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Annual Report and
Consolidated Financial Statements
For the year ended 31 December 2018
Your future, our focus.
curtisbanks.co.uk
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CURTIS BANKS GROUP PLC 2018
STRATEGIC REPORT 1 – 13
Operational, Financial Highlights and
Key Performance Indicators 1
Our services and history 2
Chairman’s statement 3
Chief Executive’s review 4 – 6
Chief Financial Officer’s review 7 – 9
Principal risks and uncertainties 10 – 11
Corporate and social responsibility 12 – 13
GOVERNANCE 14 – 25
Board of Directors 14 – 15
Directors’ report 16 – 17
Statement of Directors’
responsibilities 16 – 17
Chairman’s corporate
governance report 18 – 20
Corporate governance 21 – 23
Directors’ remuneration report 24 – 25
FINANCIAL STATEMENTS 26 – 76
Independent auditors’ report 27 – 32
Consolidated statement of
comprehensive income 33
Consolidated statement of
financial position 34
Company statement of
financial position 35
Consolidated statement of
changes in equity 36
Company statement of changes
in equity 37
Consolidated statement of cash flows 38
Company statement of cash flows 39
Notes to the financial statements 40 – 73
Company information 74
Supplementary unaudited
information 75 – 76
Company Registration
No. 07934492 (England and Wales)
Your future, our focus.
curtisbanks.co.uk
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Operational, Financial Highlights and
Key Performance Indicators
Curtis Banks Group PLC, one of the UK's leading SIPP providers, is pleased to announce its final results for the
12 months to 31 December 2018.
Highlights
—
Operating Revenue increased by 6% to £46.1m (2017: £43.6m)
—
—
—
—
—
—
—
Adjusted profit before tax1 increased by 13% to £12.1m (2017: £10.7m)
Adjusted operating margin2 increased to 27.1% (2017: 25.8%)
Profit before tax increased by 72% to £10.1m
Adjusted diluted EPS increased by 13% to 17.32p
Gross organic growth in own SIPP numbers of 9% with total administered now 77,739
Assets under administration increased by 0.4% to £24.8bn
Proposed final dividend of 6.00p (2017: 4.75p) making a full year payment of 8.00p (2017: 6.25p)
Highlights and key performance indicators for the year include:
2018 2017
Financial
Operating Revenue £46.1m £43.6m
Adjusted Profit before tax1 £12.1m £10.7m
Profit before tax £10.1m £5.9m
Adjusted Operating Margin2 27.1% 25.8%
Diluted EPS 14.45p 9.26p
Diluted EPS on Adjusted Operating profit
less an effective tax rate 17.32p 15.38p
Operational Highlights
Number of SIPPs Administered 77,739 76,474
Assets under Administration £24.8bn £24.7bn
Total organic new own SIPPs in year 5,838 8,719
Number of Properties Administered 6,231 6,031
1 Profit before tax, amortisation and non-recurring costs.
2 The ratio of operating profit before net finance costs, amortisation and non-recurring costs to operating revenues.
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Our services and history
Curtis Banks Group PLC (“Curtis Banks” or “the
Group”) is one of the United Kingdom’s leading
administrators of self-invested pension products,
principally SIPPs and SSASs. The Group commenced
trading in 2009 and has successfully developed,
through a combination of organic growth and
acquisitions, into one of the largest UK providers of
these products. At 31 December 2018 the Group
administered circa £24.8bn (2017: £24.7bn) of pension
assets on behalf of over 77,000 (2017: 76,000) active
clients.
In May 2015 the shares of Curtis Banks (LON: CBP)
were admitted and listed on the London Alternative
Investment Market (“AIM”).
On 25 May 2016 the Group completed its largest
acquisition to date, the purchase of Suffolk Life Group
Limited, a long established provider of SIPPs operating
through Suffolk Life Pensions Limited and Suffolk Life
Annuities Limited. The Group now trades under the
names Curtis Banks and Suffolk Life. Approximately
600 staff are employed across its head office in Bristol
and regional offices in Ipswich and Dundee.
Curtis Banks Limited and Suffolk Life Pensions Limited,
the Group’s principal trading subsidiaries, are
authorised by the Financial Conduct Authority to
provide trust based SIPP products. Suffolk Life
Annuities Limited is regulated by the Prudential
Regulatory Authority and the Financial Conduct
Authority to provide insurance based SIPP Products.
The latter company provides SIPPs through
non-participating individual insurance contracts. As
such, it is regarded as an insurance company for the
purposes of regulatory and statutory reporting. Due to
Suffolk Life Annuities Limited’s status as an insurance
company, the consolidated results for the whole Group
also include insurance policyholder assets, liabilities
and returns.
The Executive Directors have proven experience in the
pensions market and have established a business that
focuses on a service-driven proposition for the
administration of flexible SIPPs. The Group’s products
are primarily distributed by authorised and regulated
financial advisers, targeted towards pension savers
who wish to take full advantage of the features and
flexibility offered in the UK’s modern and changing
pension regime. Long standing relationships with key
distributors result in high levels of repeat business and
demonstrate satisfaction with products and services
provided.
The Group is focussed on continuing to deliver value to
both customers and shareholders in the years ahead.
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Chairman’s statement
Chris Macdonald
Chairman
Progressing towards ambitious goals
I am pleased to report the Curtis Banks Group final
results for the year ended 31 December 2018. These
results show solid growth in all financial KPI’s over
a transitional period in which we have made important
operational developments.
I would like to start by thanking our former Chief
Executive Officer Rupert Curtis for being instrumental
in the evolution of the business over a number of years
from founding the business to the successful IPO in
2015. I am delighted that he remains a strategic
advisor to the business. I would also like to thank
Paul Tarran following his announcement to step down
by the end of the year. Paul has made an enormous
contribution to the business over a number of years.
The search for his successor has already begun.
Taking Rupert Curtis’ place is our new Chief Executive
Officer, Will Self. Will has been with the business since
2016 and with strong credentials, over 17 years’
experience and a member of the Board since 2016,
I believe he is very well positioned to lead the business
through the next stage of its growth. I am also
delighted that Jane Ridgley has now joined the Board.
Jane is currently Chief Operating Officer for the Group
and will continue in that role as an executive director
of the Board.
The period under review has shown an increase in all
key financial metrics. Operating revenue has increased
by 6% from £43.6m to £46.1m compared to the same
period last year, with adjusted profit before tax
increasing by 13% from £10.7m to £12.1m. Adjusted
operating margin increased to 27.1% (2017: 25.8%) and
profit before tax increased 72% to £10.1m. Fully
diluted earnings per share on these adjusted operating
results (after tax) amounted to 17.32p per share
(2017: 15.38p). It is extremely pleasing during this
period of transition for the Group to be able to report
both top line growth and margin improvement.
We have invested significantly in our products this year
and launched ‘Your Future SIPP’ in February 2019.
In a sense, this development is the culmination of the
Suffolk Life integration, as the product combines the
best features of both companies’ services into one
industry leading proposition. We have also invested in
our sales team and digital portals throughout the year
and I am confident that these enhancements,
combined with our expansion into UK's commercial
property market, will lead to greater top-line growth.
The total number of SIPPs currently administered by
the Group now exceeds 77,000. This is a result of
continued new organic growth of all SIPPs and our
attrition rates remaining stable with previous years.
Dividends
We paid an interim dividend of 2.00p per share (2017:
1.50p per share) on 15 November 2018 and the Board
proposes a final dividend of 6.00p per share (2017:
4.75p per share) which, if approved, will be paid to
shareholders on the register at the close of business on
26 April 2019. The shares will be marked ex-dividend
on 25 April 2019 and the proposed dividend paid on
23 May 2019. This will mean the total dividend paid in
respect of the year ended 31 December 2018 will
amount to 8.00p per share (2017: 6.25p).
Summary and outlook
We are well positioned to grow the business and we
continue to actively seek appropriate acquisition
opportunities. Following a year of successfully
implementing change within the Group, we have
entered 2019 in a strong position for the year ahead.
We continue to invest in the business to ensure we
stay industry leaders and are in a strong position to
grow revenues and maximise stakeholder value.
Chris Macdonald
Chairman
19 March 2019
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Chief Executive’s review
Will Self
Chief Executive Officer
My first review as Chief Executive of the Group reports
that 2018 has been another year of strong and
profitable growth, building on the foundations of
consolidation and integration prioritised over the last
two years. It goes without saying that I would like to
thank my predecessor Rupert Curtis who, along with
Chris Banks and Paul Tarran, founded the business and
helped build the industry leading Group that we have
today. Their vision and belief in the SIPP market has
enabled the Group to remain at the top of our sector
and created a platform for the next stage of our
journey.
One of the founding principles of the Group was to
deliver high quality service. The Group remains a
customer centric organisation, and I would also like to
thank our hugely valued staff members who deserve
recognition for the many and varied achievements
over the last 12 months. Their success in meeting the
challenges we present to them plays a vital role in
delivering the increasing expectations of our
customers at the same time as we evolve our business.
The SIPP market is experiencing rapid change, and it is
the hard work and dedication of each and every
member of the business that enables us to deliver
these final results for the year ended 31 December
2018.
We have focussed on adjusted operated margin as one
of our key performance indicators, and I am pleased to
report that this has further increased to 27.1% (2017:
25.8%). We remain confident that a 30% adjusted
operating margin is sustainable with our current
model. Adjusted profit before tax increased 13% to
£12.1m (2017: £10.7m) as a result of strong revenue
growth and further operational alignment within the
Group.
2018 was a year of transition for some elements of the
Group. We completed the delivery of our new brand,
consolidating under a single identity and completing
a journey that began internally with our staff, offices
and culture. This has delivered a platform from which
we can invest in and grow our market presence and
reputation within our market. In April, we announced
the appointment of Jane Ridgley to Chief Operating
Officer of the Group. Jane brings a wealth of
experience to the role, having previously held senior
roles in Suffolk Life and Legal & General. She is
a member of the Group Executive Committee and,
as of January 2019, a member of the Board. Her
extensive footprint within the company continues to
drive cohesiveness within the Group’s core operational
teams and will engender enhanced collaboration.
In other areas of the Group we focussed on five key
deliverables to provide the foundation required for us
to deliver the next stage of our journey:
New single SIPP proposition – We have successfully
launched our new SIPP product ‘Your Future SIPP’
which replaces the current range of products with
a combined product offering the best features of the
Curtis Banks and Suffolk Life SIPPs. It capitalises on
our new brand, with a clear single market presence for
our customers, and its enhanced digital functionality
and customer focused service model is more efficient
and appealing for both advisers and their clients.
New national sales function – Distributing ‘Your Future
SIPP’ is our fully resourced, significantly enhanced
sales team, headed by our Group Sales Director, Dave
Stratton, a National Sales Manager and a team of
seven Business Development Managers. Dedicated sales
resource is also focussed on key adviser networks and
investment partners to capitalise on other distribution
channels.
Expanded commercial property expertise – We also
have expanded further into the UK’s commercial
property market with the launch of two new
companies. Rivergate Legal Limited offers a range of
legal services to SIPP, SSAS and open market customers
relating to commercial property transactions; and
Templemead Property Solutions Limited provides
valuation services and negotiates other professional
services on behalf of Curtis Banks Group clients.
GDPR – During the period we also successfully
implemented a GDPR framework throughout the Group
without material financial or operational impact.
As a Group we interact with a large number of
external parties and I am pleased that this has been
completed effectually.
IT Strategy – We continue to progress with the work to
simplify our IT Infrastructure, as previously outlined.
We launched our new website and secure portal,
marking a material shift in and de-risking of our digital
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Chief Executive’s review
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infrastructure. We now continue to explore the best
routes to further exploit this investment.
Having successfully navigated a period in which we
delivered both transitional and structural growth, we
are well positioned to continue to grow the business
and deliver against our strategic objectives.
Sales Growth
At the year end the number of SIPPs administered
increased to 77,739 with 5,838 gross new own SIPPs
added organically. Our two core areas of strategic
focus, the Full SIPP and Mid SIPP both saw encouraging
levels of new gross organic growth. Attrition rates on
own SIPPs remain stable at 6.07%. The table below
sets out more detail on SIPPs numbers and rates of
attrition.
T
Total Third Party
Full SIPPs Mid SIPPs eSIPPs own SIPPs Administered Total
2018 number 20,450 26,354 22,935 69,739 8,000 77,739
2017 number 20,539 24,682 22,193 67,414 9,060 76,474
Gross organic growth rate* 3.14% 12.43% 9.58% 8.66% 0.73% 7.72%
SIPPs added organically 644 3,068 2,126 5,838 66 5,904
SIPPs added through acquisitions — 578 — 578 — 578
Conversions and reclassifications 507 (507) — — — —
SIPPs lost through attrition (1,240) (1,467) (1,384) (4,091) (1,126) (5,217)
Attrition rate* 6.04% 5.94% 6.24% 6.07% 12.43% 6.82%
* Growth and attrition percentage rate based on opening SIPP numbers at the beginning of the year.
Our strategic focus remains on the Full and Mid SIPP
market where our expertise, charging model and
customer service focus are concentrated in ‘Your
Future SIPP’. The Full SIPP market is relatively mature,
with historic restrictions on annual contributions and
annual allowances meaning that gross flow
predominantly comes from existing SIPP customers.
Many of these clients seek to add Commercial Property
as an asset class or wish to move their existing SIPP to
a new provider. Mid SIPPs continue to be the product
of choice for pension consolidation and the first step
for many pension customers from default funds into
investment selection, therefore contributing material
gross flow.
There have been some well publicised challenges,
from which no provider has been immune, which have
led to lower gross sales across the industry. The
Defined Benefits (‘DB’) transfer review has impacted
all Professional Advisers, spanning both ‘DB’ and
Defined Contribution pension transfer advice.
Liabilities arising from SIPPs holding non-standard
assets have reduced confidence in the SIPP market,
and the general economic environment has reduced
consumers’ focus on pension savings. All of these
factors have been felt across the industry but we
believe that our robust financial strength, quality of
administration and our new proposition puts us at the
forefront of the sector.
In spite of the above the overall SIPP market
opportunity remains strong, with SIPPs still benefitting
from the introduction of the pension freedoms and
favoured as a way of allowing individuals to have
greater access, control and responsibility over their
pension savings. SIPPs are now being considered by
a much larger group of consumers than ever before
and are no longer perceived as reserved solely for
those with large pension fund values.
‘Your Future SIPP’ - our new SIPP proposition
‘Your Future SIPP’ was launched following detailed
adviser research and combines the best of the Curtis
Banks and Suffolk Life SIPPs into one of the industry’s
leading propositions. Your Future SIPP accesses a high
quality customer-focussed service model with
specialised teams across the Group, and is
competitively priced, with no application fees for
online applications coupled with a tiered annual
administration fee.
A new online portal has been launched that directly
supports ‘Your Future SIPP’. This will deliver
efficiencies for advisers, reducing the time spent on
administration. Advisers and clients will benefit from
more digital functionality than before and it is
accessible from desktop computers, tablets and
mobiles. Other features include market access to
virtually any investment solution, easy management of
cash and automated adviser charging.
‘Your Future SIPP’ benefits from our highly
experienced commercial property team, now
enhanced by the legal and property management
solutions within the Group offered by Rivergate Legal
and Templemead Property Solutions, adding
experience and value to customers with property
investments.
We are still in the very early stages of the new
proposition but believe our new proposition is market
leading with a suite of features, flexibility and
attractive pricing. Coupled with our new distribution
structure we are now well-placed to increase our
organic growth of Full and Mid SIPPs.
Acquisition activity
Investing to add high quality assets is a core
component of our future growth strategy. In December
2018, we announced the completion of the purchase of
wealth manager Hargreave Hale's book of SIPPs. This
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comprised 578 SIPPs invested in assets valued at circa
£180m. This SIPP book represented a good fit for our
business model and marked the tenth asset purchase
by Curtis Banks since the company was founded in
2009.
We remain disciplined in our approach to acquisitions
where we consider each opportunity from both an
earnings per share and return on investment
perspective. We are committed to exploring further
opportunities to add scale and expand our offering to
greater numbers of clients.
Industry context and regulation
Regulatory scrutiny continues in the pension market.
Our business model means that we only work with
regulated financial advisers and do not give any advice
or provide the investments held within our SIPPs. In
addition our fee structures remain fair and
transparent.
The issue of non-standard investments has received
increased media attention. Whilst we acknowledge
that these issues are significant within the wider
industry, and that some uncertainty still persists,
we do not consider them to be a material risk to our
business. The Group continues to carry out robust due
diligence on non-standard investments and our new
product has a clear Schedule of Allowable Investments.
We have also taken a prudent approach to our legacy
book, composed of our own SIPPs as well as a large
number of historic acquisitions, and have undertaken
a detailed review of this business. There are areas
where we will need to take remedial action but these
are limited. Commercial Property remains a complex
asset class and we are now undertaking a
comprehensive data cleanse in this area.
Our People and Culture
Our Chief Financial Officer, Paul Tarran, has notified
the Board that he intends to stand down from the
Board by the end of 2019. A process has begun to
identify and recruit a successor as Chief Financial
Officer, who can continue our journey to enhanced
financial reporting and discipline while ensuring that
the Group can capitalise on strategic growth
opportunities. Paul will retain his current
responsibilities until this process is complete to ensure
a smooth transition.
We value our people and the positive contribution they
make to our culture and the performance of our
business. In late 2018 we appointed a new Group HR
Director to lead us on defining a modern, forward
looking people strategy. In doing so we are reviewing
all elements of our culture from recruitment
methodologies to long term incentives to ensure that
all staff throughout the group are given the
opportunity to develop and succeed.
Our wider strategy
The Group has considerable experience of
administration of complex assets within a regulated
environment coupled with management of complex
data from multiple and diverse counterparties. We
intend to formulate a strategy that delivers revenue
growth and diversity in our areas of expertise. We
have three areas of strategic focus:
• Organic sales – supported by our new national
sales function and market leading proposition.
• Acquisition opportunities – driving growth
through additional books of business.
• Diversifying revenue streams – building on our
core capabilities of complex administration and
commercial property, and expanding our service
into Legal and Property Management offerings.
In addition to this we will continue to focus on our
core operating models to ensure that our risks remain
effectively managed, and that operational
opportunities and efficiencies are realised and able to
meet our future strategic ambitions.
The SIPP market is undergoing an evolution and, as one
of the leading providers, we have looked to the future
and created the new SIPP proposition that advisers
asked for, supported by a nationwide adviser support
network. We have broadened our appeal and capability
to commercial property clients and will place
structured focus on other strategic growth
opportunities. We have entered 2019 in a strong
position and I am confident about our prospects for
growth and our broadening capability to deliver
enhanced services for our customers.
Will Self
Chief Executive Officer
19 March 2019
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Chief Financial Officer’s review
Paul Tarran
Chief Financial Officer
Results
A healthy Group financial performance for the year
ended 31 December 2018 resulted in an increased
adjusted profit before tax of £12.1m (2017: £10.7m),
an increase of 13% over the previous year. Statutory
profit before tax, which is stated after amortisation
and non-recurring costs increased by 72% to £10.1m.
Adjusted diluted EPS similarly increased by 13% to
17.32p, while diluted EPS on a statutory basis
increased by 56% to 14.45p.
The performance was achieved despite incurring
upfront costs for laying the groundwork for enhanced
future revenue generation through the new single
Group wide product (as discussed in the Chief
Executive’s report), fully adopting the Curtis Banks
brand and identity throughout the Group and
expanding our sales team to provide nationwide
coverage.
During the year costs were also incurred for the launch
of the new companies to provide SIPP property
valuation services (“Templemead Property Solutions
Limited”) and legal services (“Rivergate Legal
Limited”) to the 6,000+ commercial properties held by
SIPPs and SSASs administered by the Group.
These results show an improvement in adjusted
operating margin of 27.1% (2017: 25.8%). This has been
achieved not only by the revenue growth but also
following efficiency gains made on closure of our
Market Harborough office in early 2018, and cost
saving measures achieved through further alignment
and amalgamation of suppliers, technology, processes
and staff departments within the Group.
A healthy Group financial
performance for the year ended
31 December 2018 resulted in
an increased adjusted profit
before tax of £12.1m
Revenue
Operational revenues of £46.1m in 2018 (2017:
£43.6m) increased by 6% over the comparable period,
driven by further good organic growth in numbers of
SIPPs held and increased interest income.
Fee revenue from SIPPs and SSASs remains the
predominant source of fee income for the Group with
87% (2017: 84%) of these fees being recurring fixed
annual fees. These fees are subject to contractual
annual inflationary rises. A menu of additional fixed
fees are charged depending on the transactional
services provided on the products.
All SIPP and SSAS fees levied are fixed monetary
amounts and are not a percentage based charge on the
value of the underlying assets held within SIPPs and
SSASs. As a result the income of the Group is not
affected by movements in financial markets and
property values. This is a key differential that sets us
apart from most of our competitors and provides an
attractive product in terms of fees to higher value
SIPPs.
Interest income on the margin on client funds remains
a significant part of Group income. In the year ended
31 December 2018 £10.8m of the Group operating
revenues were from interest margin (2017: £9.5m).
Structural efficiencies in treasury management and the
further strengthening of our relationships with deposit
providers have led to the increase over last year in
addition to favourable movements in base rates during
the year.
Both Rivergate Legal Limited and Templemead
Property Solutions Limited, since their launch in 2018,
have positively contributed to revenue in 2018 and the
further development of these companies is expected
to drive higher operational revenues through 2019.
Expenses
The year ended 31 December 2018 saw administrative
expenses increase by 4.0% to £33.6m from £32.3m.
Staff costs for the year increased by 4% to £21.9m
(2017: £21.1m). Savings from the closure of the Market
Harborough office were partly offset by recruitment in
the second half of the year of an expanded Group wide
sales team that achieves full national coverage of the
UK. This coincided with the launch in early 2019 of our
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new Group product, ‘Your Future SIPP’, consistent with
our strategy of investing for future organic growth.
Staff costs were also impacted by further share based
payment awards under the Group’s Long Term
Incentive Plan and Save As You Earn option schemes,
the annual pay review and required increases under
auto enrolment of staff pension contributions. These
measures however continue to contribute to improved
levels of key staff retention and morale and provide
the service levels to clients required from our
introducers of business.
Staff numbers have decreased slightly to 558 as at
31 December 2018 (2017: 597), reflecting the closure
of the Market Harborough office during the year offset
by organic growth of staff numbers to service
increasing SIPP numbers and our expanded sales team
to achieve nationwide coverage.
The Group continues to take steps to improve its
adjusted operating margin through a combination of
revenue enhancements, cost saving measures and
operational improvements. The Group also reduced
computer costs by £0.2m year on year through
renegotiation of contracts with key suppliers, and
further alignment of suppliers and services between
each of the Group’s offices.
Provisions as at 31 December 2017 of £0.9m relating to
the closure of the Group’s Market Harborough office
were fully utilised during 2018. A tenant was procured
in 2018 to occupy the office for the remaining lease
period providing sub-let income equivalent to the head
lease rental payable over the remainder of the lease.
Finance costs reduced by £0.1m year on year as the
company continues to repay borrowings taken out to
facilitate the Suffolk Life acquisition in 2016. The debt
continues to be repaid in line with scheduled terms
and conditions and the covenants required by the bank
in respect of this gearing are well covered. Interest on
the debt accrues at a rate of 2.25% plus LIBOR.
Non-Recurring costs
Non-recurring costs for the year have reduced
significantly following the provisions last year for the
closure of the Market Harborough Office and the
expensing of exceptional IT impairment costs.
Current year non-recurring costs have arisen from
further restructuring costs within the Group, the costs
associated with the acquisition of the Hargreave Hale
book of SIPPs during the year and provisions arising as
part of the consolidation and integration exercises
undertaken over the past year.
As part of these exercises, management initiated
a review of data records relating to properties held
within SIPPs administered by the Group. Based on
a detailed review of a sample of properties and
extrapolation of the initial findings across the full
population of relevant properties, the directors
recognise that additional direct costs may be incurred
in completing this data cleansing exercise, including
from any potential remediation. A provision of £0.5m
has been made for this matter, being the directors’
best estimate of the direct costs the Group may have
to bear.
Suffolk Life Annuities
Part of the Suffolk Life Group of Companies, Suffolk
Life Annuities Limited, is an insurance company that
writes SIPP Products as insurance contracts. These are
all non-participating investment contracts and so the
Group does not bear any insurance risk. As the
policyholder assets and liabilities are shown on the
balance sheet of Suffolk Life Annuities Limited, these
also show on the Group balance sheet on
consolidation. Assets in the SIPPs administered by the
rest of the Group are held in trust and not under
insurance contracts and therefore do not need to be
included on the balance sheet. As the policies are
non-participating investment contracts, the client
related assets and liabilities in Suffolk Life Annuities
Limited match. In addition the revenues, expenses and
investment returns of the non-participating investment
contracts are shown in the consolidated statement of
comprehensive income. Again, these income, expense
items and investment returns due to the policyholders
are completely matched. An illustrative balance sheet
as at 31 December 2018 showing the financial position
of the Group excluding the policyholder assets and
liabilities is included as supplementary unaudited
information after the notes to the financial
statements. An illustrative cash flow on the same basis
has also been provided.
Employee Benefit Trust (“EBT”)
The EBT set up during the previous year continues to
be used to acquire shares in the Company in the
market to satisfy future vesting of options and long
term incentive awards. The EBT is funded by loans
from the Group. As at 31 December 2018 the EBT held
263,790 shares in Curtis Banks Group plc. A further
£0.5m was advanced to the EBT by the Company
during the year. A number of options awarded under
the Company’s Save As You Earn schemes vested during
the year and awards were made from the shares held
by the EBT.
The financial statements of the EBT are consolidated
within the overall Group financial statements and
these shares are shown on the balance sheet of the
Group as Treasury Shares and are included within total
equity.
Capital requirements
The Group’s regulated subsidiary companies submit
regular returns to the FCA and the PRA relating to their
capital resources. At 31 December 2018 the total
regulatory capital requirement across the Group was
£11.6m and the Group had an aggregate surplus of
£18.0m across all regulated entities. In addition to this
it is Group internal policy for regulated companies
within the Group to hold at least 130% of their
required regulatory capital resulting in the aggregate
surplus reducing to £14.5m. All the regulated firms
within the Group maintained surplus regulated capital
throughout the year.
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ST R AT EG I C R E P O RT
continued
Chief Financial Officer’s review
continued
After taking into account the regulatory capital
requirements set out above, assuming all these were
required to be held in cash, the Group had surplus
‘free’ cash available of approximately £13m.
Financial Position
The Group increased net assets by 12% to £49.7m as at
31 December 2018 (2017: £44.6m), and increased
shareholder cash reserves from £25.7m to £28.0m over
the same period.
As at 31 December 2018, the Group had net
shareholder cash (after debt) of £13.6m (2017:
£8.1m).
The Group will have to adopt the provisions of IFRS 16,
accounting for leases, for accounting periods
commencing from 1 January 2019. We have evaluated
the effect of this on our financial performance and this
is not material. We have also had confirmation from
our principal lenders that the provisions of IFRS 16 do
not need to be taken into account when calculating
our banking covenants. We have also received
confirmation from the FCA that at this point in time
the provisions of IFRS 16 do not need to be taken into
account in calculating our regulatory capital
calculations.
Paul Tarran
Chief Financial Officer
19 March 2019
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ST R AT EG I C R E P O RT
continued
Principal risks and uncertainties
The risks to the Group have been fully assessed and
mitigated to every extent commercially possible and
a full risk register is maintained. The principal risks
that would adversely affect the activities of the Group
are set out below.
1.
Risks related to acquisitions
The material risks in relation to past and
potential future acquisitions include:
• Unanticipated litigation or claims against the
Group.
• Unexpected integration costs and
unanticipated diversion of management time
and focus and other resources leading to an
inability to integrate on a cost-effective and
timely basis.
No assurance can be given that any businesses
acquired will achieve levels of profitability or
earnings that will justify the investment made by
the Group.
Mitigation
To minimise this risk the Group carries out
thorough due diligence on all potential
acquisitions using internal expertise and external
resources where considered necessary. In the
case of all acquisitions appropriate warranties
and indemnities are required from the vendors
and where possible consideration is partly
deferred to cover any potential issues arising
from the acquisition. Where possible insurance
cover is arranged to cover past events in
businesses being acquired.
2. Regulatory risks
The Group’s operations are subject to
authorisation from the FCA and the PRA, and
supervision from bodies such as HMRC and The
Pensions Regulator. In particular, certain
subsidiaries are subject to the FCA’s and PRA’s
regulatory capital requirements. It is possible
that the FCA or the PRA may increase the
regulatory capital requirements applicable to
SIPP providers and change other regulatory
requirements from time to time that may
increase the Group’s compliance costs. HMRC
changes to Pension Scheme legislation could also
adversely impact the Group’s business.
Mitigation
To minimise this risk Group compliance personnel
closely monitor all current and proposed
regulations to ensure full compliance and assess
the effect of any future changes on the Group.
The Group is well funded and holds regulatory
capital in excess of current needs. Any changes in
Pension Scheme legislation are fully analysed and
the Group’s product offerings adapted to the new
legislative requirements.
Interest on client funds
The Group makes a margin on client cash by
generating interest income in excess of a
3.
pre-determined percentage paid to clients.
There is a risk that a change in prevailing
interest rates or rates paid to clients may
materially reduce the margins earned in respect
of client monies held.
From time to time, the Group may lock into fixed
rates of interest on client funds that appear
attractive. To the extent that prevailing interest
rates increase following the making of such fixes,
the margin to be paid by Curtis Banks to its
client’s may increase and the interest turn
received by the Group reduces.
Mitigation
To minimise this risk the Group’s Asset and
Liability Committee continually monitors all
client deposits and the terms of those deposits to
ensure any risks from changing interest rates are
minimised. This is partly achieved by varying the
maturity dates of term deposits.
4. Dependence on key executives and
personnel
The Group’s future success may be substantially
dependent on the continued services and
performance of its Executive Directors and senior
management and its ability to continue to attract
and retain highly skilled and qualified personnel.
Mitigation
To minimise this risk the Group seeks to recruit
and maintain high quality experienced staff by
offering market competitive packages. These
packages are enhanced by the addition of share
based incentive and reward schemes for all key
staff. In addition the Group offers structured
training for staff and works with staff to ensure
that there is a favourable work environment that
attracts and retains staff.
5. Reliance on Information Technology
systems
The Group requires complex and extensive
IT systems to run its business. Delays in any
modifications to its systems or a failure of
existing systems could lead to business disruption
with a resultant material adverse impact on the
Group. System enhancements are continually
being assessed and taking place.
Mitigation
To minimise this risk the Group has project teams
that continually evaluate and update current
systems, and implement new or enhanced
systems where considered necessary. A full risk
assessment is carried out before significant
changes to systems. Business continuity is
assured by thorough full back up of data and
comprehensive data recovery procedures being in
place.
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ST R AT EG I C R E P O RT
continued
Principal risks and uncertainties
continued
remains acceptable. In addition, the Group
carries high levels of professional indemnity
insurance to protect against any claims.
9. Brexit
The method by which the United Kingdom will be
leaving the EU is currently unknown which
creates uncertainty within the economy, for
clients and for the Group. The Group has carried
out a full review of the impact of Brexit on the
Group and the potential implications of a no deal
scenario. Curtis Banks is a UK based business and
we consider the Group to be largely isolated
from many of the issues which other financial
institutions face, such as tariffs, passporting and
currency risks.
As part of our review we assessed the impact of
a disorderly exit from EU including scenario
reviews. Our review has focussed on the
following areas:
• banking partners currently used by the Group
and the ability of the Group to continue to
use these partners;
• SIPP deposits and investments in the EU and
the ability to realise these;
• financial markets and currency movements
affecting investments within the SIPPs;
• SIPP members who have retired and are living
in the EU; and
• employees of the Group.
Mitigation
Action has been taken to mitigate, to the extent
possible, the risks arising from Brexit and the
Group has concluded, based on the current
understanding of the Brexit legislation, provisions
and intentions, that the risks have been
mitigated to the extent reasonably possible.
We do not consider there to be an overall
adverse material impact of Brexit on the Group,
even in the event of a no deal Brexit.
6. Operational Risk and Internal control
systems
The Board believe that the Group has in place
appropriate regulatory, financial, management
and internal controls which are adequate to
ensure that the Group meets its regulatory
obligations and its contractual commitments to
clients and other third parties, as well as
appropriate protections against detrimental
activities such as fraud, theft, misuse of funds,
money laundering or other unauthorised or
criminal activities. Nevertheless, such systems
may prove inadequate. In the event that such
controls fail this may lead to a material adverse
effect and lead to claims against the Group.
Mitigation
All staff are fully trained and all processes fully
documented to ensure operational risk is at a
minimum. The processes are regularly tested by
compliance personnel. There is full segregation
of duties wherever needed to mitigate as much
as possible any detrimental activities.
7. Online security
The Group’s software and systems are at risk
from computer viruses, and other breaches of
cyber security. While the Group takes the
security of its computer systems very seriously
computer viruses or breaches of cyber security
may cause the Group’s systems to suffer delays
or other service interruptions and result in claims
against the Group.
Mitigation
To minimise this risk the Group carries out
extensive testing of all computer systems on a
regular basis to ensure security is maintained and
also makes use of the latest technology and
software to ensure there is appropriate cyber
security in place.
8. Non Standard Investments (“NSIs”)
Pension Schemes administered by the Group are
permitted under HMRC rules to hold NSIs within
them. Such investments are considered more
high risk than standard investments such as
quoted equities. As high risk investments, NSIs do
occasionally fail and clients may look to the
Group, as pension provider, for compensation.
Mitigation
The proportion of the plans under administration
of the Group that hold NSIs is small and full due
diligence procedures are carried out on all NSI’s
before they are accepted into a pension scheme.
New business is only accepted from regulated
financial advisors who have a duty to ensure that
any NSIs that are recommended are suitable for
the relevant pension scheme. Once held, NSIs are
monitored annually by the Group’s technical
investments team to consider whether the NSI
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ST R AT EG I C R E P O RT
continued
Corporate and social responsibility
Sponsorships and partnerships with charities
and community organisations
The Group actively encourages support of charities and
community organisations and activities. With three
regional offices there is adequate scope to carry out
this support. In Bristol, Curtis Banks are corporate
sponsors of Bristol Museum. All offices regularly hold
fund raising events for local charities or those charities
where staff that have connections or have had need of
those charities. As well as organising and funding the
events, Curtis Banks also gives further support through
a matching contribution to the relevant charity.
Staff initiatives and interaction
Management engage closely with staff to determine
their needs, and initiatives are implemented where
these benefit the majority of employees. Procedures
are in place to ascertain the views of staff on day to
day operational aspects of the business. These
procedures are designed to ensure the workforce are
motivated and happy in their work environment.
Internal surveys are carried out on a regular basis to
assess staff satisfaction levels. Newsletters containing
information about both Group developments and social
events are provided to employees monthly. The Group
provides for formal employee forums at all locations at
which matters of concern to staff can be discussed and
communicated to senior management. The Group
provides a save as you earn share option scheme for
the benefit of all employees to encourage active
participation in the future of the Group.
It is the aim of the group to employ a workforce which
reflects the diverse community within which it
operates. In addition, employees are expected to
conduct business so as to enhance the Group’s
reputation and to safeguard against unfair business
practices. The Group provides a clean and safe
working environment to all. Employees are given
regular opportunities to sit down with senior
management to discuss any concerns they have
together with regular team meetings, employee
feedback surveys and social events and this is key to
delivering heightened employee engagement.
Staff Training
Staff are actively encouraged to train and develop
through both structured and ‘on the job’ training
above the core requirements. Staff are supported in
these, both financially and through a dedicated
training department. The Group has an approved list
of professional qualifications that staff are sponsored
to study towards, to help and motivate them to
progress up though the organisation. All vacancies are
filled internally whenever possible.
Employment of staff with disabilities
The Group’s approach to recruitment, promotion,
training or any other benefit will be on the basis of
aptitude and ability with all employees helped and
encouraged to develop their full potential in order to
maximise the efficiency of the group.
The development of all our employees is integral to
our corporate goals and we look to maximise individual
contribution at all levels by providing appropriate
opportunities for personal and professional
development. The Group aims to establish and
maintain a culture that values lifelong learning and
development amongst our employees. Training
functions are equipped to meet any special needs of
individuals with disabilities and consideration is given
to the modification and adaptation of facilities and
provision of special aids or equipment.
CSR fund raising activities at the Ipswich office
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ST R AT EG I C R E P O RT
continued
Corporate and social responsibility
continued
The Group actively monitors recruitment,
development and promotion to ensure that the Group
provides career development opportunities to
employees with disabilities and the company remains
satisfied that policy and practice meets and in some
cases exceeds statutory requirements.
For those employees who develop a disability during
the course of their employment, every effort is made
to ensure they remain with the Group by finding them
suitable alternative employment, whether through
making appropriate adjustments, retaining or
redeployment, or, where this is not possible, financial
provision is made for such employees through the
operation of long-term sickness cover.
On behalf of the board
Paul Tarran
Chief Financial Officer
19 March 2019
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G OV E R N A N C E
Board of Directors
Will Self
Chief Executive Officer
Will joined the Board in August 2016 and has over 17 years of experience in
the SIPP and SSAS industry. Will was CEO of the Suffolk Life Group prior to
acquisition by Curtis Banks Group plc. Prior to that Will was Chief
Commercial Officer of the Digital Savings Division (including Cofunds) of
L&G and holds an MBA from Cranfield School of Management.
Paul Tarran
Chief Financial Officer
Paul has over 35 years’ experience in the financial services industry and
was one of the founders of Curtis Banks in 2009. Paul is responsible for the
finance function for the Group and in addition brings a wealth of
experience in corporate matters to benefit the strategic development of
the Group. Paul is a Fellow of the Institute of Chartered Accountants in
England & Wales.
Jane Ridgley
Chief Operating Officer
Jane Ridgley joined the Board on 18 January 2019. Jane has many years’
experience of working for Legal & General plc, working closely with
advisers to deliver their clients’ needs in a sales and operational capacity.
15 years’ experience working directly with IFAs led her to take a role as
Investment Development Director in 2009. She then progressed to Product
Director, responsible for the design and development of workplace savings,
investment and product proposition. Jane joined Suffolk Life as Operations
Director in September 2013. Her role expanded to cover Human Resources
in March 2016 before assuming the role of Chief Operating Officer for the
Curtis Banks Group in April 2018.
Chris Macdonald
Executive Chairman, Non-executive Director and Chairman of the Risk and
Compliance Committee
Chris was one of the founders of Brooks Macdonald Group plc where he was
CEO until 2017. He is a qualified investment manager and has worked in
investment management and financial services since the start of his career
in 1982 and has won several investment management awards.
Chris is Chairman of Catley Lakeman Ltd, is an advisor to a number of
financial services companies and is an associate of the Institute of
Continuing Professional Development. Chris brings experience of
involvement with an AIM listed company for many years and knowledge of
the challenges and responsibilities towards all stakeholders attached to
being a listed company as well as bringing financial services industry
experience to the Group.
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G OV E R N A N C E
continued
Board of Directors
continued
Bill Rattray
Non-executive Director and Chairman of the Audit Committee
Bill is Chief Financial Officer of Standard Life Aberdeen plc, one of the
world’s largest investment companies. Bill is a Chartered Accountant and
brings strong financial skills and extensive experience of the asset
management industry, having previously served as Finance Director of
Aberdeen Asset Management PLC since 1991.
As an executive director of a FTSE 100 company Bill brings a depth of
experience in dealing with shareholders and looking after their interests
and has relevant industry experience.
T
Jules Hydleman
Non-executive Director and Chairman of the Remuneration Committee
Jules has over 15 years’ experience as a Non-executive Director and
Chairman. Currently he holds Chairmanships of Equip Holdings Limited,
Gro-group International Limited and Cornwall Farmers Co-operative.
Previously Jules was Chairman of Innocent Drinks for 10 years from start up
until eventual exit. Jules brings to the Board a ‘non-industry’ outlook to
the activities of the Group and with a background in sales and marketing
this provides valuable input. Jules also provides experience that focuses on
remuneration policies based on performance and targets.
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G OV E R N A N C E
continued
Directors’ Report
The directors present their annual report and audited
consolidated financial statements for the year ended
31 December 2018.
Business review
The principal activity of the Group continued to be
that of the provision of pension administration services
principally for Self-Invested Personal Pension schemes
("SIPPs") and Small Self-Administered Pension Schemes
("SSASs"). The Group is staffed by experienced
professionals who all have proven track records in this
sector. The Company was incorporated in England and
Wales (registered no. 07934492).
An indication of likely future developments in the
business, corporate and social responsibility, and risk
management of the Group is included in the Strategic
Report.
Results and dividends
The consolidated statement of comprehensive income
for the year is set out on page 33.
A final dividend in respect of 2017 results of 4.75p per
share totalling £2,551,000 was proposed and paid on
18 May 2018. An interim dividend in respect of 2018
results of 2.00p per share totalling £1,071,000 was
proposed and paid on 15 November 2018. A final
dividend of 6.00p per share is proposed and if
approved, will be paid to shareholders on the register
at the close of business on 26 April 2019. The shares
will be marked ex-dividend on 25 April 2019 and the
dividend paid on 23 May 2019.
Substantial Shareholders
At 1 March 2019 the Company had been notified of the following interests (excluding directors still serving at year
end) representing 3% or more of its issued share capital:
No. of Ordinary shares Percentage Holding
Chris Banks 14,651,142 27.23%
Liontrust Investment Partners LLP 6,537,223 12.15%
BlackRock Investment Management (UK) Ltd 4,872,158 9.05%
Canaccord Genuity Group Inc 3,240,050 6.02%
Pie Funds Management Ltd 1,901,338 3.53%
Directors
The following directors have held office since
1 January 2018 and up to the date on which the
financial statements were signed:
(Appointed 18 January 2019)
(Resigned 31 December 2018)
Rupert Curtis
Paul Tarran
Will Self
Jane Ridgley
Chris Macdonald
Bill Rattray
Jules Hydleman
Directors’ indemnity
The directors had qualifying indemnity cover totalling
£10,000,000 during the year ended 31 December 2018.
Related party transactions
Details of related party transactions are given in
note 32.
Annual General Meeting
The Annual General Meeting of the Company will be
held on 21 May 2019. The Notice of the Meeting is
included with this document and contains further
information on the business to be proposed at the
meeting.
Independent Auditors
The independent auditors, PricewaterhouseCoopers
LLP, have indicated their willingness to continue in
office, and a resolution that they be re-appointed will
be proposed at the Annual General Meeting.
Going concern
The directors have prepared the financial statements
on a going concern basis, as in their opinion the Group
is able to meet its obligations as they fall due. This
opinion is based on detailed forecasting for the
following 12 months based on current and expected
market conditions together with current performance
levels.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual
Report and the financial statements in accordance
with applicable law and regulation.
Company law requires the directors to prepare
financial statements for each financial year. Under
that law the directors have prepared the group
financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by
the European Union and company financial statements
in accordance with International Financial Reporting
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G OV E R N A N C E
continued
Directors’ Report
continued
Standards (IFRSs) as adopted by the European Union.
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 Company and of the profit or loss of the
Group and Company for that period. In preparing the
financial statements, the directors are required to:
• select suitable accounting policies and then
apply them consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the
Group financial statements and IFRSs as adopted
by the European Union have been followed for
the company financial statements, subject to any
material departures disclosed and explained in
the financial statements;
• make judgements and accounting estimates that
are reasonable and prudent; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and Company will
continue in business.
Company’s position and performance, business model
and strategy.
In the case of each director in office at the date the
Directors’ Report is approved:
• so far as the director is aware, there is no
relevant audit information of which the Group
and Company’s auditors are unaware; and
• they have taken all the steps that they ought to
have taken as a director in order to make
themselves aware of any relevant audit
information and to establish that the Group and
Company’s auditors are aware of that
information.
This confirmation is given in accordance with
Section 418(2) of the Companies Act 2006.
On behalf of the board
The directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
Paul Tarran
Director
19 March 2019
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and Company and
enable them to ensure that the financial statements
comply with the Companies Act 2006.
The directors of the ultimate parent company are
responsible for the maintenance and integrity of the of
the ultimate parent company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The directors consider that the annual report and
accounts, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group and
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G OV E R N A N C E
continued
Chairman’s corporate governance report
Introduction
The Board is committed to achieving high standards of
corporate governance, integrity and business ethics.
On 28 August 2018, the Board of Curtis Banks Group
PLC decided to fully adopt the QCA Corporate
Governance Code (2018 edition) (“the QCA Code”).The
Board believes that the QCA Code provides the right
governance framework for a Group of our size in which
we can continue to develop our governance model to
support our business.
Corporate governance principles
The corporate governance principles contained in the
QCA Code are as follows:
1. Establish a strategy and business model which
promote long-term value for shareholders.
the Group, given the size of our business, and will
ensure the Group maintains good corporate
governance practices while allowing the business to
continue its entrepreneurial culture. The Board works
together to ensure that these corporate governance
standards are adhered to and the below sets out how
they are practically implemented.
The Board
The Board comprises of three Executive directors and
three non-executive directors. Details of the directors
and their strengths and experience are set out on
pages 14 to 15 of this Report
All the Non-Executive Directors of the Group are
considered to be independent and are as follows:
• Chris Macdonald (Chairman)
2. Seek to understand and meet shareholder needs
• Bill Rattray (Senior Independent Director)
and expectations.
3. Take into account wider stakeholder and social
responsibilities and their implications for
long-term success.
4. Embed effective risk management, considering
both opportunities and threats, throughout the
organisation.
5. Maintain the board as a well-functioning,
balanced team led by the chair.
6. Ensure that between them the directors have the
necessary up-to-date experience, skills and
capabilities.
7. Evaluate board performance based on clear and
relevant objectives, seeking continuous
improvement.
8. Promote a corporate culture that is based on
ethical values and behaviours.
9. Maintain governance structures and processes
that are fit for purpose and support good
decision-making by the board.
10. Communicate how the company is governed and
is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
Application of the QCA Code and required
disclosures in our annual report or on our
website
Application of the QCA Code requires us to apply the
principles set out above and also to publish certain
related disclosures; these can appear in our annual
report, be included on our website or we can adopt
a combination of the two approaches. Recommended
locations for each disclosure are specified in the
QCA Code and these have been followed.
As Chairman of Curtis Banks Group plc, it is my
responsibility to lead the board in ensuring that the
Group has in place good standards of corporate
governance. The Board believes that the QCA Code is
the most appropriate corporate governance code for
• Jules Hydleman
All the Executive Directors are full time employees
of the Group. In addition, Executive Directors are
required to work such additional hours, over and above
normal working hours, that are necessary for the
proper performance of their duties.
There are no grounds to question the independence
of any of the above Non-Executive Directors.
Non-Executive Directors are expected to devote such
time as is necessary for the proper performance of
their duties. This is anticipated as an equivalent of
a minimum of one day a month on work for the Group
including attendance at a minimum of four Board
meetings per annum and the AGM and consideration of
all relevant papers before each meeting
All directors are subject to either an Executive Service
Agreement or a letter of appointment. The Company’s
articles of association (“Articles”) require that each
Director shall retire from office at the third annual
general meeting after the annual general meeting or
general meeting (as the case may be) at which they
were previously appointed. The Articles further
provide that any Director who retires in such
circumstances shall be eligible for re-appointment by
the Shareholders at the annual general meeting at
which his retirement takes effect.
The Board meets formally every three months and on
other occasions where specific transactions or events
dictate the need. In addition the Board has established
a number of committees in order to provide corporate
governance and these also meet formally on a
quarterly basis. These committees are an audit
committee, a risk and compliance committee and
a remuneration committee and comprise of only the
three Non-Executive directors with Executive directors
in attendance as required. Each of the committees are
governed by terms of reference that have been
approved by the Board.
Both Chris Macdonald and Bill Rattray are, or have
been, executive directors of UK publically listed
companies and maintain their skill sets through those
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G OV E R N A N C E
continued
Chairman’s corporate governance report
continued
connections. In addition non-executive directors
attend external courses where appropriate.
Since listing on the AIM market the Company has used
the services of external consultants for guidance on
executive remuneration levels and share incentive
packages. Consultants have also been engaged to assist
in the design and documentation required for the
introduction of share incentive plans for all levels of
staff.
The Board regularly consult and meet with both
internal and external auditors to the Company.
Executive directors maintain their skill set though day
to day interaction with the industry and attendance at
courses, both internal and external.
All directors are required to undertake and record
continual professional development training.
The internal advisory responsibilities of the Company
Secretary include that of also acting as Chief Financial
Officer for the Group.
The Chief Executive currently conducts annual
performance appraisals of the other executive
directors that report to him. This is also supported by
regular 1:1 meetings between the executives. In turn
other executive directors conduct annual appraisal
reviews of the Chief Executive.
The Board promotes and monitors a healthy corporate
culture through ensuring that the Company has proper
processes and written procedures in place to achieve
this. Monitoring is carried out by the Executive Board
members by day to day interaction with staff at all the
offices and review of all relevant minutes to identify
any areas of weakness. An ‘open door’ policy exists for
all members of staff. Non-Executive directors visit the
offices on a regular basis and have sight of
management committee minutes and papers to keep
fully briefed of the corporate culture and any issues
that may arise.
The Board receives regular updates on matters of
corporate culture through Executive Reports and
Committee minutes, compliance and risk updates and
regular presentations from the Group Heads of
Departments. Board meetings are rotated to include
both Bristol and Ipswich, providing the opportunity for
Non-Executive Directors to experience the working and
corporate culture and to gain greater understanding of
all areas of the Group’s business.
Audit Committee
The primary focus of the Audit Committee is on
corporate reporting (from an external perspective) and
on monitoring the Group’s internal control and risk
management systems (from an internal perspective).
Further details on the committee’s responsibilities and
activities are on page 21 of this annual report.
Remuneration committee:
The primary function of the Remuneration Committee
is to determine, on behalf of the board, the
remuneration packages of the executive directors and
the bonus and share option schemes to be offered to
employees. Further details on the committee are on
pages 22 to 25 of this annual report.
Risk Committee:
The primary function of the Risk Committee is to
consider the Group’s appetite to risk, to review and
monitor the risk process undertaken by the Group and
adherence to the risk profile and monitor procedures
for identifying and controlling risk. Further details on
the committee’s responsibilities and activities are on
pages 21 to 22 of this annual report.
The terms of reference for the Audit, Remuneration
and Risk committees can be found in the investors
section of the Group website (www.curtisbanks.co.uk).
Attendance at the four scheduled Board and
Committee Meetings in the twelve month period ended
31 December 2018 is set out in the table below:
Board
Executive directors Meeting Audit Remuneration Risk
Rupert Curtis 4 4 4 4
Will Self 4 4 4 4
Paul Tarran 4 4 4 4
Non-Executive directors
Chris Macdonald 4 4 4 4
Bill Rattray 4 4 4 4
Jules Hydleman 3 3 3 3
Board Evaluation
Board effectiveness as a whole is evaluated annually
by means of formal questionnaire to each director by
the Chairman followed by collective discussions on the
results and evaluation of the effectiveness of the
Board.
The Chief Executive conducts annual performance
appraisals of the other executive directors that report
to him. This is also supported by regular 1:1 meetings
between the executives. In turn other executive
directors conduct annual appraisal reviews of the
Chief Executive. The senior independent director, on
behalf of the board, has agreed to explore
performance evaluation of the other non-executive
directors, the Board and the Board’s committees.
Relationships with shareholders
The Group has a programme of meetings each year
with institutional shareholders, potential shareholders,
brokers and analysts following the release of
preliminary and half-year results. These include formal
written presentations that are available on our
website. These meetings allow the Executive
Directors, to update shareholders on strategy and the
Group’s performance. Additional meetings with
institutional investors and/or analysts are arranged
from time to time during the year as requested by
both our brokers and investor relations agents.
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G OV E R N A N C E
continued
Chairman’s corporate governance report
continued
Following the formal bi annual presentations all Board
members receive copies of feedback reports keeping
them in touch with shareholder views. Will Self and
Paul Tarran are the key contacts with the Group’s
shareholders.
Camarco LLP provide investor public relations to the
Group and joint stockbrokers are Peel Hunt LLP and
N+1 Singer LLP.
Chris Macdonald, as Chairman, and the other
Non-Executive Directors are all willing to engage with
shareholders should they have a concern that is not
resolved through the normal channels. The Company
Secretary can also be contacted by shareholders on
matters of governance and investor relations.
The Board also uses the AGM to communicate with
investors, including those staff holding shares or
options in the Company. The meeting is held near the
Head Office in Bristol each year and attended by
shareholders and professional advisers. All
shareholders are given the opportunity to ask
questions and raise issues; this can be done formally
during the meeting or informally with the directors
after it. Computershare plc (Computershare) are
registrars to the Company and attend the AGM.
Copies of our annual report (and the notice of AGM)
and the interim report are sent to all shareholders and
copies can be downloaded from the investors section
of our website (www.curtisbanks.co.uk). Alternatively,
they are available on request by writing to the
Company Secretary at 3 Temple Quay, Bristol, BS1 6DZ.
Other information for shareholders (and other
interested parties) is also provided on the Investors
section of our website, including all RNS
Announcements, preliminary and half-year results
presentations to shareholders and other matters
relevant to shareholders.
Compliance with legislation
The Group has fully documented internal policies to
ensure compliance with legislation including those
relating to The Bribery Act, The Modern Slavery Act,
and the General Data Protection Regulations and
anti-tax evasion procedures. There are also internal
policies on dealing in shares of the Company to ensure
compliance with Market Abuse Rules of the AIM
market.
Approved on behalf of the Board
Chris Macdonald
Chairman
19 March 2019
20 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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G OV E R N A N C E
continued
Corporate governance
Audit Committee Report
The Audit Committee is chaired by Bill Rattray with
Chris Macdonald and Jules Hydleman as the other
members.
The key duties of the Committee are:
a) to monitor the integrity of the financial
statements of the Group, including its annual
and half yearly reports, preliminary results’
announcements and any other formal
announcement relating to its financial
performance, reviewing significant financial
reporting issues and judgements which they
contain.
b) to keep under review the adequacy and
effectiveness of the Group’s internal financial
controls and internal control and risk
management systems.
c) to review the adequacy and security of the
Group’s arrangements for its employees and
contractors to raise concerns, in confidence,
about possible wrongdoing in financial reporting
or other matters.
d) meet regularly with the external auditors,
including once at the planning stage before the
audit and once after the audit at the reporting
stage to discuss their remit and any issues arising
from the audit. In addition the Committee will
review and approve the annual audit plan and
ensure that it is consistent with the scope of the
audit engagement, having regard to the seniority,
expertise and experience of the audit team. The
Committee will also agree the level of audit fee.
The Audit Committee has met four times during the
year under review with the external statutory auditors
and external Internal auditors being in attendance at
all of those meetings. Specific matters discussed at
those meetings included:
a) Review of financial statements for the Group for
the year ended 31 December 2017 and receiving
the external auditors audit report thereon and
considering the key accounting considerations
and judgments attaching to those accounts.
b) Consideration and approval of the plan for the
interim review by the Auditors on the interim
financial statements for the six month period to
30 June 2018.
c) Review of financial statements for the Group for
the six month period ended 30 June 2018 and
receiving the external auditors review report
thereon and considering the key accounting
considerations and judgments attaching to those
accounts.
d) Consideration and approval of the year the audit
plan for the year ended 31 December 2018 and
confirmation of key audit matters.
e) Consideration of the effect of the adoption and
implementation of new accounting standards
that would affect the Group in the year ended
31 December 2018.
f) Review of three internal audit reports produced
by KPMG in their role as external internal
auditors to the Group and consideration of
actions to be taken on matters arising from those
reports.
g) Consideration of the Internal Audit plan prepared
by KPMG for the year ending 31 December 2019
and agreement of matters to be covered in those
reports.
Risk and Compliance Committee Report
The Risk and Compliance committee is chaired by
Chris Macdonald with Bill Rattray and Jules Hydleman
as the other members.
The key duties of the Committee are:
a) to consider the Group’s appetite for risk, in
particular review and monitor the process
undertaken by the Group to set and adhere to
the Group’s current risk profile.
b) to ensure that Group has in place procedures and
mechanisms for the identification and control of
all fundamental risks including financial, legal,
regulatory and operational risks.
c) In relation to proposed strategic transactions
including acquisitions, disposals or joint ventures
and significant new business streams, products or
business partners, ensure that due diligence of
the proposition has been carried out, in
particular on the risk aspects and implications for
the Group’s risk appetite alongside the
commercial and legal aspects.
d) to ensure that the Group has in place sufficient
regulatory capital.
Internal control and risk management is monitored by
the Committee by the review of key risk and control
documentation, review of internal compliance reports
and discussions with Executive directors and
Compliance staff.
The Risk and Compliance Committee has met four
times during the year under review and received
formal presentations from the Compliance Officer of
the Group at two of the meetings.
Specific matters discussed at those meetings included:
a) Review and consideration of Compliance Reviews
and Compliance Strategy reports for the Group.
b) Consideration of Risk appetite throughout the
Group.
c) Consideration of the corporate governance code
to be adopted by the Group and conclusion as to
the QCA Code being the most appropriate code
for the Group.
d) Review of the Group Risk Register and individual
risks within each area of the business. This
register summarises the key risks for the
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Corporate governance
continued
business, their likely impact and relevant
mitigation actions.
The Remuneration Committee has met four times
during the year under review.
e) Consideration and approval of updated Staff
Specific matters discussed at those meetings included:
Share Dealing codes and Procedures following
changes in FCA Market Abuse Rules.
f) Review and acceptance of Own Risk and Solvency
Assessments for Suffolk Life Annuities Limited.
Remuneration Committee Report
The Remuneration Committee is chaired by
Jules Hydleman with Bill Rattray and Chris Macdonald
as the other members. The key duties of the
Committee are:
a) To determine and agree with the Board the
framework or broad policy for the remuneration
of the Group’s Chairman and the executive
directors including pension rights and
compensation payments.
b) In determining such policy, to take into account
all factors which it deems necessary including
relevant legal and regulatory requirements and
the provisions and recommendations of the
Corporate Governance Guidelines for Small and
Mid-Size Quoted Companies published by the
Quoted Companies Alliance (QCA Code) and other
relevant guidance.
c) To review the on-going appropriateness and
relevance of the overall remuneration policies in
the Group. To approve the design of, and
determine targets for, any performance related
pay schemes operated by the Group and approve
the total annual payments made under such
schemes.
d) To review the design of all share incentive plans
for approval by the Board and shareholders. For
any such plans, determine each year whether
awards will be made, and if so, the overall
amount of such awards, the individual awards to
executive directors, company secretary and
other senior executives and the performance
targets to be used.
e) Within the terms of the agreed policy and in
consultation with the Chairman and/or Chief
Executive as appropriate, to determine the total
individual remuneration package of the
Chairman, each executive director, the company
secretary and other senior executives including
bonuses, incentive payments and share options
or other share awards.
f) To obtain reliable, up-to-date information about
remuneration in other companies of comparable
scale.
g) It is the policy of the Committee that all
appointments in the Group with a remuneration
package of in excess of £100,000 be reviewed
and approved by the Committee. Any changes to
existing employees with such packages are also
reviewed and approved by the Committee.
a) Annual salary reviews for all Executive Directors
and senior management and approval of
parameters for overall annual staff salary annual
reviews.
b) Agreement of Bonus awards in respect of the
year ended 31 December 2017.
c) Award of Long Term Incentives to Executive
Directors and senior staff.
d) Proposals and agreement to a further offering in
2018 to all staff of the Save As You Earn Share
Scheme.
e) Consideration and agreement of remuneration
packages for new key executives joining the
Group during the year.
f) Consideration of the funding of the Employee
Benefit Trust and the use of the Trust for
satisfying options exercised.
g) Consideration and agreement of the executive
bonus schemes with performance targets for
2018 for Executive Directors and senior staff and
approval of the parameters for the 2018 staff
bonus scheme.
h) Consideration and agreement of a bonus scheme
for new sales team.
The committee continuing to evaluate other incentive
based share option schemes for all employees and
directors and additional grants under the existing
schemes.
Remuneration Policy
It is the policy of the remuneration committee to
reward executive directors with packages that will
retain, incentivise and motivate. The packages are
designed to be market competitive and are reviewed
annually.
Current remuneration packages for Executive directors
comprise:
a) Basic Annual salary.
b) Pension contributions equivalent to 5% of basic
salary.
c) Benefits in kind comprising principally life
assurance and car allowance.
d) Performance based annual bonus.
e) Award of shares under Long Term Incentive Plans.
The performance based annual bonus scheme provides
for an Executive Director to earn a maximum annual
bonus equivalent to 100% of their basic annual salary.
A percentage of the annual bonus entitlement is based
on the financial performance of the Group against
budgets approved by the Board and a percentage
based on individual performance. A percentage of
bonus entitlement over certain monetary limits is
22 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
The table below summarises the key terms of the
Service Agreements for Executive and non-Executive
Directors:
Date of Notice Notice
Service Period by Period by
Director Agreements Company Director
Executive:
Will Self 30 August 2016 12 months 12 months
Paul Tarran 14 April 2015 12 months 12 months
Jane Ridgley 18 January 2019 12 months 12 months
Non-Executive:
Chris Macdonald 2 April 2015 3 months 3 months
Bill Rattray 2 April 2015 3 months 3 months
Jules Hydleman 2 April 2015 3 months 3 months
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Corporate governance
continued
deferred for a period of two years and malus
provisions apply.
Awards based under the Long Term Incentive Plan are
in shares in the Company at nil value limited to a
maximum of 100% of the Executive Directors salary in
any one year and calculated using the market value of
the shares in the Company at the date of grant. The
percentage vesting of the shares depends on the
performance of the fully diluted Earnings per Share
(“EPS”) of the Group, based on the adjusted operating
profit of the Group. To fully vest the average increase
of the adjusted EPS over a three year period has to
average more than 8% per annum plus the annual
increase in the Retail Price Index in the respective
year. There is partial vesting for increases of more
than 2% plus the annual increase in the Retail Price
Index. After the shares vest the Executive Director is
required to hold these for a minimum of two years
before sale. In the event of the Executive Director
ceasing employment with the Company during the
vesting period, except under such conditions as
retirement or illness, the grant of shares will lapse.
The Remuneration Committee continually reviews
these elements of the Executive Remuneration
packages to ensure that appropriate annual and long
term incentives are in place and that management’s
interests are aligned with those of shareholders.
Service Agreements and Notice periods for Executive
directors.
Service Agreements for Executive Directors are
terminable by either party on twelve months written
notice, with the Group having the option to place the
Executive on garden leave or to make a payment in
lieu of notice.
The Service Agreements include restrictive covenants
following the termination of employment for the
period of six months as regards non-competition and
solicitation of staff and clients.
Non-Executive directors
The Executive Directors are responsible for
determining the fees of the Non-executive Directors
who do not receive pension, shared based payments or
other benefits from the Group. Service Agreements for
Non-executive Directors are terminable by either party
on three months written notice.
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Directors’ remuneration report
Directors’ remuneration
Total emoluments
Basic salary Pension 2018 2017
Director and fees Bonus contributions Benefits £ £
Rupert Curtis* 294,624 75,000 13,258 7,385 390,267 476,157
Paul Tarran 214,830 65,000 9,667 8,885 298,382 357,060
Will Self 214,830 150,000 9,643 7,385 381,858 340,410
Chris Macdonald 100,000 — — — 100,000 66,500
Bill Rattray 50,000 — — — 50,000 50,000
Jules Hydleman 50,000 — — — 50,000 50,000
Total 924,284 290,000 32,568 23,655 1,270,507 1,340,127
*Resigned 31 December 2018.
Directors’ shareholdings
As at 31 December 2018, the interest of the Directors in the issued shares of the Company, as shown in its register
maintained under section 809 (2) and (3) of the Companies Act 2006 were:
2018 2017
Director No. % No. %
Rupert Curtis 6,370,084 11.84 7,347,684 13.66
Paul Tarran 3,510,478 6.52 3,803,758 7.07
Will Self — — — —
Chris Macdonald 7,894 0.01 7,894 0.01
Bill Rattray 7,894 0.01 7,894 0.01
Jules Hydleman 46,548 0.09 51,973 0.10
The following share options are currently held by Directors under the Long Term Incentive Plan (“LTIP”):
Number of Number of
shares under shares under
option at Granted option at
Date of 31 December during 31 December Exercise Exercise
Director grant 2017 the year 2018 price date
Rupert Curtis 26 October 2017 100,174 — 100,174 0p 26 October 2020
Paul Tarran 26 October 2017 73,043 — 73,043 0p 26 October 2020
Will Self 26 October 2017 73,043 — 73,043 0p 26 October 2020
Will Self 5 October 2018 — 55,559 55,559 0p 5 October 2021
Jane Ridgley 26 October 2017 17,391 — 17,391 0p 26 October 2020
Jane Ridgley 18 September 2018 — 21,951 21,951 0p 18 September 2021
263,651 77,510 341,161
24 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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G OV E R N A N C E
continued
Directors’ remuneration report
continued
The following share options are currently held by Directors under the Company Share Option Plan (“CSOP”):
Number of Number of
shares under shares under
option at Granted option at
Date of 31 December during 31 December Exercise Exercise
Director grant 2017 the year 2018 price date
Will Self 14 September 2016 53,745 — 53,745 267p 14 March 2018
Will Self 15 December 2016 535,996 — 535,996 201p 15 December 2019
Will Self 26 June 2017 535,996 — 535,996 260p 25 March 2020
Jane Ridgley 14 September 2016 27,388 — 27,388 267p 14 March 2018
1,153,125 — 1,153,125
Further information about the CSOP and LTIP share option schemes are contained within note 25.
Group Remuneration
Remuneration paid to employees of the Group, including salary and benefits, are set in line with prevailing market
rates and at levels to attract the speciality skills required by the Group. In addition to salary and benefits wider
share ownership of the Group by staff is encouraged through share option and sharesave schemes.
Jules Hydleman
Chairman of the Remuneration Committee
19 March 2019
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 25
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C O N S O L I DAT E D F I N A N C I A L STAT E M E N TS
FINANCIAL STATEMENTS 27 – 76
Independent Auditors’ report 27 – 32
Consolidated statement of
comprehensive income 33
Consolidated statement of
financial position 34
Company statement of
financial position 35
Consolidated statement of
changes in equity 36
Company statement of
changes in equity 37
Consolidated statement of
cash flows 38
Company statement of
cash flows 39
Notes to the financial statements 40 – 73
Company information 74
Supplementary unaudited
information 75 – 76
26 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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I N D E P E N D E N T AU D I TO R S’ R E P O RT TO T H E
M E M B E R S O F C U RT I S BA N K S G RO U P P LC
Report on the audit of the financial statements
Opinion
In our opinion, Curtis Banks Group PLC’s group financial statements and company financial statements (the
“financial statements”):
•
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2018 and
of the group’s profit and the group’s and the company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the company’s financial statements, as applied in accordance with the
provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Consolidated Financial
Statements (the “Annual Report”), which comprise: the consolidated and company statements of financial position
as at 31 December 2018; the consolidated statement of comprehensive income, the consolidated and company
statements of cash flows, and the consolidated and company statements of changes in equity for the year then
ended; and the notes to the financial statements, which include a description of the significant accounting
policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Context
Curtis Banks Group PLC is an administrator of self-invested pension products in the United Kingdom. There have
been no significant changes in the business impacting the current financial year.
Overview
• Overall group materiality: £607,000 (2017: £537,000), based on 5% of adjusted profit
before tax, amortisation and non-recurring costs.
Materiality
• Overall company materiality: £458,000 (2017: £367,000), based on 1% of net assets.
Audit scope
Key audit
matters
• The scope of our audit and the nature, timing and extent of audit procedures
performed were determined by our risk assessment, the financial significance of
components and other qualitative factors including history of misstatement through
fraud or error.
• We concluded that the three principal trading entities (Curtis Banks Limited, Suffolk
Life Pensions Limited and Suffolk Life Annuities Limited) and the group holding
company (Curtis Banks Group PLC) are significant components for the group audit and
as such we performed audit procedures on each of these components.
• Carrying value of intangible assets (Group).
• Carrying value of investment in subsidiaries (Parent).
• Provisioning and contingent liability disclosure (Group).
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M E M B E R S O F C U RT I S BA N K S G RO U P P LC
continued
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Carrying value of intangible assets (Group)
The Group financial statements include
intangible assets arising from the acquisition of
Suffolk Life Group Limited during 2016 and the
acquisitions of client portfolios.
The total intangible assets as of the year-end
amount to £44.1m within the consolidated
Group accounts.
An impairment loss is recognised if the carrying
value of an asset is less than its recoverable
value. The recoverable amount is determined by
estimating the present value of future cash
flows that are expected to be derived from the
assets. Management consider the fair value of
the intangible assets to be its value in use.
We consider the risk to relation to the
assumptions adopted by management as part of
their impairment assessments.
Refer to page 21 (Corporate Governance);
note 2, pages 44 and 46 (Significant accounting
policies); and note 12, pages 55 to 56 (Intangible
assets).
The audit procedures we have performed to address this key
audit matter are as follows:
– We assessed the key assumptions which management have
adopted in their impairment assessment. This included:
•
•
•
the relevant future expected cash flows from the
business that are used to support intangible assets
and goodwill;
the revenue and margin forecasts for each of the
customer books; and
the discount rate and attrition assumption used in
these calculations.
– We performed a sensitivity analysis over the assumptions
used; and
– We assessed management’s forecasting ability by
comparing previous forecasts to actual past performance.
From our work carried out we found that the assumptions used
were supported by the evidence we obtained.
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continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of investment in subsidiaries
(Company)
The Company financial statements include an
investment in Suffolk Life Group Limited. This
investment is held at cost and must be impaired
if the recoverable amount falls below this value.
The assumptions used in the impairment
assessment can be subjective, in particular, the
assessment is sensitive to changes in forecast net
cash contributions and discount rate used.
Refer to page 21 (Corporate Governance);
note 2, page 45 (Significant accounting policies);
and note 15, page 58 (Intangible assets).
Provisioning and contingent liability disclosure
(Group)
In the year the Group initiated a review of data
records on a certain population of properties
held within SIPPs administered by the Group.
Deficiencies have been identified in the way
some of these SIPPs had been administered and
management is currently assessing the historic
issues identified.
In order to estimate the potential financial
effect on the Group as at 31 December 2018
management completed case reviews on a
sample of properties affected and extrapolated
their findings across the remaining population.
A provision of £500k has been recognised to
estimate for the probable direct costs the Group
may bear. A contingent liability in respect of
indirect costs that the Group may possibly be
exposed to in the future has also been disclosed
with a current best estimate of £1.5m.
There are inherent uncertainties in the estimate
of the provision including, for example,
uncertainties resulting from the current sampling
and extrapolation approach and the quality of
data.
There is a greater degree of uncertainty in
relation to the estimation of the best estimate
quantification of the contingent liability with
potential significant variations in the possible
liabilities payable to rectify individual SIPP
positions alongside the same sampling and data
uncertainties associated with the provision
itself.
The audit procedures we have performed to address this key
audit matter are as follows:
– We compared the carrying value of investment to the net
assets of the subsidiary balance sheet;
– We considered whether the future forecast net cash flows
arising within Suffolk Life Group Limited were reasonable;
and
– We considered the discount rate assumption used in these
calculations is appropriate.
From our work carried out we found that the assumptions
used were supported by the evidence we obtained.
The audit procedures we have performed to address this key
audit matter are as follows:
– We considered relevant historical experience within the
Group and reviewed external advice in relation to this
matter to inform our own assessment of potential
liabilities and contingent liabilities.
– We understood and evaluated the process and controls
management have in place to assess and quantify an
appropriate contingent liability and associated provision.
– We tested management’s process to support the
quantification of both the provision and contingent
liability, and to inform our understanding of the inherent
uncertainties within each. To do this we re-performed
a sample of case reviews to assess the validity of
conclusions drawn by management.
– We performed substantive procedures over completeness
and accuracy of the key reports used by management to
assess the provision and contingent liability.
– We obtained and re-performed management’s provision
calculation and management’s calculation of their best
estimate of the associated contingent liability.
– We assessed the appropriateness of the key assumptions
used within the calculations.
– We performed independent sensitivity analysis over the
key assumptions.
As described in the notes to the financial statements, there
are inherent uncertainties within both these amounts.
Based on the work we have performed, we consider the
provision and contingent liability to be based on information
currently available, and related disclosures to be fair and
balanced.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 29
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I N D E P E N D E N T AU D I TO R S’ R E P O RT TO T H E
M E M B E R S O F C U RT I S BA N K S G RO U P P LC
continued
Refer to page 21 (Corporate Governance);
note 2, page 46 (Significant accounting policies);
note 3, page 49 (Critical accounting judgements
and key sources of estimation uncertainty); and
note 33, page 73 (Contingent liabilities).
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial statements as a whole, taking into account the structure of the group and the company, the accounting
processes and controls, and the industry in which they operate.
The scope of our audit and the nature, timing and extent of audit procedures performed were determined by our
risk assessment, the financial significance of components and other qualitative factors including history of
misstatement through fraud or error.
We concluded that the three principal trading entities (Curtis Banks Limited, Suffolk Life Pensions Limited and
Suffolk Life Annuities Limited) and the group holding company (Curtis Banks Group PLC) to be significant
components for the group audit and as such we performed audit procedures on each of these components.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Group financial statements Company financial statements
Overall materiality £607,000 (2017: £537,000). £458,000 (2017: £367,000).
How we determined it 5% of adjusted profit before tax, 1% of net assets.
amortisation and non-recurring costs.
Rationale for
benchmark applied
We have selected this benchmark because We consider the net assets of the Company
it is considered by the Directors to be a to be an appropriate benchmark as the
key performance indicator of the group entity is principally a holding company and
and to be a reflection of the underlying does not itself trade. Profit measures are
performance of the trading business. therefore less relevant to the financial
reporting for this entity.
We have applied a higher materiality of £35m (2017: £37m), based on 1% of total policyholder assets, solely for
the purpose of identifying and evaluating the effect of misstatements that are likely only to lead to a
reclassification between line items within the Statement of Financial Position or the Statement of Comprehensive
Income.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across components was between £101,000 and £577,000. Certain
components were audited to a local statutory audit materiality that was also less than our overall group
materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above £30,000 (Group audit) (2017: £27,000) and £23,000 (Company audit) (2017: £18,000) as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
30 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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I N D E P E N D E N T AU D I TO R S’ R E P O RT TO T H E
M E M B E R S O F C U RT I S BA N K S G RO U P P LC
continued
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group’s and company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
group’s or company’s ability to continue as a going concern. For example, the terms on which the United Kingdom
may withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential
implications on the group’s or company’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ report, we also considered whether the disclosures required by
the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK)
require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors’ report for the year ended 31 December 2018 is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ report.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 31
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I N D E P E N D E N T AU D I TO R S’ R E P O RT TO T H E
M E M B E R S O F C U RT I S BA N K S G RO U P P LC
continued
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities set out on pages 16 to 17, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The directors are also 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.
In preparing the financial statements, the directors are responsible for assessing the group’s and the 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 the directors either intend to liquidate the group or the company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
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 an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a 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 the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Sue Morling (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
19 March 2019
32 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
Curtis Bank pp33-76.qxp 18/04/2019 13:22 Page 33
C O N S O L I DAT E D STAT E M E N T O F
C O M P R E H E N S I V E I N C O M E
Year ended 31 December 2018
Year ended 31 December 2018
Year ended 31 December 2017
Group
Notes
Before
amortisation Amortisation
and non-
recurring
costs
£’000
and non-
recurring
costs
£’000
Before
amortisation Amortisation
and non-
recurring
costs
£’000
and non-
recurring
costs
£’000
Total
£’000
Operating revenue
Policyholder investment
returns
Revenue
Administrative expenses
Non-participating investment
21
4
46,125
41,677
87,802
(33,637)
contract expenses
21
(34,477)
Changes in provisions:
Non-participating investment
contract liabilities
Policyholder total expenses
Operating profit before
amortisation and
non-recurring costs
Non-recurring costs
Amortisation
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Total comprehensive income
for the year
Attributable to:
Equity holders of the company
Non-controlling interests
Earnings per ordinary share on
net profit
Basic (pence)
Diluted (pence)
6
5
9
8
10
11
11
Total
£’000
43,573
343,009
386,582
(32,336)
(34,560)
(308,449)
(343,009)
11,237
(3,754)
(1,131)
—
—
—
—
—
—
—
—
46,125
43,573
41,677
343,009
87,802
386,582
(33,637)
(32,336)
(34,477)
(34,560)
(7,200)
(308,449)
(41,677)
(343,009)
12,488
11,237
—
—
—
—
—
—
—
—
(7,200)
(41,677)
12,488
—
—
(748)
(1,268)
(748)
(1,268)
—
—
(3,754)
(1,131)
12,488
(2,016)
10,472
11,237
(4,885)
6,352
116
(467)
12,137
(2,294)
—
—
116
(467)
67
(562)
—
—
(2,016)
10,121
10,742
(4,885)
383
(1,911)
(1,565)
940
67
(562)
5,857
(625)
9,843
(1,633)
8,210
9,177
(3,945)
5,232
8,204
6
8,210
15.30
14.45
5,222
10
5,232
9.75
9.26
The consolidated statement of comprehensive income has been prepared on the basis that all operations are
continuing operations.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 33
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C O N S O L I DAT E D STAT E M E N T O F F I N A N C I A L
P O S I T I O N
As at 31 December 2018
As at As at
31 Dec 18 31 Dec 17
Group Notes £’000 £’000
ASSETS
Non-current assets
Intangible assets 12 44,110 44,593
Investment property 13 1,274,452 1,206,298
Property, plant and equipment 14 1,216 1,148
Investments 15 1,813,057 2,032,293
Deferred tax asset 22 595 124
3,133,430 3,284,456
Current assets
Trade and other receivables 17 18,055 16,687
Cash and cash equivalents 18 431,576 437,849
Current tax asset 243 310
449,874 454,846
Total assets 3,583,304 3,739,302
LIABILITIES
Current liabilities
Trade and other payables 19 15,204 12,658
Deferred income 24,601 24,374
Borrowings 20 30,005 29,444
Provisions 22 500 641
Deferred consideration 255 341
Current tax liability 991 —
71,556 67,458
Non-current liabilities
Borrowings 20 56,525 64,584
Provisions 22 - 259
Deferred consideration 125 454
Non-participating investment contract liabilities 21 3,405,428 3,561,929
3,462,078 3,627,226
Total liabilities 3,533,634 3,694,684
Net assets 49,670 44,618
Equity attributable to owners of the parent
Issued capital 23 269 269
Share premium 24 33,451 33,451
Equity share based payments 24 1,357 731
Treasury shares 24 (716) (250)
Retained earnings 24 15,295 10,403
49,656 44,604
Non-controlling interest 26 14 14
Total equity 49,670 44,618
The financial statements on pages 33 to 76 are approved by the Board of Directors and authorised for issue on
19 March 2019.
Paul Tarran
Chief Financial Officer
Company Registration No. 07934492
34 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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C O M PA N Y STAT E M E N T O F F I N A N C I A L P O S I T I O N
As at 31 December 2018
As at As at
31 Dec 18 31 Dec 17
Company Notes £’000 £’000
ASSETS
Non-current assets
Investments 15 58,440 57,266
58,440 57,266
Current assets
Trade and other receivables 17 52 15
Cash and cash equivalents 18 1,967 2,318
Current tax asset 81 —
2,100 2,333
Total assets 60,540 59,599
LIABILITIES
Current liabilities
Trade and other payables 19 220 108
Borrowings 20 3,158 3,158
3,378 3,266
Non-current liabilities
Borrowings 20 11,396 14,508
11,396 14,508
Total liabilities 14,774 17,774
Net assets 45,766 41,825
Equity attributable to owners of the parent
Issued capital 23 269 269
Share premium 24 33,451 33,451
Equity share based payments 24 1,357 731
Retained earnings 24 10,689 7,374
Total equity 45,766 41,825
The financial statements on pages 33 to 76 are approved by the Board of Directors and authorised for issue on
19 March 2019.
Paul Tarran
Chief Financial Officer
Company Registration No. 07934492
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 35
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C O N S O L I DAT E D STAT E M E N T O F C H A N G E S I N
EQ U I T Y
Equity share Non-
Issued Share based Treasury Retained controlling Total
capital premium payments shares earnings Total interest equity
Group £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2017 268 33,425 239 — 7,589 41,521 9 41,530
Total comprehensive
income for the year — — — — 5,222 5,222 10 5,232
Share based payments — — 492 — — 492 — 492
Ordinary shares bought
by EBT — — — (250) — (250) — (250)
Ordinary shares issued 1 26 — — — 27 — 27
Ordinary dividends
declared and paid — — — — (2,408) (2,408) (5) (2,413)
At 31 December 2017 269 33,451 731 (250) 10,403 44,604 14 44,618
Total comprehensive
income for the year — — — — 8,204 8,204 6 8,210
Share based payments — — 626 — — 626 — 626
Ordinary shares bought
and sold by EBT — — — (466) — (466) — (466)
Deferred tax on share
based payments — — — — 310 310 — 310
Ordinary dividends
declared and paid — — — — (3,622) (3,622) (6) (3,628)
At 31 December 2018 269 33,451 1,357 (716) 15,295 49,656 14 49,670
36 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
Curtis Bank pp33-76.qxp 18/04/2019 13:22 Page 37
C O M PA N Y STAT E M E N T O F C H A N G E S I N EQ U I T Y
Equity share
Issued Share based Retained
capital premium payments earnings Total
Company £’000 £’000 £’000 £’000 £’000
At 1 January 2017 268 33,425 239 2,275 36,207
Total comprehensive income for the year — — — 7,507 7,507
Share based payments — — 492 — 492
Ordinary shares issued 1 26 — — 27
Ordinary dividends declared and paid — — — (2,408) (2,408)
At 31 December 2017 269 33,451 731 7,374 41,825
Total comprehensive income for the year — — — 6,937 6,937
Share based payments — — 626 — 626
Ordinary dividends declared and paid — — — (3,622) (3,622)
At 31 December 2018 269 33,451 1,357 10,689 45,766
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 37
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C O N S O L I DAT E D STAT E M E N T O F C A S H F LO WS
Year ended 31 December 2018
Year ended 31 December
2018 2017
Group £’000 £’000
Cash flows from operating activities
Profit before tax 10,121 5,857
Adjustments for:
Depreciation 596 570
Amortisation and impairments 1,268 3,126
Interest expense 467 554
Share based payment expense 626 492
Fair value losses/(gains) on financial investments 116,517 (156,046)
Additions of financial investments (490,830) (493,638)
Disposals of financial investments 593,549 542,304
Fair value gains on investment properties (47,275) (44,074)
(Decrease)/increase in liability for investment contracts (156,498) 167,525
Changes in working capital:
Decrease/(increase) in trade and other receivables 247 (433)
Increase in trade and other payables 992 4,193
Taxes paid (1,375) (999)
Net cash flows received from operating activities 28,405 29,431
Cash flows from investing activities
Purchase of intangible assets (785) (277)
Purchase of property, plant and equipment (202,089) (161,923)
Purchase and sale of shares in the Group by the EBT (466) (250)
Receipts from sale of property, plant and equipment 180,546 148,191
Net cash flows from acquisitions (421) (669)
Net cash flows used in investing activities (23,215) (14,928)
Cash flows from financing activities
Equity dividends paid (3,628) (2,413)
Net proceeds from issue of ordinary shares — 27
Net decrease in borrowings (7,538) (21,274)
Interest paid (297) (504)
Net cash used in financing activities (11,463) (24,164)
Net decrease in cash and cash equivalents (6,273) (9,661)
Cash and cash equivalents at the beginning of the year 437,849 447,510
Cash and cash equivalents at the end of the year 431,576 437,849
38 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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C O M PA N Y STAT E M E N T O F C A S H F LO WS
Year ended 31 December 2018
Year ended 31 December
2018 2017
Company £’000 £’000
Cash flows from operating activities
Profit before tax 6,937 7,507
Adjustments for:
Interest expense 467 554
Changes in working capital:
Decrease in trade and other receivables — 38
(Decrease)/increase in trade and other payables (50) 54
Taxes paid (81) —
Net cash flows received from operating activities 7,273 8,153
Cash flows from investing activities
Investment in employee benefit trust (548) (250)
Net cash flows used in investing activities (548) (250)
Cash flows from financing activities
Equity dividends paid (3,622) (2,408)
Net proceeds from issue of ordinary shares — 27
Net decrease in borrowings (3,157) (3,158)
Interest paid (297) (504)
Net cash used in financing activities (7,076) (6,043)
Net (decrease)/increase in cash and cash equivalents (351) 1,860
Cash and cash equivalents at the beginning of the year 2,318 458
Cash and cash equivalents at the end of the year 1,967 2,318
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 39
Curtis Bank pp33-76.qxp 18/04/2019 13:22 Page 40
NOTES TO THE FINANCIAL STATEMENTS
Corporate information
1.
Curtis Banks Group PLC (“the Company”) is a public limited company incorporated and domiciled in England and
Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange PLC. The financial
statements were authorised for issue in accordance with a resolution of the Directors on 19 March 2019.
2.
Basis of preparation
Significant accounting policies
The financial statements comprise the financial statements of the Company and its subsidiaries (“the Group”) as
at 31 December each year. The nature of the Group’s operations and its principal activities are set out in the
Chief Executive’s review.
The financial statements have been prepared on a historical cost basis modified by revaluation of financial assets
and financial liabilities through profit and loss where held at fair value, and are presented in pounds sterling, with
all values rounded to the nearest thousand pounds except when otherwise indicated.
The financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union and in accordance with the IFRS Interpretations Committee (“IFRS IC”)
interpretations.
The financial statements have been prepared in accordance with The Companies Act 2006 as applicable to
companies using IFRS and accounting policies have been consistently applied.
New standards adopted by the Group
The Group has applied the following new accounting standards for the first time for their annual reporting period
commencing 1 January 2018:
•
•
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 9
Shareholder financial assets and liabilities were previously all recognised under existing IAS 39 categories of “loans
and receivables” and “available for sale”; none were recognised under “held to maturity”. From 1 January 2018,
all shareholder financial assets are now either recognised at amortised cost or fair value through profit and loss
(“FVTPL”) under IFRS 9. There was no impact to equity on transition due to the simple nature of these assets.
The Group holds a wide variety of policyholder financial assets and liabilities within non-participating investment
contracts. All gains or losses on policyholder assets and liabilities are ultimately borne by the policyholder and
therefore net impact on equity from application of IFRS 9 was £nil.
IFRS 9 requires the Group to recognise a provision for impairment of trade and other receivables based on an
‘expected credit loss’ (“ECL”) model, which replaces the old ‘incurred loss’ model required under IAS 39.
Consequently, the Group has introduced additional disclosures within the notes to the financial statements to
describe the way in which it has applied the ECL model and the relevant implications for the financial statements.
Principally, this is a change in the method used to measure and manage credit risk attached to trade and other
receivables. The new methodology is further described in note 30 to the financial statements.
There was no material impact to equity at 1 January 2018 on application of the new ECL model. In determining
this, the Group has considered the following factors:
–
–
–
The Group’s shareholder financial assets and specifically the trade receivables balance do not contain any
significant financing components therefore a simplified approach has been taken to recognise lifetime ECLs
on all relevant financial assets.
The time value of money is not expected to have a material impact on ECLs as the Group’s shareholder
current financial assets are all expected to be recoverable within one year, and the Group holds no
shareholder non-current financial assets.
The Group holds data about its customers’ individual holdings within their respective SIPPs and SSASs, and
can therefore determine a consequent level of liquidity in the scheme. This data provides reasonable and
supportable information about the past, current and future likelihood of recovering fees due. An analysis of
this data had already been prepared in order to assess the current impairment provision in place under IAS 39
against the Group’s trade receivables as at 31 December 2017. The same data used under the ECL model as
at 1 January 2018 indicated that the provision required was not materially different.
40 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
IFRS 15
IFRS 15 introduced a new five stage model for the recognition of revenue from contracts with customers replacing
the previous standards IAS 11 Construction Contracts, IAS 18 Revenue and related IFRIC and SIC Interpretations.
The reasons for clarifying the principles for recognising revenue were to:
–
–
–
–
–
Remove inconsistencies and weaknesses in previous revenue requirements
Provide a more robust framework for addressing revenue issues
Improve comparability of revenue recognition practices across entities
Provide more useful information to users of financial statements through improved disclosure requirements
Simplify the preparation of financial statements by reducing the number of requirements to which entities
must refer
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in
exchange for those goods or services. An entity recognises revenue in accordance with that core principle by
applying the following steps:
–
–
–
–
–
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Application of this model depends on the facts and circumstances presented in a contract with a customer and
requires the exercise of judgement.
The standard also includes a comprehensive set of disclosure requirements that results in the Group providing
users of the financial statements with comprehensive information about the nature, amount, timing and
uncertainty of revenue and cash flows arising from the Group’s contracts with customers.
The Group has applied this model from 1 January 2018, making the following key judgements against the five step
model:
–
–
–
–
–
Step 1: The Group’s customers are deemed to be the underlying SIPP & SSAS members regardless of whether
the Group is providing services under a third party administration agreement or directly to its own clients.
Step 2: Performance obligations are understood to be the individual components of SIPP & SSAS
administration as detailed in the Group’s products’ terms and conditions and fee schedules. Annual renewal
fees are deemed to comprise multiple individual obligations. However, each of these obligations represents
a continuous service over the same annual period and can therefore be viewed collectively as one obligation
for the purpose of revenue recognition. Obligations under set up fees and transaction fees are deemed to be
short term in nature (three months or less).
Step 3: The transaction price is deemed to be that shown in the Group’s products’ terms and conditions and
fee schedules against each individual fee item which includes interest turn on client funds. Transaction prices
for individual components of the annual renewal fee are not separable as the combined set of obligations
represents a continuous service over the same annual period.
Step 4: The result of judgements made in Step 2 and Step 3 mean that transaction prices are allocated in
substance to fee items included in the Group’s product’s terms and conditions and fee schedules, as these
also wholly reflect the individual performance obligations.
Step 5: The Group’s current revenue recognition policy appropriately recognises revenue when (or as)
performance obligations are satisfied.
Following adoption of IFRS 15, the Group has updated its revenue recognition accounting policy to reflect the
requirements of the new accounting standard, and enhanced other disclosures within the financial statements in
order to comply with the standard. There has been no material change to the value and timing of revenue
recognition from adoption of IFRS 15 in the Group’s financial statements and no material impact on equity as at
1 January 2018.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 41
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary
undertakings up to 31 December 2018.
The profits and losses of the Company and its subsidiaries are consolidated from the date of acquisition using the
acquisition method of accounting.
The trading subsidiaries of Curtis Banks Group PLC as at 31 December 2018 were Curtis Banks Limited, Suffolk Life
Pensions Limited, Suffolk Life Annuities Limited, Curtis Banks Investment Management Limited, Rivergate Legal
Limited and Templemead Property Solutions Limited. The trading subsidiaries of Curtis Banks Group PLC as at
31 December 2017 were Curtis Banks Limited, Suffolk Life Pensions Limited, Suffolk Life Annuities Limited and
Curtis Banks Investment Management Limited.
Suffolk Life Annuities Limited provides SIPPs through non-participating individual insurance contracts. As such, it is
regarded as an insurance company for the purposes of regulatory and statutory reporting. Due to Suffolk Life
Annuities Limited’s status as an insurance company, the consolidated results for the whole Group include insurance
policyholder assets, liabilities and returns.
Certain trading subsidiaries of Curtis Banks Group PLC hold the entire issued share capital of a large number of
non-trading trustee companies. The accounts of these companies have not been consolidated into the Group
accounts as they would be immaterial to the Group's position. All of these companies are bare trustee companies
for the pension products administered by the trading subsidiaries of Curtis Banks Group PLC and have been
dormant throughout the period and are expected to remain dormant.
Going concern
The Group is required to assess whether it has sufficient resources to continue its operations and to meet its
commitments for the foreseeable future. The directors have prepared the financial statements on a going concern
basis, as in their opinion the Group is able to meet its obligations as they fall due. This opinion is based on
detailed forecasting for the following 12 months based on current and expected market conditions together with
current performance levels.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or 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. In assessing control, potential voting rights currently exercisable are taken into account. The
financial statements of trading subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. The accounting policies of the subsidiaries have been
changed when necessary to align them with the policies adopted by the Group.
Business Combinations
Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The cost of the business
combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange of control of the acquiree, plus any
costs directly attributable to the business combination. Any deferred consideration is included as part of the initial
fair value, with a corresponding liability being recognised. The acquiree’s identifiable assets, liabilities and
contingent liabilities that meet conditions for recognition under IFRS 3 Business Combinations are recognised at
their fair value at the acquisition date.
Segment Reporting
IFRS 8 Operating Segments requires segments to be identified on the basis of internal reports that are regularly
reviewed by the Chief Operating Decision Maker (“CODM”).
All results are viewed as one by the CODM for the purposes of management decisions. This is because all
operations are conducted within the UK and all material operations are of the same nature and share the same
economic characteristics including a similar customer base and nature of product and services (i.e. pensions
administration). As a result, the Group only has one reportable segment being pensions administration, the results
of which are included within the financial statements.
Foreign Currencies
The consolidated financial statements are presented in Pound Sterling which is the Group’s functional and
presentational currency. All foreign currency transactions and foreign currency balances relate to policyholder
assets and liabilities.
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling
at the Statement of Financial Position date and the gains or losses on translation are included in the Statement of
Comprehensive income.
42 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
All foreign exchange gains or losses arising on policyholder transactions and balances have a net impact of £nil on
the consolidated statement of comprehensive income due to the legal structure of policyholder assets and
liabilities as further described in the accounting policy for non-participating investment contracts.
Pensions
The Group contributes to defined contribution schemes for the benefit of its employees. Contributions payable are
charged to the consolidated statement of comprehensive income in the year they are payable.
Research and development
Research expenditure is written off to the consolidated statement of comprehensive income in the year in which it
is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the
technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred
and amortised over a four year period during which the Group is expected to benefit.
Non-participating investment contracts
The Group’s long term business includes unit linked Self-Invested Personal Pension policies, also referred to as the
‘Policyholder Business’, wholly administered by Suffolk Life Annuities Limited, a subsidiary company. The liability
of the Group towards its policyholders is exactly equal to the value of policyholder assets held at all times.
Non-participating investment contract liabilities are measured at fair value by reference to the value of the
underlying net asset values of the assets held to cover investment contracts at the Statement of Financial Position
date.
For non-participating investment contracts, premiums are not included in the consolidated statement of
comprehensive income but are reported as contributions to non-participating investment contract liabilities in the
consolidated statement of financial position. Investment income in respect of non-participating investment
contracts are accounted for in ‘Investment return’. Investment income and investment return includes dividends,
rental and interest income.
Expenses and charges in respect of non-participating investment contracts are accounted for in ‘non-participating
investment contract expenses’. These expenses include investment management fees and interest payable.
Claims are not included in the consolidated statement of comprehensive income but are deducted from
non-participating investment contract liabilities.
Transfers out, annuity purchases and drawdowns are accounted for when the associated assets have been
transferred out of the Company. Acquisition costs comprising direct and indirect costs arising from the conclusion
of non-participating investment contracts are expensed on receipt of the inwards premium. There are no deferred
acquisition costs.
Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to
purchase or sell the assets, at their fair value less transaction costs. Investments carried at fair value are
measured using a fair value hierarchy, with values based on quoted bid prices where available.
Investment property held within non-participating investment contracts comprises land and buildings which are
held for long term rental yields and capital growth. It is carried at fair value with movements recognised in the
consolidated statement of comprehensive income.
Unquoted investments in property vehicles and direct holdings in investment property are valued by independent
valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of
Chartered Surveyors or by reference to the movement in a property index from the last purchase or valuation
date. Valuation techniques may include discounted cash flow calculations using net current rent, and estimated
and terminal values; they may also include yield methodology calculations using market rental values capitalised
with a market capitalisation rate. Both of these are then further validated against market transactions to produce
a final valuation.
Revenue recognition
Operating revenue comprises the fair value of the consideration received or receivable for the sale of services in
the ordinary course of the Group’s activity. Revenue is shown net of value added tax (“VAT”), returns, rebates and
discounts and after eliminating sales within the Group. The Group applies the 5 step model under IFRS 15 Revenue
from Contracts with Customers to recognition of revenue as follows:
–
Step 1: Identify the contract(s) with a customer
The Group’s customers are deemed to be the underlying SIPP & SSAS members regardless of whether the
Group is providing services under a third party administration agreement or direct to its own clients.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 43
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Revenue recognition – continued
–
Step 2: Identify the performance obligations in the contract
Performance obligations are understood to be the individual components of SIPP & SSAS administration as
detailed on the Group’s products’ terms and conditions and fee schedules. Annual renewal fees are deemed
to comprise multiple individual obligations. However, each of these obligations represents a continuous
service over the same annual period and can therefore be viewed collectively as one obligation for the
purpose of revenue recognition. Obligations under set up fees and transaction fees are deemed to be short
term in nature (three months or less).
Step 3: Determine the transaction price
The transaction price is deemed to be that shown in the Group’s products’ terms and conditions and fee
schedules against each individual fee item which includes interest turn on client funds. Transaction prices for
individual components of the annual renewal fee are not separable as the combined set of obligations
represents a continuous service over the same annual period.
Step 4: Allocate the transaction price to the performance obligations in the contract
The result of judgements made in Step 2 and Step 3 mean that transaction prices are allocated in substance
to fee items included in the Group’s product’s terms and conditions and fee schedules, as these also wholly
reflect the individual performance obligations.
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Set up, and initial transaction fees, as well as ad hoc transaction fees are recognised as the work is
completed and performance obligations satisfied, net of VAT.
–
–
–
Annual renewal fees are invoiced in advance and recognised, net of VAT, evenly over the year to which they relate,
and held as deferred income at the year end where the annual fee period spans multiple accounting periods.
Fees which are received in arrears, including certain property annual fees and property acquisition fees, are
accrued over the period in which services are provided and performance obligations are satisfied.
Any interest received in excess of that payable to clients is retained by the Group and is included within revenue.
Interest income receivable by the Group is recognised as it accrues.
The timing of satisfaction of performance obligations under contracts with SIPP & SSAS members does not bear any
relevance to the typical timing of payment for such services. The typical timing of payment is on or after the
related fee invoice is issued.
Policyholder revenue comprises investment income and investment gains and losses on non-participating
investment contracts. Investment income includes dividends, rental and interest income. Dividends and
distributions from collective investment schemes are recognised on the date on which shares are quoted
ex-dividend. Interest and rental income is recognised on an accruals basis.
Investment gains and losses in the consolidated statement of comprehensive income comprise realised and
unrealised gains and losses. Realised gains and losses are calculated as the difference between the net sale
proceeds and the original cost or, if previously re-valued, the valuation at the last statement of financial position
date. Unrealised gains and losses on investments are calculated as the difference between the current valuation
and the original cost or, if previously re-valued, the valuation at the last statement of financial position date.
Intangible assets – Client Portfolios
Client portfolios are included in the statement of financial position at cost to the Group less accumulated
amortisation and provisions for impairment.
The carrying value of client portfolios is reviewed for impairment if events or circumstances change and indicate
that the carrying values may not be recoverable. In this event the values are written down to the recoverable
amount. The carrying value of client portfolios is also reviewed for impairment annually at each reporting date.
Client portfolios are amortised on a straight line basis over their estimated useful life of 20 years.
Intangible assets – Computer Software
Computer software is included in the statement of financial position at cost to the Group less accumulated
amortisation and provisions for impairment. The carrying value of computer software is reviewed for impairment if
events or circumstances change and indicate that the carrying values may not be recoverable. In this event the
values are written down to the recoverable amount. The carrying value of computer software is also reviewed for
impairment annually at each reporting date. Computer software is amortised on a straight line basis over its
estimated useful life of between four and five years.
44 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Property, plant and equipment
Property, plant and equipment are included in the statement of financial position at cost to the Group less
accumulated depreciation and provisions for impairment.
The carrying value of property, plant and equipment is reviewed for impairment if events or circumstances change
and indicate that the carrying values may not be recoverable. In this event the values are written down to the
recoverable amount.
Property, plant and equipment is depreciated on a straight line basis at rates sufficient to write off the cost less
estimated residual values of individual assets over their estimated useful lives. The depreciation rates for the
principal categories of assets are as follows:
Leasehold improvements
Computer equipment
Office equipment, fixtures & fittings
Impairment of non-financial assets
25%
25%
25%
straight line
straight line
straight line
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and
intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets,
the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. 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 is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated 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 been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the
asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation
decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at
a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Investments
Non-current asset investments excluding those held under non-participating investment contracts are stated at
cost less provision for diminution in value.
Financial assets
Financial assets held under non-participating investment contracts are categorized either as fair value through
profit and loss, or as loans and receivables. All other financial assets are classified in the category of loans and
receivables. The classification depends on the purposes for which these assets were acquired. Management takes
decisions concerning the classification of its financial assets at initial recognition and reviews such classification
for reliability at each reporting date. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included in current assets, except for
maturities greater than 12 months after the statement of financial position date. These are classified as
non-current assets. The Group’s financial assets comprise “non-current asset investments”, “investment
property”, “trade and other receivables” and “cash and cash equivalents” in the statement of financial position.
Trade receivables
Trade receivables, defined as loans and receivables in accordance with IFRS 9 Financial Instruments, are recorded
and subsequently measured at amortised cost.
Trade receivables are amounts due from customers for services performed in the ordinary course of business. If
collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are
classified as current assets. If not, they are presented as non-current assets.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have
been grouped based on shared characteristics and overall credit quality. A provision for impairment of trade
receivables is established when there is evidence that the Group might not be able to collect all amounts due
according to the original terms of the receivables. The movement in the provision is recognised in the consolidated
statement of comprehensive income.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 45
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Trade receivables – continued
The expected loss rates for each grouping are based on historic actual recovery rates achieved for such groupings
over the last 12 months, modified for factors such as existing market conditions, days past due or forward looking
estimates, where supported by existing reliable evidence.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts.
Financial liabilities – Trade and other payables
Trade and other payables are recognised and initially measured at cost, due to their short term nature. All of the
Group’s trade payables are non-interest bearing.
Financial liabilities - Borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less attributable
transaction costs. After initial recognition interest bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest method. Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds.
Current and deferred income tax
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the consolidated statement of comprehensive income, because it excludes items of income or expense that are
taxable or tax deductible in other years and it further excludes items that are never taxable or tax deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or the
liability is settled. Deferred tax is charged or credited in the profit or loss, except when it relates to items
credited or charged in other comprehensive income directly to equity, in which case the deferred tax is also dealt
with in other comprehensive income.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the
amount can be made. If the effect is material, provisions are determined by discounting the expected future cash
flows at an appropriate pre-tax discount rate.
Non-recurring costs
Non-recurring costs are classified as such when the nature of the expense is significant and expected to be a ‘one
off’ business event or activity that does not form part of usual day to day operations. Examples of such costs
include acquisitions, office relocations and restructuring. Where costs are classified as non-recurring due to their
nature, these are described in full within a note to the financial statements.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the
amount of any non-controlling interest in the acquiree and the acquisition and the acquisition date fair value of
any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. Goodwill
impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a
potential impairment. Any impairment is recognised immediately as an expense and is not subsequently reversed.
46 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Leases
Leases of property, plant and equipment which transfer substantially all the risks and rewards of ownership to the
Group are classified as finance leases. Finance leases are classified as a financial liability and measured at
amortised cost. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the
leased property, plant and equipment and the present value of the minimum lease payments and depreciated over
the term of the lease. The resulting lease obligations are included in liabilities. 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.
All other leases are classified as operating leases. Rentals payable under operating leases, net of lease incentives,
are charged to the consolidated statement of comprehensive income on a straight-line basis over the year of the
lease. Where property lease contracts contain guaranteed minimum incremental rental payments, the total
committed cost is determined and is amortised on a straight-line basis over the life of the lease.
Share based payments
Curtis Banks Group PLC operates several share schemes under which certain employees of the Group receive part
of their remuneration for the financial year in the form of options to purchase shares in Curtis Banks Group PLC,
the ultimate parent Company.
These schemes are accounted for as equity-settled share-based payment transactions in accordance with IFRS 2.
The share options granted become exercisable at varying future dates. If certain conditions are met, following the
vesting period, employees and third parties will be eligible to exercise their option at an exercise price
determined on the date the share options are granted.
The fair value of Curtis Banks Group PLC’s share options is determined at the date of grant. This fair value is
calculated by applying the Black Scholes model. The model utilises inputs for the risk free rate, expected volatility
in share price, dividend yield and the current share price at fair value, which are factors determined on the date
the share options are granted.
The share based payment charge to the consolidated statement of comprehensive income is calculated based on
the Group’s estimate of the number of options that will eventually vest.
The resulting staff costs under the share schemes are recognised pro rata in the consolidated statement of
comprehensive income to reflect the services rendered as consideration during the vesting period.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been
early adopted by the Group
The following standards, interpretations and amendments to existing standards have been published by the IASB
but are yet to be endorsed by the EU or are not effective for the period presented in the financial statements and
the Group has decided not to early adopt them.
Effective date, annual period
Standard beginning on or after
IFRS 17 Insurance Contracts 1 January 2022
Amendments to IAS 1 and IAS 8 – Definition of material 1 January 2020
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
Amendments to IFRS 3 Business combinations – definition of a business 1 January 2020
IFRS 16 Leases 1 January 2019
Amendments to references to the conceptual framework in IFRS standards 1 January 2020
Amendments to IFRS 9 Prepayment Features with Negative Compensation 1 January 2019
Amendments to IAS 19 Plan amendment, curtailment of settlement 1 January 2019
Amendments to IAS 28 Long-term Interests in Associates & Joint Ventures 1 January 2019
Annual Improvements to IFRSs 2015-2017 Cycle 1 January 2019
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 47
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been
early adopted by the Group – continued
Except for IFRS 16, the directors anticipate that the adoption of these standards and interpretations and
amendments in future periods will have no material impact on the financial statements of the Group. The Group is
required to adopt IFRS 16 from 1 January 2019 and the estimated impact of the adoption of this standards is as
described:
Nature of change
IFRS 16 Leases was issued in January 2016. It introduces significant changes to lessee accounting by requiring
a lessee to recognise assets and liabilities on the balance sheet for almost all leases. The only exceptions are short
term and low value leases. It applies to accounting periods ending on or after 1 January 2019.
Currently, International Accounting Standard 17 (IAS 17) Leases, requires companies within the Group to classify
leases as either operating or finance leases. The new standard eliminates the classification of leases by lessees as
either operating leases or finance leases. Instead, applying IFRS 16, each company within the Group will be
required to recognise both an asset and a liability on the balance sheet.
The asset represents the lessee’s right to use the underlying lease for the duration of the lease term, creating
a right-of-use asset. The liability reflects the lessee’s contractual obligation to make payments to the lessor
throughout the lease term, using a discounted cash flow model.
Once on the balance sheet, the Group will recognise a depreciation charge and a lease interest charge in the profit
& loss account throughout the life of the lease. The liability reflects the lessee’s contractual obligation to make
payments to the lessor throughout the lease term.
Impact
A full review of all leases in the group has been undertaken.
The majority of leases within the group are operating leases because the risks and rewards are not transferred to
the lessee with the transfer of the asset; operating leases do not currently appear on the balance sheet. From
1 January 2019, this will change when lessees are required to apply IFRS 16.
A lessee may become an intermediate lessor if it sub-leases an asset it in turn leases from another lessor. IFRS 16
requires the intermediate lessor to determine the classification of the sub-lease by reference to the right-of-use
asset arising from the head lease.
In the Group, this applies to the following leases:
•
•
•
The sub-let of 153 Princes Street, Ipswich;
The sub-let of the Market Harborough office; and
The sub-let of SIPP investment properties which were originally purchased as leasehold properties by
Suffolk Life Annuities Limited (SLA) and held legally and beneficially on behalf of policyholders within
non-participating investment contracts (SIPPS); these properties are then sub-let to tenants within the legal
framework of the non-participating investment contracts.
IFRS 16 defines the lease term as the non-cancellable period of the lease together with periods covered by an
option to extend the lease if the lessee is reasonably certain to exercise that option and periods covered by an
option to terminate the lease if the lessee is reasonably certain not to.
The following Group lease contains break clauses which have been considered in line with the above:
•
The lease of 153 Princes Street, Ipswich and associated sub-leases.
All other leases are fixed term and non-cancellable.
Ground rent leases of SIPP investment property have been excluded, based on immateriality.
Principally as a result of operating leases held for the Group’s Bristol, Ipswich, Dundee and Market Harborough
offices, the following changes are anticipated in the Group financial statements on adoption as at 1 January 2019:
•
•
•
•
Group right of use assets: increase by circa £5.3m.
Group finance lease receivables: increase by circa £0.2m.
Group liabilities: increase by circa £5.4m.
Group retained earnings: increase by circa £0.1m.
48 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2.
Date of adoption
The Group will apply the standard from its mandatory adoption date of 1 January 2019. The Group intends to
apply the cumulative catch-up method and will not restate comparative amounts for the first year of adoption.
Right-of-use assets for property leases will be measured on transition as if the new rules have always been applied.
Any other right-of-use assets will be measured at the amount of the lease liability on adoption (adjusting for any
prepaid or accrued lease expenses).
3. Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
In preparing the financial statements the Group has selected and applied various accounting policies which are
described in the notes to the financial statements. In order to apply these accounting policies the Group has made
estimates and judgements concerning the future.
There are no critical judgements in the application of accounting policies.
The key sources of estimation uncertainty are disclosed below:
Client portfolios
Client portfolios acquired are amortised over their useful economic life (UEL) which management estimate to be
20 years. This estimated UEL is based upon management’s historical experience of similar portfolios and
expectation of the future persistency of the portfolio. The reasonableness of this estimated is assessed annually by
comparison to actual lapse rates and consideration of factors that may affect it in the future, for example,
changes to products.
Additionally, the Group reviews and judges whether acquired client portfolios show any indicators of impairment
at least on an annual basis by considering actual versus forecast lapse rates and comparing the carrying value and
recoverable amount. An impairment would exist where the recoverable amount determined is less than the
carrying value of the asset.
Assessing recoverable amount through value in use comprises an estimation of future cash flows expected to arise
from each client portfolio, 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 that asset, together with an estimated
rate of attrition for each portfolio. The estimation of future cash flows is derived by taking the current earnings
before tax, interest, depreciation and amortisation (“EBITDA”) margin of the Group and applying this against
forecast revenue from the relevant client portfolio. The key source of estimation uncertainty arises from the
attrition rates used because the recoverable amount is most sensitive to this assumption. A 20% increase to the
attrition rate assumption would result in no change to the carrying value of the book. A 40% increase to the
attrition rate assumption would result in a cumulative £100,000 decrease in the carrying value of client portfolios.
IFRS 9 impairment
Trade and other receivables are impaired based on the IFRS 9 simplified approach to measure expected credit
losses using a lifetime expected loss allowance for all trade receivables. The loss allowances for trade and other
receivables are based on assumptions about risk of default and expected loss rates. The Group uses judgement in
making these assumptions and selecting the inputs to the impairment calculation, based on the group’s past
history of shared credit risk characteristics, days past due, existing market conditions as well as forward looking
estimates at the end of each reporting period. The loss rates are considered the key source of estimation
uncertainty because the impact of a change in these could result in a material change in the expected credit loss.
Details of the key assumptions and estimates are disclosed in note 30 to the financial statements.
Provisions
As part of the consolidation and integration exercise undertaken in the past year management initiated a review of
data records relating to properties held within SIPPs administered by the Group.
Based on a detailed review of a sample of properties and extrapolation of the initial findings across the full
population of relevant properties, the directors recognise that additional direct costs will be incurred in
completing this data cleansing exercise. These costs include incremental costs of completing the review, as well as
some potential costs of remediation. A provision of £500,000 has been recognised made for this matter, being the
directors’ best estimate of the direct costs the Group may have to bear.
In estimating the amount provided, the main areas of uncertainty include:
•
•
The number of properties within the population that may require remediation; and
The nature and financial impact of the remediation required.
If the number of properties requiring remediation were to increase by 10% the potential cost of the exercise would
increase by £39,000.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 49
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NOTES TO THE FINANCIAL STATEMENTS
continued
4. Revenue
Revenue is wholly derived from activities undertaken within the United Kingdom and comprises the following
categories:
Year ended 31 December
2018 2017
£’000 £’000
Fees 35,352 34,073
Interest income 10,773 9,500
Policyholder investment returns 41,677 343,009
87,802 386,582
Profit for the year
5.
Profit for the year is arrived at after:
Year ended 31 December
2018 2017
£’000 £’000
Charging:
Amortisation of intangible assets 1,268 1,131
Depreciation of property, plant and equipment 596 570
Auditors remuneration:
- audit of the financial statements of the Group 234 177
- audit of the financial statements of the Company 56 29
- audit related assurance services 8 97
6. Non-recurring costs
Non-recurring costs include the following significant items:
Year ended 31 December
2018 2017
£’000 £’000
Set up costs associated with the take on of SIPPs — 20
Hargreave Hale acquisition costs 45 —
Exceptional legal fees — 67
Redundancy & restructuring costs following acquisitions 156 1,143
Suffolk Life acquisition costs — 72
European Pension Management acquisition costs 47 328
Exceptional impairment charge — 2,124
Data cleansing provision 500 —
748 3,754
Redundancy & restructuring costs following acquisitions
During the year ended 31 December 2018, the two existing sales teams within the Group were restructured into
one to coincide with the launch of a new Group wide product in H1 2019. During the year ended 31 December 2017
a full strategic review of all the office locations used by the Group was carried out. As a result of that review, the
decision was taken to close the Group’s office in Market Harborough and full provision was made for this in the
financial statements for the year ended 31 December 2017.
Exceptional impairment charge
During the year ended 31 December 2017 the Group completed the review if its operating systems following the
acquisition of the Suffolk Life business in May 2016. As a result of this review the Group concluded that the most
cost effective, appropriate and lowest risk solution was, subject to contract, to implement a material upgrade of
the existing back office operating system at the Group.
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NOTES TO THE FINANCIAL STATEMENTS
continued
6. Non-recurring costs – continued
As a result of this decision, costs of approximately £2.1m incurred and capitalised on the initial development,
installation, evaluation and testing of an alternative system over recent years were written off as an exceptional
impairment charge in the financial statements for the year ended 31 December 2017.
Data cleansing provision
As part of the consolidation and integration exercise undertaken in the past year management initiated a review of
data records relating to properties held within SIPPs administered by the Group.
Based on a detailed review of a sample of properties and extrapolation of the initial findings across the full
population of relevant properties, the directors recognise that additional direct costs will be incurred in
completing this data cleansing exercise. These costs include incremental costs of completing the review, as well as
some potential costs of remediation. A provision of £500,000 has been recognised for this matter, being the
directors’ best estimate of the direct costs the Group may have to bear.
In estimating the amount provided, the main areas of uncertainty include:
•
The number of properties within the population that may require remediation; and
The nature and financial impact of the remediation required.
Directors and employees
•
7.
Year ended 31 December
2018 2017
£’000 £’000
Wages and salaries 18,034 17,585
Social security costs 1,627 1,630
Other pension costs 1,413 1,337
Share-based incentive awards 626 492
21,700 21,044
2018 2017
Number Number
The monthly average number of employees during the year was:
Directors 6 7
Administration 552 571
558 578
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NOTES TO THE FINANCIAL STATEMENTS
continued
Directors and employees – continued
7.
Details of emoluments paid to the directors and key management personnel of the Group are as follows:
Year ended 31 December
2018 2017
£’000 £’000
Total emoluments paid to:
Directors
Wages and salaries 1,876 1,411
Social security costs 139 123
Post-employment costs 33 21
Share-based incentive awards 467 83
Key management personnel
Wages and salaries 1,151 806
Social security costs 135 93
Post-employment costs 60 47
Share-based incentive awards 130 184
3,991 2,768
Emoluments of highest paid director:
Wages and salaries 377 468
Pension contribution 13 8
390 476
Finance costs
8.
Year ended 31 December
2018 2017
£’000 £’000
Interest payable on bank loans 467 562
Finance income
9.
Year ended 31 December
2018 2017
£’000 £’000
Interest income 116 67
52 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
10. Taxation
Year ended 31 December
2018 2017
£’000 £’000
Domestic current year tax
UK Corporation tax 2,072 791
Deferred tax
Origination and reversal of temporary differences (161) (166)
1,911 625
Factors affecting the tax charge for the year
Profit before tax 10,121 5,857
Profit before tax multiplied by standard rate of UK Corporation tax of
19.00% (2017: 19.25%) 1,923 1,127
Effects of:
Adjustment to prior year 23 (305)
Non-deductible expenses 10 13
Other tax adjustments (45) (210)
(12) (502)
Total tax charge 1,911 625
11. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary
shares into ordinary shares.
Changes in income or expense that would result from the conversion of the dilutive potential ordinary shares are
deemed to be trivial, and therefore no separate diluted net profit is presented.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2018 2017
£’000 £’000
Net profit available to equity holders of the Group 8,204 5,222
Net profit before tax, non-recurring costs (note 6) and amortisation (note 5)
available to equity holders of the Group. 12,137 10,742
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 53
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NOTES TO THE FINANCIAL STATEMENTS
continued
11. Earnings per share – continued
Number Number
Weighted average number of ordinary shares:
Issued ordinary shares at start of the year 53,809,146 53,599,669
Effect of shares issued in the current year — 25,127
Effect of shares held by employee benefit trust (201,622) (78,941)
Basic weighted average number of shares 53,607,524 53,545,855
Effect of options exercisable at the reporting date 985,661 800,000
Effect of options not yet exercisable at the reporting date 2,165,288 2,044,484
Diluted weighted average number of shares 56,758,473 56,390,339
Pence Pence
Earnings per share:
Basic 15.30 9.75
Diluted 14.45 9.26
Earnings per share on net profit before non-recurring costs and
amortisation, less an effective tax rate*:
Basic 18.34 16.20
Diluted 17.32 15.38
* In order to reduce the impact of accounting measures such as deferred tax, and the timing of tax reliefs, the effective tax rate
matches the current tax rate applicable to the accounting year. The current tax rate applicable for the year ended
31 December 2018 was 19.00% (2017: 19.25%).
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NOTES TO THE FINANCIAL STATEMENTS
continued
Intangible assets
12.
Group
Computer
Goodwill Client Portfolios Software Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2017 28,903 18,430 3,116 50,449
Additions — 5 272 277
Disposals — (2) (1,993) (1,995)
At 31 December 2017 28,903 18,433 1,395 48,731
Additions — 433 352 785
Disposals — — (266) (266)
At 31 December 2018 28,903 18,866 1,481 49,250
Amortisation
At 1 January 2017 — 2,533 474 3,007
Charge for the year — 922 209 1,131
At 31 December 2017 — 3,455 683 4,138
Charge for the year — 924 344 1,268
Disposals — — (266) (266)
At 31 December 2018 — 4,379 761 5,140
Net book value
At 1 January 2017 28,903 15,897 2,642 47,442
At 31 December 2017 28,903 14,978 712 44,593
At 31 December 2018 28,903 14,487 720 44,110
Goodwill
Goodwill arose on the acquisition of Suffolk Life Group Limited and its subsidiaries on 25 May 2016. The Group
tests goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired.
The recoverable amount of goodwill has been determined based on value-in-use calculations using a discount rate
appropriate to the risk profile of the asset. These calculations use operating cash flow projections based on
financial budgets approved by management covering a three year period, assuming business then continues
onwards after this period at a steady rate for the purpose of the analysis.
Client Portfolios
Client portfolios represent individual client portfolios acquired through business combinations and accounted for
under the acquisition method. The directors consider that there is no impairment to assets as at the year end. The
client portfolios are being amortised over a period of 20 years.
The brought forward balance relates to the purchase by Curtis Banks Limited, a subsidiary company, of the trade
and assets of Montpelier Pension Administration Services Limited on 13 May 2011, the full SIPP business of Alliance
Trust Savings Limited on 18 January 2013, the full SIPP business and certain assets of Pointon York SIPP Solutions
Limited on 31 October 2014, the full SIPP business of Rathbones Pension & Advisory Services Limited on
31 December 2014, and a book of full SIPPs from Friends Life PLC (now Aviva PLC) on 13 March 2015.
The brought forward balance also includes the purchase by Suffolk Life Pensions Limited, a subsidiary company, of
the trade and assets of European Pensions Management Limited on 14 July 2016, and books of SIPPs purchased
from Pointon York SIPP Solutions Limited on 9 November 2012, Pearson Jones PLC on 30 April 2013, and Origen
Investment Services Limited on 22 May 2013.
Additions in the year comprise the purchase by Curtis Banks Limited of a book of 578 SIPPs from Hargreave
Hale Limited for cash consideration of £433,000, all of which was settled on the acquisition completion date of
10 December 2018. Acquisition related costs of £45,000 were incurred in relation to this which have been expensed
as non-recurring costs.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 55
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NOTES TO THE FINANCIAL STATEMENTS
continued
Intangible assets – continued
12.
All acquisitions have been accounted for under the acquisition method of accounting.
The directors have considered the carrying value of the client portfolios and have concluded that no impairment is
required. The client portfolios are being amortised over a period of 20 years and have an average remaining
expected useful economic life as at 31 December 2018 of 15 years and seven months.
Computer Software
Computer software contains costs that meet the recognition criteria under IAS 38 as Intangible Assets. General
small computer software costs are amortised over their useful economic life of four years on a straight-line basis.
Computer software costs for significant projects are amortised over an estimated UEL on a project by project
basis.
13.
Assets held at fair value
Investment Property
Group
Year ended 31 December
2018 2017
£’000 £’000
Fair value
At 1 January 1,206,298 1,149,135
Additions 201,425 161,280
Disposals (180,546) (148,191)
Fair value gains 47,275 44,074
At 31 December 1,274,452 1,206,298
All investment properties have been valued at the year end by reference to most recent professional valuations
and this is further adjusted by applying the corresponding property index available. Investment properties held to
cover the linked policyholder business are included in non-participating investment contract liabilities.
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NOTES TO THE FINANCIAL STATEMENTS
continued
14. Property, plant and equipment
Assets held at cost
Group
Office
Leasehold Computer equipment,
Improvements equipment fixtures & fittings Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2017 54 3,606 1,093 4,753
Additions — 520 125 645
Disposals — (42) — (42)
At 31 December 2017 54 4,084 1,218 5,356
Additions — 318 346 664
Disposals (54) (64) (36) (154)
At 31 December 2018 — 4,338 1,528 5,866
Depreciation
At 1 January 2017 28 2,697 955 3,680
Charge for the year 13 493 64 570
Disposals — (42) — (42)
At 31 December 2017 41 3,148 1,019 4,208
Charge for the year 13 471 112 596
Disposals (54) (64) (36) (154)
At 31 December 2018 — 3,555 1,095 4,650
Carrying value
At 1 January 2017 26 909 138 1,073
At 31 December 2017 13 936 199 1,148
At 31 December 2018 — 783 433 1,216
Investments
15.
Assets held at fair value
Total fair value as at 31 December 2018
Group
2018 2017
£’000 £’000
Fair value
Equity and other variable-yield securities 1,734,341 1,955,264
Debt securities and other fixed-income securities 78,716 77,029
Total shares and securities 1,813,057 2,032,293
At cost 1,580,306 1,588,937
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 57
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NOTES TO THE FINANCIAL STATEMENTS
continued
Investments – continued
15.
Movement in the year on total shares and securities
Group
2018 2017
£’000 £’000
At beginning of the year 2,032,293 1,924,913
Additions 490,830 493,638
Disposals (593,549) (542,304)
Unrealised (losses)/gains (116,517) 156,046
At end of the year 1,813,057 2,032,293
The Group values all investments in line with its accounting policy.
Assets held at cost
Company
£’000
Cost
At 1 January 2017 56,524
Additions 742
At 31 December 2017 57,266
Additions 1,174
At 31 December 2018 58,440
Net book value
At 1 January 2017 56,524
At 31 December 2017 57,266
At 31 December 2018 58,440
Additions in the year comprise further net investment in the Group’s employee benefit trust of £498,000,
investment in Rivergate Legal Limited of £50,000 and equity share based payment cost additions of £626,000.
58 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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NOTES TO THE FINANCIAL STATEMENTS
continued
Investments – continued
15.
The directors are satisfied that no impairment has occurred in the carrying value of the non-current asset
investments at 31 December 2018. Details of the investments are as follows:
% of Ordinary
Shares held % of Ordinary
Registered Office Principal Country of by parent Shares held
Name of entity Address Indicator activity Incorporation Company by Group
Curtis Banks Limited (A) Provision of England and Wales 100.00 100.00
pension
administration
services
Suffolk Life Group Limited (B) Holding England and Wales 100.00 100.00
company
Suffolk Life Pensions Limited (B) Provision of England and Wales — 100.00
pension
administration
services
Suffolk Life Annuities Limited (B) Provision of England and Wales — 100.00
pension
administration
services
Curtis Banks Investment (A) Provision of England and Wales — 90.00
Management Limited financial advice
Rivergate Legal Limited (A) Provision of England and Wales — 100.00
legal services
Templemead Property (A) Provision of England and Wales — 100.00
Solutions Limited property
valuation services
Colston Trustees Limited (A) Dormant England and Wales — 100.00
Montpelier Pension Trustees Limited (A) Dormant England and Wales — 100.00
Tower Pension Trustees Limited (A) Dormant England and Wales — 100.00
SPS Trustees Limited (A) Dormant England and Wales — 100.00
Crescent Trustees Limited (A) Dormant England and Wales — 100.00
Tower Pension (S-B) Trustees Limited (C) Dormant Scotland — 100.00
Bridgewater Pension Trustees Limited (A) Non-trading England and Wales — 100.00
Temple Quay Pension Trustees Limited (A) Dormant England and Wales — 100.00
Suffolk Life Trustees Limited (B) Non-trading England and Wales — 100.00
Suffolk Life (Spartan Estate) Limited (B) Dormant England and Wales — 100.00
SLA Property Company Limited (B) Dormant England and Wales — 100.00
EPPL P1056 Limited (B) Dormant England and Wales — 100.00
EPPL P1060 Limited (B) Dormant England and Wales — 100.00
The registered office address indicator included in the table above reflects the following current registered offices
for each company:
(A)
(B)
(C)
3 Temple Quay, Temple Back East, Bristol, BS1 6DZ.
153 Princes Street, Ipswich, Suffolk, IP1 1QJ.
Suite 3, West Port House, 144 West Marketgait, Dundee, DD1 1NJ.
In the opinion of the directors, the aggregate value of the Group's investment in subsidiary undertakings is not less
than the amount included in the statement of financial position. All subsidiaries, other than Curtis Banks Limited,
Suffolk Life Pensions Limited and Suffolk Life Annuities Limited are exempt from audit under the requirements of
s479A of the Companies Act 2006.
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NOTES TO THE FINANCIAL STATEMENTS
continued
16. Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data
obtained from independent sources, while unobservable inputs reflects the Group’s view of market assumptions in
the absence of observable market information. The Group utilises techniques that maximise the use of observable
inputs and minimise the use of unobservable inputs.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than
quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the
measurement that is not based on observable market data (unobservable inputs).
The following table presents the Group’s financial investments and investment property by IFRS 13 hierarchy
levels:
Total Level 1 Level 2 Level 3
£’000 £’000 £’000 £’000
As at 31 December 2018
Equity and other variable-yield securities 1,734,341 1,692,505 24,929 16,907
Debt securities and other fixed-income securities 78,716 46,533 27,994 4,189
Cash equivalents 1,342 1,328 14 —
Investment property 1,274,452 — — 1,274,412
Total financial investments and investment
property 3,088,851 1,740,366 52,937 1,295,508
Total Level 1 Level 2 Level 3
£’000 £’000 £’000 £’000
As at 31 December 2017
Equity and other variable-yield securities 1,955,264 1,905,318 30,513 19,433
Debt securities and other fixed-income securities 77,029 44,056 31,643 1,330
Cash equivalents 48 32 16 —
Investment property 1,206,298 — — 1,206,298
Total financial investments and investment
property 3,238,639 1,949,406 62,172 1,227,061
There have been no significant transfers between level 1 and level 2 in 2018 (2017: £nil).
All non-participating investment contract liabilities included within note 21 are classified as level 2.
Level 3 assets where internal models are used comprise property and unquoted investments, the latter including
investments in private equity, property vehicles and suspended securities.
In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the
fair value hierarchy. In these situations, the Group determines the level in which the fair value falls based upon
the lowest level input that is significant to the determination of the fair value. As a result, both observable and
unobservable inputs may be used in the determination of fair values that the Group has classified within level 3.
The Group determines the fair values of certain financial assets and liabilities based on quoted market prices,
where available. The Group also determines fair value based on estimated future cash flows discounted at the
appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality,
the Group’s credit standing, liquidity and risk margins on unobservable inputs.
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NOTES TO THE FINANCIAL STATEMENTS
continued
16. Fair value hierarchy – continued
Where quoted market prices are not available, fair value estimates are made at a point in time, based on relevant
market data, as well as the best information about the individual financial instrument. Illiquid market conditions
have resulted in inactive markets for certain of the Group’s financial instruments. As a result, there is generally no
or limited observable market data for these assets and liabilities. Fair value estimates for financial instruments
deemed to be in an illiquid market are based on judgements regarding current economic conditions, liquidity
discounts, currency, credit and interest rate risks, loss experience and other factors. These fair values are
estimates and involve considerable uncertainty and variability as a result of the inputs selected and may differ
significantly from the values that would have been used had a ready market existed, and the differences could be
material. As a result, such calculated fair value estimates may not be realisable in an immediate sale or
settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value
measurement technique could significantly affect these fair value estimates.
Equity and Debt securities and
other variable-yield other fixed income Investment
securities securities Property
2018 2018 2018
Level 3 Investments £’000 £’000 £’000
Fair value
At 1 January 2018 19,433 1,330 1,206,298
Net (losses)/gains for the year recognised in
profit and loss (4,907) (775) 47,275
Purchases/Additions — — 201,425
Disposals — — (180,546)
Transfers into level 3 12,670 4,109 —
Transfers out of level 3 (10,289) (475) —
At 31 December 2018 16,907 4,189 1,274,452
Equity and Debt securities and
other variable-yield other fixed income Investment
securities securities Property
2017 2017 2017
Level 3 Investments £’000 £’000 £’000
Fair value
At 1 January 2017 13,172 180 1,149,135
Net (losses)/gains for the year recognised in
profit and loss (5,304) (133) 44,074
Purchases/Additions — — 161,280
Disposals — — (148,191)
Transfers into level 3 13,766 1,283 —
Transfers out of level 3 (2,201) — —
At 31 December 2017 19,433 1,330 1,206,298
Transfers out of level 3 relate to assets held for which observable inputs subsequently became available. Transfers
into level 3 relate to assets formerly categorised as level 1 or level 2 assets. This is principally due to assets
becoming illiquid meaning that observable inputs are no longer available.
Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that
incorporate inputs and assumptions that are not evidenced by prices from observable current market transactions
in the same instrument and are not based on observable market data. The following table shows the level 3
financial instruments carried at fair value as at the balance sheet date, the valuation basis, main assumptions used
in the valuation of these instruments and reasonably possible increases or decreases in fair value based on
reasonably possible alternative assumptions.
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NOTES TO THE FINANCIAL STATEMENTS
continued
16. Fair value hierarchy – continued
Reasonably possible
As at 31 December 2018 alternative assumptions
Current Increase in Decrease in
fair value fair value fair value
Valuation Main inputs 2018 2018 2018
Assets Basis/Technique and assumptions £’000 £’000 £’000
Suspended securities Note 1 Estimated 4,327 216 (216)
recoverable
amount
Unquoted securities Note 1 Price earning 16,770 839 (839)
multiple
Investment property Note 2 Third party 1,274,452 63,723 (63,723)
property index
1,295,549 64,778 (64,778)
Reasonably possible
As at 31 December 2017 alternative assumptions
Current Increase in Decrease in
fair value fair value fair value
Valuation Main inputs 2017 2017 2017
Assets Basis/Technique and assumptions £’000 £’000 £’000
Suspended securities Note 1 Estimated 7,592 380 (380)
recoverable
amount
Unquoted securities Note 1 Price earning 13,171 659 (659)
multiple
Investment property Note 2 Third party 1,206,298 60,315 (60,315)
property index
1,227,061 61,354 (61,354)
1. Values are based on estimate of market price. Sources used in deriving these estimates include the last traded price between
a buyer and a seller, brokers providing a matched bargain facility or a company’s audited financial statements, if available.
2. Valued using professional specialist property third party indexation data and indexation from the last valuation.
The Directors consider that the carrying value of financial instruments in the Group’s and Company’s financial
statements is equivalent to fair value.
The fair value of cash equivalents, trade receivables and trade payables approximate to their carrying values due
to their short-term nature.
The fair value of deferred consideration payable is split between creditors due within one year and creditors due
in more than one year. The total deferred consideration payable relates to a book of SIPPs acquired and is linked
to a share of the fees received over a five year period from the date of acquisition.
Any changes in value of assets held within non-participating investment contracts are offset by an equal and
opposite change in investment contract liabilities.
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NOTES TO THE FINANCIAL STATEMENTS
continued
17. Trade and other receivables
Group Company
As at 31 December As at 31 December
2017
2018 As restated* 2018 2017
£’000 £’000 £’000 £’000
Trade receivables 10,698 11,668 — —
Prepayments and accrued income 5,811 3,219 2 2
Amounts owed by group undertakings — — 50 —
Other receivables 1,546 1,800 — 13
18,055 16,687 52 15
All of the trade receivables were non-interest bearing and receivable under normal commercial terms. The
directors consider that the carrying value of trade and other receivables approximates to their fair value. All trade
receivables are fees due from SIPPs and SSASs or due to policyholders in relation to their investments. Fees are
taken from the assets of the respective schemes of which the Group has control. If there are no assets in the
scheme, payment of the fees is the responsibility of the member who set the scheme up. As such, all debts should
be recoverable over time. The Group holds the trade receivables with the objective to collect the contractual cash
flows and therefore measures them subsequently at amortised cost using the effective interest method.
Details about the Group’s impairment policies and the calculation of loss allowance are provided in note 30 to the
financial statements.
*Accrued interest income of £1,038,000 as at 31 December 2017 was previously reported within other receivables. To better reflect the underlying nature of this balance the
amount is now included within prepayments and accrued income.
18. Cash and cash equivalents
As at 31 December 2018 and 2017 cash and cash equivalents were as follows:
Group Company
As at 31 December As at 31 December
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Cash at bank and in hand 28,018 25,673 1,967 2,318
Deposits with credit institutions 402,216 412,128 — —
Cash equivalents 1,342 48 — —
Cash and cash equivalents 431,576 437,849 1,967 2,318
19. Trade and other payables
Group Company
As at 31 December As at 31 December
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Trade payables 1,787 1,027 19 12
Taxes and social security costs 2,165 2,668 — —
Amounts owed to group undertakings — — 27 31
Other payables 5,442 3,498 — —
Accruals 5,810 5,465 174 65
15,204 12,658 220 108
Trade payables are non-interest bearing and are normally settled on 30 day terms.
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NOTES TO THE FINANCIAL STATEMENTS
continued
20. Borrowings
Group Company
As at 31 December As at 31 December
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Current
Bank loans 30,005 29,444 3,158 3,158
30,005 29,444 3,158 3,158
Non-current
Bank loans 56,525 64,584 11,396 14,508
56,525 64,584 11,396 14,508
Total borrowings 86,530 94,028 14,554 17,666
Bank borrowings
The bank borrowings are repayable as follows:
Group Company
As at 31 December As at 31 December
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Within 1 year 30,005 29,444 3,158 3,158
Between 1 year and 5 years 38,306 44,158 11,396 14,508
After more than 5 years 18,219 20,426 — —
86,530 94,028 14,554 17,666
Bank borrowings of the Company are repayable between January 2019 and December 2020 and bear average
coupons of 2.25% plus LIBOR per annum.
Total borrowings of the Group include liabilities of £72,085,000 (2017: £76,464,000) secured by legal charge over
certain properties held within non-participating investment contracts, and liabilities of £14,554,000 (2017:
£17,666,000) secured on the shares of Curtis Banks Limited, Suffolk Life Pensions Limited and Suffolk Life Annuities
Limited.
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NOTES TO THE FINANCIAL STATEMENTS
continued
21. Non-participating investment contract liabilities
(a)
Analysis of investment contract liabilities
Investment contract liability provisions for linked liabilities arising in connection with the above policies are
detailed below. There is no reinsurance amount (2017: £nil).
For each linked SIPP the Group provides, there is a separate internal fund. Where the Group provides
a Trustee Investment Plan or Group Managed Fund, there are a number of separate internal funds.
2018 2017
Movement in non-participating investment contract liabilities £’000 £’000
As at 1 January 3,561,929 3,394,404
Reserves in respect of new business 182,532 162,788
Amounts paid on surrenders and maturities during the year (346,233) (303,712)
Investment income 41,677 343,009
Expenses (34,477) (34,560)
As at 31 December 3,405,428 3,561,929
These relate to:
2018 2017
£’000 £’000
Self-Invested Personal Pensions 2,355,773 2,593,639
Group Managed Funds – Trustee Investment Plans 70,172 72,727
Group Managed Funds 76,230 82,930
Trustee Investment Plans 903,253 812,633
As at 31 December 3,405,428 3,561,929
Assets held to cover non-participating investment contracts are detailed under separate notes to the
financial statements.
(b)
Investment contract liabilities – investment income
2018 2017
£’000 £’000
Rents receivable 78,358 78,249
Interest receivable 3,222 3,329
Investment and other income 37,734 38,370
Realised (losses)/gains on investments (9,689) 24,528
Unrealised (losses)/gains on investments (67,948) 198,533
41,677 343,009
(c)
Investment contract liabilities – expenses
2018 2017
£’000 £’000
Investment management fees 10,558 10,297
Adviser fees 315 341
Management charges – administration 6,988 6,803
Bank fees and charges 117 145
Professional fees and sundries 13,233 14,031
Bad debts 663 583
Interest payable on bank loans and overdrafts 2,603 2,360
34,477 34,560
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NOTES TO THE FINANCIAL STATEMENTS
continued
21. Non-participating investment contract liabilities – continued
(d)
Reserves in respect of new business
2018 2017
£’000 £’000
Gross premiums
Periodic premiums relating to Self-Invested Personal Pensions 2,777 2,926
Single premiums relating to Self-Invested Personal Pensions 52,965 54,474
Single premiums relating to Group Managed Funds – TIPs 6,671 6,460
Single premiums relating to Group Managed Funds 8,243 8,571
Single premiums relating to Trustee Investment Plans 111,876 90,357
182,532 162,788
(e)
Amounts paid on surrenders and maturities during the year
2018 2017
£’000 £’000
Gross claims paid
Lump sums on death 28,366 20,218
Lump sums on pensions vesting 21,697 22,297
Income withdrawals 38,341 36,741
Annuities purchased 856 89
Transfers out 247,186 218,287
Surrenders of managed funds – Trustee Investment Plans 9,787 6,080
346,233 303,712
22. Provisions for liabilities
Deferred taxation
As a result of the taxation position set out in note 10, a deferred tax asset has arisen as follows:
Group
As at 31 December
2018 2017
£’000 £’000
Brought forward (asset)/provision (124) 42
Net change in temporary differences on equity share based payments (454) —
Net change in temporary differences on plant and equipment (17) (166)
Carried forward (asset)/provision (595) (124)
The deferred tax asset with respect to temporary differences is analysed as follows:
Group
As at 31 December
2018 2017
£’000 £’000
Temporary differences on equity share based payments (454) —
Temporary differences on plant and equipment (141) (124)
(595) (124)
The deferred tax asset assumes a future corporation tax rate of 19% will be applicable to the Group up to and
including the year ended 31 December 2019, and a rate of 17% applicable thereafter.
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NOTES TO THE FINANCIAL STATEMENTS
continued
22. Provisions for liabilities – continued
Group
As at 31 December
Restructuring Onerous
Other provision* provision lease provision
Provisions £’000 £’000 £’000
Balance as at 1 January 2017 — — —
Amounts introduced — 534 366
Balance as at 31 December 2017 — 534 366
Amounts introduced 500 — —
Amounts utilised — (532) (197)
Amounts written back unused — (2) (169)
Balance as at 31 December 2018 500 — —
* See note 3 for details.
Issued capital
23.
Group and Company
2018 2017
As at 31 December £’000 £’000
Allotted, called up and fully paid
Ordinary shares of 0.5p each 269 269
269 269
Number Number
Number of Ordinary shares
Brought forward 53,809,146 53,599,669
Issued during the year — 209,477
Carried forward 53,809,146 53,809,146
Ordinary shares are classified as equity. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
The ordinary shares rank equally for voting purposes. On a show of hands each member shall have one vote and on
a poll each member shall have one vote per share held. Each ordinary share ranks equally for any dividend
declared and rank equally for any distribution made on a winding up.
There were no ordinary shares reserved for issue under options at 31 December 2018 (2017: nil).
24. Reserves
Share premium
This reserve was created on admission to trading on the Alternative Investment Market (“AIM”) and arises on the
difference between the placing price and the par value of Ordinary shares issued. Expenses directly relating to the
issue of new shares in the Company onto the AIM market have been deducted from the share premium account.
Equity share based payments
This reserve arises from share options granted by the Group to certain employees of the Group. Further details are
disclosed in note 25.
Retained earnings
Retained earnings comprise the cumulative realised gains and losses of the Group from each of the individual
combined entities.
As permitted by section 408 Companies Act 2006, the holding company’s profit and loss account has not been
included in these financial statements. The Company’s profit after tax for the year was £6,937,000 (2017:
£7,507,000).
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NOTES TO THE FINANCIAL STATEMENTS
continued
24. Reserves – continued
Treasury shares
The Group established an employee benefit trust (“EBT”) during the year ended 31 December 2017 in order to
acquire ordinary shares in the Company to satisfy awards under the Group’s share based payment schemes. At
31 December 2018, the EBT held 263,790 ordinary shares in the Company, acquired for a total consideration of
£793,027 with a market value of £701,681 (2017: 99,155 ordinary shares acquired for a total consideration of
£250,000 with a market value of £282,592). They are classified as treasury shares in the Consolidated Statement of
Financial Position, their cost being deducted from equity.
25. Equity share based payments
The weighted average exercise price for all options outstanding at 31 December 2018 was 151.71p (2017: 174.38p).
The weighted average exercise price for all options exercised during the year ended 31 December 2018 was
249.49p (2017: 12.90p).
The weighted average remaining contractual life of all unexercised share options as at 31 December 2018 was
six years and seven months (2017: six years and ten months).
The total charge to the Consolidated Statement of Comprehensive Income arising from equity-settled share-based
payment transactions for the year ended 31 December 2018 was £626,000 (31 December 2017: £492,000). The
total increase in equity arising from equity-settled share-based payment transactions for the year ended
31 December 2018 was £626,000 (31 December 2017: £492,000).
The following table sets out each of the Group’s equity share based payments in operation during the year ended
31 December 2018:
Number of Number of
shares under shares under
option at option at Latest
Date of 1 January 31 December Exercise Exercise
Scheme grant 2018 Granted Exercised Lapsed 2018 price Date
EMI15 08/04/15 800,000 — — — 800,000 62.54p 08/04/25
SS16 28/06/16 126,297 — (3,313) (42,310) 80,674 288.88p 01/02/20
SS17 30/05/17 630,394 — (10,485) (103,845) 516,064 213.60p 01/02/21
SS18 21/05/18 — 137,304 — (29,998) 107,306 268.80p 01/02/22
CSOP16A 14/09/16 635,119 — (14,045) (449,458) 171,616 267.00p 14/09/26
CSOP16B 15/12/16 535,996 — — — 535,996 201.00p 15/12/26
CSOP17 26/06/17 535,996 — — — 535,996 260.00p 25/06/27
LTIP17 26/10/17 393,943 — — (20,870) 373,073 0p 26/10/27
LTIP18A 18/09/18 — 154,603 — — 154,603 0p 18/09/28
LTIP18B 05/10/18 — 55,559 — — 55,559 0p 05/10/28
3,657,745 347,466 (27,843) (646,481) 3,330,887
EMI15
The Group set up an EMI scheme during the year ended 31 December 2014 by which certain employees and key
management personnel of Curtis Banks Limited were able to subscribe to ordinary shares in the Company. As at the
year end 31 December 2018, one employee of Curtis Banks Limited held options under the EMI.
SS16, SS17 & SS18
The Group operates a Save As You Earn (“SAYE”) share option scheme under which almost all employees of the
Group are eligible to subscribe to ordinary shares in the Company following a three year contribution and vesting
period. Grants under the SAYE are expected to be provided to eligible employees annually.
CSOP16A, CSOP16B & CSOP17
During the year ended 31 December 2016, the Group set up a Company Share Option Plan (“CSOP”) share option
scheme under which certain key management of the Group are able to subscribe to ordinary shares in the
Company. As at the year end 31 December 2018, six key management personnel of the Group held options under
the CSOP. The CSOP is a performance based option grant.
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NOTES TO THE FINANCIAL STATEMENTS
continued
25. Equity share based payments – continued
LTIP17, LTIP18A & LTIP18B
The Group operates a performance based Long Term Incentive Plan (“LTIP”) share option scheme under which
certain key management and senior management of the Group are able to subscribe to ordinary shares in the
Company. As at the year end 31 December 2018, 11 key management personnel of the Group and 9 senior
management personnel within the Group held options under the LTIP.
Share based payment expenses – all schemes
The fair values of all options at the date of grant were determined by using the Black Scholes model. Expected
volatility was based upon historical information about the Group’s share price, measured using the standard
deviation of its monthly share prices over the last three years (where data is available) and comparisons against
similar entities at the date of grant. The Company first listed on the Alternative Investment Market (“AIM”) in May
2015 and consequently less than three years of data has been available for use in measuring the expected volatility
of certain grants shown below. The model includes separate vesting periods for each proportion of options based
on their exercise dates. The fair values derived and model inputs for each grant are reflected in the table below:
Fair value Share price Risk free
per option on grant rate of Expected
Scheme Date of grant granted date interest volatility Dividend yield
EMI15 08/04/15 5.64p 62.54p 0.50% 24.00% 0.00%
SS16 28/06/16 58.76p 302.50p 0.50% 29.00% 1.00%
SS17 30/05/17 99.77p 282.50p 0.25% 44.29% 1.50%
SS18 21/05/18 84.09p 316.00p 0.50% 37.39% 1.98%
CSOP16A 14/09/16 45.58p 267.00p 0.25% 39.01% 1.00%
CSOP16B 15/12/16 52.42p 201.00p 0.25% 42.95% 1.00%
CSOP17 26/06/17 63.54p 260.00p 0.25% 43.41% 1.50%
LTIP17 26/10/17 289.25p 310.00p 0.25% 46.66% 1.50%
LTIP18A 18/09/18 262.35p 287.00p 0.75% 36.05% 2.18%
LTIP18B 05/10/18 265.09p 290.00p 0.75% 35.98% 2.18%
26. Non-controlling interests
The non-controlling interests reflect the relevant amounts of the trading results and net assets or liabilities
attributable to the non-controlling shareholders in Curtis Banks Investment Management Limited (see note 15).
As at 31 December
2018 2017
£’000 £’000
Share of net assets brought forward 14 9
Movement in the year – share of profits 6 10
Ordinary dividends declared (6) (5)
Share of net assets 14 14
27. Financial commitments
The future aggregate minimum lease payments under non-cancellable operating leases attributable to shareholder
reserves are as follows:
As at 31 December
2018 2017
Attributable to shareholder reserves £’000 £’000
Land and buildings
Within 1 year 901 895
Within 2 - 5 years 908 1,809
1,809 2,704
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NOTES TO THE FINANCIAL STATEMENTS
continued
27. Financial commitments – continued
The Group holds investment properties on behalf of non-participating investment contracts which generate income
by leasing these to tenants under operating leases.
At the statement of financial position date, the Group had contracted with vendors to purchase investment
properties or develop existing investment properties to pay the following future payments:
As at 31 December
2018 2017
Attributable to non-participating investment contracts £’000 £’000
Authorised and contracted commitments not provided for in respect of investment
property acquisition and development, payable after 31 December: 1,832 2,174
At the statement of financial position date, the Group had contracted with tenants to receive the following future
minimum lease payments on behalf of non-participating investment contracts:
As at 31 December
2018 2017
Attributable to non-participating investment contracts £’000 £’000
Future aggregate minimum lease receivables under non-cancellable
operating leases:
Within 1 year 70,126 66,206
Within 2 – 5 years 162,679 140,520
After more than 5 years 290,557 82,949
523,362 289,675
28. Pension costs – defined contribution
Year to 31 December
2018 2017
£’000 £’000
Contributions payable by the Group for the year 1,413 1,337
29. Dividends
Year to 31 December
2018 2017
£’000 £’000
Ordinary interim declared and paid 3,622 2,408
3,622 2,408
A final share dividend in respect of 2017 of 4.75p per share was declared and paid on 18 May 2018.
An interim share dividend in respect of 2018 of 2.00p per share was declared and paid on 15 November 2018.
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NOTES TO THE FINANCIAL STATEMENTS
continued
30. Financial risk management
Financial assets principally comprise trade and other receivables, cash and short-term deposits, which arise
directly from its operations. Financial liabilities principally comprise trade and other payables, deferred
consideration and borrowings.
The main risks arising from financial instruments are interest rate risk, credit risk, and liquidity risk. Each of these
risks is discussed in detail below.
The Group monitors financial risks on a consolidated basis, with its financial risk management based upon sound
economic objectives and good corporate practice. No hedging transactions have taken place during the years
presented.
Interest rate risk
Interest rate risk is the risk that the Group will sustain losses from adverse movements in interest bearing assets.
There is an exposure to interest rates on shareholder owned banking deposits held in the ordinary course of
business. The value of financial instruments on the Group’s consolidated statement of financial position exposed
to interest rate risk was £28.02m (2017: £25.68m) comprising cash and short-term deposits. This exposure is
monitored to ensure that the Group is maximising its interest earning potential within accepted liquidity and
credit constraints. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short term
deposits are also made for varying periods of between one day and 30 days depending on the immediate cash
requirements of the Group and earn interest at the respective term deposit rates.
The Group had external borrowings attributable to shareholders at the year end of £14.45m (2017: £17.56m). The
interest rates attached to borrowings held include a floating rate based on the London Interbank Offered Rate
(“LIBOR”). There is an exposure on external borrowings therefore to interest rate risk.
The following table demonstrates the sensitivity to a 100bps (1%) change in interest rates on actual borrowings,
with all other variables held constant, on the Group’s profit before tax.
Effect on profit
Increase/decrease before tax
in basis points £’000
2018
£ Sterling +100 (176)
£ Sterling –100 176
2017
£ Sterling +100 (207)
£ Sterling –100 207
In addition, a source of revenue is based on the value of client cash under administration. The Group has an
indirect exposure to interest rate risk on these cash balances held for clients. The Group manages this risk through
a central treasury function which monitors client cash and interest rate movement on a monthly basis.
Credit risk
The Group trades only with third parties it recognises as being creditworthy. In addition, receivable balances are
monitored continually.
The maximum credit risk exposure of the Group’s financial instruments in the event of other parties failing to
perform their obligations is considered to be equal to the carrying amount of such financial instruments, excluding
policyholder assets and liabilities within non-participating investment contracts included within the consolidated
statement of financial position. Given the nature of the Group’s operations, it does not have significant
concentration of credit risk in respect of shareholder trade receivables, with exposure spread over a large number
of customers.
All of the banks currently used by the Group have long-term credit ratings of at least BBB+ (Fitch). This results in
the Group retaining the ability to further mitigate the counterparty risk on its own behalf and that of its
customers. The directors continue to monitor the strength of the banks used by the Group.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. The loss rate is determined by reference to the underlying level
of liquidity in each of the Group’s clients’ SIPPs because clients’ fees are normally settled directly from their
SIPP cash holdings. A lower level of liquidity in the SIPP, or indeed illiquidity, indicates reduced credit quality in
the related trade receivable balance.
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NOTES TO THE FINANCIAL STATEMENTS
continued
30. Financial risk management – continued
The Group’s credit quality ratings as at 31 December 2018 in respect of shareholder trade receivables are set out
below:
Trade receivables
IFRS 9 loss gross carrying Net trade
rate amount Loss allowance receivables
% £’000 £’000 £’000
Good quality 0.00 – 10.00 3,344 (139) 3,205
Satisfactory quality 10.01 – 30.00 52 (16) 36
Low quality 30.01 – 99.99 1,205 (944) 261
No expected recovery 100.00 101 (101) —
4,702 (1,200) 3,502
Credit risk – continued
The Group’s approach to managing credit risk is based on its credit quality ratings, where a set of policies and
procedures are in place to recover fee debt based on individual SIPP liquidity. This underlying level of liquidity in
each of the Group’s clients’ SIPPs is mostly driven by the clients’ use of the SIPP and what they choose to invest in.
The terms and conditions attached to the Group’s SIPP products include a requirement to maintain a minimum
cash balance from which the Group normally draws fees when due. Where cash is not immediately available,
assets from the SIPP are disinvested in order to settle fees. We also request fees direct from clients where
necessary.
Trade receivables of £10,698,000 at 31 December 2018 (2017: £11,668,000) includes £7,196,000 (2017: £7,853,000)
of policyholder receivables under non-participating investment contracts. Since there is a direct link between the
investments and obligations for non-participating investment contracts, these policyholder receivables have not
been included in the credit quality rating analysis since the Group is not directly exposed to the risks from these
contracts.
The Group’s credit quality ratings and resulting loss allowance at 1 January 2018 in respect of shareholder trade
receivables were not different to the loss allowance as at 31 December 2017 of £703,000 recognised under IAS 39.
The Group continually assesses historical recovery data to help determine how the underlying level of liquidity in
the SIPPs fits into each of the credit quality ratings. Future historical data available may lead to changes in the
estimated categorisation of trade receivables gross carrying amounts and associated loss allowance.
Where trade and other receivables have been outstanding for more than six years, amounts are deemed to have no
reasonable expectation of recovery and are written off.
Changes in macroeconomic factors may impact the Group’s clients’ use of the SIPP and cause the level of liquidity
in the SIPP to increase or decrease. A 10% increase or decrease in loss rates estimated at the year end would have
the following impact:
Increase/(decrease) Effect on profit
in percentage before tax
Year ended 31 December 2018 rates £’000
Loss rate 10% 228
Loss rate (10%) (381)
The Group charges fixed fees for its services reducing its exposure to changes in macroeconomic factors which may
otherwise impact a percentage basis point fee charging model.
Liquidity risk
This is the risk that the Group may be unable to meet its liabilities as and when they fall due. The Group monitors
its risk to a shortage of funds by considering the maturity of its financial assets (e.g. trade receivables, other
financial assets) and projected cash flows from operations. As part of these projections, the Group also monitors
anticipated capital expenditure and the expected timing of settlement of financial liabilities. The Group is a highly
cash generative business and maintains sufficient cash to fund its foreseeable trading requirements. Details on the
maturity of the Group’s borrowings are disclosed in note 20.
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NOTES TO THE FINANCIAL STATEMENTS
continued
31. Capital management
Certain subsidiaries of the Group are supervised in the UK by the Financial Conduct Authority (“FCA”) and,
following the acquisition of Suffolk Life Annuities Limited during the year ended 31 December 2016, the Prudential
Regulation Authority (“PRA”). The Group manages its capital through continuous review of the capital
requirements of its regulated subsidiaries, which are monitored by the Group’s management and reported monthly
to the Board. The Group’s objectives when managing capital are:
–
–
–
To comply with the regulatory capital requirements set by the FCA and the PRA;
To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
To maintain a strong capital base to support the development of its business.
Capital is defined as the total of share capital, share premium, retained earnings and other reserves. Total capital
of the Group as at 31 December 2018 was £49.67m (2017: £44.60m). The Group manages the capital structure and
makes adjustments to it in light of changes in economic conditions. The Group’s regulated subsidiary companies
submit regular returns to the FCA and the PRA relating to their capital resources. The regulated subsidiaries are
limited in the distributions that can be paid up to the Group by each of their individual capital resource
requirements. Group internal policy is for regulated companies within the Group to hold at least 130% of their
required regulatory capital.
32. Related parties
At the year end, Curtis Banks Group PLC owed £26,586 to Curtis Banks Limited (2017: £31,285). This relates to
expenses paid by Curtis Banks Limited on behalf of Curtis Banks Group PLC. The total amount of expenses
recharged by Curtis Banks Limited in the year amounted to £220,374 (2017: £127,858).
During the year ended 31 December 2018, Suffolk Life Group Limited paid dividends totalling £4,000,000 to Curtis
Banks Group PLC (2017: £4,000,000). During the year ended 31 December 2018, Curtis Banks Limited paid
dividends totalling £4,000,000 to Curtis Banks Group PLC (2017: £4,000,000).
During the year the Group paid £138,000 gross emoluments to Chris Banks, a strategic advisor and significant
shareholder of Curtis Banks Group Plc.
During the year Curtis Banks Group PLC provided an unsecured loan of £50,000 to Templemead Property Solutions
Limited, a subsidiary of the Group, to assist with set up costs. The loan is repayable on demand and remains
outstanding at the year end.
33. Contingent liabilities
In-specie contributions
The Group has been in correspondence with HMRC regarding processes and documentation in respect of in specie
contributions. HMRC have alleged that incorrect procedures were followed and is seeking to reclaim tax reliefs
granted and interest thereon. This is an industry wide issue affecting other SIPP operators and is being challenged
by the industry as a whole. It is not possible to determine when this matter will be resolved and the outcome and
impact are not known at this stage. We do not believe that the net exposure arising from this will be material to
the Group.
Data cleansing
As reported in note 3, management initiated a review of data records related to properties held within SIPPs
administered by the Group.
This review requires a case by case assessment of each of the properties within the population in order to assess
whether any remedial action is required by the Group in respect of that property or the associated SIPP.
In addition to the provision of £500,000 for the estimated direct costs that the Group may incur in respect of this
exercise, the directors consider that it is possible that the Group may also be exposed to indirect costs in the
future, depending on the outcome of the case by case reviews.
The directors’ best estimate of this contingent liability is £1.5m, however there are inherent uncertainties in this
estimate including due to the sampling and extrapolation approach adopted so far, the quality of data and
potential significant variations in the assumed liabilities payable to rectify individual SIPP positions.
This estimate will be reviewed regularly, and any changes or refinements will be reported as appropriate. The
directors currently expect that the review will be completed by the end of 2019 with any potential material follow
up actions completed by 2020.
34. Control
There is no one ultimate controlling party.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 73
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COMPANY INFORMATION
Directors
Will Self – Chief Executive Officer
Paul Tarran – Chief Financial Officer
Jane Ridgley – Chief Operating Officer
Chris Macdonald – Non Executive Director
Bill Rattray – Non Executive Director
Jules Hydleman – Non Executive Director
Founders & Strategic Advisors
Chris Banks
Rupert Curtis
Company Secretary
Paul Tarran
Registered Office
3 Temple Quay
Temple Back East
Bristol
BS1 6DZ
Registered Number
07934492
Nominated Advisor and Broker
Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET
Independent Auditors
PricewaterhouseCoopers LLP
2 Glass Wharf
Bristol
BS2 0FR
Solicitors
Roxburgh Milkins
Merchants House North
Wapping Road
Bristol
BS1 4RW
Registrars
ComputerShare Plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
Joint Broker
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
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SUPPLEMENTARY UNAUDITED INFORMATION
Unaudited IFRS Consolidated Statement of Financial Position as at 31 December 2018 split
between insurance policy holders and the Group’s shareholders
2018 2018 2018 2017
£’000 £’000 £’000 £’000
ASSETS Group Total Policyholder Shareholder Shareholder
Non-current assets
Intangible assets 44,110 — 44,110 44,593
Investment property 1,274,452 1,274,411 41 40
Property, plant and equipment 1,216 — 1,216 1,148
Investments 1,813,057 1,813,057 — —
Deferred tax asset 595 — 595 124
3,133,430 3,087,468 45,962 45,905
Current assets
Trade and other receivables 18,055 8,344 9,711 8,832
Cash and cash equivalents 431,576 403,558 28,018 25,673
Current tax asset 243 243 — —
449,874 412,145 37,729 34,505
Total assets 3,583,304 3,499,613 83,691 80,410
LIABILITIES
Current liabilities
Trade and other payables 15,204 8,909 6,295 5,310
Deferred income 24,601 13,194 11,407 10,928
Borrowings 30,005 26,847 3,158 3,158
Provisions 500 — 500 641
Deferred consideration 255 — 255 341
Current tax liability 991 — 991 295
71,556 48,950 22,606 20,673
Non-current liabilities
Borrowings 56,525 45,235 11,290 14,406
Provisions — — — 259
Deferred consideration 125 — 125 454
Non-participating investment
contract liabilities 3,405,428 3,405,428 — —
3,462,078 3,450,663 11,415 15,119
Total liabilities 3,533,634 3,499,613 34,021 35,792
Net assets 49,670 — 49,670 44,618
Equity attributable to owners of
the parent
Issued capital 269 — 269 269
Share premium 33,451 — 33,451 33,451
Equity share based payments 1,357 — 1,357 731
Treasury shares (716) — (716) (250)
Retained earnings 15,295 — 15,295 10,403
49,656 — 49,656 44,604
Non-controlling interest 14 — 14 14
Total equity 49,670 — 49,670 44,618
Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 Curtis Banks Group PLC | 75
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SUPPLEMENTARY UNAUDITED INFORMATION
continued
Unaudited IFRS Consolidated Statement of Cash Flows as at 31 December 2018 split between
insurance policy holders and the Group’s shareholders
2018 2018 2018 2017
£’000 £’000 £’000 £’000
ASSETS Group Total Policyholder Shareholder Shareholder
Cash flows from operating activities
Profit before tax 10,121 — 10,121 5,857
Adjustments for:
Depreciation 596 — 596 570
Amortisation and impairments 1,268 — 1,268 3,126
Interest expense 467 — 467 554
Share based payment expense 626 — 626 492
Fair value losses on financial investments 116,517 116,517 — —
Additions of financial investments (490,830) (490,830) — —
Disposals of financial investments 593,549 593,549 — —
Fair value gains on investment properties (47,275) (47,275) — —
Decrease in liability for investment
contracts (156,498) (156,498) — —
Changes in working capital:
Decrease/(increase) in trade and other
receivables 247 1,019 (772) (122)
Increase in trade and other payables 992 159 833 2,629
Taxes paid (1,375) - (1,375) (999)
Net cash flows from operating activities 28,405 16,641 11,764 12,107
Cash flows from investing activities
Purchase of intangible assets (785) — (785) (277)
Purchase of property, plant & equipment (202,089) (201,425) (664) (645)
Investment in employee benefit trust (466) — (466) (250)
Receipts from sale of property,
plant & equipment 180,546 180,546 — —
Net cash flows from acquisitions (421) — (421) (669)
Net cash flows from investing activities (23,215) (20,879) (2,336) (1,841)
Cash flows from financing activities
Equity dividends paid (3,628) — (3,628) (2,413)
Net proceeds from issue of ordinary shares — — — 27
Net decrease in borrowings (7,538) (4,380) (3,158) (3,158)
Interest paid (297) — (297) (504)
Net cash flows from financing activities (11,463) (4,380) (7,083) (6,048)
Net (decrease)/increase in cash and
cash equivalents (6,273) (8,618) 2,345 4,218
Cash and cash equivalents at the
beginning of the year 437,849 412,176 25,673 21,455
Cash and cash equivalents at the end
of the year 431,576 403,558 28,018 25,673
76 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2018
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CURTIS BANKS GROUP PLC
3 Temple Quay, Bristol BS1 6DZ l Tel: 0117 910 7910 l www.curtisbanks.co.uk