also enable
more institutional investors to participate in AJ Bell’s
future and, as previously publicised, an element of the
offering will be exclusively set aside for our own retail
customers.
Strategic update
Our leading strategic aim is to become the easiest
platform to use and each year we invest in technology
and innovation to improve the customer journey and
develop our platform propositions. Mobile technology, in
particular, is revolutionising the way people manage and
access their money. We continue to invest in applications
for mobile technology to ensure our customers have the
ability to invest how they want and when they want.
AJ Bell Youinvest launched its Mywealth functionality
during the year, making it easier for customers to manage
their finances by providing a snapshot of their financial
position, wide of platform investments held with AJ Bell.
Our digital strategy for AJ Bell Investcentre has seen the
launch of a new mobile application that allows customers
to access their accounts on the move via iOS and
Android devices. This also provides a dealing service for
those customers who have an execution-only account.
A stocks and shares Lifetime ISA was launched for
AJ Bell Investcentre earlier in the year, following the
success of the AJ Bell Youinvest Lifetime ISA in 2017. We
remain one of only a few investment platforms to offer
the product, which has been popular with existing and
new customers.
We extended our range of simple, transparent low-cost
investment solutions during the year and reduced our
prices. Our AJ Bell Passive fund range now includes the
AJ Bell Global Growth fund, which is a multi-asset fund
focused on global equities. In addition, two new income-
focused multi- asset portfolios were launched for AJ Bell
Investcentre’s Managed Portfolio Service. Our annual
management fees for both the AJ Bell Passive fund
range and the Managed Portfolio Service were reduced
to 0.15% excluding VAT, whilst maintaining our 50bps cap
on ongoing fund charges (OCF).
Earlier in the year we embarked on a project to relocate
our Tunbridge Wells operation to Manchester. This
project was undertaken as part of the implementation
of the Group’s target operating model, which aims to
enhance operational efficiencies across the business
in future years. The final phase of the project was
successfully completed on time in September 2018.
At AJ Bell, we believe in providing a culture that allows
staff to learn, develop and succeed in a dynamic, fast-
paced environment. Earlier in the year we achieved a key
strategic aim when we were recognised as one of the UK’s
top 100 Best Companies to Work For. The award, based
on feedback from staff, is the largest of its kind in the UK
and represents a significant achievement for the business.
6
Market developments
The UK investment and savings market is estimated to
grow from £2.3 trillion to £2.8 trillion between 2017 and
2020 (source: Spence Johnson). The rate of growth
of the platform market we operate within is currently
outpacing that of the wider UK savings and investment
market as technology savvy and cost-conscious
customers move from non-platform to platform
providers. We believe the current trend will continue in
future years, representing a significant opportunity for
the business, given its core strengths.
The FCA’s interim report on the Investment Platforms
Market Study was published in July 2018. The market
study looks at how competition is developing in this
growing sector, and concludes that the market appears
to be working well in many respects, for both advised
and non-advised consumers, with customer satisfaction
currently high. It did highlight that for five consumer
groups there were potential improvements that could be
made and it is with these groups in mind that the market
study posed a series of questions to better understand
the issues. We have contributed to the market study by
responding to the specific questions posed, and through
additional independent input.
In particular, we support the FCA’s simple and pragmatic
approach to comparing the costs of different platform
providers by focusing on each platform’s revenue
margin. This is the total amount of revenue each platform
makes in a year from each £ of customer AUA. We have
adopted this measure as one of our KPIs to provide
transparency and comparison with the rest of the
market. On this basis, our revenue is 21 bps per £ of AUA,
representing one of the lowest margins in the market.
As a net recipient of transfers from other financial
institutions and platforms, we are particularly supportive
of any regulatory impetus that can be provided to
industry initiatives designed to speed up and simplify
the transfer process. Having provided feedback to the
FCA on their findings and proposed remedies, we look
forward to the publication of the final report of the
Platforms Market Study, which is due in 2019 Q1.
We operate in a highly regulated environment and
during the year, there were two significant changes in
legislation. Firstly, The Markets in Financial Instruments
Directive II (MiFID II) became effective from January 2018
and secondly, the General Data Protection Regulation
(GDPR) came into force in May 2018. During the year we
have undertaken significant investment to enhance our
systems and processes to ensure we comply with the
new legislation. Given our scale and profitability, we have
the infrastructure and flexibility to deal with an evolving
regulatory environment, but the cost and complexity can
act as a barrier to entry for potential new entrants.
On 9 December 2019 the Senior Manager and
Certification Regime (SMCR) will come into effect
for the rest of the financial services sector, having
been implemented for banks in 2016. At its heart, the
SMCR is about having a good corporate culture and
accountability for senior management. In achieving this,
the aim is to ensure that markets operate effectively and
in doing so prevent harm to consumers. As we are a large
business we have both Enhanced and Core entities that
require different levels of effort to ensure we are ready
for December 2019.
Conclusions and outlook
The outlook for the Group remains positive, with the
long-term UK investment and savings market growing
strongly, and within it the platform market continuing
to grow at a faster rate. In the UK there is a growing
awareness of the savings gap as people continue to live
longer. The World Economic Forum has flagged the UK
as one of several countries facing a significant shortfall,
estimated at £25 trillion by 2050 if action is not taken.
The need for people to save and invest in their future
has never been higher and we aim to provide the easiest
investment platform to use in the market.
We have a well-established brand, strong product
propositions with highly competitive pricing and a
scalable, easy-to-use, award-winning platform supported
by great customer service. In the following 12 months
we have exciting plans to enhance our propositions.
The development of the Mywealth functionality will
continue to make it easier for customers to manage
their finances and investments. Our digital strategy for
AJ Bell Investcentre will focus on a number of initiatives
to improve the customer’s journey. These are expected to
include introducing an execution-only dealing facility for
customers under ISA and GIA.
The final report on the Investment Platforms Market
Study is due to be published in 2019 Q1 and we expect
it will contain a number of actions for the industry. We
believe further transparency in the market that allows
customers to compare charges would be positive for
the industry, and we will be supportive of any measures
introduced to achieve it.
The UK base rate has increased from 0.25% to 0.75%
during the year. Any further moves from the BOE will be
influenced by the terms of the UK’s departure from the
EU on 29 March 2019, and we expect market volatility
to continue as we approach the deadline – and possibly
beyond, depending on the outcome. Our mix of recurring
and transactional revenue streams yields a balanced
overall revenue model and provides resilience during
changing macroeconomic conditions.
This year we have acquired more customers than at any
time in our history and have reported our most profitable
trading period since the company was established. I
believe this is a springboard to enjoy greater successes in
the future as we plan for the next phase of growth in the
business. These results would not be possible without the
commitment of our staff and the quality of their work, and
I would like to take this opportunity to thank them. We
look forward to next year with optimism as we prepare for
another exciting period in the company’s history.
Andy Bell
Chief Executive Officer
7
GovernanceFinancial statementsStrategic reportOther information Financial review
The Group has delivered record financial results this year, with revenue up
19% to £89.7m and profit before tax increasing 31% to £28.4m (2017: £21.7m).
These strong results have been achieved by continuing the growth of our
platform business. The number of platform customers increased by 42,006
in the year, representing a 30% increase on the prior year. This strong flow
of new business increased our platform customer numbers to 183,213 and
platform AUA to £38.6bn at 30 September 2018 (2017: £30.9bn).
Michael Summersgill
Chief Financial Officer
Financial performance
Revenue
Revenue increased by 19%, from £75.6m to £89.7m for
the year ended 30 September 2018. We have three
categories of revenue, these being recurring ad-valorem,
recurring fixed fee and transactional.
Recurring ad-valorem revenue (comprising of custody
fees, retained interest income and investment
management fees) grew by 29% to £47.9m (2017:
£37.2m). This increase was driven by the strong levels
of new business and the high asset values across the
world’s largest stock markets, from which the majority of
our ad-valorem charges are derived. Custody fees grew
broadly in line with AUA, with retained interest income
growing at a faster rate following the BOE’s decision to
increase the UK base rate twice during the period.
Recurring fixed revenue (which includes recurring
pension administration fees and media revenue) saw an
increase of 4% this year to £25.2m (2017: £24.2m). The
increase has been predominantly driven by the increase
in AJ Bell Investcentre customers.
Transactional revenue (incorporating dealing fees and
pension scheme activity fees) grew by 17% to £16.6m
(2017: £14.2m) as a result of an increase in customers.
However, this was slightly offset by an adverse rate
variance caused by an increase in the number of
customers using the discounted dealing service for
regular investment and dividend reinvestment.
Administrative expenses
Administrative expenses increased by 14% to £61.4m
(2017: £53.8m). Staff costs remain our largest expense,
increasing by 16% to £32.6m (2017: £28.2m), with the
average number of staff rising to 758 (2017: 656). This
increase is partly due to the growth in the customer
base, but was also impacted by the relocation of our
stockbroking operation from our Tunbridge Wells office
to our Head Office in Manchester. A small provision of
£0.2m remains at the year-end for the redundancy costs.
Non-staff costs totalled £28.8m, an increase of £3.2m
in comparison to the prior year (2017: £25.6m). This
included ‘one-off’ professional fees of £1.8m incurred
in relation to our proposed listing on the London Stock
Exchange. Marketing costs also increased by £0.6m this
year, reflecting our continued investment in the AJ Bell
brand.
Total capitalised expenditure was £1.7m (2017: £3.6m)
relating to additional equipment for the centralisation of
operations in Manchester and to support the growth of
the business.
Profit before tax (PBT)
PBT increased by 31% to £28.4m for the year ended 30
September 2018, compared to £21.7m in the prior year.
The increase in profitability is due to the strong growth
in our customer base and AUA in combination with
operational efficiency improvements made across the
business.
Tax
The effective tax rate for the year was 20.1% (2017:
19.5%). 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 11.45p
per share, from 42.60p per share last year to 54.05p 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 £64.0m at 30 September 2018 (2017:
£61.4m), providing a healthy surplus to our regulatory
capital requirement and a return on assets of 35%
(2017: 28%). 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 £49.7m at the year-end, an increase
of 18% compared with the prior year (2017: £42.1m). This
cash surplus ensures that we have funds available to
invest in the business and maintain a significant liquidity
buffer.
8
Further details on our capital requirements can be found
under our Capital Requirement Regulation (CRR) Part
Eight disclosures (see page 29 on the Directors’ report
for more information).
Revenue
£89.7m
Dividends
(30 September 2017: £75.6m)
19%
The Board has declared a final ordinary dividend of
21.50p per share, equating to an ordinary dividend
payout ratio of 65% for the full year. This takes the total
ordinary dividend for the year to 35.50p per share; a
26% increase when compared to the 28.25p payment in
the previous year. This reflects the financial strength of
the Group and the Board’s commitment to a progressive
dividend policy, whilst also ensuring we have sufficient
capital to invest in the business and maintain a surplus of
regulatory capital.
The Board declared and paid a special dividend of
19.50p per share (2017: Nil) in September 2018 in order
to distribute excess cash to shareholders ahead of
the proposed listing. The total dividend for the year,
including the special dividend, was 55.00p.
Michael Summersgill
Chief Financial Officer
Profit before tax
£28.4m
(30 September 2017: £21.7m)
31%
Net assets
£64.0m
(30 September 2017: £61.4m)
4%
Total ordinary dividend
55.00p*
(30 September 2017: 28.25p)
95%
Return on assets
35%
(30 September 2017: 28%)
7ppts
*including special dividend
9
GovernanceFinancial statementsStrategic reportOther information About us
As one of the largest investment platforms in the UK, based on the value of our AUA,
we operate successfully in both the advised and D2C areas of the platform market
through our flagship platform propositions; AJ Bell Investcentre and AJ Bell Youinvest.
Our business
AJ Bell offers SIPPs, ISAs and General Investment/Dealing
Accounts. Our customers and advisers are provided with
additional support in the form of various investment
solutions, tools and investment content. We also offer
access to a broad range of investments, including
shares and other instruments traded on the major stock
exchanges around the world, as well as all mainstream
collective investments available in the UK and a range of
in-house investment solutions.
AJ Bell Investcentre is one of the fastest-growing
platforms in the UK advised platform market. It provides
regulated financial advisers and wealth managers
with a suite of online tools to help manage their retail
clients' portfolios. It also provides a number of in-house
investment solutions, including a range of collective
investment funds, called the AJ Bell Passive funds range,
and its Managed Portfolio Service, with a range of active
and passive funds. AJ Bell Investcentre also provides
a fully integrated investment custody administration
solution to assist wealth management firms with the
administration of client assets.
Customers
88,658
(30 September
2017: 76,498)
Accounts
102,897
(30 September
2017: 88,230)
AUA
£29.9bn
(30 September
2017: £24.3bn)
AJ Bell Youinvest is one of the UK's fastest-growing D2C
retail investment platforms. The service is principally
designed to meet the requirements of online and
execution-only retail customers. No regulated advice
in the form of personal recommendations is given by
AJ Bell. Our customers are supported with investment
content provided online and through Shares magazine,
and have access to the in-house AJ Bell Passive funds,
selected fund ideas via the AJ Bell Favourite Funds list
and will have access to AJ Bell ready-made portfolios
due to be launched before the end of 2018.
Customers
94,555
(30 September
2017: 64,709)
Accounts
117,765
(30 September
2017: 81,491)
AUA
£8.7bn
(30 September
2017: £6.6bn)
In addition to our investment platform, we also offer
three non-platform services:
• AJ Bell Platinum: providing adviser-led and D2C
pension administration services to customers with
Platinum SIPP and SSAS accounts.
• White label SIPP administration: branded to Barclays
Smart Investor and Halifax Share Dealing.
• AJ Bell Securities stockbroking: providing dealing,
settlement and custody services to institutional
investment businesses.
Although our primary focus is on our two flagship
investment platform propositions, these non-platform
services continue to make a valuable contribution to our
business and are managed to deliver high quality service
and value to existing and new customers.
10
Our market
The platform market is a fast-growing retail
market, within the UK savings and investment
market, with attractive structural growth drivers
and a number of barriers to entry. The FCA’s
Investment Platforms Market Study recently
reported that the platform service provider
market doubled from £250 billion AUA at the
end of 2013 to £500 billion at the end of June
2017. This growth in AUA is being driven by rising
markets and increasing levels of investment.
AJ Bell operates in both the advised and the
D2C platform markets. Both markets continue to
see significant growth, with Platforum recently
quoting estimated growth of around 22% and
21% respectively in 2017. This rate of growth is
expected to continue to outpace the growth of
the wider UK savings and investment market,
driven in particular by increasing demand for
online access to investments from customers and
advisers and the Government’s pension freedoms
reforms, introduced in April 2016.
The FCA’s interim Investment Market Platforms
Study also noted that more consumers are using
platforms, with an increase of around 2.2 million
retail customer accounts between 2013 and 2017.
Platform revenue from retail consumers reached
£1.3 billion in 2017, up from £750m in 2013.
Development of technology through various
distribution channels continues to improve
accessibility and drive both customer growth and
asset flows. The emergence of a digitally savvy
generation who are increasingly managing their
finances through mobile applications and the
arrival of more ‘challenger’ offerings have also
impacted awareness of financial planning and
the need for people to save for themselves. This
trend of digitalisation giving investors the control,
visibility and convenience of investing through
a platform can only continue to drive the rapid
growth already seen within this market.
11
GovernanceFinancial statementsStrategic reportOther information 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. The AJ Bell
Way is a structured framework, informed by our guiding
principles, that aids the development of our strategy and
is the primary tool used for communicating that strategy
to all key stakeholders.
OUR
GUIDING
PRINCIPLES
Strai gh tfor ward
I ntellige nt
Pe rsona l
Prin c iple d
Focu sed
En erge tic
Our guiding principles will drive
our behaviour and will ensure
that staff are fully engaged
with our strategy and goals.
We help people to invest but will not
provide personal recommendations.
We will continue to develop our
customer propositions with a focus
on ease of use, service and price.
We will seek to
continually improve
the quality, efficiency
and security of the
services we provide to
our customers.
L E
P
O
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:
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n
|
O U R P
|
Prop o siti o
RG E TI C
We never
stand still
E
N
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OUR C
m a t ch our custom
I N T ELLIGENT
We know
o ur stuff
U
S
T
O
M
ers’ n
E
R
S
|
e
e
d
s
P
R
I
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We will grow both customer
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key focus will be on organic
growth. We will grow in a
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Our guiding principles will drive
our behaviour and will ensure
that staff are fully engaged
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We help people to invest but will not
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We will grow both customer
numbers and AUA, and the
key focus will be on organic
growth. We will grow in a
sustainable and cost-
effective manner.
We will preserve our
financial security,
regulatory and reputational
standing. We will treat all
stakeholders fairly.
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 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.
13
GovernanceFinancial statementsStrategic reportOther information
The AJ Bell Way
How we create value
High customer retention rates and a diversified revenue
offering combine to yield predictable and sustainable
revenue streams from the business.
We earn the majority of our revenue through
the administration of assets managed on our
investment platform. The mix of fixed fees,
ad-valorem and transactional charges provides
a balance of inflation protection and resilience
in the face of economic and capital market
fluctuations. 82% (2017: 81%) of the Group’s
revenues are recurring in nature, rather than
transactional.
With our re-platforming project completed in
2014, AJ Bell's platform technology is robust,
scalable and adaptable and well placed to
support planned growth. The technology is
fully embedded in the business and we have
migrated other products such as Platinum onto
the core system’s technology. We continue to
significantly invest in technology to ensure the
Platform remains secure, efficient and capable
of delivering enhancements to the services
provided to customers and advisers, in line with
their changing needs. This approach has allowed
us to generate high operating margins, whilst
delivering value to our customers by keeping our
prices low.
Our high quality earnings and scalability
deliver strong profits which quickly convert
into cash, creating value for our stakeholders.
The business continues to adopt a progressive
dividend policy for its shareholders, which is
balanced with holding sufficient funds to meet
our regulatory capital requirements and invest
in the business.
How we deliver value
The AJ Bell Way and its five strategic drivers help us to
grow, develop and create long-term stakeholder value.
Our customers:
making investing easier
We operate in both the advised and D2C areas of the
platform market through our flagship propositions;
AJ Bell Investcentre, an adviser-led investment platform
and custody solution for wealth managers, and AJ Bell
Youinvest, a D2C investment platform. The combination
14
of our expertise in SIPP administration and stockbroking
gives us the core skills needed to excel in the platform
market by delivering a first-class service.
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, with a focus on ease
of use, service and price.
Growth:
growing customer numbers and AUA
We continue to focus on organic growth, both in
terms of customer numbers and the level of AUA, by
developing our marketing capabilities and improving
brand awareness.
We have a well-established branding strategy. Our aim is
to become one of the best-known names in our market
by growing the business in a sustainable and cost-
effective manner. Our marketing strategy is focused on
maximising our PR and sponsorship activities to broaden
our customer reach and attract new customers to the
platform. Our central branding teams are supported by
our AJ Bell Investcentre Business Development team and
our AJ Bell Youinvest Marketing team, who are tasked
with growing our customer base each year.
Finance and assurance:
preserving our established culture of compliance
We have a strong corporate culture at AJ Bell and
the business has developed and maintained strong
relationships with institutional investors since 2007. We
maintain this compliant culture to preserve our financial
security, as well as our regulatory and reputational
standing in the market. We have a progressive dividend
policy which is balanced with holding sufficient funds to
meet our regulatory capital requirements and invest in
the business.
Customer services:
continually improving our customer service
We continually seek to improve the quality, efficiency
and security of the services we provide to our customers
through a resilient, stable and secure IT platform.
The platform uses a hybrid technology solution, which
seeks to combine proprietary and third party systems
into a consolidated, efficient technology platform.
In the digital age, we believe the ability to generate
and implement ideas at speed is paramount to
achieving success. There is a fundamental link between
technological improvements and enhancing the customer
journey. This is why our digital strategy is at the forefront
of our focus to be the easiest platform to use. Our
Innovation function continues to create new ideas and
technologies to ensure our products remain market-
leading and responsive to customer requirements.
Our people:
engaging with our employees
We recognise the importance of ensuring our staff are
fully engaged with our objectives and strategy, and that
all are aligned with our culture. Our success is built on
delivering a first-class service through the skills and
passion of people who bring the ‘AJ Bell Way’ values
to life across the business. We focus on ensuring that
employees are inspired, sourcing talented people and
developing them to realise their potential. This cultivates
a transparent and innovative culture in which we strive to
achieve our strategic objectives.
“We’re always striving to
exceed the expectations of
our customers … we never
stand still and that brings
exciting opportunities”
Helen
Communications Manager
Awards
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:
• The Sunday Times
100 Best Companies to Work For 2018
• ADVFN International Financial Awards
Self-Select ISA Provider of the Year
• The Consumer Investment Awards 2018
Best Online Pension Provider
• Money Marketing Awards
Best Pension Provider 2018
• City of London Wealth Management Awards
Best SIPP Provider
• Moneywise Awards
Best SIPP for Income Drawdown
• Professional Paraplanner Awards
Best Full SIPP 2018
• Platforum Awards
Best Direct Platform 2018, Best Platform 2018
• The Consumer Investment Awards
Best Online Investment Platform
15
GovernanceFinancial statementsStrategic reportOther information Brand awareness
AJ Bell’s ambition is to become one of the best-known names in its markets. During
2018 we continued our focus on increasing both our PR and sponsorship activities,
building on our trusted reputation in the wider market.
Public relations
We continued to build momentum during 2018 with
our aim to become one of the best-known names in the
market, broadening our reach with high profile broadcast
opportunities, mainstream national press and specialist
industry publications coverage.
Our spokespeople regularly appear on high profile
TV and radio stations, predominantly the BBC and
Sky News. Our publicised responses to political and
regulatory announcements on pensions and investments
in general, as well as our daily market comment in
the Shares publication, mark us out as experts in our
industry.
In February 2018 we launched our first-ever TV
advertising campaign, focused on promoting the idea
that investing is a tool to facilitate people’s individual
life choices and aspirations. The TV advert ran for three
months in a targeted campaign on Sky AdSmart. It also
ran for six weeks on the On Demand services ITV Player
and Channel 4OD, as well as on YouTube. This campaign
was well received and we continue to review new media
opportunities to broaden our customer reach.
Invest in the life
you want to live
Sports sponsorship
Our strategic sponsorship partnerships with sporting
teams, events, venues and individuals has once again
delivered high quality exposure for the AJ Bell brand. We
continue to sponsor key activities which align the brand
with positive sporting values – dedication, commitment,
self-belief and striving for success – to help raise
awareness of the positive impact that sport can have on
your physical and mental wellbeing.
16
AJ Bell London Triathlon
The AJ Bell London triathlon is the biggest competition
of its kind in the world, attracting participants of all ages
and abilities, including some of the sport's best and most
exciting elite athletes. 2018 saw our fourth year as title
sponsor of the event. Over 10,000 participants took part
and 30,000 spectators took to the streets around the
London ExCel to cheer on their friends and family.
This year the event played host to the British Triathlon
Mixed Relay Cup, an increasingly popular sport which will
make its Olympic debut in Tokyo in 2020. A one-hour
highlights programme was broadcast on Channel 4, with
coverage also shown on SkySports and Eurosport. The
event was streamed across Front Runner and Premier
Sports whilst the Mixed Relay Cup was also streamed
live on BBC Sport Online, giving great exposure to the
AJ Bell brand.
The AJ Bell World Triathlon Leeds
In May 2018 we were proud to announce a new
partnership with British Triathlon, which sees us take
title sponsorship of the ITU World Series event in Leeds
for up to three years. This event is truly the pinnacle of
the elite calendar in the UK, with Leeds having become
synonymous with the sport, thanks to the worldwide
success of athletes such as the Brownlee brothers.
The AJ Bell World Triathlon Leeds 2018 took place over
the weekend of 9 and 10 June, attracting over 75,000
spectators. The event was covered live on BBC 2, with
viewing figures peaking at just under one million.
Sale Sharks and the AJ Bell Stadium
Our long-term partnership with Sale Sharks continues to
provide fantastic coverage across national media as well
as unmissable branding across the roof of the AJ Bell
Stadium in Salford, which is seen by many thousands of
motorists travelling on the M60 every day.
The 2017 AJ Bell PSA Men’s and Women’s World
Squash Championship
In December 2017 we were delighted to sponsor the
AJ Bell PSA World Squash Championships, in our home
city of Manchester. The event took place over two weeks,
with the final played at the iconic city centre Manchester
Central venue. The championships brought together
over 200 of the world’s best players from the men’s and
women’s tours. The 2017 events marked the first time in
history that men and women competed for equal prize
money.
Our people and Corporate Social Responsibility
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. Our guiding principles drive
our behaviour and ensure that staff are fully engaged with our strategy and goals.
Our people
Our people strategy focuses on talent management and
employee engagement.
Talent management
As our workforce continues to grow, new promotion
opportunities are created. Our talent management
strategy ensures we nurture our staff and give them the
appropriate training, development and support to ensure
they can progress with the business.
We continually strive to enhance our Learning and
Development framework. This year, we have launched
new workshops, online learning and development
programmes to help staff invest in their personal growth,
their career and their future with AJ Bell. This included a
new Team Leader development programme to support
the ongoing development of future leaders within the
business.
Following the launch of the AJ Bell apprenticeship
programme in September 2017, our apprentices have
now completed their first year with the business,
enjoying rotations in our Customer Services department.
They have become skilled and valuable members of the
teams in which they have worked, and have successfully
progressed towards the achievement of the CISI’s
Investment Operations Certificate (IOC). The apprentices
act as great ambassadors for AJ Bell, and recently
appeared on ‘That’s Manchester TV’ to talk about their
experience of our apprenticeship programme. We look
forward to supporting them through to the completion
of their apprenticeships in 2019. Following the success of
the inaugural programme, a new cohort of apprentices
joined us in September 2018.
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. In line with the
growth of the business, we have expanded our reach
for new recruits this year with the launch of a bespoke
recruitment campaign across a range of media outlets.
We have also built stronger links with local schools and
colleges, and held a number of networking events at our
Manchester office, including the CISI’s annual Careers
in Investment Management Insight Conference, which
was attended by over 50 students from around Greater
Manchester. We will continue to develop our employer
brand in the coming year, ensuring that AJ Bell has a
significant presence in the jobs market.
We recruit the best people with the
right skills and behaviours for AJ Bell.
Employee engagement
Our business is founded on a transparent yet innovative
culture, supported by a committed management team
and strong corporate governance. 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 know that our people want opportunities to learn,
gain new skills and to progress their careers. 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. The AJ Bell intranet
has been utilised to communicate with staff, via daily
business updates, staff feedback surveys and social news.
18
BESTCOMPANIESTO WORK FOR2018100 This year we were officially recognised
as one of the Sunday Times’ 100 Best
Companies to Work For, gaining our
highest-ever engagement score.
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.
Gender Pay Gap Reporting
In line with the new regulations, AJ Bell published its
first Gender Pay Gap Report in March 2018. The figures
reported are in line with most financial services companies
and reflect the gender profile of our work force and the
higher number of men in senior roles than women.
We are confident that men and women are paid equally
for doing equivalent jobs across our business, and that
our pay gap is driven primarily by the structure of our
workforce at a senior executive level, the composition of
which has been stable for several years.
In keeping with our guiding principles, we will continue to
evaluate the effectiveness of our HR practices so that we
do not disadvantage anyone. In particular, in relation to
how we attract, select and develop our staff, ensuring they
have the support that they need to realise their potential
at AJ Bell.
Full details of our Gender Pay Gap Report can be found at
www.ajbell.co.uk.
S
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Our staff engagement framework focuses on the eight
measures used within the Best Companies survey; the
largest survey of its kind in the UK. This year we were
officially recognised as one of the Sunday Times’ 100
Best Companies to Work For, gaining our highest-ever
engagement score.
This was a great achievement and testament to our on-
going commitment to invest in our staff and their place
of work, in order to create the best environment to learn,
develop and succeed.
In addition, our EQ4 building has been independently
recognised as being one of the top three work places
in the UK, based on research conducted by Leesman;
the largest independent benchmark of workplace
effectiveness. EQ4 achieved a Leesman+ certification, the
highest rating that can be issued. The award recognises
our commitment to putting the success and wellbeing of
our people at the heart of EQ4, and in doing so create a
truly great place to work.
We are always keen to invest in the health and wellbeing
of our staff, and this summer we offered staff free entry
to two challenges - the Tough Mudder 5k event at
Heaton Park and the AJ Bell London Triathlon. We also
encourage the use of our facilities at EQ4, including the
on-site gym. In response to employee feedback, 2018
saw a host of new gym classes added to compliment the
schedule of activities already provided by our in-house
trainers. We will continue to focus on staff engagement
activities moving into 2019.
To support our employee engagement strategy,
we continue to invest in improvements to our
technology. Following the launch of our new learning
and performance portal last year, we have enhanced
the talent management system’s capabilities so that
employees can now book technical training in line with
their personal needs and manage their progression in
a more dynamic way. Further developments are also
underway to make the system work as a knowledge hub
for training, new policies, and eventually webinars which
will be used to cascade keynote speeches.
19
Corporate social responsibility
At AJ Bell we have a strong social conscience and
encourage our staff to give something back through
charitable and voluntary activities. We have also
introduced company initiatives to help raise the profile
of local charities. Here is a brief summary of the activities
that were undertaken in 2018.
Volunteering
In February staff from our Manchester office took part
in a volunteering day at the Booth Centre, a Manchester
homeless charity which we previously raised £8,000 for in
December through a day of Christmas-themed fundraising
activities.
In September we gave staff in our Manchester office the
opportunity to register to be a blood stem cell donor
with DKMS, a charity dedicated to the fight against blood
cancer and blood disorders, and which is very close to the
heart of one of our colleagues.
Charity fundraising
This year we announced our formal partnership with
Snow-Camp, a national charity which uses snow sports to
engage with young people from disadvantaged inner-
city backgrounds, helping them develop confidence and
self-esteem, as well as achieve nationally recognised
qualifications and work experience. Every hour the young
people spend on the slopes is matched with an hour in the
classroom, which focuses on fundamental life skills that
will help them on their journey into adulthood.
We are proud to have been able to fund the launch of
the Snow-Camp programme in the North West, which
is based at The Chill Factore in Manchester and will see
over 200 young people from the Greater Manchester area
complete the programme in 2018 alone.
We also continue to sponsor the annual AJ Bell Alpine
Challenge, which this year raised over £50,000 for
Snow-Camp.
In May staff from the London office took part in a charity
walk covering six of London’s parks and walking 15 miles
to raise money for Daisy’s Dream, a charity supported
by the family of our colleague Mike Morrison who sadly
passed away in November 2017. In addition, several
staff completed marathons, 10k runs and various other
challenges, including trekking for two weeks to Everest
Base Camp, to raise money for charities close to their
hearts.
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.
We were pleased to announce that for the next two years,
we have donated the naming rights of this stand to
Snow-Camp.
Caring for our environment
At AJ Bell we are committed to giving something back
to our local community, and one way we exemplify this is
through the actions we take to look after our environment.
Since moving into EQ4 last year we’ve taken further steps
to minimise our environmental impact. For example,
installing more energy efficient equipment in the office
and implementing processes to ensure that waste is
recycled.
20
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
Strategic risks
Economic and capital
markets fluctuation risk
The risk that a significant and
prolonged capital market or
economic downturn has an
adverse effect on consumer
confidence.
Potential impact
Mitigations
• Adverse effect on customer
transactional activity or ad-
valorem fees generated from
assets under administration
from which the Group derives
revenue.
The Executive Management Board tracks and
discusses emerging risks to ensure appropriate
responses are in place. The Risk Framework defines
the overarching risk strategy and ensures risks that are
taken are aligned with the business' strategic aim of
achieving controlled growth in fast-growing markets.
Ongoing Brexit negotiations regarding future
relations between the UK and the EU mean 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.
The Group has a variety of transactional and recurring
revenue streams, some of which are fixed amounts
while others are ad-valorem. The mix of revenue types
helps to limit the Group's exposure to capital market
fluctuations.
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 Group remains closely aligned with trade and
industry bodies, and other policy makers across
our market. The use of ongoing competitor analysis
provides insight and an opportunity to adapt strategic
direction in response to market conditions.
21
Competitor or market risk
• Loss of competitive advantage,
The risk that the Group
fails to remain competitive
in its peer group, due to
lack of innovative products
and services, increased
competitor activity, regulatory
expectations, and lack of
marketing focus and spend to
keep pace with competitors.
such that AUA and client
number targets are adversely
impacted. This would have a
negative impact on profitability.
• Reputational damage as a result
of underperformance and/or
regulatory scrutiny.
GovernanceFinancial statementsStrategic reportOther information Principal risks and uncertainties
Risk
Operational risks
Potential impact
Mitigations
Regulatory & litigation risk
• Regulatory censure and/or fine.
The risk that the Group fails
to comply with the existing
standards of the regulatory
system, including FCA,
ICO, HMRC and European
Regulations.
• Related negative publicity could
reduce customer confidence
and affect ability to generate
new inflows.
• Poor conduct could have a
negative impact on customer
outcomes, impacting the
Group's ability to achieve
strategic objectives.
• Complaints and claims from
third parties and clients in
connection with the Group’s
regulatory responsibilities could
have an adverse impact on the
Group’s financial condition.
Forward-looking regulatory
and tax law risk
• Non-compliance with regulation
leading to customer detriment.
The risk of changes to
taxation legislation or
regulatory restriction severely
reducing our ability to
operate.
• Financial loss due to reduction
in client numbers and/or fines
from regulators.
The Group maintains a strong compliance culture
geared towards positive customer outcomes and
regulatory compliance.
The compliance function is responsible for ensuring
all standards of the regulatory system are being
met by the Group. This is achieved by implementing
policies and procedures across the business, raising
awareness and developing an effective control
environment through the deliverance of training.
Where appropriate, the Compliance monitoring
team conducts reviews to ensure a high standard of
compliance has been embedded into the business.
There is currently a lack of certainty as to precisely
what liability attaches to SIPP operators in respect
of SIPP investments which they have accepted at
different times in the past, which have subsequently
performed poorly. This uncertainty has increased
following the dismissal of Berkeley Burke’s claim for
judicial review of the Financial Ombudsman Service’s
decision on a complaint involving the loss suffered by
a customer arising from an investment which turned
out to be fraudulent. The case involved an unregulated
introducer with whom Berkeley Burke had an
agreement. The directors are satisfied that the controls
and procedure in place ensure the Group remains
compliant with its regulatory responsibilities and the
Group has never entered into an agreement with an
unregulated introducer.
The Group’s Board is supported by a Risk and
Compliance Committee, Executive Management
Assurance Committee, and a Risk Management
Committee where all regulatory changes are reported
and scrutinised.
• Missed opportunities to
achieve competitive advantage
through the approach to
implementation.
Strong Compliance Policy and Technical teams
responsible for ensuring all new rules and regulations,
as well as changes to industry practice, are captured,
interpreted and implemented appropriately.
Information security risk
The threat of a vulnerability
in the Group’s infrastructure
being exploited or user
misuse that causes harm to
service, data and/or an asset
causing material business
impact.
• Related negative publicity could
damage customer and market
confidence in the business,
affecting our ability to retain
and attract new customers.
•
Information security breaches
could result in fine/censure from
regulators, ICO and FCA.
The Group continually reviews its cyber security
position to ensure that it protects the confidentiality,
integrity and availability of its network and the data
that resides upon it.
A defence in depth approach is in place with firewalls,
web gateway, email gateway and anti-virus amongst
the technologies deployed. Staff awareness is seen as
being a key component of the layered defences, with
regular updates, training and mock phishing exercises.
Our security readiness is subject to independent
assessment by a penetration testing partner that
considers both production systems and development
activities. This is supplemented by running a
programme of weekly vulnerability scans to identify
configuration issues and assess the effectiveness of
the software patching schedule.
22
Risk
Potential impact
Mitigations
Fraud and financial crime risk
• Loss of data or inability to
The risk of failure to protect
against cybercrime, fraud
or security breaches, as
a result of staff or third
party dishonesty, including
‘cyber’ attack, causing major
misappropriation of customer
funds or theft of customers’
identities.
maintain our systems, resulting
in reputational damage through
negative press exposure.
• Potential customer detriment as
customers are at risk of losing
funds or identities, which can
subject them to further loss via
other organisations.
• Fraudulent activity leading to
identity fraud and/or loss of
customer holdings to fraudulent
activity.
Third party IT failure risk
The risk that a third party
provider materially fails
to deliver the contracted
services.
IT system performance,
capacity & resilience risk
The risk that the design,
implementation and
management of applications,
infrastructure and services fail
to meet current and future
business requirements.
• Loss of service from a third
party technology provider
could have a negative impact
on customer outcomes due to
website unavailability, delays
in receiving and/or processing
customer transactions or
interruptions to settlement and
reconciliation processes.
• Financial impact through
increased operational losses.
• Regulatory fine and/or censure.
• The reliance on evolving
technology remains crucial to
the Group’s effort to develop its
services and enhance products.
Prolonged underinvestment in
technology will affect our ability
to serve our clients and meet
their needs.
• Failing to deliver and manage
a fit-for-purpose technology
platform could have an adverse
impact on customer outcomes
and affect the ability to attract
new customers.
•
IT failures may lead to financial
or regulatory penalties, and
reputational damage.
Extensive controls are in place to minimise the risk
of fraud and financial crime. Policies and procedures,
including mandatory fraud training, are in place for
all employees to aid the detection, prevention and
reporting of internal fraud. The Group has an extensive
recruitment process in place to screen potential
employees.
The Group actively maintains defences against a
broad range of likely attacks by global actors, bringing
together tools from well-known providers, external
consultancy and internal expertise to create multiple
layers of defence. The latter includes intelligence
shared through participation in regulatory, industry
and national cyber security networks.
We regularly assess our maturity against an
acknowledged security framework, which includes an
ongoing programme of staff training and assessment
through mock security exercises.
To mitigate the risk posed by third party software
suppliers, the Group continues to build strong
partnerships with key suppliers, managing
relationships day-to-day under formal governance
structures, and monitoring performance against
documented service standards to ensure their
continued commitment to service, financial stability
and viability. Performance metrics are discussed
monthly with documented actions for any identified
improvements.
This is supplemented by attendance at formal user
groups with other clients of the key suppliers, sharing
experience and leveraging the strength of the user
base. Annual financial due diligence is also undertaken,
together with on-site auditors where relevant and
appropriate.
The Group continues to implement a programme
of increasing annual investment in the technology
platform. This is informed by recommendations that
result from regular architectural reviews of applications
and underpinning infrastructure and services.
Daily monitoring routines provide oversight of
performance and capacity, and regular reviews of
those routines.
Our rolling programme of both business continuity
planning and testing, and Single Point of Failure
management, maintains our focus on the resilience of
key systems in the event of an interruption to service.
Business continuity risk
• Failure to maintain or quickly
The risk of the inability to
maintain critical operations in
the event of either an internal
or external disruptive event
e.g. loss of building, IT failure,
loss of key supplier and staff
shortages.
recover operations would lead
to inability to service customer
needs, generating negative
publicity.
• The loss of services could lead
to a financial loss.
The Group has a comprehensive and tested Business
Continuity Management model.
Agreements are 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.
23
GovernanceFinancial statementsStrategic reportOther information Principal risks and uncertainties
Risk
Potential impact
Mitigations
Operational capability risk
The risk that, due to
unexpectedly high volumes
and/or levels of change
activity, the Group is unable
to process work within agreed
service levels and/or to an
acceptable quality for a
sustained period.
• A decline in the quality of work
will have a financial impact
through increased operational
losses.
• Unexpectedly high volumes
coupled with staff recruitment
and retention issues could lead
to poor customer outcomes and
reputational damage.
Financial control
environment risk
The risk that the financial
control environment is weak.
This includes the risk of
loss to the business, or its
customers, because of either
the actions of an associated
third party or the misconduct
of an employee.
Retail conflicts/ conduct
risk
The risk that the fair
treatment of customers is
not central to the Group’s
corporate culture.
• Reputational damage with
regulators, leading to increased
capital requirement.
• Customer detriment damaging
the AJ Bell brand.
•
Increased expenditure in order
to compensate customers for
loss incurred.
• Poor conduct could have a
negative effect on customer
outcomes, impacting the
growth of our business.
• Reputational damage resulting
from poor levels of customer
service.
• Additional regulatory scrutiny
and financial loss.
Financial risks
Interest rate risk
The risk of market,
commercial or regulatory
pressure on interest rate
margins.
• Reduction in revenue.
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. This reduces the need for
manual intervention and the potential for errors.
There is an on-going programme to train staff on
multiple operational functions. Diversifying the
workforce enables the business to deploy staff
when high work volumes are experienced. Causes of
increased volumes of work, for example competitor
behaviour, are closely monitored in order to plan
resource effectively.
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.
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 who
act as first line of defence to facilitate early detections
of potential fraudulent activity.
Strong technology controls are in place to identify
potential money laundering activity or market abuse.
The Group's customer focus is founded by our guiding
principles, which drive the culture of the business and
ensure customers remain at the heart of everything
we do. Training and awareness are delivered to all staff
on a regular basis on the importance of the delivery of
good consumer outcomes.
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.
Revenue from retained interest income is derived from
the pooling of customer cash balances. 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.
Interest is also derived from corporate cash balances
and is reported within investment income. The cash
income earned from corporate cash balances is not
material and the impact of any interest rate movement
would not be significant.
The Group does not have any significant external
borrowing. Borrowing currently in place relates to
finance leases with a fixed interest rate.
24
Risk
Potential impact
Mitigations
The Group's credit risk extends principally to its
financial assets, cash balances held with banks and
trade and other receivables. 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.
The Group continues to diversify across a range
of approved banking counterparties, reducing the
concentration of credit risk as exposure is spread over
a large number of counterparties. The banks currently
used by the Group are detailed in note 24.
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 has minimised
credit risk in this area.
The Group is a highly cash generative business and
maintains sufficient cash and standby banking facilities
to fund its foreseeable trading requirements.
The Group has robust systems and controls, and
monitors all legal entities to ensure they have sufficient
funds to meet their liabilities as they fall due.
Counterparty credit risk
• Unintended market exposure.
The risk of potential failure of
clients, market counterparties
or banks used by the Group
to fulfil their contractual
obligations.
• Customer detriment.
•
Increased future capital
requirements.
Liquidity risk
• Reputational damage.
• Potential customer detriment.
• Financial loss.
• Unable to meet obligations as
they fall due.
The risk that the Group
suffers significant settlement
default or otherwise suffers
major liquidity problems or
issues of liquidity deficiency
which severely impact on
the Group’s reputation in the
markets.
Risk that the Group does
not have available readily
realisable financial resources
to enable it to meet its
obligations as they fall due,
or can only secure such
resources at excessive cost.
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
7 November 2018
25
GovernanceFinancial statementsStrategic reportOther information
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 UK's largest investment platforms.
Michael Summersgill - Chief Financial Officer
Michael joined AJ Bell in July 2007 and was subsequently appointed as Chief Financial
Officer in May 2011. In addition to ensuring financial oversight of the Group, he is responsible
for all operational functions in the business. Michael graduated from the University of
Sheffield with a degree in Economics and began his career as an accountant in public
practice.
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 significant spells on the Boards at one of
Britain’s biggest building societies, and a major UK bank.
Laura Carstensen - Non-executive Director
Laura joined the Board in March 2018. She is the Non-executive Chairman of an AIM-listed
financial services company, and a Non-executive Director and Chairman of the Values and
Ethics Board Committee of a high street banking plc. Former roles have included many years
as a partner in a major City law firm; several years as a Member and Deputy Chairman of the
Competition Commission, and a term as a Commissioner of the Equality and Human Rights
Commission. She is a Trustee of National Museums Liverpool.
Eamonn Flanagan - Non-executive Director
Eamonn joined the Board in March 2018, having previously been a Director in a respected
independent securities business since its establishment in 2003. Prior to this, Eamonn was a
Director and then Head of European Insurance at a leading investment bank. He is a Fellow of
the Institute of Actuaries and the Institute of Directors. Among other roles, Eamonn currently
acts as Non-executive Director within a global insurance broker.
Other director who served during the year:
John Tomlins – Non-executive Director to 23 March 2018.
John was appointed to the Board on 16 January 2014 and stepped down on 23 March 2018.
26
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 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 30 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 sectors. He is responsible for the
risk, compliance, data protection 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.
27
GovernanceFinancial statementsStrategic reportOther information Directors' report
For the year ended 30 September 2018
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 2018.
Principal activity
The principal activity of the Group is the provision of an investment platform operating in the advised and D2C
markets.
Results and future performance
A review of the Group’s results and activities is covered within the Strategic report on pages 3 to 25. This
incorporates the Chairman’s and Chief Executive Officer’s statements, which include an indication of likely future
developments.
Key performance indicators
Key performance indicators in relation to the Group’s activities are continually reviewed by senior management and
are presented on the Group highlights page.
Dividends
The Company has declared a final dividend of 21.50p (2017: 15.50p) per share, to be paid on 13 November 2018, as
detailed in Note 10. This, together with the interim dividend of 14.00p per share (2017: 12.75p) paid on 25 May 2018
and special dividend of 19.50p per share paid on 28 September 2018 (2017: Nil), makes a total dividend in respect of
the financial year ended 30 September 2018 of 55.00p per share (2017: 28.25p).
Directors
The Directors of the Group who were in office during the year, are disclosed on page 26.
Eamonn Flanagan and Laura Carstensen joined the Board on 22 March and 29 March respectively as independent
Non-executive Directors of the Group following regulatory approval. John Tomlins stepped down as a Non-executive
Director on 23 March 2018.
Directors' interests
The directors who held office at 30 September 2018 had the following interests in the share capital of the Company:
Les Platts
Andy Bell
Michael Summersgill
Simon Turner
Laura Carstensen
Eamonn Flanagan
Total
Ordinary
30 Sept 2018
70,305
11,700,747
10,000
34,414
12,048
12,048
A non-voting
30 Sept 2018
-
104,093
20,000
-
-
-
X non-voting
30 Sept 2018
-
Growth shares
30 Sept 2018
-
-
66,330
-
-
-
232,294
295,665
-
-
-
11,839,562
124,093
66,330
527,959
No director held the Ordinary non-voting class of shares at 30 September 2018, 30 September 2017 or at any time
during the period between these dates.
Directors’ share options
At 30 September 2018, the directors who held office held the following share options:
Director
Michael Summersgill
Michael Summersgill
Number
2,500
1,000
Exercise price
£
Date of grant
of option
Earliest date
of exercise
3.00
3.50
1 Oct 10
19 Dec 11
14 Nov 18
14 Nov 18
There are no performance criteria attached to either tranche of share options.
28
Directors' report
For the year ended 30 September 2018
The following options were exercised by directors who held office during the year:
Director
Michael Summersgill
Number
10,000
Exercise price
£
1.90
Date of grant
of option
1 Aug 09
Exercise date
14 Sept 18
Directors' indemnities
The company has made qualifying third party indemnity provisions for the benefit of its directors which were made
during the year and remain in force at the date of this report.
FCA Remuneration code
The Group is subject to CRD IV and therefore the FCA Remuneration Code.
The Group maintains remuneration policies and practices in accordance with the applicable principles of 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 variable remuneration to be linked to performance.
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 continues to hold a significant amount of
capital above its regulatory capital requirement.
Country by country reporting
AJ Bell Securities Limited is 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
Financial instruments
The risk management objectives and policies of the Group are set out within note 24 of the financial statements.
Political and charitable contributions
During the year the Group made charitable donations of £142,000 (2017: £109,000). No political contributions were
made by the Group during the year (2017: Nil).
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 the 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.
29
GovernanceFinancial statementsStrategic reportOther information Directors' report
For the year ended 30 September 2018
Employee consultation
The Group places considerable value on the involvement of its employees and has continued to keep them informed
on matters affecting them as employees and on the various other 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 been 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 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 within note 2.1 of
the consolidated financial statements.
Events after reporting date
Details of significant events since the reporting date are contained in note 28 to the financial statements.
Disclosure of information to auditor
Each of the persons who is 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/she ought to have taken as a director in order to make himself/herself
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 7 November 2018 and signed on its behalf by:
Christopher Bruce Robinson
Company secretary
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
30
Statement of directors’ responsibilities in respect of the Strategic
report, Directors’ report and the financial statements
The directors are responsible for preparing the Strategic Report, the Directors’ 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 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.
31
GovernanceFinancial statementsStrategic reportOther information 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 2018 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 in note 2.
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 2018 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; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for 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 31, 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.
32
Independent auditor’s report to the members of AJ Bell Holdings
Limited
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.
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
7 November 2018
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Consolidated income statement
Revenue
Administrative expenses
Operating profit
Investment income
Finance costs
Profit before tax
Tax expense
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)
Note
5
6
8
9
11
11
2018
£000
2017
£000
89,691
75,576
(61,435)
(53,800)
28,256
21,776
128
(25)
3
(82)
28,359
21,697
(5,713)
(4,223)
22,646
17,474
22,646
17,571
-
(97)
22,646
17,474
55.26
54.05
42.85
42.60
All revenue, profit and earnings are in respect of continuing operations.
There were no other components of recognised income or expense in either period and consequently no statement
of other comprehensive income has been presented.
34
The notes on pages 38 to 73 form an integral part of these financial statements.for the year ended 30 September 2018 Consolidated statement of financial position
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
Other financial liabilities
Provisions
Non-current liabilities
Trade and other payables
Other financial liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Retained earnings
Total equity
Note
2018
£000
2017
£000
12
13
14
16
17
18
19
20
21
19
20
21
22
3,660
3,124
4,433
372
11,589
20,075
49,695
69,770
3,660
3,841
3,994
227
11,722
22,172
42,138
64,310
81,359
76,032
(11,438)
(2,491)
(300)
(1,282)
(10,115)
(1,857)
(75)
(1,587)
(15,511)
(13,634)
(603)
(431)
(778)
(178)
(68)
(790)
(1,812)
(1,036)
(17,323)
(14,670)
64,036
61,362
42
4,410
(1,364)
40
2,806
-
60,948
58,516
64,036
61,362
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The financial statements were approved by the Board of directors and authorised for issue on 7 November 2018 and
signed on its behalf by:
Michael Summersgill
Chief Financial Officer
AJ Bell Holdings Limited
Company registered number: 04503206
35
35
GovernanceFinancial statementsStrategic reportOther informationThe notes on pages 38 to 73 form an integral part of these financial statements.as at 30 September 2018
Consolidated statement of changes in equity
Share
capital
£000
Share
premium
£000
Retained
earnings
£000
Own
shares
£000
Balance at 1 October 2017
40
2,806
58,516
Total
equity
£000
61,362
22,646
1,606
(20,095)
112
51
128
(410)
-
-
-
-
-
-
-
-
Total comprehensive income for the year:
Profit for the financial year
Transactions with owners,
recorded directly in equity:
Issue of share capital
Dividends paid
Equity settled share-based payment
transactions
Deferred tax effect of share-based
payment transactions
Tax relief on exercise of share options
Purchase of own share capital
Own shares acquired
Total transactions with owners
-
2
-
-
-
-
2
-
22,646
1,604
-
(20,095)
112
51
128
(410)
-
-
-
-
-
-
(1,364)
(1,364)
1,604
(20,214)
(1,364)
(19,972)
Balance at 30 September 2018
42
4,410
60,948
(1,364)
64,036
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 year
Transactions with owners, recorded directly
in equity:
Issue of share capital
Dividends paid
Equity settled share-based payment transactions
Deferred tax effect of share-based payment
transactions
Tax relief on exercise of share options
Purchase of non-controlling interest
Purchase of own share capital
Total contributions by and distributions to owners
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
17,571
(97)
17,474
577
-
-
-
-
-
-
-
-
(10,564)
107
88
57
(360)
(165)
(136)
577
(10,973)
-
-
-
-
-
360
-
136
496
577
(10,564)
107
88
57
-
(165)
-
(9,900)
Balance at 30 September 2017
40
2,806
58,516
-
61,362
36
The notes on pages 38 to 73 form an integral part of these financial statements.for the year ended 30 September 2018 Consolidated statement of cash flows
Cash flows from operating activities
Profit for the financial year
Adjustments for:
Investment income
Finance costs
Income tax expense
Depreciation and amortisation
Share-based payment expense
Net increase in provisions and other payables
Loss on disposal of property, plant and equipment
Decrease/ (increase) in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Interest paid
Income tax paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of other intangible assets
Purchase of property, plant and equipment
Interest received
Net cash flows used in investing activities
Cash flows from financing activities
Payments of obligations under finance leases and
hire purchase contracts
Proceeds from issue of share capital
Proceeds from settlement of part-paid shares
Payments for purchase of own shares
Purchase of own shares for employee share schemes
Dividends paid
Net cash used in financing activities
Note
2018
£000
2017
£000
22,646
17,474
(128)
25
5,713
1,971
112
108
11
2,137
1,323
(3)
82
4,223
2,057
107
466
48
(4,434)
561
33,918
20,581
(25)
(82)
(5,045)
(4,100)
28,848
16,399
13
14
(6)
(951)
128
(44)
(3,476)
3
(829)
(3,517)
(199)
1,292
314
(410)
(1,364)
(102)
556
21
(165)
-
10
(20,095)
(10,564)
(20,462)
(10,254)
Net increase in cash and cash equivalents
7,557
2,628
Cash and cash equivalents at beginning of year
Total cash and cash equivalents at end of year
18
18
42,138
49,695
39,510
42,138
37
GovernanceFinancial statementsStrategic reportOther informationThe notes on pages 38 to 73 form an integral part of these financial statements.for the year ended 30 September 2018 Notes to the consolidated financial statements
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 Directors' report.
The Company is a private limited company limited by shares and incorporated in the United Kingdom under the
Companies Act 2006 and is registered in England and Wales. The Company's number is 04503206 and its 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
7 November 2018.
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 41. They are presented in sterling, which is the currency of the primary economic environment in which the
Group operates, rounded to the nearest thousand.
The accounting policies have been applied consistently to all periods presented in these financial statements and by
all Group entities, unless otherwise stated.
Presentational changes have been made to note 5 to better reflect the activities and internal reporting of the
business, notes 7 and 23 to include additional disclosures for share based payments not included in prior year and
note 26 to remove service charges included in the prior year.
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 7
Disclosure Initiative
IAS 12
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments)
IFRS 12
Annual Improvements 2014-2016 Cycle
The above standards have not had a material impact on the financial statements of the Group.
Effective from
1 Jan 2017
1 Jan 2017
1 Jan 2017
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.
IFRS 9
Financial Instruments
Effective from
1 Jan 2018
IFRS 2
Classification and Measurement of Share-Based Payment Transactions (Amendment)
1 Jan 2018
IFRS 15
Revenue from Contracts with Customers
IFRS 16
Leases
1 Jan 2018
1 Jan 2019
There are no other standards issued but not yet effective that are expected to have an impact on the Group in the
current or future reporting periods and on foreseeable future transactions.
38
for the year ended 30 September 2018 Notes to the consolidated financial statements
IFRS 9 – Financial Instruments
IFRS 9 was issued in 2014 and addresses the classification, measurement and recognition of financial instruments.
The standard will replace IAS 39 Financial Instruments: Recognition and Measurement and is effective for accounting
periods commencing on or after 1 January 2018. The Group does not intend to adopt this standard early and will
therefore apply IFRS 9 from the accounting period commencing 1 October 2018.
The Group has performed a preliminary assessment of the impact of adopting IFRS 9 based on its existing financial
instruments. The review concluded that adopting this standard will not result in any material adjustments to opening
equity or the carrying amount of financial assets and liabilities recognised on the statement of financial position. In
addition, whilst the Group will adopt a new impairment model, the change to an expected credit loss model will not
have a material impact on the financial statements.
Classification and measurement
The number of categories of financial assets under IFRS 9 has been reduced compared to IAS 39 in relation to the
classification and measurement of financial assets. The classification is based both on the business model within which
the asset is held and the contractual cash flow characteristics of the asset. Financial assets will fall into one of three
categories:
•
•
•
amortised cost
fair value through profit or loss (FVPL)
fair value through other comprehensive income (FVOCI)
The Group is also required to review contractual terms and conditions to determine whether the cash flows arising on
these assets are solely payments of principal and interest.
Based on the Group’s assessment of the new standard, the change in the classification and measurement of financial
assets under IFRS 9 will have no impact on the Group’s financial assets, which consist of trade and other receivables
and cash and cash equivalents. The cash flows arising on these assets are solely payments of principal and interest and
therefore continue to be recognised at amortised cost on transition.
The classification and measurement of financial liabilities remains unchanged from IAS 39 with no impact expected on
the Group’s financial liabilities on adoption of the new standard.
The Group does not use hedge accounting therefore this element of the standard is not applicable.
Impairment
IFRS 9 introduces a new expected credit loss impairment model to replace the incurred loss model under IAS 39.
Essentially, this means that it is not necessary for a trigger event to have occurred before credit losses are recognised.
Instead, the Group always accounts for expected credit losses and changes in those expected credit losses. The amount
of expected credit losses should be updated at each reporting date.
The new impairment model will apply to the Group’s financial assets that are debt instruments measured at amortised
cost.
The Group expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables
as permitted by IFRS 9. The Group’s preliminary calculation of the loss allowance for these assets is expected to
be immaterial reflecting the low historic default rates on trade receivables which are short-term and do not contain
a significant financing component. Development of the impairment model is still ongoing and will be finalised for
application.
In adopting IFRS 9, the Group plans to take advantage of the exemption from having to restate comparative
information, instead recognising any differences between the previous and the new carrying amounts in opening equity
and reserves.
IFRS 2 – Share-based payment transactions (amendment)
The International Accounting Standards Board (IASB) has issued amendments to IFRS 2 Share-based payments in
relation to the classification and measurement of share-based payment transactions, effective for accounting periods
commencing on or after 1 January 2018.
The amendment is in relation to the effects of vesting conditions on cash-settled share-based payments, the
classification of share-based payments with net settlement features for withholding tax obligations and the
modification of share-based payment transactions from cash-settled to equity-settled. All of which are not applicable to
the Group as all options are equity-settled.
39
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
IFRS 15 – Revenue from contracts with customers
IFRS 15 was issued in 2014 and outlines a single comprehensive model for revenue arising from contracts with customers.
It will replace existing revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction contracts and related
interpretations. IFRS 15 is effective for periods commencing on or after 1 January 2018. The Group does not intend to
adopt this standard early and will therefore apply IFRS 15 from the accounting period commencing 1 October 2018.
IFRS 15 changes how and when revenue is recognised from contracts with customers and the treatment of the costs
of obtaining a contract with a customer. The new standard is based on the principle that revenue is recognised when
control of goods or services transfer to the customer.
The Group has conducted a preliminary assessment of the potential impact of the new standard by analysing each
revenue stream and associated costs of obtaining contracts. The assessment made by the Group is preliminary as not
all transition work requirements have been finalised and therefore may be subject to adjustment. The adoption of IFRS
15 is not expected to have a material financial impact on the Group's financial statements however, it will result in some
changes to presentation and disclosure.
The Group intends to adopt IFRS 15 using the cumulative effect method, with the effect of initially applying the
standard recognised at the date of initial application, with no restatement of the comparative period.
IFRS 16 – Leases
IFRS 16 was issued in 2016 and represents a significant change in the accounting and reporting of leases for lessees
as it provides a single lessee accounting model that replaces the current model where leases are either recognised as
operating or finance leases. Accounting requirements for lessors are substantially unchanged from IAS 17 Leases. IFRS
16 is effective for accounting periods commencing on or after 1 January 2019. The Group does not intend to adopt the
standard early and therefore expects to apply IFRS 16 from the accounting period commencing 1 October 2019.
On transition to IFRS 16, the Group can choose to apply one of two transition methods:
•
full retrospective transition method, prepared as if the standard had always applied; or
• modified retrospective approach, with an option to apply a practical expedient and retain its previous
assessments of which contracts contain a lease.
It is anticipated that the Group will adopt the modified retrospective transition approach, taking advantage of the
practical expedient as detailed above.
A preliminary assessment of the impact of adopting this standard has been performed, concluding that the primary
impact will be to bring the Group’s leasehold properties onto the statement of financial position, recognising both a
right-of-use asset and a lease liability for future lease payments. Whilst there will be a material adjustment to gross
assets and liabilities, there is unlikely to be a material impact on net assets at Group level. The right-of-use asset will be
depreciated over the shorter of the expected life of the asset and the lease term on a straight-line basis, recognised in
the income statement. The lease liability will be reduced by the lease payments over the lease term with interest being
recognised on the lease liability and charged to the income statement. Depreciation and interest charges will replace
the lease costs currently charged to the income statement. Higher interest charges will be recognised in earlier years of
the lease as the discount rate unwinds.
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 an entity when it is exposed to,
or it has rights to variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. The Group reassesses whether it controls an entity 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.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The Group recognises
any non-controlling interest in the acquired entity at the non-controlling interests’ proportionate share of the recognised
amounts of the acquired entity’s identifiable net assets. Total comprehensive income is attributed to the non-controlling
interests even if this results in the non-controlling interests having a deficit balance.
40
for the year ended 30 September 2018
Notes to the consolidated financial statements
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 3 to 25 and the Directors’ report on pages
28 to 30. Note 24 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.
2.2 Business combinations
A business combination is recognised where separate entities or businesses have been acquired by the Group. The
acquisition method of accounting is used to account for the business combinations made by the Group. The cost of
a business combination is measured at 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 acquired
entity. Where the consideration includes a contingent consideration arrangement, the contingent consideration is
measured at its acquisition date fair value and included as part of the cost of the acquisition. Subsequent changes in
such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments.
All other subsequent changes in the fair value of contingent consideration are charged to income statement or other
comprehensive income, except for obligations that are classified as equity, which are not re-measured.
Acquisition related costs are expensed as incurred in the income statement, except if related to the issue of debt or
equity securities.
Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are
measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value
of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of
the Group's share of the identifiable net assets of the subsidiary acquired, the difference is taken immediately to the
income statement.
2.3 Goodwill
Goodwill arising on consolidation represents the difference between the consideration transferred and the fair value
of net assets acquired of the subsidiary at the date of acquisition. Goodwill is not amortised, but is reviewed at
least annually for impairment. Any impairment is recognised immediately through the income statement and is not
subsequently reversed.
For the purposes of impairment testing goodwill is allocated to one or more of the Group’s cash generating units
(CGUs) 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, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
2.4 Segmental reporting
The Group determines and presents operating segments based on the information that is provided internally to the
Board, which is the Group’s Chief Operating Decision Maker (CODM). In assessing the Group’s operating segments
the directors have considered the nature of the services provided, product offerings, customer bases and distribution
channels amongst other factors. A description of the services provided is given within note 4.
41
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
2.5 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable
for services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Revenue represents fees receivable from investment administration and dealing and custody services for both client
assets and client money. Revenue is recognised when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity, and when specific criteria have been met for each of the Group’s
activities as described below.
Recurring fixed:
Recurring fixed revenue comprises recurring administration fees and media revenue.
Administration fees include fees charged in relation to the administration services provided by the Group and are
recognised in the period to 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 service.
Services rendered at the inception of a fixed term contract are recognised over the life of that contract.
Recurring ad-valorem:
Recurring ad-valorem revenue comprises custody fees, retained interest income and investment management fees.
Custody fees include ad-valorem fees charged in relation to the holding of client assets and interest received on
client money balances. Custody fees and investment management fees are accrued on a time basis by reference to
the principal and where applicable, the effective interest rate.
Transactional fees:
Transactional revenue comprises dealing fees and pension scheme activity fees.
Transaction-based commissions are recognised when received in accordance with the date of settlement of the
underlying transaction.
Other non-recurring fees are recognised in the period to which the service is rendered.
2.6 Leasing and hire purchase contracts
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. Subsequent to initial
recognition, the assets are accounted for in accordance with the accounting policy applicable to the asset. 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 recognised
as a liability. The aggregate benefit of the incentive is recognised as a reduction of rental expense on a straight-line
basis over the lease term.
Hire purchase contracts:
Assets held under hire purchase contracts 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 contract. Subsequent
to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to the asset.
The corresponding liability is included in the consolidated statement of financial position as an obligation under hire
purchase contracts. Payments are apportioned between finance charges and reduction of the obligation so as to
achieve a constant rate of interest on the remaining balance of the liability.
42
for the year ended 30 September 2018 Notes to the consolidated financial statements
2.7 Investment income
Investment income comprises the returns generated on corporate cash and cash equivalents. Investment income is
recognised in the income statement as it accrues, using the effective interest rate method.
2.8 Finance costs
Finance costs comprise interest payable and finance charges on finance leases and hire purchase contracts. Finance
costs are recognised in the income statement using the effective interest rate method.
2.9 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.
2.10 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 is not recognised if the temporary
difference arises (other than in a business combination) from:
•
•
•
the initial recognition of goodwill; or
investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the
temporary differences and it is probable they will 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.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to
the extent that it is probable that taxable profits will be available in the future, against which deductible temporary
differences can be utilised. Recognised and unrecognised deferred tax assets are reassessed at each reporting date.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
2.11 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.
43
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
2.12 Property, plant and equipment
All property, plant and equipment is stated at cost, which includes directly attributable acquisition costs, less
accumulated depreciation and any recognised impairment losses. Depreciation is provided 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
Office equipment
Computer equipment
Over the life of the lease
4 years
3 - 5 years
The assets’ estimated useful lives, depreciation rates and residual values are reviewed, and adjusted if appropriate at
the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if
its carrying value is greater than the recoverable amount.
Assets held under finance leases and hire purchase contracts 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.
2.13 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 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
KOS enhancements
3 - 4 years
13 years
Over the remaining life of the KOS
Customer contracts and non-contractual
5 - 10 years
The assets’ estimated useful lives, amortisation rates and residual values are reviewed, and adjusted if appropriate at
the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if
its carrying value is greater than the recoverable amount.
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.
During the year the useful life of the KOS was reviewed and subsequently extended from 10 years to 13 years to align
with the Group’s strategy. The planned growth of the business can be supported by the KOS and there are no plans in
the Group’s strategy to make any changes to the target operating model or KOS. The change in the estimated useful
life has been applied prospectively from 1 October 2017, therefore the KOS will be amortised on a straight line basis
over the remaining useful life of the asset.
The change in accounting estimate of the KOS useful life has resulted in the profit before tax for the Group increasing
by £452,000 during the financial year ended 30 September 2018. It will subsequently increase the profit before
tax by £452,000 in the next two financial years, following which it will reduce profit before tax by £146,000 and
£604,000.
2.14 Internally-generated intangible assets
An internally-generated asset arising from work performed by the Group is recognised only when the following
criteria can be demonstrated:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
44
for the year ended 30 September 2018
Notes to the consolidated financial statements
The amount initially recognised for internally-generated intangible assets is the sum of expenditure incurred from the
date when the asset first meets the recognition criteria listed above. Development expenditure that does not meet
the criteria is recognised as an expense in the period which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
2.15 Impairment of tangible and intangible assets (excluding goodwill)
At each reporting date the Group reviews the carrying amount of its 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.
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.
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.
2.16 Financial instruments
Financial assets and liabilities are recognised in the statement of financial position when a member of the Group
becomes party to the contractual provisions of the instrument.
Financial assets
All financial assets are classified as loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. The Group’s loans and receivables comprise trade receivables, loans, other receivables and cash and cash
equivalents.
Loans and receivables are initially recognised at fair value including any directly attributable costs. They are
subsequently measured at amortised cost using the effective interest method, less any impairment. No interest
income is recognised on loans and receivables, with the exception of cash and cash equivalents, as all loans and
receivables are short-term receivables and the recognition of interest would be immaterial. Financial assets are
derecognised when the contractual right to the cash flows from the asset expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair value of the amount receivable and subsequently
measured at amortised cost using the effective interest method, less any provision for impairment. Other receivables
also represent client money required to meet settlement obligations.
45
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
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.
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
Financial liabilities are classified according to the substance of the contractual arrangements entered into. All
financial liabilities are classified as other financial liabilities.
Other financial liabilities
The Group’s other financial liabilities comprise borrowings, trade and other payables and obligations under finance
leases and hire purchase contracts. Other financial liabilities are initially measured at fair value, net of transaction
costs. They are subsequently carried at amortised cost using the effective interest rate method. A financial liability is
derecognised when, and only when, the Group’s obligations are discharged, cancelled or they expire.
Trade and other payables
Trade payables consist of amounts payable to clients and other counterparties and obligations to pay suppliers for
goods and services in the ordinary course of business. Trade and other payables are measured at amortised cost
using the effective interest method.
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.
The amount recognised as a provision is 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 issues equity-settled share-based payments to certain employees which are measured at the fair value of
the equity instrument at the date of grant.
The total employee expense is recognised on a straight-line basis over the vesting period, based on managements’
estimate of shares that will eventually vest. At the end of each reporting period, the entity revises its estimates of the
number of share options expected to vest based on the non-market vesting conditions. It recognises any revision to
original estimates in the income statement, with a corresponding adjustment to equity reserves. 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.
46
for the year ended 30 September 2018
Notes to the consolidated financial statements
Fair value is measured using the Black-Scholes option pricing model. The expected life applied in the model has
been adjusted based on management's 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).
2.21 Employee Benefit Trust
The Group has an employee benefit trust, the AJ Bell Employee Benefit Trust, used for the granting of shares to
certain employees. AJ Bell Holdings is considered to be the sponsoring employer and so the assets and liabilities of
the trust are recognised as those of AJ Bell Holdings Limited.
Shares of AJ Bell Holdings Limited held by the trust are treated as ‘own shares’ held and shown as a deduction from
equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference
between the sales proceeds and original cost being taken to equity.
3. 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.
The following critical judgements have been made by the directors in applying the Group’s accounting policies.
3.1 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 estimates that management have used to forecast the expected future cash flows of the CGUs
that have been reviewed. Key judgements in arriving at these estimates include:
•
•
•
the revenue generated by the anticipated 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.
Details of the assumptions and key sensitivities are included at note 12.
47
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
3.2 Provisions
Dilapidations
The office dilapidations provision of £795,000 represents management’s best estimate of the present value of costs
which will ultimately be incurred in settling these obligations. If the rate per square foot increased by 25%, this would
increase the provision by £189,000.
Other provision
At the reporting end date, a provision of £1.1m is recognised to cover the settlement of a one-off tax liability. 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 possible outcomes considering the potential areas and time periods at risk
and any associated interest. The timings of the outflows are uncertain but the Group expects that settlement will be
within the next 12 months.
4.
Segmental reporting
It is the view of the Directors that the Group has a single operating segment; Investment services in the advised and
direct to customer space administering investments in SIPP's, ISA's, LISA's and General Investment/ Dealing accounts.
It is considered that a further disaggregation of the single operating segment does not provide a clearer or more
accurate view of the reporting within the Group. Details of the Group's revenue, results and assets and liabilities for
the reportable segment are shown within the consolidated income statement and consolidated statement of financial
position on pages 34 and 35 respectively.
The Group operates in one geographical segment, being the UK.
Due to the nature of its activities, the Group is not reliant on any one customer or group of customers for generation
of revenues.
5. Revenue
The analysis of the consolidated revenue is as follows:
Revenue:
Recurring fixed
Recurring ad-valorem
Transactional
2018
£000
2017
£000
25,212
47,890
16,589
24,219
37,160
14,197
89,691
75,576
During the financial year, the directors have reviewed the basis on which revenue is reported within the Group. As
a result revenue is now reported as recurring ad-valorem, recurring fixed fees and transactional, including dealing
and other fees and charges, as it is thought this better reflects the activities and internal reporting of the business.
Comparatives have also been adjusted to reflect this.
Recurring ad-valorem fees include custody fees. These recurring charges are derived from the market value of retail
customer assets, based on asset mix and portfolio size, and are therefore subject to market and economic risks. The
spread of rate charged is variable dependent on portfolio size and asset mix within the portfolio.
Recurring ad-valorem fees also include retained interest income earned on the level of customer cash balances, which
are based on customers’ asset mix and portfolio size and are therefore subject to market and economic risks. The
risks associated with this revenue stream in terms of its nature and uncertainty is discussed further within note 24
Financial Instruments.
The total revenue for the Group has been derived from its principal activities undertaken in the UK.
48
for the year ended 30 September 2018 Notes to the consolidated financial statements
6. Operating profit
Profit for the financial year has been arrived at after charging:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on the disposal of property, plant and equipment
Operating lease rentals:
- property
Auditor's remuneration (see below)
Staff costs (see note 7)
IPO related costs
Restructuring costs
2018
£000
723
1,248
11
1,617
811
32,629
1,769
364
2017
£000
1,219
838
48
2,081
170
28,120
-
492
IPO related costs relate to professional fees incurred in relation to listing AJ Bell Holdings on the London Stock
Exchange. These costs also include the fee for the Reporting Accountant's work disclosed within "corporate finance
services" within auditor's remuneration below.
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
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
to the Group:
Audit of the Company's subsidiaries' accounts, pursuant to legislation
Audit-related assurance services
Other assurance services
Corporate finance services
Of the above, audit related services for the year totalled £200,000 (2017: £170,000).
2018
£000
56
63
81
19
592
811
2017
£000
22
57
91
-
-
170
49
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
7.
Employees
The average monthly number of employees (including Executive Directors) of the Group was:
Operational and support
Technology
Distribution
Employee benefit expense for the Group during the year:
Wages and salaries
Social security costs
Retirement benefit costs
Termination benefits
Share-based payments
8.
Finance costs
Interest on bank overdrafts and loans
Interest on obligations under finance leases and hire purchase contracts
2018
No.
578
116
64
758
2018
£000
27,742
3,010
1,423
342
112
2017
No.
503
95
58
656
2017
£000
23,810
2,633
1,119
541
107
32,629
28,210
2018
£000
2017
£000
-
25
25
66
16
82
50
for the year ended 30 September 2018
Notes to the consolidated financial statements
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
2018
£000
2017
£000
5,694
113
5,807
(16)
(80)
2
(94)
4,375
(63)
4,312
(98)
17
(8)
(89)
Total tax expense
5,713
4,223
Corporation Tax is calculated at 19% of the estimated assessable profit for the year to 30 September 2018 (2017: 19.5%).
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 16)
Current tax relief on exercise of share options
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax
UK Corporation tax at 19.0% (2017: 19.5%)
Effects of:
Expenses not deductible for tax purposes
Effect of the exercise of employee share options
Change in recognised deductible temporary differences
Effect of rate changes to deferred tax
Income not taxable
Adjustments to current tax in respect of prior periods
Effective tax rate
2018
£000
(51)
(128)
(179)
2017
£000
(88)
(57)
(145)
2018
£000
2017
£000
28,359
21,697
5,388
4,231
338
-
(47)
2
-
32
5,713
20.1%
57
(15)
5
(2)
(6)
(47)
4,223
19.5%
51
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018
Notes to the consolidated financial statements
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 the exercising of share
options. The standard UK Corporation Tax rate was reduced from 20% to 19% (effective from 1 April 2017) and again
to 18% (effective from 1 April 2020), as substantively enacted on 26 October 2015. An additional reduction to 17%
(effective 1 April 2020) was substantively enacted on 6 September 2016.
Deferred tax has been recognised at 17% (2017: 17%), being the rate at which the deferred tax assets are expected to
reverse.
10. Dividends
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 30 September 2017 of 15.50p
(2016: 13.00p) per share
Interim dividend for the year ended 30 September 2018 of 14.00p
(2017: 12.75p) per share
Special dividend for the year ended 30 September 2018 of 19.50p
(2017: Nil) per share
Total dividends paid on equity shares
Proposed final dividend for the year ended 30 September 2018 of 21.50p
(2017: 15.50p) per share
2018
£000
2017
£000
6,362
5,327
5,728
5,237
8,005
-
20,095
10,564
8,826
6,370
A final dividend declared of 21.50p per share is payable on 13 November 2018 to shareholders on the register at close
of business on 9 November 2018. The final dividend was approved by the Board on 17 October 2018. The dividend has
not been included as a liability as at 30 September 2018.
Dividends are payable on all classes of issued, fully or partially paid up ordinary shares, except B,C,D,E and F non-
voting shares as disclosed in note 22.
Under an arrangement dated 26 June 2013, the AJ Bell Employee Benefit Trust, which held 168,713 ordinary shares in
AJ Bell Holdings Limited at 30 September 2018 (2017: Nil), has agreed to waive all dividends. This represented 0.4%
of the company's called up share capital.
52
for the year ended 30 September 2018 Notes to the consolidated financial statements
11. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent company by the
weighted average number of ordinary, non-voting ordinary, and A and X non-voting ordinary shares, excluding own
shares, in issue during the year.
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.
The calculation of basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic and diluted earnings per share being profit
attributable to equity holders of the parent company
22,646
17,571
2018
£000
2017
£000
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS
in issue during the year
Effect of potentially dilutive share options
40,979,963
41,009,036
918,865
240,433
2018
No.
2017
No.
Weighted average number of ordinary shares for the purposes of fully diluted EPS
41,898,828
41,249,469
Earnings per share (EPS)
Basic (pence)
Diluted (pence)
2018
55.26
54.05
2017
42.85
42.60
53
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
12. Goodwill
Cost
At 1 October and 30 September
Impairment
At 1 October and 30 September
Carrying value at 30 September
2018
£000
2017
£000
3,772
3,772
(112)
(112)
3,660
3,660
The carrying amount of goodwill relates to the following historic acquisitions which have been allocated to the cash
generating unit (CGU) or group of units that are expected to benefit from the business combination:
AJ Bell Securities Limited
AJ Bell Media Limited
Indexx Markets Limited
AJ Bell Investments LLP*
CGU
No.
1
1
1
1
CGU
No.
1
2
2
2
2018
£ 000
420
1,537
1,588
115
3,660
2017
£ 000
420
1,537
1,588
115
3,660
* the business, assets and liabilities of the entity were hived up into AJ Bell Asset Management Limited during the year.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be
impaired.
The Group has previously identified and tested goodwill for impairment on two CGUs, investment administration and
dealing and custody. In recent years the Group has been developing a one business strategy to support the growth
of its flagship propositions. This has resulted in the centralisation of the stock broking operation and implementation
of the Target Operating Model. As part of this, our two core systems have become more integrated and it is now
felt that they can no longer operate independently of each other. Together they form the KOS that underpins the
investment platform used by our customers, which generates the overwhelming majority of the Group’s revenue. As a
result the directors have reviewed the CGUs and conclude there is a single CGU, the investment platform, which is the
smallest group of assets that generate cash inflows from continuing use and that are wholly independent of the cash
inflows of other groups.
54
for the year ended 30 September 2018
Notes to the consolidated financial statements
CGU
Dealing and custody
Investment administration
Investment platform
1 Oct 2017
£ 000
Impairment
£ 000
Transfer
£ 000
30 Sept 2018
£ 000
2,054
1,606
-
3,660
-
-
-
-
(2,054)
(1,606)
3,660
-
-
-
3660
3,660
The recoverable amount of the assets within each CGU is determined using value-in-use calculations. In assessing
the value-in-use the estimated future cash flows of the CGU are discounted to their present value using a pre-tax
discount rate. Cash flows are based upon the most recent forecasts, approved by the Board, covering a 4 year period
and then extrapolated for the remaining useful economic life of the asset using a growth rate of nil% (2017: nil%).
The key assumptions for value-in-use calculations are those regarding discount rate, growth rates and expected
changes to revenues and costs in the period, as follows:
•
•
a rate of 13% (2017: 15%) has been used to assess the expected growth in revenue for the 4 year forecast period.
This is based on historical performance.
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.
• modest ongoing maintenance expenditure is required on the assets within the CGUs in order to generate the
expected level of cash flows.
The directors have made these assumptions based upon past experience and future expectations in the light of
anticipated market conditions and the results of steamlining processes through implementation of the target
operating model for customer services.
Cash flows have been discounted using a pre-tax discount rate of 5.5% (2017: 5%).
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 a reduction of 13% in
revenue to nil growth for the forecast period, there would still be £Nil impact on the carrying value of the assets
under the single CGU.
Based upon the review above the estimated value-in-use of the investment platform comfortably supports the
carrying value of the assets held within, and so the directors are satisfied that for the period ended 30 September
2018 goodwill is not impaired.
55
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
13. Other intangible assets
Key operating
system
£000
Contractual
customer
relationships
£000
Computer
software
£000
Cost
At 1 October 2016
Additions
Disposals
At 30 September 2017
Additions
Disposals
8,657
-
-
8,657
-
-
2,135
-
-
2,135
-
-
At 30 September 2018
8,657
2,135
Amortisation
At 1 October 2016
Charge for the year
Eliminated on disposal
At 30 September 2017
Charge for the year
Eliminated on disposal
At 30 September 2018
Carrying amount
At 30 September 2018
At 30 September 2017
At 30 September 2016
Average remaining
amortisation period
3,975
1,057
-
5,032
604
-
5,636
3,021
3,625
4,682
5 years
2,135
-
-
2,135
-
-
2,135
-
-
-
6,708
44
(370)
6,382
6
(1,154)
5,234
6,374
162
(370)
6,166
119
(1,154)
5,131
103
216
334
11 months
The amortisation charge above is included within administrative expenses in the income statement.
Total
£000
17,500
44
(370)
17,174
6
(1,154)
16,026
12,484
1,219
(370)
13,333
723
(1,154)
12,902
3,124
3,841
5,016
56
for the year ended 30 September 2018 Notes to the consolidated financial statements
14. Property, plant and equipment
Leasehold
improvements
£000
Office
equipment
£000
Assets under
construction
£000
Computer
equipment
£000
Cost
At 1 October 2016
Additions
Disposals
At 30 September 2017
Additions
Disposals
Transfers
At 30 September 2018
Depreciation
At 1 October 2016
Charge for the year
Eliminated on disposal
At 30 September 2017
Charge for the year
Eliminated on disposal
At 30 September 2018
Carrying amount
At 30 September 2018
At 30 September 2017
At 30 September 2016
677
1,452
(548)
1,581
161
-
-
1,742
553
66
(548)
71
119
-
190
1,552
1,510
124
1,429
762
(631)
1,560
132
(754)
-
938
1,200
231
(609)
822
279
(746)
355
583
738
229
-
163
-
163
-
-
(163)
-
-
-
-
-
-
-
-
-
163
-
Total
£000
5,114
3,612
3,008
1,235
(916)
(2,095)
3,327
1,405
(302)
163
6,631
1,698
(1,056)
-
4,593
7,273
2,093
541
(890)
1,744
850
(299)
3,846
838
(2,047)
2,637
1,248
(1,045)
2,295
2,840
2,298
1,583
915
4,433
3,994
1,268
The depreciation charge above is included within administrative expenses in the income statement.
During the year the Group acquired assets under finance lease and hire purchase contracts of £747,000 (2017:
£136,000). The carrying amount of office equipment and computer equipment includes an amount of £686,000
(2017: £138,000) in respect of assets held under finance leases and hire purchase contracts.
At the year-end, the Group had no commitments (2017: £Nil) to purchase any property, plant and equipment.
57
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
15. Subsidiaries
The Group consists of a parent company, AJ Bell Holdings Limited incorporated within the UK, and a number of
subsidiaries held directly and indirectly by AJ Bell Holdings Limited which operate and are incorporated in the UK.
Note 4 to the Company's separate financial statements lists details of the interests in subsidiaries.
16. Deferred tax asset
Deferred tax asset
Deferred tax liability
Net deferred tax asset
2018
£000
386
(14)
372
2017
£000
319
(92)
227
The movement on the deferred tax account and movement between deferred tax assets and liabilities is as follows:
Accelerated
capital
allowances
£000
Share-based
payments
£000
Short-term
timing
differences
£000
Losses
£000
Total
£000
At 1 October 2016
Credit to the income statement
Credit to equity
At 1 October 2017
Credit / (charge) to the income
statement
Charge to equity
At 30 September 2018
(110)
18
-
(92)
78
-
(14)
126
31
88
245
19
51
315
11
-
-
11
11
-
22
22
41
-
63
(14)
-
49
49
90
88
227
94
51
372
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 2018.
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 2018, deferred tax assets have not been
provided on trading losses of £1,407,326 (2017: £1,914,069).
58
for the year ended 30 September 2018
Notes to the consolidated financial statements
17. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
2018
£000
2,203
13,669
4,203
20,075
2017
£000
6,248
10,831
5,093
22,172
The directors consider that the carrying amount of trade and other receivables approximates their fair value. Other
receivables represent client money required to meet settlement obligations and are payable on demand.
Trade receivables disclosed above include amounts which are past due at the reporting date but against which the
Group has not recognised a provision for impairment as there has been no significant change in credit quality and the
amounts are still considered recoverable.
The ageing profile of trade receivables were as follows:
Neither past due or impaired
Past due but not impaired:
0 to 30 days
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:
Balance at the beginning of the year
Impairment losses recognised
Amounts utilised during the year
Amounts recovered during the year
Balance at end of year
2018
£000
550
705
188
58
1,165
2,666
(463)
2,203
2018
£000
412
135
(27)
(57)
463
2017
£000
1,487
3,758
106
154
1,155
6,660
(412)
6,248
2017
£000
164
300
-
(52)
412
In determining the recoverability of trade receivables the directors considered any change in the credit quality of the
trade receivable from the date credit was initially granted up to the reporting date.
59
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018
Notes to the consolidated financial statements
18. Cash and cash equivalents
Cash at bank and in hand
2018
£000
49,695
2017
£000
42,138
All cash held at bank at 30 September 2018 and 30 September 2017, has a maturity date of less than one month.
19. Trade and other payables
Current payables
Trade payables
Accruals and deferred income
Social security and other taxes
Other payables
2018
£000
1,052
8,093
1,711
582
11,438
2017
£000
817
7,514
1,411
373
10,115
Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purposes and
ongoing costs. The directors consider that the carrying amount of trade payables approximates their fair value.
Non-current payables
Other payables
2018
£000
603
2017
£000
178
20. Other financial liabilities
During the year, the Group had other financial liabilities relating to obligations under finance leases and hire purchase
contracts. Details of the obligations under finance lease and hire purchase contracts were as follows:
2018
Within one year
In the second to fifth years inclusive
2017
Within one year
In the second to fifth years inclusive
Minimum lease
payments
£000
Less finance
charges
£000
Present value of
lease obligations
£000
330
447
777
82
72
154
(30)
(16)
(46)
(7)
(4)
(11)
300
431
731
75
68
143
It is the Group's policy to lease certain items of office and computer equipment under finance leases and hire
purchase contracts. The average term is between three and five years. All lease obligations are denominated in
sterling. Interest rates are fixed at the contract date. All leases and contracts are on a fixed repayment basis and no
arrangements have been entered into for contingent rental payments. The fair value of the Group's lease obligations
approximates to their carrying amount.
60
for the year ended 30 September 2018
Notes to the consolidated financial statements
21. Provisions
At 1 October 2017
Additional provisions
Utilisation of provision
Unused provision reversed
At 30 September 2018
Included in current liabilities
Included in non-current liabilities
Office dilapidations:
Office
dilapidations
£000
Other provision
£000
Restructuring
costs
£000
790
80
-
(75)
795
17
778
1,095
-
-
-
1,095
1,095
-
492
246
(568)
-
170
170
-
Total
£000
2,377
326
(568)
(75)
2,060
1,282
778
The Group is contractually obliged to reinstate its leased properties to their original state and layout at the end of the
lease terms. The office dilapidations provision represents management's best estimate of the present value of costs
which will ultimately be incurred in settling these obligations.
Other provision:
The other provision recognised is to cover the settlement of a one-off tax liability. There is some uncertainty
regarding the amount and timing 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 timings of the outflows are uncertain but the Group expects that settlement will be within the
next 12 months.
Restructuring costs:
The restructuring provision represents the estimated costs associated with the closure of the Tunbridge Wells office.
The majority of this provision has been released during the year due to redundancies made; the residual provision
relates to the remaining staff who are expected to be made redundant by 31 March 2019. 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. It is expected that all costs will be incurred within the next financial year.
61
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
22. Share capital
Authorised share capital:
Ordinary shares of 0.1p each
Ordinary non-voting shares of 0.1p each
A non-voting ordinary shares of 0.1p each
B non-voting ordinary shares of 0.1p each
C non-voting ordinary shares of 0.1p each
D non-voting ordinary shares of 0.1p each
E non-voting ordinary shares of 0.1p each
F non-voting ordinary shares of 0.1p each
X non-voting ordinary shares of 0.1p each
2018
Number
2017
Number
77,518,446
77,518,446
900,000
900,000
8,860,518
8,860,518
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
8,860,518
8,860,518
Y non-voting ordinary shares of 0.1p each
8,860,518
8,860,518
110,000,000
110,000,000
Issued, fully-called and paid:
Ordinary shares of 0.1p each
Ordinary non-voting shares of 0.1p each
A non-voting ordinary shares of 0.1p each
X non-voting ordinary shares of 0.1p each
B non-voting ordinary shares of 0.1p each
C non-voting ordinary shares of 0.1p each
D non-voting ordinary shares of 0.1p each
E non-voting ordinary shares of 0.1p each
2018
Number
2017
Number
2018
£
2017
£
38,840,741
38,654,846
38,841
38,655
75,000
957,692
767,465
158,890
188,056
255,189
919,160
75,000
955,484
767,465
158,890
194,633
275,317
-
-
75
958
767
159
188
255
919
203
75
955
767
-
8
10
-
-
F non-voting ordinary shares of 0.1p each
203,500
Issued, partly-called and paid:
A non-voting ordinary shares of 0.1p each
X non-voting ordinary shares of 0.1p each
42,365,693
41,081,635
42,365
40,470
260,973
318,497
325,104
318,497
579,470
643,601
-
7
7
-
7
7
42,945,163
41,725,236
42,372
40,477
62
for the year ended 30 September 2018
Notes to the consolidated financial statements
The following transactions have taken place during the year:
Transaction type
Share class
New issue under OTB
Ordinary shares of 0.1p each
New issue under OTB
E non-voting ordinary shares of 0.1p each
New issue under OTB
F non-voting ordinary shares of 0.1p each
New issue
A non-voting ordinary shares of 0.1p each, 0.1% partly-paid
Repurchase and cancellation C non-voting ordinary shares of 0.1p each
Repurchase and cancellation D non-voting ordinary shares of 0.1p each
Repurchase and cancellation
E non-voting ordinary shares of 0.1p each
Repurchase and cancellation A non-voting ordinary shares of 0.1p each
Exercise of CSOP options
Ordinary shares of 0.1p each
Number of
shares
Premium
£000
49,096
931,660
203,500
15,000
(6,577)
(20,128)
(12,500)
(76,923)
136,799
350
391
85
-
-
-
-
-
464
1,219,927
1,290
Full payment
A non-voting ordinary shares of 0.1p each, 0.1% partly-paid
79,131
314
1,604
Rights of each share class
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at general meetings of the Company. They are entitled to share in the proceeds on the return of
capital, or upon the winding up of the Company in proportion to the number of and amounts paid on shares held.
The shares are non-redeemable.
Non-voting ordinary shares
The holders of non-voting ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to share in the proceeds on the return of capital, or upon the winding up of the Company in proportion to the
number of and amounts paid on shares held. The shares do not carry any voting rights and are non-redeemable.
A and X non-voting shares
The holders of non-voting ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to share in the proceeds on the return of capital, or upon the winding up of the Company in proportion to the
number of and amounts paid on shares held. The shares do not carry any voting rights and are non-redeemable.
B, C, D, E and F non-voting shares
The holders of B, C, D, E and F non-voting shares are not entitled to receive dividends. The shares do not carry any
voting rights and are non-redeemable. On the return of capital or winding up of the Company, the holders of such
shares are not entitled to share in proceeds unless a hurdle is achieved.
Own shares
The Group has an employee benefit trust in order to acquire own shares in the Company to satisfy future share
incentive plans. The costs of operating the Trust are borne by the Group but are not material.
During the year ended 30 September 2018 the Group purchased 152,707 ordinary own shares and 16,006 A non-
voting shares in exchange for cash consideration of £1,364,000 in order to satisfy future options and awards. The
Trust waived the right to receive dividends on these shares.
63
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018
Notes to the consolidated financial statements
23. Share-based payments
EMI
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 ended 30 September 2017.
Company Share Option Plan ("CSOP")
The CSOP is a HMRC approved scheme in which the Board, at their discretion, grant options to employees to
purchase ordinary shares. Each participating employee can be granted options up to the value of £30,000. Options
granted under the CSOP can be exercised between the third and tenth anniversary after the date of grant and usually
lapse if the employee leaves the Group before the option expires in circumstances in which they are considered to
be a bad leaver. In the case of a good leaver, the employee is able to exercise options for a limited period of time
after the cessation of employment. The expense for share-based payments under the CSOP is recognised over the
respective vesting period of these options.
Option To Buy scheme ("OTB") - Growth shares
The OTB scheme is an award scheme whereby the Board at their discretion, offer employees the opportunity to
purchase growth shares. Growth shares entitle the holder to participate in the growth in the value of the Group above
the base value at the date of the award if a certain threshold level, set above the current market value of the Group
at the time the shares are issued is met. Growth shares awarded under the OTB have different vesting conditions. The
vesting condition attached to all growth shares is that the threshold level needs to be met and an exit event needs to
have occurred. During the year a number of awards were made with an additional employment condition of four or
six years after the date of grant. The growth shares that were issued subject to those conditions are subject to buy
back options under which the Group can buy back the shares for their issue price if the employee leaves the Group
before the expiry of the employment condition period. The expense for share-based payments under the OTB is
recognised over the expected time to the assumed date that the growth target threshold will be met.
The table below summarises the outstanding options and awards:
2018
Number
526,152
35,039
2017
Number
566,936
104,896
(30,316)
(15,579)
(136,799)
(130,101)
394,076
526,152
168,066
194,900
CSOP and EMI
Outstanding, start of period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding, end of period
Exercisable, end of period
64
for the year ended 30 September 2018 Notes to the consolidated financial statements
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
2018
£
4.17
6.00
4.79
3.39
4.52
3.56
2017
£
3.28
5.20
3.37
1.22
4.17
3.48
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 (2017: 190p) and the
highest exercise price was 600p (2017: 520p). The weighted average remaining contractual life of share options
outstanding at the end of the period was six years (2017: seven years).
OTB - Growth shares
Outstanding, start of period
Granted during the period
Repurchased and cancelled
Outstanding, end of period
Exercisable, end of period
2018
Number
628,840
1,135,160
2017
Number
368,733
275,317
(39,205)
(15,210)
1,724,795
628,840
-
-
The movements in the weighted average exercise price of growth shares during the year were as follows:
Outstanding, start of period
Granted during the period
Repurchased and cancelled
Outstanding, end of period
Exercisable, end of period
2018
£
4.86
6.00
5.42
5.60
-
2017
£
4.59
5.20
4.51
4.86
-
The lowest base value for growth shares outstanding at the end of the period was 410p (2017: 410p) and the highest
base value was 600p (2017: 520p). The weighted average remaining contractual life of growth shares outstanding at
the end of the period was 1.4 years (2017: 0.4 years).
The fair value of equity-settled share options and awards granted is estimated as at the date of grant using the Black
Scholes method, taking into account the terms upon which the options and awards were granted. The fair value of
growth shares are estimated as at the date of grant using the Black Scholes method, however as there are multiple
areas of uncertainty, the model is limited in its valuation. The estimated impact of these uncertainties are not material
to the Group.
65
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
The inputs into the Black Scholes model and assumptions used in the calculations are as follows:
CSOP
Grant date
Number of shares under option
Fair value of share 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)
12/12/2017
35,039
6.00
6.00
25%
4.71%
0.51%
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 granting of the 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 that 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.
OTB - Growth shares
Grant date
12/12/2017
12/12/2017
12/12/2017
08/01/2018
Number of shares under option
538,160
393,500
200,000
3,500
Fair value of share options from generally accepted
business model (£)
Expected volatility
Expected dividend yield
Risk-free interest rate
6.00
25%
4.71%
0.51%
6.00
25%
4.71%
0.51%
6.00
25%
4.71%
0.51%
6.00
25%
4.71%
0.55%
Expected option life to reach growth target /life to
exercise (months)
12
48
72
11
The market 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 is the assumed date that the growth target threshold will be met, based on growth in PBT, using a
three year forecast approved by the Board.
During the year the Group recognised total share-based payment expenses of £112,000 (2017: £107,000).
66
for the year ended 30 September 2018 Notes to the consolidated financial statements
24. Financial instruments and risk management
The Group's activities expose it to a variety of financial instrument risks; market risk (including interest rate and
foreign exchange), credit risk and liquidity risk. Information is presented below regarding the exposure to each of
these risks, including the procedures for measuring and managing them.
Financial instruments include both financial assets and financial liabilities. Financial assets principally comprise
trade and other receivables and cash and cash equivalents. Financial liabilities comprise trade and other payables
and obligations under finance leases and hire purchase contracts. The Group does not have any derivative financial
instruments.
Risk management objectives
The Group has identified the financial, business and operational risks arising from its activities and has established
policies and procedures to manage these items in accordance with its risk appetite. The Board of Directors has overall
responsibility for establishing and overseeing the Group's Risk Management Framework and risk appetite.
The Group's financial risk management policies are intended to ensure that risks are identified, evaluated and subject
to ongoing monitoring and mitigation (where appropriate). These policies also serve to set the appropriate control
framework and promote a robust risk culture within the business. The Group regularly reviews its financial risk
management policies and systems to reflect changes in the business, counterparties, markets and range of financial
instruments that it uses.
The Group's Treasury Committee has principal responsibility for monitoring exposure to the risks associated with
cash and cash equivalents. Policies and procedures are in place to ensure the management and monitoring of each
type of risk. The primary objective of the Group's treasury policy is to manage short-term liquidity requirements
whilst maintaining an appropriate level of exposure to other financial risks in accordance with the Group's risk
appetite.
Significant accounting policies
Details of the significant accounting policies, including the criteria for recognition, the basis of measurement and
the basis on which income and expenses are recognised, in respect of each financial asset and financial liability, are
disclosed within note 2 to the financial statements.
Categories of financial instrument
The financial assets and liabilities of the Group are detailed below:
Loans &
receivables
£000
2018
Financial
liabilities
£000
Carrying
value
£000
Loans &
receivables
£000
2017
Financial
liabilities
£000
-
-
-
-
2,203
4,203
6,248
5,093
49,695
42,138
56,101
53,479
-
-
-
-
Carrying
value
£000
6,248
5,093
42,138
53,479
1,052
1,052
731
1,783
731
1,783
-
-
-
817
817
143
960
143
960
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Financial liabilities
Trade payables
Obligations under finance
leases and hire purchase
contracts
2,203
4,203
49,695
56,101
-
-
-
The carrying amount of all financial assets and liabilities approximate to their fair value due to their short-term nature.
67
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the consolidated financial statements
Market risk
Interest rate risk
The Group holds interest bearing assets in the form of cash and cash deposits. Cash at bank earns interest at floating
rates based on daily bank deposit rates. Term deposits can also be made for varying periods depending on the
immediate cash requirements of the Group, and interest is earned at the respective fixed-term rate. Based on the
cash balances at the reporting date, if interest rates were to move by 0.25% it would change profit before tax by
approximately:
+ 25 bps (0.25%)
- 25 bps (0.25%)
2018
£000
129
(89)
2017
£000
64
(3)
The Group retains a proportion of the interest income generated from the pooling of customer cash balances and as
a result, the Group has an indirect exposure to interest rate risk. The cash balances are held with a variety of banks
and are placed in a range of fixed term, notice and call deposit accounts with due regard for counterparty credit risk,
capacity risk and liquidity risk requirements. The spread of rate retained by the Group is variable dependent on rates
received by banks (disclosed to customers at between 0.25% below and 0.60% above the prevailing base rate) and
amounts paid away to customers.
The impact of a 0.25% increase or decrease in UK base interest rates on the Group’s revenue has been calculated and
shown below. This has been modelled on a historical basis for each year separately assuming that the UK base rate
was 25bps higher or lower than the actual position at the time.
+ 25 bps (0.25%)
- 25 bps (0.25%)
2018
£000
3,150
(5,119)
2017
£000
4,053
(3,395)
Customer cash balances are not a financial asset of the Group and so are not included in the statement of financial
position.
As at the year end the Group had no significant borrowings and therefore was not exposed to a material interest rate
risk related to debt.
Foreign exchange risk
The Group is not exposed to significant foreign exchange translation or transaction risk as the Group's activities are
primarily within the UK. Foreign exchange risk is therefore not considered material.
Credit risk
The Group's exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when
due, arises principally from its cash balances held with banks and trade and other receivables.
Trade receivables are presented net of allowances within the statement of financial position. An allowance for
impairment is made where there is an identified loss event which, based on previous experience is evidence of a
reduction in the recoverability of the cash flows. Trade receivables that are not to be impaired individually are, in
addition, assessed for impairment on a collective basis. Details of those trade receivables that are past due but not
impaired and any impairments made during the reporting period is shown within note 17.
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.
68
for the year ended 30 September 2018
Notes to the consolidated financial statements
The credit risk on liquid funds, cash and cash equivalents is limited as deposits are held across a number of major
banks. 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, Lloyds Bank Corporate Markets plc, HSBC
Bank plc, The Royal Bank of Scotland plc, Santander UK plc, Clearstream Banking SA, Close Brothers plc, and Brown
Brothers Harriman & Co. Bank of Scotland plc, the Group's principal banker is 100% owned by Lloyds Banking Group
plc. All the other banks currently used by the Group have long-term credit ratings of at least A (Fitch) and Baa3
(Moody's), apart from The Royal Bank of Scotland plc which has a rating of BBB+ (Fitch). 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.
The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties
and customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset at
the reporting date. In relation to dealing services, the Group operates as agent on behalf of its underlying customers
and in accordance with London Stock Exchange Rules. Any settlement risk during the period between trade date
and the ultimate settlement date is substantially mitigated as a result of the Group's agency status, its settlement
terms and the delivery versus payment mechanism whereby if a counterparty fails to make payment, the securities
would not be delivered to the counterparty. Therefore any risk exposure is to an adverse movement in market prices
between the time of trade and settlement. Conversely, if a counterparty fails to deliver securities, no payment would
be made.
There has been no material change to the Group's exposure to credit risk during the year.
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.
There has been no change to the Group's exposure to liquidity risk or the manner in which it manages and measures
the risk during the year.
The following table shows the undiscounted cash flows relating to non-derivative financial liabilities of the Group
based upon the remaining period to the contractual maturity date at the end of the reporting period.
Less than
1 month
£000
1 to 3
months
£000
3 to 12
months
£000
1 to 5
years
£000
Total
£000
2018
Trade payables
Obligations under finance leases and
hire purchase contracts
2017
Trade payables
Obligations under finance leases
1,052
-
1,052
701
-
701
-
-
-
-
-
-
-
300
300
116
75
191
-
431
431
-
68
68
1,052
731
1,783
817
143
960
69
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018
Notes to the consolidated financial statements
Capital management
The Group's objectives in managing capital are to:
•
safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for
shareholders, security for our customers and benefits for other stakeholders;
• maintain a strong capital base to support the development of its business;
•
comply with regulatory requirements at all times.
The capital structure of the Group consists of share capital, share premium and retained earnings. As at the reporting
date the Group had capital of £64,036,000 (2017: £61,362,000).
Capital generated from the business is both reinvested in the business to generate future growth and returned to
shareholders principally in the form of dividends. The capital adequacy of the business is monitored on a monthly
basis and as part of the business planning process by the Board. It is also reviewed before any distributions are made
to shareholders to ensure it does not fall below the agreed surplus as outlined in the Group’s capital management
policy. The liquidity of the business is monitored by management on a daily basis to ensure sufficient funding exists
to meet the Group’s liabilities as they fall due. The Group is highly cash generative and maintains sufficient cash and
standby banking facilities to fund its foreseeable trading requirements.
The Group conducts an Internal Capital Adequacy Assessment Process ("ICAAP"), as required by the Financial
Conduct Authority ("FCA") to assess the appropriate amount of regulatory capital to be held by the Group.
Regulatory capital resources for ICAAP are calculated in accordance with published rules. The ICAAP compares
regulatory capital resources against regulatory capital requirements as specified by the relevant regulatory
authorities.
The Group maintained a surplus of regulatory capital throughout the year. Information under Part Eight (Pillar 3)
Disclosure of the Capital Requirements Regulation is available on the Group's website at www.ajbell.co.uk.
70
for the year ended 30 September 2018
Notes to the consolidated financial statements
25.
Interests in unconsolidated structured entities
The Group manages a number of investment funds (open ended investments) acting as agent of the Authorised
Corporate Director. The dominant factor in deciding who controls these entities is the contractual arrangement
in place between Authorised Corporate Director and the Group, rather than voting or similar rights. As the Group
directs the investing activities through its investment management agreement with the Authorised Corporate
Director, the investment funds are deemed to be structured entities. The investment funds are not consolidated into
the Group’s financial statements as the Group are judged to act as an agent rather than having control under IFRS 10.
The purpose of the investment funds is to invest capital received from investors in a portfolio of assets in order to
generate a return in the form of capital appreciation, income from the assets, or both. The Group’s interest in the
investment funds is in the form of management fees received for its role as investment manager. These fees are
variable depending on the value of the assets under management.
The funds do not have any debt or borrowings and are financed through the issue of units to investors.
The following table shows the details of unconsolidated structured entities in which the Group has an interest at the
reporting date.
Year
2018
2017
Type
OEIC
OEIC
Number of
of funds
6
5
Net AUM
of funds
£m
141.1
48.2
Annual
management
charge
£000
Management charge
receivable at 30
September
£000
157
29
52
-
The annual management charge is included within recurring ad-valorem fees within revenue in the consolidated
income statement.
The annual management charge receivable is included within accrued income in the consolidated statement of
financial position.
The maximum exposure to loss relates to future management fees should the market value of the investment funds
decrease.
26. Operating leases
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
2018
£000
1,350
6,243
12,912
20,505
2017
£000
1,486
5,820
14,685
21,991
During the year the Group recognised £1,617,000 as an expense in the year (2017: £2,081,000).
Operating lease payments represent rentals payable by the Group for its office properties, under non-cancellable
operating lease contracts. 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.
The prior period figures have been amended to remove service charges included in the future minimum lease
payments.
71
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018
Notes to the consolidated financial statements
27. Related party transactions
Transactions between the parent company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed.
Transactions with key management personnel:
Key management personnel is represented by the Board of Directors as shown on page 26 and the Executive
Management Board as shown on page 27.
The remuneration expense of key management personnel is as follows:
Short-term employee benefits (excluding NI)
Retirement benefits
Share-based payment
Gain on the exercise of share options
2018
£000
2,353
54
45
64
2017
£000
2,586
61
40
1
2,516
2,688
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 above.
Transactions with directors:
Directors represent the Board of Directors as shown on page 26.
The remuneration expense of the directors is as follows:
Short-term employee benefits (excluding NI)
Retirement benefits
Share-based payment
Gain on the exercise of share options
2018
£000
1,253
7
23
64
2017
£000
1,315
4
19
-
1,347
1,338
The number of directors to whom retirement benefits are accruing under defined contribution schemes are 1 (2017: 1).
Dividends totalling £5,848,000 (2017: £3,027,000) were paid in the year in respect of ordinary shares held by the
Company's directors.
Directors who exercised share options within the the year are detailed in the Directors' report on page 29.
Remuneration of highest paid director:
Short-term employee benefits (excluding NI)
Share-based payment
2018
£000
802
10
812
2017
£000
863
12
875
72
for the year ended 30 September 2018 Notes to the consolidated financial statements
Other related party transactions:
Charitable donations
During the year the Group made donations of £140,000 (2017: £109,000) to the A J Bell Trust, a registered charity of
which Mr A J Bell is a trustee.
EQ Property Services Limited
The Group is party to two leases 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. Mr C Galbraith, Mr R Stott and
Mr F Lyons are members of key management personnel and shareholders of AJ Bell Holdings Limited and are
directors and shareholders of EQ Property Services Limited. The leases for the rental of the building were entered
into on 17 August 2016 for terms which expire on 30 September 2031, at an aggregate market rent of £1,594,000
per annum.
At the reporting date, there is a payable of £116,000 outstanding (2017: £Nil) with EQ Property Services Limited.
Any amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been
given or received. No provision has been made for doubtful debts in respect of amounts owed by related parties.
28. Subsequent events
There have been no material events occuring between the reporting date and the date of approval of these
consolidated financial statements.
73
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Company statement of financial position
as at 30 September 2018
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
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Tax liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Retained earnings
Total equity
Note
2018
£000
2017
£000
4
5
5
6
8
11,282
10,102
2,461
2,765
12,894
18,120
29,402
(3,182)
128
(3,054)
788
3,694
10,569
15,051
25,153
(1,236)
(62)
(1,298)
26,348
23,855
42
4,410
(1,364)
23,260
40
2,806
-
21,009
26,348
23,855
The financial statements were approved by the Board of Directors and authorised for issue on 7 November 2018 and
signed on its behalf by:
Michael Summersgill
Chief Financial Officer
AJ Bell Holdings Limited
Company registered number: 04503206
The notes on pages 76 to 81 form an integral part of these financial statements.
74
Company statement of changes in equity
for the year ended 30 September 2018
Share
capital
£000
Share
premium
£000
Own
shares
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 October 2017
40
2,806
Total comprehensive income for the year:
Profit for the financial year
Transactions with owners,
recorded directly in equity:
Issue of share capital
Dividends paid
Equity settled share-based payment transactions
Deferred tax effect of share-based payment
transactions
Tax relief on exercise of share options
Purchase of own share capital
Own shares acquired
Total transactions with owners
Balance at 30 September 2018
-
2
-
-
-
-
-
-
2
42
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 paid
Equity settled share-based payment transactions
Deferred tax effect of share-based payment transactions
Tax relief on exercise of share options
Purchase of own share capital
Total transactions with owners
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
O
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
-
-
-
-
-
-
-
-
21,009
23,855
22,465
22,465
-
1,606
(20,095)
(20,095)
112
51
128
112
51
128
(410)
(410)
(1,364)
-
(1,364)
-
1,604
-
-
-
-
-
-
1,604
(1,364)
(20,214)
(19,972)
4,410
(1,364)
23,260
26,348
Share
capital
£000
Share
premium
£000
Retained
earnings
£000
Total
equity
£000
40
2,229
28,287
30,556
-
-
-
-
-
-
-
-
3,199
3,199
577
-
577
-
-
-
-
(10,564)
(10,564)
107
88
57
107
88
57
(165)
(165)
577
(10,477)
(9,900)
Balance at 30 September 2017
40
2,806
21,009
23,855
The notes on pages 76 to 81 form an integral part of these financial statements.
75
Notes to the Company financial statements
1.
Significant accounting policies
General information
The principal activity of AJ Bell Holdings Limited ("the Company") is that of a holding company.
The Company is a private limited company limited by shares and incorporated in the United Kingdom under the
Companies Act 2006 and is registered in England and Wales. The Company's number is 04503206 and its registered
office is 4 Exchange Quay, Salford Quays, Manchester M5 3EE.
Basis of accounting
The financial statements are prepared on the historical cost basis and a going concern basis. These financial
statements are presented in sterling, which is the currency of the primary economic environment in which the
Company operates, rounded to the nearest thousand.
The financial statements are prepared in accordance with Financial Reporting Standard FRS 101 Reduced disclosure
framework (“FRS 101”). The amendments to FRS 101 (2014/15) 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 disclosure exemptions.
Disclosure exemptions
The Company is included within the consolidated financial statements of AJ Bell Holdings Limited, a company
incorporated in the United Kingdom, whose consolidated financial statements are publically available. Consequently,
the Company has, in compliance with FRS 101, taken advantage of the exemption from preparing the following
disclosures that would otherwise have been required under IFRS:
•
•
•
•
•
•
IAS7 presentation of a cash flow statement;
IAS8 Disclosures in respect of new standards and interpretations that have been issued but which are not yet
effective;
IAS24 Disclosure of key management personnel compensation and the disclosure of transactions with group
companies;
IFRS7 Disclosure in respect of financial instruments, provided that the equivalent disclosures are included in the
consolidated financial statements of the group in which the entity is consolidated;
IFRS 13 Fair Value Measurement paragraphs 91 to 99, provided that equivalent disclosures are included within the
consolidated financial statements of the group for which the entity is consolidated; and
IFRS 2 Share-Based Payment paragraphs 45 and 46 to 52 provided that equivalent disclosures are included
within the consolidated financial statements of the group for which the entity is consolidated.
The accounting policies have been applied consistently to all periods presented in these financial statements, unless
otherwise stated.
Investments
Investments in subsidiary undertakings are shown at cost less provision for impairment.
76
for the year ended 30 September 2018 Notes to the Company financial statements
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.
Employee Benefit Trust
The Group has an employee benefit trust, the AJ Bell Employee Benefit Trust, used for the granting of shares to
certain employees. AJ Bell Holdings Limited is considered to be the sponsoring employer and so the assets and
liabilities of the trust are recognised as those of AJ Bell Holdings Limited.
Shares of AJ Bell Holdings Limited held by the trust are treated as ‘own shares’ held and shown as a deduction from
equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference
between the sales proceeds and original cost being taken to equity.
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 income
statement for the year. The Company reported a profit of £22,465,000 for the year ended 30 September 2018 (2017:
£3,199,000). 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. Dividends
Details of dividends paid during the year are disclosed in note 10 of the consolidated financial statements.
77
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the Company financial statements
4.
Investments
Cost
At 1 October
Additions
Share based payments
Disposal
At 30 September
Accumulated impairment losses
At 1 October
Impairment in the year
Accumulated impairment losses at 30 September
Carrying value at 30 September
2018
£000
14,304
700
500
(20)
2017
£000
10,532
3,772
-
-
15,484
14,304
(4,202)
-
(402)
(3,800)
(4,202)
(4,202)
11,282
10,102
78
for the year ended 30 September 2018 Notes to the Company financial statements
The Company has investments in the ordinary share capital of the following subsidiaries at 30 September 2018:
Proportion
of ownership
interest and
voting rights
held
Name of subsidiary
AJ Bell Limited*
AJ Bell Trustees Limited
Ashby London Trustees Limited
AJ Bell Platinum Limited*
Ashby London Actuarial Services
Limited*
AJ Bell Management Limited*
Sippdeal Trustees Limited
AJ Bell (PP) Trustees Limited
Whitehead Trustees Limited
Ashby London (PP) Trustees Limited
Sippdeal Limited
MSM Media Limited*
AJ Bell Securities Limited*
Lawshare Nominees Limited
AJ Bell EBT Limited*
AJ Bell Media Limited*
MoneyAM Limited
Principal activity
Country of incorporation 2018
2017
Investment / Group administration
England and Wales
100%
100%
Dormant
Dormant
Dormant
Dormant
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
England and Wales
100%
100%
Investment administration
England and Wales
100%
100%
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%
Dealing and custody
England and Wales
100%
100%
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%
100%
AJ Bell Investments LLP
Indexx Markets Limited
AJ Bell Capital Limited
AJ Bell Digital Savings Limited*
Investment management services
England and Wales
100%
100%
Dormant
Dormant
Dormant
England and Wales
England and Wales
0%
0%
100%
100%
England and Wales
100%
0%
* indicates direct investment of AJ Bell Holdings Limited
The financial statements for the year ended 30 September 2018 of AJ Bell EBT Limited have been exempted from
audit under s479A of the Companies Act 2006 by way of parent guarantee from AJ Bell Holdings Limited.
During the year Indexx Markets Limited and AJ Bell Capital Limited, which were dormant companies, were struck
off the register at Companies House. Since the year-end MoneyAM Limited, MSM Media Limited and Ashby London
Actuarial Services Limited, all of which are dormant, have also been struck off the register at Companies House.
AJ Bell Investments LLP is in the process of being struck off.
The registered office of all subsidiaries is 4 Exchange Quay, Salford Quays, Manchester, M5 3EE.
79
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Notes to the Company financial statements
5.
Trade and other receivables
Amounts due within one year:
Amounts owed by Group undertakings
Prepayments and accrued income
Amounts due after one year:
Deferred tax asset relating to share-based payments
Amounts owed by Group undertakings
2018
£000
2017
£000
272
2,189
2,461
315
2,450
2,765
1
787
788
245
3,449
3,694
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
Current payables
Trade payables
Amounts owed to Group undertakings
2018
£000
2017
£000
771
2,411
3,182
8
1,228
1,236
80
for the year ended 30 September 2018 Notes to the Company financial statements
7. Related party transactions
Transactions with key management personnel
The key management personnel of the Group and the Company are the same. The related party disclosure is given in
note 27 of the consolidated financial statements.
Transactions with group companies:
During the year the Company entered into the following transactions with its subsidiaries:
Recharges
Dividends received
2018
2017
Receivable
£000
Payable
£000
Receivable
£000
Payable
£000
-
23,900
23,900
855
-
855
-
4,200
4,200
620
-
620
During the year the Company made a capital contribution of £0.7m (2017: £3.7m) to AJ Bell Asset Management
Limited.
The Company's balances with fellow group companies at the reporting date are set out in notes 5 and 6 of the
Company financial statements.
All transactions and outstanding balances with fellow group companies are priced on an arm's length basis and are
to be settled in cash. None of the balances are secured and no provisions have been made for doubtful debts for any
amounts due from fellow group companies.
Other related party transactions:
Charitable donations:
During the year the Company made donations of £140,000 (2017: £109,000) to the A J Bell Trust, a registered charity
of which Mr A J Bell is a trustee.
8. Called-up share capital
The Company’s share capital is disclosed in note 22 to the consolidated financial statements.
81
GovernanceFinancial statementsStrategic reportOther informationfor the year ended 30 September 2018 Unaudited five-year summary
2018
£000
2017
£000
IFRS
2016
£000
2015
£000
2014
£000
89,691
28,256
28,359
75,576
21,776
21,697
64,466
16,749
16,779
57,038
15,387
15,469
53,493
15,914
16,117
22,646
17,571
13,440
12,329
12,523
11,589
69,770
(15,511)
(1,034)
(778)
11,722
64,310
(13,634)
(246)
(790)
9,993
57,248
(11,693)
(1,006)
(754)
10,011
52,231
11,487
88,034
(9,372)
(49,309)
(199)
(398)
(428)
(398)
64,036
61,362
53,788
52,273
49,386
64,036
61,362
53,788
52,273
49,386
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)
55.26
42.85
32.85
30.23
30.87
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)
54.05
42.60
49.00
25.75
32.73
28.75
30.17
30.76
25.25
25.00
55.00
28.25
25.75
25.50
25.25
82
for the year ended 30 September 2018 Definitions
The following definitions are used throughout the annual report and financial statements:
AJBIC
AJBYI
AUA
Board
BPS
CGU
CODM
CRD IV
CRR
CSOP
AJ Bell Investcentre
AJ Bell Youinvest
Assets Under Administration
The Board of Directors of AJ Bell Holdings Limited
Basis points
Cash Generating Unit
Chief Operating Decision Maker
The Capital Requirements Directive IV
Capital Requirement Regulation
Company Share Option Plan
Customer retention rate
Relates to platform customers
DEPS
D2C
EMB
EMI
FCA
FRC
FRS
FTSE
GDPR
HMRC
IAS
ICO
IFRIC
IFRS
IOC
iOS
ISA
KOS
KPI
LISA
MBO
MiFID II
MPS
OCF
OEIC
OTB
Diluted Earnings Per Share
Direct to Consumer
Executive Management Board
Enterprise Management Incentives
Financial Conduct Authority
Financial Reporting Council
Financial Reporting Standards
The Financial Times Stock Exchange
General Data Protection Regulations
Her Majesty's Revenue and Customs
International Accounting Standard
Information Commissioner's Office
International Financial Reporting Interpretations Committee
International Financial Reporting Standards
Investment Operations Certificate
Mobile Operating System developed by Apple Inc.
Individual Savings Account
Key Operating System
Key Performance Indicator
Lifetime ISA
Management Buy Out
Markets in Financial Instruments Directive II
Managed Portfolio Service
Ongoing Charges Figure
Open-Ended Investment Company
Option To Buy
Own shares
Shares held by the Group to satisfy future incentive plans
PBT
PLC
Profit Before Tax
Public Limited Company
Revenue per £ AUA
Average AUA is calculated as the average of the opening and closing AUA in each
Represents revenue as a percentage of the average AUA in the year.
SIPP
SMRC
SREP
SSAS
quarter averaged for the year.
Self-Invested Personal Pension
Senior Manager & Certification Regime
Supervisory Review and Evaluation Process
Small Self-Administered Scheme
83
GovernanceFinancial statementsStrategic reportOther information
Company information
Company number
04503206
Company Secretary
Mr Christopher Bruce Robinson
Registered office
Auditor
Bankers
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
KPMG LLP
1 St Peter’s Square
Manchester
M2 3AE
Bank of Scotland plc
1 Lochrin Square
92 – 98 Fountainbridge
Edinburgh
EH3 9QA
84
Notes
AJ Bell Holdings Limited, 4 Exchange Quay, Salford Quays, Manchester M5 3EE
0345 40 89 100
www.ajbell.co.uk
Company registration number 04503206