Curtis Bank cover.qxp 29/04/2020 15:32 Page 1
Annual Report and
Consolidated Financial Statements
For the year ended 31 December 2019
Your future, our focus.
curtisbanks.co.uk
Curtis Bank cover.qxp 29/04/2020 15:32 Page 2
CURTIS BANKS GROUP PLC 2019
STRATEGIC REPORT
Operational, Financial Highlights and
Key Performance Indicators 1
Our services and history 2
Chairman’s statement 3
Chief Executive Officer’s review 4 – 5
Chief Financial Officer’s review 6 – 8
Principal risks and uncertainties 9 – 12
Corporate and social responsibility 13 – 14
GOVERNANCE
Board of Directors 15 – 16
Directors’ report 17 – 19
Statement of Directors’
responsibilities 18
Chairman’s corporate
governance report 20 – 22
Corporate governance 23 – 25
Directors’ remuneration report 26 – 27
FINANCIAL STATEMENTS 28 – 78
Independent auditors’ report 29 – 34
Consolidated statement of
comprehensive income 35
Consolidated statement of
financial position 36
Company statement of
financial position 37
Consolidated statement of
changes in equity 38
Company statement of changes
in equity 39
Consolidated statement of cash flows 40
Company statement of cash flows 41
Notes to the financial statements 42 – 75
Company information 76
Supplementary unaudited
information 77 – 78
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 2019.
Highlights
•
Operating Revenue increased by 6% to £48.9m (2018: £46.1m)
•
•
•
•
•
•
•
Adjusted Profit before tax1 increased by 11% to £13.4m (2018: £12.1m)
Adjusted Operating Margin2 increased to 28.1% (2018: 27.1%)
Profit before tax increased by 8% to £10.9m (2018: £10.1m)
Adjusted diluted EPS increased by 10% to 19.37p (2018: 17.63p)3
Gross organic growth in own SIPP numbers of 7% (2018: 9%) with total including third party administered
now 76,541 (2018: 77,730)
Assets under Administration increased by 17.3% to £29.1bn (2018: £24.8bn)
Proposed final dividend of 6.50p (2018: 6.00p) making a full year payment of 9.00p (2018: 8.00p),
an increase of 12.5%
Highlights and key performance indicators for the year include:
2019 2018
Financial
Operating Revenue £48.9m £46.1m
Adjusted Profit before tax1 £13.4m £12.1m
Profit before tax £10.9m £10.1m
Adjusted Operating Margin2 28.1% 27.1%
Diluted EPS3 15.85p 14.71p
Adjusted diluted EPS3 19.37p 17.63p
Operational Highlights
Number of SIPPs Administered 76,541 77,739
Assets under Administration £29.1bn £24.8bn
Total organic new own SIPPs in year 4,567 5,838
Number of properties administered 6,352 6,231
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.
3 Adjusted to exclude anti-dilutive options, see note 11 to the financial statements for further detail.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 1
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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 2019
the Group administered circa £29.1bn (2018: £24.8bn)
of pension assets on behalf of over 76,000 (2018:
77,000) 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. More than
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.
2 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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Chairman’s statement
Chris Macdonald
Chairman
Progressing towards ambitious goals
I am pleased to report the Curtis Banks Group results
for the year ended 31 December 2019. These results
disclose growth across all our financial metrics during
a year in which we made important changes to the
executive team and demonstrate the positive results
of operational changes made in recent years. I am
delighted by the way our new management team, with
Will Self as CEO, Dan Cowland as CFO and Jane Ridgley
as COO, work together to run the business.
The highlights of our financial results show disciplined
growth and further improvement in the operating
margin. Operating revenue has increased by 6% from
£46.1m to £48.9m compared to the previous financial
year, with adjusted profit before tax increasing by 11%
from £12.1m to £13.4m. Our adjusted operating
margin increased to 28.1% (2018: 27.1%) and profit
before tax increased by 8% to £10.9m. Fully diluted
earnings per share on these adjusted operating results
(after tax) amounted to 19.37p per share (2018:
17.63p).
During the year, we have continued to invest in the
operations of our business. The launch of Your Future
SIPP has been a success with enormously positive
feedback received from the adviser community. As
stated in our interim results, we continue to see the
benefits of the investment in our new sales structure,
with 226 new adviser relationships delivering new
business in the year. We have also invested
significantly in our digital capabilities with a successful
launch of a new customer portal which is accessible to
66% of clients onboarding. We are now beginning to
see these investments benefiting the Group.
Our results need to be assessed in the context of the
wider political and economic uncertainty in the
pension market where Brexit and political
uncertainties impacted client and adviser sentiment.
This, in conjunction with proactive management of
plans under administration, has led to a small
decrease in the total number of SIPPs administrated by
the Group from 77,739 to 76,541.
Dividends
We paid an interim dividend of 2.5p per share (2018:
2p per share) on 14 November 2019 and the Board
proposes a final dividend of 6.5p per share (2018:
6p per share) which, if approved, will be paid to
shareholders on the register at the close of business on
1 May 2020. The shares will be marked ex-dividend on
30 April 2020 and the proposed dividend paid on
8 June 2020. This will mean the total dividend paid in
respect of the year ended 31 December 2019 will
increase by 12.5% to 9p per share (2018: 8p).
Summary and outlook
Curtis Banks has entered 2020 with good momentum
and at the start of the new year we saw an
improvement in conditions in the wider market. Whilst
our revenue model is not linked to equity market
movements the outlook for the coming year is likely to
be affected by the current COVID-19 outbreak and
there remains significant uncertainty over how this
will unfold. Nevertheless, we believe our investments
in the operations of the business will continue to
benefit the Group and that the majority of the return
on these investments is yet to come. We continue to
actively seek appropriate acquisition opportunities to
complement our organic growth.
I look forward to the future with confidence as Curtis
Banks remains well placed to deliver long term value
for all stakeholders.
Chris Macdonald
Chairman
17 March 2020
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Chief Executive Officer’s review
Will Self
Chief Executive Officer
Summary
My first year as Chief Executive Officer of the Group
has seen growth delivered across all our financial
metrics. We have reported an improved operating
margin, whilst still investing in the business, to build
a platform that will deliver excellent client service
and operational efficiency to support further organic
growth.
The last month has been dominated by the COVID-19
outbreak and has created a huge amount of
uncertainty in the market. It is clear that there will be
a level of impact over the coming months including
operational disruption and the potential impact on
new sales volumes however we have contingency plans
in place for the business and remain confident in our
underlying robust and resilient business model.
The financial performance of the business was strong
with 6% growth in operational revenue and 11% in
adjusted profit before tax. Importantly, we delivered
a consequent improvement in adjusted operating
margin to 28.1% (2018: 27.1%), continuing progression
towards our target of 30%. This has been achieved
through operational efficiencies such as the closer
alignment of key operational teams and improved
management of legacy issues. During the year we
commenced a project to centralise commercial
property administration within one office location.
We have continued to make significant operational
progress throughout the business during the year. We
successfully completed the launch of Your Future SIPP,
a single proposition for the Group that combines the
best offerings of both the Curtis Banks and Suffolk Life
SIPPs. Already, 31% of own SIPP new business is written
into Your Future SIPP, expected to increase to 70% of
own SIPP new business by the end of 2020.
We have continued to diversify the business by
focusing on areas of complementary strategic interest.
We expanded our commercial property expertise
through the launch of Rivergate Legal Limited and this
activity was profitable over its first full year of trading
in 2019. Rivergate is a complementary service for
Curtis Banks and as such a significant portion of
Rivergate’s revenue is derived from clients selecting
its services from the ‘Curtis Banks Panel’ of Solicitors.
Rivergate has established a strong brand recognition in
line with that of the Group, and as such longstanding
client relations are driving notable success in
increasing the number of repeat clients using its
services, diversifying its offering. Rivergate’s client
base has expanded across the year which consists not
only of pension scheme trustees and operators but also
high net worth individuals. Rivergate has remained
focused on the supply of commercial property and real
estate services in line with the Groups strategy. Total
properties administered by the Group has increased to
over 6,350 (2018: 6,231) and we expect this to
continue.
In June we announced the appointment of Dan
Cowland to the Board as Chief Financial Officer. Dan
is extremely experienced in financial services and
previously worked for WH Ireland and Shore Capital.
We are delighted at the way Dan has fitted into the
business and adapted quickly to his new role. Dan and
his team have continued to elevate the standards in
financial reporting across the Group and will further
support commercial analysis over the year ahead.
SIPP Sales
At the year end the number of SIPPs administered fell
slightly to 76,541 (2018: 77,739), largely as a result of
the inevitable, and largely expected, attrition from
our older books combined with a slowdown in the
pension transfer market. We added 4,567 gross new
own SIPPs added organically (2018: 5,838),
representing a gross organic growth rate of 6.55%
(2018: 8.66%). In our two core areas of strategic focus,
the Full SIPP saw a higher level of gross organic growth
than last year at 3.35% (2018: 3.14%) but our mid SIPP
gross organic growth rate reduced slightly to 10.78%
(2018: 12.43%). This was due to a slowdown in the
pension transfer market, with the wider retail savings
sector remaining subdued. Our total own SIPP attrition
rate was 7.04% during the year (2018: 6.07%). The
table below sets out more detail on SIPPs numbers and
rates of attrition.
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Chief Executive Officer’s review
continued
Total Third Party
Full SIPPs Mid SIPPs eSIPPs own SIPPs Administered Total
2019 number 19,869 27,799 21,726 69,394 7,147 76,541
2018 number 20,450 26,354 22,935 69,739 8,000 77,739
Gross organic growth rate* 3.35% 10.78% 4.53% 6.55% 0.35% 5.91%
SIPPs added organically 686 2,841 1,040 4,567 28 4,595
Conversions and reclassifications (59) 59 — — — —
SIPPs lost through attrition (1,208) (1,455) (2,249) (4,912) (881) (5,793)
Attrition rate* 5.91% 5.52% 9.81% 7.04% 11.01% 7.45%
* Growth and attrition percentage rate based on opening SIPP numbers at the beginning of the year.
Your Future SIPP
The launch of Your Future SIPP in February was a
milestone for the Group and has allowed us to deploy
our expertise and focus on customer service to offer
advisers an extremely well-rounded product. The new
SIPP has been well received by the market with
226 new adviser relationships delivering new business
in the year, and 2,964 advisers and 2,259 clients
registered to use the new adaptive portal.
The new SIPP and introduction of the new client portal
greatly improves the user experience. This has been
designed and continually developed in consultation
with advisers; it will deliver efficiencies for our clients
and reduce the time spent on administration for
advisers, clients and our business. The enhanced
digital functionality is completely responsive to all
modern devices including smart phones, tablets and
desktops. The new proposition also includes market
access to a wide range of investment solutions, easy
management of cash and automated adviser charging.
We believe that our new proposition is truly market
leading by virtue of the suite of features it contains
and the flexibility it provides to both advisers and
their clients. Through the introduction of Your Future
SIPP we are well placed to increase our organic growth
of Full and Mid SIPPs over the coming years.
Legacy review
The first phase of our legacy review has been
completed, identifying elements of our product
portfolio to cleanse and informing our Target
Operating Model. The commercial property data
cleanse initiative has been completed with no further
provision required (2018: £0.5m) although we have
revised our assessment of contingent liabilities for
£2.3m (2018: £1.5m).
Acquisition activity
Acquisitions are a core component of our growth
strategy. We remain disciplined in our approach by
considering each opportunity from both an earnings
per share and return on investment perspective. We
remain committed to exploring opportunities to add
scale to our existing SIPP book and expand our offering
through complementary acquisitions.
Industry context and regulation
Regulatory focus on the pension market continued
during 2019. The Curtis Banks business model is clear
and the fact that we only work with regulated
financial advisers and do not give any advice or
provide the investments held within our SIPPs protects
our business from some of the challenges experienced
by other SIPP Providers. Our fee structures also remain
fair, transparent and competitive for our target
market.
Non-standard investments have received an increasing
amount of media coverage of late. While these are
a significant issue for the wider industry, 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 both at outset and
throughout the life of the investment and all new
Curtis Banks products have a clear Schedule of
Allowable Investments.
We have undertaken a detailed review of the business
to ensure a prudent approach to our legacy book,
which is composed of our own SIPPs as well as a large
number of historic acquisitions.
Our People and Culture
We have continued our focus on corporate social
responsibility activities. I am delighted by the way our
employees have fundraised for the charities we
support and Curtis Banks continues to be an integral
member of the communities in which we operate.
Being a diverse and inclusive business is integral to
Curtis Banks. We continue to evaluate ways in which
we can take steps forward to improve our commitment
to our employees. As a business, we continue to strive
to improve our diversity and our initiatives in this
space will continue into 2020.
I would like to pay thanks to all our employees for
their efforts over the course of the past year. They
have made an enormous contribution to the Group and
I look forward to working with them as Curtis Banks
continues to grow.
Will Self
Chief Executive Officer
17 March 2020
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Chief Financial Officer’s review
Dan Cowland
Chief Financial Officer
Results
A consistent financial performance for the year ended
31 December 2019 resulted in operational revenue
increasing by 6% to £48.9m (2018: £46.1m) and
adjusted profit before tax of £13.4m (2018: £12.1m),
an increase of 11% over the previous year. Adjusted
diluted EPS similarly increased by 10% to 19.37p (2018:
17.63p). Statutory profit before tax, which is stated
after amortisation and non-recurring costs, was
£10.9m (2018: £10.1m), up 8% on the previous year
despite the non-recurring costs incurred during the
year on previously announced restructuring activities.
Diluted EPS on a statutory basis increased by 8% to
15.85p (2018: 14.71p).
The improvement in underlying performance was
achieved despite the domestic economic and political
headwinds which persisted throughout the reporting
year. As with many other firms, we were not immune
from the undeniable impact these have had on the
financial services sector as a whole and the lack of
client investment into SIPPs more generally has
affected our organic growth.
These results show further improvement in adjusted
operating margin to 28.1% (2018: 27.1%). A contributor
to this was the increasing success of our Your Future
SIPP product launched in early 2019, supported by
a newly restructured nationwide sales distribution
network which provides the Group with a much
a broader geographic footprint than ever before.
The investment in our IT infrastructure is gaining
positive momentum amongst advisers and clients.
In addition to this the Group continues to leverage
alignment opportunities across its three offices and
identify areas which will improve both efficiencies and
the levels of client servicing.
Consistent financial performance for
the year resulted in adjusted profit
before tax increasing to £13.4m. The
results show further improvement in the
adjusted operating margin to 28.1%.
Revenue
Operational revenues of £48.9m in 2019 (2018:
£46.1m) increased by 6% year on year, driven in
particular by the resilient organic growth in own
mid-SIPP numbers excluding attrition and an
improvement in interest income.
Fee revenue from SIPP products remains the
predominant source of fee income for the Group with
84% (2018: 87%) of these fees being recurring fixed
annual fees. These fees are subject to contractual
annual inflationary rises linked to average weekly
earnings. Additional fixed fees are charged depending
on the transactional services provided for each of the
products.
All SIPP fees levied are fixed sterling charges and are
not a percentage based charge on the value of the
underlying assets held within the SIPP. As a result,
the revenues of the Group are not vulnerable to
movements in financial markets or commercial
property values and are therefore subject to less
volatility than many of our peers. This is a key
differential that sets us apart from most of our
competitors and provides an attractively priced
product in terms of fees applied on higher value SIPPs.
Interest income margin on client deposits remains
a significant part of the Group’s revenue. In the year
ended 31 December 2019, £12.7m of the Group
operating revenues were from interest margin (2018:
£10.8m). The Group operates a highly efficient
treasury operation with diverse partners that helps
keep SIPP fees lower for clients. The further
strengthening of our relationships with these deposit
providers has also been supported by an increase in
the level of deposits held during the year.
Interest rates paid to clients are set on a discretionary
basis by the Group, in accordance with our terms and
conditions, allowing flexibility to change as and when
market movements necessitate and allow the Group to
maintain more predictable and commercial levels of
interest income. This is monitored via the Group Assets
and Liabilities Committee which ensures fairness to
clients as well as commercial outcome for the Group.
Any discretion exercised is balanced carefully with the
need to demonstrate fairness to clients as well as
other stakeholders.
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Chief Financial Officer’s review
continued
Expenses
The year ended 31 December 2019 saw administrative
expenses increase by 4.8% to £35.2m from £33.6m.
changes leave the Group well placed to drive forward
its strategic plans through both organic growth and
targeted acquisition.
Staff costs for the year increased by 4.6% to £22.9m
(2018: £21.7m) and were primarily driven by salary
inflation, referenced to average weekly earnings, and
the first full year impact of the expanded distribution
and sales team referred to earlier.
Staff costs continue to reflect the cost of share based
payment awards under the Group’s Long Term
Incentive Plan and Save As You Earn (“SAYE”) schemes,
as well as the commitment to the auto enrolment of
staff pension contributions. These measures continue
to reflect the importance of staff satisfaction to the
Group and contribute not only to improved levels of
key staff engagement and retention but also drive the
provision of desired service levels to clients which are
demanded by our introducers of business.
Staff numbers have increased to 572 as at
31 December 2019 (2018: 558). This represents the
support provided for the organic growth in own Full
and Mid SIPPs achieved and to manage the migration
of commercial property administration to a centralised
function.
The other material operating expense that the Group
incurs is in respect of IT and in 2019 this amounted to
£3.4m (2018: £3.3m). This reflects not only the cost of
supporting the core IT infrastructure across the
Group’s three offices but also the amount of
investment in technological improvements to the SIPP
administration platform and the programme of these
improvements is expected to continue into 2023.
The cost of undertaking regulatory activity continues
to increase and for the year ended 31 December 2019
the Group spent £1.1m (2018: £1.0m) on a
combination of regulatory fees, levies and insurance.
Finance costs relating to interest payable on bank
loans reduced by £0.1m year on year as the Group
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 the
covenants required by the bank in respect of this
gearing are well covered.
Interest on the debt accrues at a rate of 1.75% over
LIBOR.
The Group continues to take steps to improve its
adjusted operating margin through a combination of
revenue enhancements and operational efficiencies,
balanced with the continued investment back into the
business and the provision of a high quality service to
our clients.
Non-Recurring costs
Non-recurring costs for the year can be broadly
categorised into two core elements.
The senior management restructuring activities which
have been signposted in our previous statements have
now been completed with changes to both the Group’s
Executive Committee and the main Board. These
During the year ended 31 December 2019, the Group
progressed its strategy to deliver its Target Operating
Model by deciding to centralise commercial property
administration within one office location. Redundancy
costs associated with this decision as well as costs
associated with duplicated staff efforts while work is
transferred between offices have been included within
non-recurring costs, totalling £696,000 in the year
ended 31 December 2019. The Group expects further
costs will be incurred associated with this transition,
but not yet committed, of approximately £825,000 in
the year ended 31 December 2020 recognisable as
non-recurring costs.
Delivery of the Target Operating Model is ultimately
seen as the main driver of operational efficiencies
which are expected to be attainable once the broader
investment in our IT infrastructure has been
completed.
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 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 2019 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 continues to be used to acquire shares in the
Group in the open 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
2019, the EBT held 206,286 shares in Curtis Banks
Group PLC (2018: 263,790). A number of options
awarded under the Company’s SAYE 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
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Chief Financial Officer’s review
continued
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 2019 the total
regulatory capital requirement across the Group was
£12.5m (2018: £11.7m) and the Group had an
aggregate surplus of £11.7m (2018: £9.0m) 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 and this has been maintained
throughout the year.
Two of the principal trading subsidiaries of the Group
are regulated by the FCA and the relevant capital
adequacy rules do not allow current year profits to
contribute towards solvency requirements until such
profits are audited or externally verified. Once profits
for the year ended 31 December 2019 are taken into
account the regulatory capital surplus at 31 December
2019 increases to £21.7m.
Financial Position
The Group increased net assets by 12% to £55.5m as
at 31 December 2019 (2018: £49.7m), and increased
shareholder cash reserves from £28.0m to £31.2m over
the same period.
As at 31 December 2019, the Group had net
shareholder cash (after debt) of £19.9m (2018:
£13.6m).
The Group adopted the provisions of IFRS 16,
accounting for leases, for the accounting period
commencing 1 January 2019. The effect of this on our
financial performance is not material although the
impact on the Group’s balance sheet has been to
increase Non-current assets and Current/Non-current
liabilities. It should be noted that our principal lenders
exclude the impact of IFRS 16 when calculating our
banking covenants. We have also received
confirmation previously from the FCA that the
provisions of IFRS 16 do not need to be taken into
account in our regulatory capital calculations.
Outlook
The Group’s profitability is not linked to market
performance and therefore provides more visibility
and less volatility of earnings. In 2020 we expect the
combination of SIPP revenue growth and interest
income to continue to add top line growth and we will
maintain careful cost discipline whilst supporting our
stated growth strategy.
Dan Cowland
Chief Financial Officer
17 March 2020
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ST R AT EG I C R E P O RT
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Principal risks and uncertainties
The risks faced by the Group have been fully assessed
and a comprehensive risk register maintained and
regularly reviewed and updated. Appropriate controls
and mitigating actions have been agreed and are
regularly monitored for the risks identified, with
further actions identified and tracked through to
completion where the level of residual risk remains
above the target threshold set.
The principal risk categories that would adversely
affect the activities of the Group are set out below.
1.
Strategic risks
Strategic risks are those that are affected or
created by the Group’s business strategy and
strategic objectives, including risks in relation
to current and future acquisitions.
The material risks in relation to past and
potential future acquisitions include:
• Unanticipated litigation or claims against the
Group, leading to increased costs to deal with
and defend the claims along with the impact
upon management time and focus.
• 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.
• The acquired businesses does not achieve the
levels of profitability or earnings required to
justify the investment made by the Group.
Mitigation
The Group Risk, Audit & Compliance Committee
acts under a delegated authority from the Group
Board to manage the Group’s risks and ensure
an appropriate framework is in place for the
identification, assessment and management of
material risks. Relevant Group governance
committees will monitor and track progress made
and potential impacts in relation to strategic
objectives. The Group carries out thorough due
diligence on all potential acquisitions using
internal expertise and external resources where
considered necessary. Appropriate warranties and
indemnities are obtained 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 operates in a highly regulated and
specialist industry and therefore is susceptible to
any significant regulatory or legislative policy
changes from a variety of regulatory bodies, or
a change in the way existing legislation or
regulation is interpreted by a regulatory body.
Any changes will influence the overall framework
for the design, marketing and distribution of
products, the acceptance and administration of
business, and the regulatory capital that is
required to be held.
The key risk here is interpretation by the Group
of regulatory change and what the new rules
entail. Judgements and decisions must be made
to ensure change is implemented, however, apart
from internal assessment and analysis and
further external support obtained as required
from legal professionals, trade bodies and others
in the market, there will always be a small
residual risk of misinterpretation of the intended
or of existing rules. In addition, if unexpected
regulatory changes are made at short notice, this
could impact the capital and regulatory position
of the group in the short term.
Mitigation
An internal buffer of at least 130% of required
capital is maintained to ensure regulatory capital
requirements can be maintained in the event of
unexpected regulatory changes. A Group
Regulatory Change Committee is in place, which
is responsible for the initial identification and
review of new regulatory publications applicable
to the Group. The Group is also able to seek
external advice as required to support the
analysis and interpretation of regulatory change.
This includes external accountancy and legal
firms and the wider financial community via
membership of trade bodies. Ongoing compliance
monitoring and internal audit activity is
undertaken to review processes, procedures and
documentation to ensure this is in line with
regulatory and legislative requirements and
expectations.
3.
Interest on client funds
The Group retains a margin on client cash by
generating interest income in excess of a
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. COVID-19
As of the date these financial statements were
signed there remains significant uncertainty over
how the current COVID-19 outbreak will unfold,
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ST R AT EG I C R E P O RT
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Principal risks and uncertainties
continued
and what government measures will be
introduced. The main risks to the Group are
considered to be staff welfare and maintaining
continuity of service for our clients. All SIPP fees
levied are fixed sterling charges and are not
a percentage based charge on the value of the
underlying assets held within the SIPP, so the
Group is not directly affected by recent
increased volatility in the financial markets
arising from COVID-19.
Mitigation
The Group continually reviews guidance from the
UK government and NHS and ensures staff are
kept regularly updated and fully informed in
order to reduce the risk of spreading the virus.
The Group has a comprehensive Business
Continuity Plan (“BCP”) that is reviewed
regularly and tested every calendar year. The
last test was successfully conducted in October
2019, with involvement of senior staff including
the CEO and COO. The BCP caters for a number
of scenarios, including those where high numbers
of staff or all staff are unable to access
individual or multiple offices. Current actions
already initiated under the BCP in relation to
COVID-19 include:
• BCP team formed and meeting regularly to
oversee progress of preparations
• Restrictions on non-essential business travel
implemented
• Clear, regular guidance to staff in respect of
their responsibilities and roles
• Additional hygiene and sanitiser stations
installed in all offices
•
Identifying and validating key process owners
• Preparatory steps towards widening remote
access from core to all staff
•
‘Warming’ our disaster recovery site in
preparation for deployment should the need
arise
The Group is a financially sound business with
capital and liquidity well in excess of minimum
regulatory requirements.
5. 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.
6. 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.
7. Operational Risk and Internal control
systems
Operational risk relates to the risk of loss
resulting from inadequate or failed internal
processes, people and systems or from external
events. 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
The Group has a clear and robust governance
framework in place to manage and mitigate the
risk faced by the business. Within this structure,
the Group Operational Risk & Compliance
Committee has responsibility for managing the
operational risks faced by the business. This
delegation of authority, along with escalation of
key risks, provides clear oversight to the Group
Risk, Audit & Compliance Committee and Senior
Management of the key risks across the business.
The low tolerance towards operational risk is
embedded in the culture of the group, alongside
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continued
Principal risks and uncertainties
continued
the desire to ensure fair customer outcomes are
achieved. A comprehensive risk register is
maintained by the Group, which identifies a
number of operational risks faced by the business
and identifies the controls currently in place to
mitigate these risks, along with any further
actions required to reduce the level of risk to the
agreed target level. Risk events are recorded and
appropriate root cause analysis undertaken to
identify and address potential systemic issues
and a range of relevant management information
is produced and regularly analysed to support the
measurement and tracking of operational risk.
Infrastructure security
Infrastructure is considered in relation to both
the environment for staff and the assets that
store data. The business model is heavily reliant
on the security and physical robustness of
IT systems and the reliability of the chosen
software providers. 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
The Group has an extremely low appetite toward
any compromise to either the staff that utilise
the infrastructure of the group and the actual
infrastructure itself, as such these risks are
closely monitored. 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. Key dependencies are regularly
monitored and assessed to ensure mitigation
procedures are in place should a major risk
crystallise. There are also controls in place to
mitigate the people risk to group infrastructure,
including measures such as defining clear roles
and responsibilities, succession planning for
middle-level staff and ensuring competency for
roles through ad-hoc relevant training.
Non Standard Investments (“NSIs”)
Pension Schemes administered by the Group are
permitted under HMRC rules to hold certain NSIs
within them. Such investments are considered to
represent a higher level of risk than standard
investments, such as quoted equities. As high risk
investments, NSIs are potentially far more
volatile than standard investments and clients
may look to the Group, as pension provider, for
compensation in the event that a NSIs fails or
suffers a significant decrease in value.
8.
9.
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,
this will also incorporate consideration of the
circumstances of the individual looking to hold
the NSI within their pension scheme. The Group
has a clearly defined statement of allowable
assets, setting out the categories of NSI which
may be accepted, subject to completion of
appropriate due diligence and those that will not
be considered at all. New business is typically
only accepted from regulated financial advisers,
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 remains
acceptable. In addition, the Group carries high
levels of professional indemnity insurance to
protect against any claims.
10. Commercial Property
The Group acts as landlord for a large volume
of commercial properties held within Group
pensions schemes. As the size of the commercial
property portfolio has increased over time, the
Group has been required to develop its systems
and controls to meet the needs of the book as
they arise, including understanding the key risks
posed by becoming legal owner of the
commercial property assets on behalf of its
customers.
Mitigation
The Group regularly considers and assesses the
key risks posed by the commercial property
book, and these are monitored as part of Group
Property Oversight Committee, acting under
delegated authority. This, along with escalation
of key risks, provides clear oversight to Senior
Management of the key risks across the
commercial property book. The Group has also
sought external legal expertise to ensure the
documentation, and underlying responsibilities in
relation to a commercial property, are set out
and clearly defined between the Group and other
involved parties (tenant, customer, property
manager etc.) to prevent future legal dispute.
The nature of physical commercial property is
that all risks that are known are considered, but
the Group are aware that each commercial
property is unique and there will exist some
residual risks (such as legal, unexpected cost or
market risk) that cannot be fully mitigated, and
some will sit outside of the control or remit of
the Group responsibilities. These have been
accepted as an inherent risk to continuing to
offer commercial property investment to
customers, and is mitigated as far as possible
through a robust due diligence process prior to
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ST R AT EG I C R E P O RT
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Principal risks and uncertainties
continued
accepting any property investment. Monitoring of
the commercial property book is conducted on an
ongoing basis to ensure there is minimal
deterioration in the book, and to safeguard the
interests of customer’s investments.
11. Brexit
The UK has now left the EU but there remains
a level of uncertainty as the transition period
continues through to the end of 2020, while the
UK and EU negotiate additional arrangements.
The Group had 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 the Group is considered
to be largely isolated from many of the issues
which other financial institutions face, such as
tariffs, passporting and currency risks.
The review assessed the impact of a disorderly
exit from EU, which remains a possibility at the
end of the transition period. This included
consideration of the following:
• 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 fullest
extent possible, the risks arising from a
disorderly exit at the end of the transition period
and the Group has concluded, based on the
current understanding of the relevant legislation,
provisions and intentions, that the risks have
been mitigated as far as is reasonably possible.
This is an area which continues to be closely
monitored and the analysis refreshed to reflect
ongoing developments.
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continued
Corporate and social responsibility
The Group is dedicated to ensuring an environment
where collaboration and growth of all staff is seen as
being part of the fabric of day to day office culture.
The Group encourages celebration of success on both
a corporate and personal level, and is actively
addressing key areas of focus including its
environmental/climate impact, employee
engagement, staff training and equal opportunities.
The Group has a CSR committee comprised of
members from all locations and a variety of pay grades
and some of the key activities for 2019 that both the
committee and the wider Group have contributed to
are highlighted below, with further initiatives planned
for 2020 and beyond.
Environmental Focus
As a pension provider, we understand the need to think
about the long-term, and are well aware that climate
change impacts all of us. As such, any action that can
be taken to reduce our impact should be considered.
As a self-invested pension provider, we do not choose
what investments our customers hold, but we can
make changes to our own operations to reduce our
corporate impact. Our target is to run our business in
a sustainable way, and a number of initiatives led by
both senior management, staff and the in-house
Corporate Social Responsibility Team have been
undertaken during 2019 which increased our recycling
rate from 2018. These initiatives include:
•
•
•
•
Providing recycle bins at multiple convenient
locations throughout our offices
Having bags available in all offices so staff can
avoid single-use plastic bags at lunchtime
Being part of the Walkers Crisp Recycle Scheme
Recycling all electrical and lighting equipment
•
•
•
•
Providing sweet wrapper bins in the kitchens
Ensuring all of our Confidential Paper waste is
recycled by our third party provider
Being part of the Carbon Capture programme,
where our paper usage is converted to plant
trees
Encouraging staff to take a paid day out of the
office to work with a number of local charities on
team building days that provide a positive impact
on the environment
Sponsorships and partnerships with charities
and community organisations
The Group actively encourages support of charities,
community organisations and activities, with each
office location supporting a local charity. In 2019 the
Group supported three hospices; St Peters Hospice in
Bristol, St Elizabeth Hospice in Ipswich and Archie’s
Foundation in Dundee. From 2020 to 2021 we will be
supporting three new charities; The Teenage Cancer
Trust, Lighthouse Ipswich and Wellbeing Works in
Dundee. In 2019, the staff within the Group
collectively raised a fantastic total of £14,200 to help
these charities carry on their great work. As part of
the 2019 efforts, Curtis Banks sponsored an element of
the Twilight 5k run in Ipswich as well as the Elmer
Parade, which included the sponsorship of one of the
150+ Elmer the Elephant statues located around the
town.
To further the charity fundraising efforts, all offices
regularly hold events for the chosen local charities,
and staff are encouraged to fundraise for other
charities that may have provided them, their friends
or family with support. As well as organising and
In 2020 Curtis Banks is delighted to be sponsoring Victoria Evans of Sea Change Sport in her bid to break the world
record for a female solo row crossing of the Atlantic
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ST R AT EG I C R E P O RT
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Corporate and social responsibility
continued
funding the events, Curtis Banks also gives further
support through a matching contribution to the
relevant charity.
In 2020 Curtis Banks is delighted to be sponsoring
Victoria Evans of Sea Change Sport in her bid to break
the world record for a female solo row crossing of
the Atlantic. Victoria is taking on this phenomenal
challenge to raise funds and awareness for Women
in Sport. This charity resonates with Victoria’s
experiences in early life and the transformational
impact that involvement in sport gave her.
Women in Sport was founded in 1984, with the goal of
giving every woman and girl in the UK the opportunity
to experience the transformational rewards of sport.
They believe that women and girls are missing out
on the lifelong benefits of sport, and their vision is
a society where women and men have equal
opportunities. They are the only organisation in the UK
that researches sport purely from the perspective of
women and girls.
Further details are available at seachangesport.com
and womeninsport.org.
Staff initiatives and interaction
Management engage closely with staff to determine
their needs, and initiatives are implemented where
these benefit the majority of employees. The Group
Management Team, which supports the Executive
Committee and Group Board, have implemented
a number of initiatives for all levels of staff, and
continue to interact with and listen to feedback from
staff to ensure Curtis Banks is seen as a forward-
thinking and flexible employer. Newsletters containing
information about both Group developments and social
events are provided to employees on a regular basis,
and personal achievements from staff are actively
shared, such as exam successes, promotions or
completion of personal challenges such as marathons
or other competitive events. The Group has an
established Employee Forum which supports staff in
matters of concern and can assist in communications
and matters with senior management. The business
provides a Save As You Earn share option scheme for
the benefit of all employees to encourage active
participation and vested interest in the continued
success of the Group.
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, and are given study leave to help
and motivate them to progress their career within the
organisation.
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 business.
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. Curtis Banks 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.
The Group actively monitors recruitment,
development and promotion to ensure that we provide
a fully inclusive culture with company policies and
practice that exceed statutory requirements wherever
possible.
On behalf of the board
Dan Cowland
Chief Financial Officer
17 March 2020
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continued
Board of Directors
Will Self
Chief Executive Officer
Will joined the Board in August 2016 and has over 18 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.
Dan Cowland
Chief Financial Officer
Dan is a Fellow of the ICAEW, having qualified as a Chartered Accountant
with Ernst & Young in 1997. Having worked in EY’s Banking and Capital
Markets group, Dan moved to the WestLB owned Panmure Gordon business
where he spent seven years in various finance roles, latterly as the Head of
Finance. Dan performed senior finance roles at Lehman Brothers,
Macquarie Bank and Shore Capital Stockbrokers before being appointed to
the Board of WH Ireland plc in March 2014 as Finance Director. Dan joined
Curtis Banks in July 2019 as the Group’s Chief Financial Officer.
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,
Non-Executive Chairman and Non-Executive Director
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, a Director of Millfield and is an adviser 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, Chairman of the Audit Committee and Chairman of
the Risk & Compliance Committee
Until 2019, Bill was Chief Financial Officer of Standard Life Aberdeen plc,
one of the world’s largest investment companies, having previously served
as Finance Director of Aberdeen Asset Management PLC since 1991. Bill is a
Chartered Accountant and brings strong financial skills and extensive
experience of the asset management industry, having spent significant
time as an executive director of a FTSE 100 company Bill brings a depth of
experience in dealing with shareholders and looking after their interests.
Jules Hydleman
Non-Executive Director and Chairman of the Remuneration Committee
Jules has over 16 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 2019.
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 &
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. Information on financial risk management is
disclosed within note 31 to the financial statements.
Results and dividends
The consolidated statement of comprehensive income
for the year is set out on page 35.
A final dividend in respect of 2018 results of 6.00p per
share totalling £3,212,000 was proposed and paid on
23 May 2019. An interim dividend in respect of 2019
results of 2.50p per share totalling £1,350,000 was
paid on 14 November 2019. A final dividend of 6.50p
per share is proposed and, if approved, will be paid to
shareholders on the register at the close of business on
1 May 2020. The shares will be marked ex-dividend on
30 April 2020 and the dividend paid on 8 June 2020.
Substantial Shareholders
At 1st March 2020 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 27.06%
Liontrust Asset Management 6,566,212 12.13%
BlackRock Investment Management 4,787,653 8.84%
Paul Tarran 3,328,228 6.15%
Canaccord Genuity Wealth Management 3,190,703 5.89%
Rupert Curtis 2,874,084 5.31%
Sally Curtis 2,336,000 4.31%
Chelverton Asset Management 1,750,000 3.23%
Directors
The following directors have held office since
1 January 2019 and up to the date on which the
financial statements were signed:
Will Self
Jane Ridgley (Appointed 18 January 2019)
Dan Cowland (Appointed 5 September 2019)
Paul Tarran (Resigned 30 September 2019)
Chris Macdonald
Bill Rattray
Jules Hydleman
Directors will seek re-election annually at the
Company’s annual general meeting.
Directors’ indemnity
The directors had qualifying indemnity cover totalling
£10,000,000 during the year ended 31 December 2019
and up to the date these financial statements have
been approved.
Related party transactions
Details of related party transactions are given in
note 33.
Annual General Meeting
The annual general meeting of the Company will be
held on 4 June 2020. 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.
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continued
Directors’ Report
continued
Section 172 of the Companies Act 2006
A director of a company must act in the way they
consider, in good faith, would be most likely to
promote the success of a company for the benefit of
its members as a whole, and in doing so have regard
(amongst other matters) to:
Risk Management
The Group provides important products to its clients in
a regulated environment. As the Group grows, its
business and risk environment will become more
complex. It is vital therefore that the directors
identify, evaluate, manage and mitigate the risks the
Group faces, and that directors continue to evolve
their approach to risk management. For details of the
Group’s principal risks and uncertainties and how the
directors mitigate them please see pages 9-12.
Our People
The Group is committed to being a responsible
business. Our behaviour is aligned with the
expectations of our people, clients, community and
society as a whole. People are at the heart of our
Group and, for our business to succeed, we need to
develop them and manage their performance, while
operating as efficiently as possible. We must ensure
that we share common values that inform and guide
our behaviour so we achieve our goals in the right way.
For further details please see details on our people on
page 5 and page 14.
Business Relationships
The Group’s strategy includes organic growth,
acquisition and diversification. To achieve this the
Group develops and maintains strong client and
supplier relationships. Culture, values and standards
underpin how the Group creates and sustains value
over the longer term and are key elements of how it
maintains a reputation for high standards of business
conduct. Please see the Group’s corporate governance
principles on page 20.
Community and Environment
The Group is dedicated to ensuring an environment
where collaboration and growth of all staff is seen as
being part of the fabric of day to day office culture.
Also, the Group encourages that any action that can be
taken to reduce its impact on the environment should
be considered. Please see more details of this on
page 13.
Shareholders
The Board is committed to openly engaging with the
Group’s shareholders, as it recognises the importance
of a continuing effective dialogue, whether with major
institutional investors or with individual shareholders,
brokers or analysts. It is important to us that
shareholders understand the Group’s strategy and
objectives, so these must be explained clearly,
feedback heard and any issues or questions raised
properly considered. For further details on how we
engage with our shareholders please see page 22.
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
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.
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.
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
financial statements, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Group and Company’s position and performance,
business model and strategy.
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Directors’ Report
continued
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
Dan Cowland
Director
17 March 2020
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Chairman’s corporate governance report
Introduction
The Board is committed to maintaining 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;
2. Seek to understand and meet shareholder needs
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
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 three Executive directors and
three Non-Executive Directors. Details of the directors
and their strengths and experience are set out on
pages 15 and 16 of this Report.
All the Non-Executive Directors of the Group are
considered to be independent and are as follows:
• Chris Macdonald (Chairman)
• Bill Rattray (Senior Independent Director)
• Jules Hydleman
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 to be the 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 annual general meeting
and consideration of all relevant papers before each
meeting.
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.
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 have been
Executive Directors of UK publicly listed companies
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and maintain their skill sets through those
connections. In addition, Non-Executive Directors
receive external training where appropriate.
Since listing on the AIM market the Company has used
the service 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 other senior
managers.
The Board regularly consult and meet with both
internal and external auditors to the Company at
quarterly Audit Committee meetings.
Executive Directors maintain their skill set though day
to day interaction with the industry and periodic
training, both internal and external.
All Directors are required to undertake and record
continual professional development training.
The internal advisory responsibilities of the Company
Secretary are currently performed by the Chief
Financial Officer for the Group.
The Chief Executive Officer 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.
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 the Executive Committee
minutes, compliance and risk updates and regular
presentations from the Group Heads of Departments.
Board meetings are rotated to include both the Bristol
and Ipswich office locations, 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.
The Audit Committee is chaired by Bill Rattray with
Chris Macdonald and Jules Hydleman as the other
members. Further details on the committee’s
responsibilities and activities are on page 23 of the
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. The Remuneration Committee is chaired by
Jules Hydleman with Bill Rattray and Chris Macdonald
as the other members. Further details on the
committee are on pages 24 to 25 of the annual report.
Risk & Compliance Committee:
The primary function of the Risk & Compliance
Committee is to consider the Group’s appetite for 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.
The Risk and Compliance Committee has been chaired
by Bill Rattray since 9 September 2019; Chris
Macdonald (who chaired the committee until 27 August
2019) with Jules Hydleman as the other member.
Further details on the committee’s responsibilities and
activities are on pages 23 to 24 of the annual report.
The terms of reference for the Audit, Remuneration
and Risk & Compliance Committees can be found in
the “Investors” section of the Group website at
www.curtisbanks.co.uk.
Attendance at the four scheduled Board and
committee meetings in the year ended 31 December
2019 is set out in the table below:
Board Risk &
Executive directors Meeting Audit Remuneration Compliance
Will Self 4 4 4 4
Jane Ridgley 4 4 4 4
Paul Tarran 3 3 3 3
Dan Cowland 2 2 2 2
Non-Executive
directors
Chris Macdonald 4 4 4 4
Bill Rattray 4 4 4 4
Jules Hydleman 4 4 4 4
Board Evaluation
Board effectiveness as a whole is evaluated annually
by means of formal questionnaire completed by each
Director followed by collective discussions on the
results and evaluation of the effectiveness of the
Board. The latest evaluation was undertaken in the
second half of 2019 and the results of the review
confirmed consistent responses among the participants
and no formal recommendations were put forward as a
consequence.
The Chief Executive Officer 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.
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Compliance with legislation
The Group has 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
17 March 2020
Relationships with shareholders
The Group has a programme of meetings each year
with institutional shareholders, potential shareholders,
brokers and analysts following the release of interim
and annual results. These include formal written
presentations that are available on our website. These
meetings allow the Executive Directors to update
existing and potential 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 our
brokers and investor relations agents.
Following the formal interim and annual results
presentations, the Board receive copies of feedback
reports keeping them in touch with shareholder views.
Camarco LLP provide investor public relations to the
Group with Peel Hunt LLP and N+1 Singer LLP acting as
joint brokers.
Chris Macdonald, as Non-Executive 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 annual general meeting to
communicate with investors, including those staff
holding shares or options in the Company. The meeting
is held 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 are registrars to the
Company and attend the annual general meeting.
Copies of our annual report, the annual general
meeting notice and the interim report are sent to all
shareholders and copies can be downloaded from the
Investors section of our website. They are also
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, interim and full year results
presentations to shareholders and other matters
relevant to shareholders.
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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;
e) Evaluation of the external auditor’s
qualifications, performance, objectivity and
independence, including consideration of the
where other audit services are provided, and
recommendation of appointment of the external
auditor to the annual general meeting of
shareholders.
The Audit Committee has met four times during the
year under review with the external statutory auditors
and 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 2018 and receiving
the external auditors audit report thereon and
considering the key accounting considerations
and judgments attaching to those financial
statements;
b) Consideration and approval of the plan for the
interim review by the external auditor on the
interim financial statements for the six month
period to 30 June 2019;
c) Review of financial statements for the Group for
the six month period ended 30 June 2019 and
receiving the external auditors review report
thereon and considering the key accounting
considerations and judgments attaching to those
financial statements;
d) Consideration and approval of the year the audit
plan for the year ended 31 December 2019 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 2019;
f) Review of three internal audit reports produced
by KPMG in their role as 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 2020
and agreement of matters to be covered in those
reports.
Risk and Compliance Committee Report
The Risk and Compliance 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 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;
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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
business, their likely impact and relevant
mitigation actions;
e) Consideration of an updated Share Dealing
policy;
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 Officer 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 and complexity;
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.
The Remuneration Committee has met four times
during the year under review.
Specific matters discussed at those meetings included:
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 2018;
c) Proposals and agreement to a further offering in
2019 to all staff of the “Save As You Earn” Share
Scheme;
d) Consideration and agreement of remuneration
packages for new key Executives joining the
Group during the year;
e) Consideration of the funding of the Employee
Benefit Trust and the use of the Trust for
satisfying options exercised;
f) Consideration and agreement of the Executive
bonus schemes with performance targets for
2019 for Executive directors and senior staff and
approval of the parameters for the 2019 staff
bonus scheme;
g) Consideration and agreement of bonus scheme
for the sales and distribution team.
The Committee continues 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 them. 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;
c) Benefits in kind comprising principally life
assurance and travel 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
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bonus entitlement over certain monetary limits is
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 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.
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
Jane Ridgley 18 January 2019 12 months 12 months
Dan Cowland 8 July 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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Directors’ remuneration report
Directors’ remuneration
Total emoluments
Basic salary Pension 2019 2018
Director and fees Bonus contributions Benefits £ £
Will Self 268,738 160,000 8,907 7,336 444,981 381,858
Jane Ridgley* 180,000 117,000 13,050 7,069 317,119 —
Dan Cowland** 100,180 65,000 4,859 6,000 176,039 —
Rupert Curtis*** — — — — — 390,267
Paul Tarran**** 219,986 65,000 15,949 8,569 309,504 298,382
Chris Macdonald 101,667 — — — 101,667 100,000
Bill Rattray 50,833 — — — 50,833 50,000
Jules Hydleman 51,000 — — — 51,000 50,000
Total 972,404 407,000 42,765 28,974 1,451,143 1,270,507
* appointed 18 January 2019.
** appointed 5 September 2019.
*** resigned 31 December 2018.
**** resigned 30 September 2019.
Directors’ shareholdings
As at 31 December 2019, 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:
2019 2018
Director No. % No. %
Will Self — — — —
Jane Ridgley — — — —
Dan Cowland — — — —
Chris Macdonald 7,894 0.01 7,894 0.01
Bill Rattray 7,894 0.01 7,894 0.01
Jules Hydleman 37,890 0.07 46,548 0.09
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 2018 the year 2019 price date
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
167,944 — 167,944
26 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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 2018 the year 2019 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 26.
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
17 March 2020
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 27
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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 28 – 78
Independent Auditors’ report 29 – 34
Consolidated statement of
comprehensive income 35
Consolidated statement of
financial position 36
Company statement of
financial position 37
Consolidated statement of
changes in equity 38
Company statement of
changes in equity 39
Consolidated statement of
cash flows 40
Company statement of
cash flows 41
Notes to the financial statements 42 – 75
Company information 78
Supplementary unaudited
information 77 – 78
28 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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 2019 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 2019; 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: £668,000 (2018: £607,000), based on 5% of adjusted profit
before tax, amortisation and non-recurring costs.
Materiality
• Overall company materiality: £493,000 (2018: £458,000), 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) to be significant components for the group audit
and as such we performed audit procedures on each of these components.
• Carrying value of goodwill and client portfolios (Group).
• Carrying value of investment in the Suffolk Life Group (Company).
• Provisioning and contingent liability disclosure (Group).
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 29
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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 goodwill and client portfolios
(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 carrying value of intangible assets as
of the year-end amount to £43.4m 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 primary risk, in respect of
determining an appropriate carrying value for
intangibles, is in relation to the assumptions
adopted by management as part of their
impairment assessments.
Refer to note 3, page 50 (Critical accounting
judgements and key sources of estimation
uncertainty); page 46 (Accounting policies); and
page 55 (Note 12 to the financial statements).
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 cashflows from the
business that are used to support the carrying value of
client portfolios and goodwill;
the revenue and margin forecasts for each of the
customer books;
the discount rate and attrition assumption used in
these calculations; and
the period over which the client portfolio is
amortised.
– 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 and accordingly
that the carrying value of intangible assets was supported.
30 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of investment in the Suffolk Life
Group (Company)
The Company financial statements include an
investment in Suffolk Life Group Limited (SLG).
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 flows and the discount rate used.
Refer to page 47 (Accounting policies) and
page 58 (Note 15 to the financial statements).
Provisioning and contingent liability disclosure
(Group)
In the prior year management identified
deficiencies relating to the administration of
a certain population of properties held within
SIPPs administered by the Group. Subsequently,
management have completed its review of the
data records relating to these properties.
Management have used the data obtained as part
of this review to estimate the potential financial
effect on the Group as at 31 December 2019.
A provision of £0.5m was recognised as of
31 December 2018 of which £0.25m that has
been utilised during the year. 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 £2.3m. (2018: £1.5m).
There is an inherent degree of uncertainty in
relation to the best estimate quantification of
the contingent liability with potential significant
variations in the possible liabilities payable to
rectify individual SIPP positions.
Refer to page 48, (Accounting policies); and
Note 34, page 75 (Contingent liabilities).
The audit procedures we have performed to address this key
audit matter are as follows:
– We compared the carrying value of investment in SLG and
noted that it was lower than the net assets of the
subsidiary balance sheet;
– We then considered whether the future forecast net cash
flows arising within the trading entities held by SLG are
sufficient to support the carrying value of the investment,
when taken together with its net assets at the balance
sheet date; 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 and no
impairment to the carrying value was warranted.
The audit procedure we have performed to address this key
audit matter in relation to the provision held, is as follows:
– We have considered whether the level of provision held
was appropriate in relation to the probable risks
identified.
Based on the work we have performed, we consider the
provision held to be reasonable.
In relation to the contingent liability disclosed, we performed
the following audit procedures:
– We considered whether a contingent liability best
reflected the current level of risk, being less than
probable but more than remote, or if a provision should
to be recorded.
– We considered relevant historical experience within the
Group and reviewed external advice in relation to this
matter to inform our own assessment of contingent
liabilities and concluded that the disclosure as
a contingent liability was appropriate.
To test the disclosure of the contingent liability within the
notes, we performed the following audit procedures;
– We understood and evaluated the process and controls
management have in place to assess and quantify an
appropriate contingent liability.
– We tested management’s process to support the
quantification of the contingent liability, and to inform
our understanding of the inherent uncertainties. To do
this we performed substantive testing over the data
inputs considered by management to estimate the
contingent liability.
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continued
Key audit matter
How our audit addressed the key audit matter
– We performed substantive procedures over completeness
and accuracy of the key reports used by management to
assess the contingent liability.
– We obtained and re-performed management’s calculation
of their best estimate of the 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
decision to reflect wider possible risks as a contingent liability
appropriate and the level and nature of disclosures around
this matter to be fair and balanced.
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 £668,000 (2018: £607,000). £493,000 (2018: £458,000).
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 to be a key performance to be an appropriate benchmark as the
indicator of the group by the Directors and entity is principally a holding company 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.
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continued
We have applied a higher materiality of £36m (2018: £35m), 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 assets and liabilities.
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 £108,000 and £635,000. 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 £33,000 (Group audit) (2018: £32,000) and £25,000 (Company audit) (2018: £23,000) as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
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 and company’s ability to continue as a going concern. For example, the terms of the United Kingdom’s
withdrawal from the European Union are not clear, and it is difficult to evaluate all of the potential implications
on the group’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 2019 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 2019 Curtis Banks Group PLC | 33
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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 page 18, 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
17 March 2020
34 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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 2019
Year ended 31 December 2019
Year ended 31 December 2018
Total
£’000
46,125
41,677
87,802
(33,637)
(34,477)
(7,200)
(41,677)
12,488
(748)
(1,268)
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
contract expenses
Changes in provisions:
Non-participating
investment contract
liabilities
Policyholder total expenses
Operating profit before
amortisation and
non-recurring costs
21
4
48,949
365,815
414,764
(35,218)
21
(33,943)
(331,872)
(365,815)
13,731
—
—
—
—
—
—
—
—
48,949
365,815
46,125
41,677
414,764
87,802
(35,218)
(33,637)
(33,943)
(34,477)
(331,872)
(7,200)
(365,815)
(41,677)
13,731
12,488
—
—
—
—
—
—
—
—
Non-recurring costs
Amortisation
Operating profit
Finance income
Finance costs
Profit before tax
Taxation
Total comprehensive
income for the year
6
5
9
8
10
Attributable to:
Equity holders of the company
Non-controlling interests
Earnings per ordinary share on
net profit
Basic (pence)
Diluted (pence)*
11
11
—
—
(1,091)
(1,379)
(1,091)
(1,379)
—
—
(748)
(1,268)
13,731
(2,470)
11,261
12,488
(2,016)
10,472
145
(523)
13,353
(2,502)
—
—
145
(523)
116
(467)
—
—
116
(467)
(2,470)
10,883
12,137
(2,016)
10,121
469
(2,033)
(2,294)
383
(1,911)
10,851
(2,001)
8,850
9,843
(1,633)
8,210
8,850
—
8,850
16.49
15.85
8,204
6
8,210
15.30
14.71
The consolidated statement of comprehensive income has been prepared on the basis that all operations are
continuing operations.
*Adjusted to exclude anti-dilutive options, see note 11 to the financial statements for further detail.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 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 F I N A N C I A L
P O S I T I O N
As at 31 December 2019
As at As at
31 Dec 19 31 Dec 18
Group Notes £’000 £’000
ASSETS
Non-current assets
Intangible assets 12 43,427 44,110
Investment property 13 1,265,784 1,274,452
Property, plant and equipment 14 6,195 1,216
Investments 15 1,994,197 1,813,057
Deferred tax asset 22 911 595
3,310,514 3,133,430
Current assets
Trade and other receivables 17 19,915 18,055
Cash and cash equivalents 18 421,547 431,576
Current tax asset 446 243
441,908 449,874
Total assets 3,752,422 3,583,304
LIABILITIES
Current liabilities
Trade and other payables 19 15,608 15,204
Deferred income 26,192 24,601
Borrowings 20 28,215 30,005
Lease liabilities 719 —
Provisions 23 553 500
Deferred consideration 214 255
Current tax liability 738 991
72,239 71,556
Non-current liabilities
Borrowings 20 48,911 56,525
Lease liabilities 3,915 —
Deferred consideration — 125
Non-participating investment contract liabilities 21 3,571,904 3,405,428
3,624,730 3,462,078
Total liabilities 3,696,969 3,533,634
Net assets 55,453 49,670
Equity attributable to owners of the parent
Issued capital 24 271 269
Share premium 25 33,659 33,451
Equity share based payments 25 2,313 1,357
Treasury shares 25 (534) (716)
Retained earnings 25 19,730 15,295
55,439 49,656
Non-controlling interest 27 14 14
Total equity 55,453 49,670
The financial statements on pages 35 to 78 were approved by the Board of Directors and authorised for issue on
17 March 2020.
Dan Cowland
Chief Financial Officer
Company Registration No. 07934492
36 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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 2019
As at As at
31 Dec 19 31 Dec 18
Company Notes £’000 £’000
ASSETS
Non-current assets
Investments 15 59,396 58,440
59,396 58,440
Current assets
Trade and other receivables 17 78 52
Cash and cash equivalents 18 1,330 1,967
Current tax asset 243 81
1,651 2,100
Total assets 61,047 60,540
LIABILITIES
Current liabilities
Trade and other payables 19 322 220
Borrowings 20 3,156 3,158
3,478 3,378
Non-current liabilities
Borrowings 20 8,274 11,396
8,274 11,396
Total liabilities 11,752 14,774
Net assets 49,295 45,766
Equity attributable to owners of the parent
Issued capital 24 271 269
Share premium 25 33,659 33,451
Equity share based payments 25 2,313 1,357
Retained earnings 25 13,052 10,689
Total equity 49,295 45,766
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 £6,922,000 (2018:
£6,937,000).
The financial statements on pages 35 to 78 were approved by the Board of Directors and authorised for issue on
17 March 2020.
Dan Cowland
Chief Financial Officer
Company Registration No. 07934492
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 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 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 2018 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
Total comprehensive
income for the year — — — — 8,850 8,850 — 8,850
Share based payments — — 956 — — 956 — 956
Ordinary shares bought
and sold by EBT — — — 182 — 182 — 182
Ordinary shares issued 2 208 — — — 210 — 210
Deferred tax on share
based payments — — — — 147 147 — 147
Ordinary dividends
declared and paid — — — — (4,562) (4,562) — (4,562)
At 31 December 2019 271 33,659 2,313 (534) 19,730 55,439 14 55,453
38 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
Curtis Bank pp35-80.qxp 29/04/2020 15:50 Page 39
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 2018 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
Total comprehensive income for the year — — — 6,925 6,925
Share based payments — — 956 — 956
Ordinary shares issued 2 208 — — 210
Ordinary dividends declared and paid — — — (4,562) (4,562)
At 31 December 2019 271 33,659 2,313 13,052 49,295
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 39
Curtis Bank pp35-80.qxp 29/04/2020 15:50 Page 40
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 2019
Year ended 31 December
2018
2019 As restated*
Group £’000 £’000
Cash flows from operating activities
Profit before tax 10,883 10,121
Adjustments for:
Depreciation 1,321 596
Amortisation and impairments 1,379 1,268
Interest expense 523 467
Share based payment expense 956 626
Fair value (gains)/losses on financial investments (232,848) 116,517
Additions of financial investments (532,717) (490,830)
Disposals of financial investments 584,425 593,549
Fair value losses/(gains) on investment properties 12,469 (47,275)
Increase/(decrease) in liability for investment contracts 166,476 (156,498)
Changes in working capital:
(Increase)/decrease in trade and other receivables (1,730) 247
Increase in trade and other payables 1,990 992
Taxes paid (2,454) (1,375)
Net cash flows received from operating activities 10,673 28,405
Cash flows from investing activities
Purchase of intangible assets (696) (785)
Purchase of property, plant and equipment (1,015) (664)
Purchase of investment property (125,848) (201,425)
Purchase and sale of shares in the Group by the EBT 182 (466)
Receipts from sale of investment property 122,047 180,546
Net cash flows from acquisitions (166) (421)
Net cash flows used in investing activities (5,496) (23,215)
Cash flows from financing activities
Equity dividends paid (4,562) (3,628)
Net proceeds from issue of ordinary shares 210 —
Net decrease in borrowings (9,456) (7,538)
Principal elements of lease payments (933) —
Interest paid (465) (297)
Net cash used in financing activities (15,206) (11,463)
Net decrease in cash and cash equivalents (10,029) (6,273)
Cash and cash equivalents at the beginning of the year 431,576 437,849
Cash and cash equivalents at the end of the year 421,547 431,576
* During the year ended 31 December 2019 the Group identified that cash flows relating to investment properties should be
presented separately in the consolidated statement of cash flows. These cash flows were previously included within cash flows
relating to property, plant and equipment. Consequently, a new line has been inserted to reflect these cash flows and the prior
year has been restated on the same basis. There is no impact to either the income statement or balance sheet of the group or
company, or the closing cash positions brought forward and carried forward.
40 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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 2019
Year ended 31 December
2019 2018
Company £’000 £’000
Cash flows from operating activities
Profit before tax 6,922 6,937
Adjustments for:
Interest expense 376 467
Changes in working capital:
Increase in trade and other receivables (6) —
Increase/(decrease) in trade and other payables 204 (50)
Taxes paid (158) (81)
Net cash flows received from operating activities 7,338 7,273
Cash flows from investing activities
Investment in employee benefit trust — (548)
Net cash flows used in investing activities — (548)
Cash flows from financing activities
Equity dividends paid (4,562) (3,622)
Net proceeds from issue of ordinary shares 210 —
Net decrease in borrowings (3,158) (3,157)
Interest paid (465) (297)
Net cash used in financing activities (7,975) (7,076)
Net decrease in cash and cash equivalents (637) (351)
Cash and cash equivalents at the beginning of the year 1,967 2,318
Cash and cash equivalents at the end of the year 1,330 1,967
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 41
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NOTES TO THE FINANCIAL STATEMENTS
Corporate information
1
Curtis Banks Group PLC ("the Company") is a public limited company incorporated in the United Kingdom and
domiciled and registered 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 17 March 2020.
Significant accounting policies
2
Basis of preparation
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 the financial year commencing
1 January 2019:
•
IFRS 16 Leases
IFRS 16
The Group has adopted IFRS16 Leases, which became effective 1 January 2019, in presenting its results for the
year ended 31 December 2019. The Group has applied the modified retrospective method in doing so which
requires recognition from 1 January 2019 without the need to restate comparative amounts prior to this date.
Right-of-use assets for property leases have been measured on transition as if the new rules have always been
applied.
The new standard eliminates the classification, under IAS17, of leases by lessees as either operating (off balance
sheet) or finance leases (on balance sheet). Instead, applying IFRS16, the Group is required to recognise both an
asset and a liability on the balance sheet where a right-of-use asset exists. For the current reporting year, property
leases are the only such leases within the Group. The Group’s leases for various offices differ in contract length
and terms and were classified as operating leases prior to 1 January 2019. These are now classified as right-of-use-
assets and the Group has relied on its historic assessment as to whether the leases were onerous prior to
application of IFRS16.
The Group, in applying IFRS16, has followed the following practical expedients permitted by the standard:
•
•
•
Applying a single discount rate to a portfolio of leases with reasonably similar characteristics
Accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as
short-term leases
Using hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The right-of-use asset represents the lessee’s right to use the underlying asset for the duration of the lease term.
When the Group has the option to invoke a break clause in a lease, management uses its judgement to determine
whether or not the break option would be reasonably certain to be exercised. The liability reflects the lessee’s
contractual obligation to make payments to the lessor throughout the lease term, using a discounted cash flow
model. The Group recognises a depreciation charge and a lease interest charge in the profit and loss account
throughout the lease term.
As a result of leases held, the following changes are reflected in the financial statements on adoption of IFRS16 at
1 January 2019 in respect of shareholder reserves:
•
•
Right-of-use assets increase by £5,285k
Liabilities increase by £5,285k
A reconciliation is provided below between the future aggregate minimum lease payments under non-cancellable
operating leases attributable to shareholder reserves that were disclosed in the Group’s financial statements for
the year ended 31 December 2018, and the liabilities increase of £5,285k stated above.
42 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies - continued
2
New standards adopted by the Group – continued
IFRS 16 – continued
Group
£’000
Operating lease commitments disclosed as at 31 December 2018 1,809
Adjustments as a result of a different treatment of extension and termination options 4,257
Discounted using the lessee’s incremental borrowing rate as of 1 January 2019 (781)
Lease liability recognised as at 1 January 2019 5,285
The impact of IFRS 16 on policyholder assets and liabilities is considered to be immaterial by the Group and
consequently no right-of-use assets or lease liabilities are disclosed in respect of policyholder assets and liabilities.
IFRS 16 would only apply to ground rents on policyholder leasehold investment property and therefore the impact
is minimal.
The Group has updated its accounting policies for the introduction of IFRS16 as follows:
Property, plant and equipment
The accounting policy now includes a statement clarifying how right-of-use assets are treated in the Group’s
financial statements. Right-of-use assets are treated in a consistent manner to other asset types within property,
plant and equipment, and depreciated on a straight line basis over their useful economic lives which are linked at
an individual asset level to the expected underlying lease length.
Leases
This accounting policy has been updated to clarify that following introduction of IFRS16, leases of property, plant
and equipment are no longer classified as finance leases. Instead, the Group assesses whether a right-of-use
relationship exists and classifies a lease as property, plant and equipment when this criteria is satisfied.
Financial liabilities – Trade and other payables
This accounting policy has been expanded to further describe the treatment of other payables arising from lease
liabilities on right-of-use assets. These are held at amortised cost, discounted by an effective interest rate over
the expected term of the lease. The effective interest rate is calculated using an incremental borrowing rate
similar to what the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms, security and conditions. A single discount rate is applied to
portfolios of leases with reasonably similar characteristics.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary
undertakings up to 31 December 2019.
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 2019 were Curtis Banks Limited, Suffolk Life
Pensions Limited, Suffolk Life Annuities Limited, Rivergate Legal Limited and Templemead Property Solutions
Limited. 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.
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 Group are required to disclose
insurance policyholder assets, liabilities and returns.
Certain trading subsidiaries of Curtis Banks Group PLC hold the entire issued share capital of several non-trading
trustee companies. The financial statements of these companies have not been consolidated 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 year
and are expected to remain dormant.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 43
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies - continued
2
Going concern
The Group and Company are required to assess whether they have sufficient resources to continue their operations
and to meet their commitments for the foreseeable future. The directors have prepared the financial statements
on a going concern basis, as in their opinion the Group and Company are both able to meet their 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. The Company is supported by dividend
income from its subsidiaries.
In respect of shareholder reserves, excluding policyholder assets and liabilities, the Group has net current assets of
£16,976k (2018: £15,123k).
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 Pounds 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.
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.
44 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies - continued
2
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.
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.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 45
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies - continued
2
Revenue recognition – continued
–
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.
All brought forward deferred income is recognised in the current year as there are no performance obligations
spanning a period of more than twelve months.
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 4 and 5 years.
Administrative expenses
Administrative expenses represent those arising as a result of the Group’s operations and include depreciation. All
amounts are recognised on an accruals basis.
46 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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
Right of use assets
25%
25%
25%
Expected underlying lease length of between 1 and 12 years
straight line
straight line
straight line
On initial recognition, right of use assets are measured at cost comprising the following:
–
–
–
–
The amount of the initial measurement of lease liability
Any lease payments made at or before the commencement date less any lease incentives received
Any initial direct costs
Any restoration costs expected
Impairment of non-financial assets
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 recorded and subsequently measured at amortised cost. 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.
The Group classifies its financial assets at amortised cost where the asset is held within a business model whose
objective is to collect the contractual cash flows and the contractual terms give rise to cash flows that are solely
payments of principal and interest. Other financial assets are classified as fair value through profit or loss. The
Group has no financial assets at fair value through other comprehensive income.
Amounts recorded and measured at amortised cost include non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. These 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.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 47
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies - continued
2
Trade receivables
Trade receivables are recorded and subsequently measured at amortised cost in accordance with IFRS 9 Financial
Instruments.
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.
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 at bank and in hand, deposits with credit institutions, cash equivalents and
bank overdrafts.
Cash at bank and in hand, and deposits with credit institutions, are classified and measured at amortised cost.
Cash equivalents are classified as fair value through profit loss.
Financial liabilities – Trade and other payables
Trade and other payables are recognised and initially measured at cost, due to their short term nature, and
subsequently measured at amortised cost. 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.
48 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Significant accounting policies – continued
2
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.
Leases
Leases of property, plant and equipment are assessed as to whether a right-of-use relationship exists and are
classified as property, plant and equipment when this criteria is satisfied. 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. Interest and
finance costs associated with lease liabilities on right-of-use assets are expensed to the consolidated statement of
comprehensive income within total finance costs.
Assets and liabilities arising from a lease where a right-of-use relation exists are initially measured on a present
value basis. Lease liabilities include the net present value of fixed payments, less any lease incentive payments
receivable, and include amounts following lease extension options where there is reasonable certainty of
extension. There are no other types of payments or variable amounts included. Lease payments are allocated
between principal and finance cost. The finance cost is charge to the consolidated statement of income over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
year.
Lease payments are discounted using the interest rate implicit in the lease where possible. However, this cannot
currently be readily determined for any of the leases that the Group holds in respect of right-of-use assets. The
Group therefore uses an incremental borrowing rate similar to what it would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms, security and
conditions.
The Group has no short-term leases or low value assets that may be considered as short term leases. All of the
Group’s leases where a right-of-use relationship exists relate to commercial property assets. The Group has no
other classes of right-of-use assets such as equipment or vehicles.
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.
A right-of-use asset exists and a corresponding lease liability exists in respect of non-participating investment
contract assets which relate entirely to ground rent on policyholder leasehold investment property. Consequently
the Group has opted not to recognise right-of-use assets and lease liabilities in relation to these leases as the
impact from recognition in the consolidated financial statements is minimal.
Non-recurring costs
Non-recurring costs are classified as such when the nature and quantum of the expense is significant and arises
from 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.
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.
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 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.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 49
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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
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.
Standard Effective date, annual period beginning on or after
IFRS 17 Insurance Contracts 1 January 2022
Amendments to IAS 1 – Clarification of liabilities as Current or Non-Current 1 January 2020
Amendments to IFRS9, IAS39 & IFRS7 – Interest rate benchmark reform 1 January 2020
Amendments to References to the Conceptual Framework 1 January 2020
Amendments to IAS 1 and IAS 8 – Definition of material 1 January 2020
Amendments to IFRS 3 Business combinations – definition of a business 1 January 2020
The directors anticipate that the adoption of these standards and interpretations and amendments in future years
will have no material impact on the financial statements of the Group.
Critical accounting judgements and key sources of estimation uncertainty
3
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 has estimated 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 estimate 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 a cumulative £74,000 decrease in the carrying value of client portfolios.
A 40% increase to the attrition rate assumption would result in a cumulative £120,000 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 31 to the financial statements.
50 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Revenue
4
Revenue is wholly derived from activities undertaken within the United Kingdom and comprises the following
categories:
Year ended 31 December
2019 2018
£’000 £’000
Fees 36,268 35,352
Interest income 12,681 10,773
Policyholder investment returns 365,815 41,677
414,764 87,802
Profit for the year
5
Profit for the year is arrived at after:
Year ended 31 December
2019 2018
£’000 £’000
Charging:
Amortisation of intangible assets 1,379 1,268
Depreciation of property, plant and equipment 1,321 596
Auditors remuneration:
- audit of the financial statements of the Group 278 201
- audit of the financial statements of the Company 50 56
- audit related assurance services 35 41
Non-recurring costs
6
Non-recurring costs include the following significant items:
Year ended 31 December
2019 2018
£’000 £’000
Hargreave Hale acquisition costs 32 45
Redundancy & restructuring costs 696 156
European Pension Management Ltd acquisition costs 29 47
Data cleansing provision — 500
Costs relating to directorate and senior management changes 334 —
1,091 748
Redundancy & restructuring costs
During the year ended 31 December 2019, the Group progressed its strategy to deliver its Target Operating Model
and centralise commercial property administration within one office location. Redundancy costs associated with
this decision as well as costs associated with duplicated staff efforts while work is transferred between offices
have been included within non-recurring cost.
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.
Costs relating to directorate and senior management changes
During the year ended 31 December 2019, the incumbent Chief Financial Officer of the Group announced he was
stepping down from the role and a successor was recruited. An orderly handover of responsibilities took place
between the previous Chief Financial Officer and the new Chief Financial Officer. Costs associated with this
transitional period, including recruitment costs and costs of associated senior staff changes, have been treated as
non-recurring costs.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 51
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NOTES TO THE FINANCIAL STATEMENTS
continued
Non-recurring costs – continued
6
Data cleansing provision
As part of the consolidation and integration exercise undertaken during the year ended 31 December 2018
management initiated a review of data records relating to commercial properties held within SIPPs administered
by the Group. No further costs associated with this process arose during 2019.
Hargreave Hale & European Pension Management Ltd acquisition costs
During the year ended 31 December 2019 some further costs were incurred in relation to these historic acquisitions
in connection with data migration and data cleanse work.
Directors and employees
7
Year ended 31 December
2019 2018
£’000 £’000
Wages and salaries 18,524 18,034
Social security costs 1,765 1,627
Other pension costs 1,704 1,413
Share-based incentive awards 956 626
22,949 21,700
2019 2018
Number Number
The monthly average number of employees during the year was:
Directors 6 6
Administration 566 552
572 558
Details of emoluments paid to the directors and key management personnel of the Group are as follows:
Year ended 31 December
2019 2018
£’000 £’000
Total emoluments paid to:
Directors
Wages and salaries 1,280 1,876
Social security costs 146 139
Post-employment costs 37 33
Share-based incentive awards 427 467
Key management personnel
Wages and salaries 1,334 1,151
Compensation for loss of office 126 —
Social security costs 173 135
Post-employment costs 67 60
Share-based incentive awards 177 130
3,767 3,991
Emoluments of highest paid director:
Wages and salaries 436 377
Pension contribution 9 13
445 390
Short term employee benefits include wages and salaries. Long term employee benefits include share-based
incentive awards.
52 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Finance costs
8
Year ended 31 December
2019 2018
£’000 £’000
Interest payable on bank loans 382 467
Interest and finance costs on lease liabilities 141 —
523 467
Finance income
9
Year ended 31 December
2019 2018
£’000 £’000
Interest income 145 116
10 Taxation
Year ended 31 December
2019 2018
£’000 £’000
Domestic current year tax
UK Corporation tax 2,202 2,072
Deferred tax
Origination and reversal of temporary differences (169) (161)
2,033 1,911
Factors affecting the tax charge for the year
Profit before tax 10,883 10,121
Profit before tax multiplied by standard rate of UK Corporation tax
of 19.00% (2018: 19.00%) 2,068 1,923
Effects of:
Adjustment to prior year (33) 23
Non-deductible expenses 10 10
Other tax adjustments (12) (45)
(35) (12)
Total tax charge 2,033 1,911
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 53
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NOTES TO THE FINANCIAL STATEMENTS
continued
Earnings per share
11
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:
2019 2018
£’000 £’000
Net profit available to equity holders of the Group 8,850 8,204
Net profit before tax, non-recurring costs (note 6) and amortisation (note 5)
available to equity holders of the Group. 13,353 12,137
Number Number
Weighted average number of ordinary shares:
Issued ordinary shares at start of the year 53,807,346 53,807,346
Effect of shares issued during the year 90,192 —
Effect of shares held by employee benefit trust (244,741) (201,622)
Basic weighted average number of shares 53,652,797 53,605,724
Effect of options exercisable at the reporting date** 1,173,236 965,011
Effect of options not yet exercisable at the reporting date** 1,000,925 1,204,885
Diluted weighted average number of shares 55,826,958 55,775,620
Pence Pence
Earnings per share:
Basic 16.49 15.30
Diluted** 15.85 14.71
Earnings per share on net profit before non-recurring costs and amortisation,
less an effective tax rate*:
Basic 20.16 18.34
Diluted** 19.37 17.63
* 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 2019 was 19.00% (2018: 19.00%).
** During the year the diluted EPS calculation was adjusted to exclude anti-dilutive options. The 2018 diluted EPS has been
restated on the same basis in these financial statements, resulting in an increase of 0.22p per share in 2019 (2018: 0.25p).
There is no impact to either the income statement or balance sheet of the Group.
54 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
12 Intangible assets
Group
Computer
Goodwill Client Portfolios Software Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2018 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
Additions — — 696 696
Disposals — — — —
At 31 December 2019 28,903 18,866 2,177 49,946
Amortisation
At 1 January 2018 — 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
Charge for the year — 941 438 1,379
Disposals — — — —
At 31 December 2019 — 5,320 1,199 6,519
Net book value
At 1 January 2018 28,903 14,978 712 44,593
At 31 December 2018 28,903 14,487 720 44,110
At 31 December 2019 28,903 13,546 978 43,427
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, a book of full SIPPs from Friends Life PLC (now Aviva PLC) on 13 March 2015 and a book of SIPPs
from Hargreave Hale Limited on 10 December 2018.
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.
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 2019 of 14 years and 6 months.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 55
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NOTES TO THE FINANCIAL STATEMENTS
continued
12 Intangible assets – continued
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 Investment Property
Assets held at fair value
Group
Year ended 31 December
2019 2018
£’000 £’000
Fair value
At 1 January 1,274,452 1,206,298
Additions 125,848 201,425
Disposals (122,047) (180,546)
Fair value (losses)/gains (12,469) 47,275
At 31 December 1,265,784 1,274,452
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.
Rental income from investment property is disclosed in note 21(b) to the financial statements.
56 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
14 Property, plant and equipment
Assets held at cost
Group
Office
Right of Leasehold Computer equipment,
use assets Improvements equipment fixtures & fittings Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 January 2018 — 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
Arising on transition to IFRS 16 5,285 — — — 5,285
Additions — — 917 98 1,015
Disposals — — (172) — (172)
At 31 December 2019 5,285 — 5,083 1,626 11,994
Depreciation
At 1 January 2018 — 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
Charge for the year 695 — 459 167 1,321
Disposals — — (172) — (172)
At 31 December 2019 695 — 3,842 1,262 5,799
Carrying value
At 1 January 2018 — 13 936 199 1,148
At 31 December 2018 — — 783 433 1,216
At 31 December 2019 4,590 — 1,241 364 6,195
15 Investments
Assets held at fair value
Total fair value as at 31 December 2019
Group
2019 2018
£’000 £’000
Fair value
Equity and other variable-yield securities 1,920,595 1,734,341
Debt securities and other fixed-income securities 73,602 78,716
Total shares and securities 1,994,197 1,813,057
At cost 1,578,366 1,580,306
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 57
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NOTES TO THE FINANCIAL STATEMENTS
continued
15 Investments – continued
Movement in the year on total shares and securities
Group
2019 2018
£’000 £’000
At beginning of the year 1,813,057 2,032,293
Additions 532,717 490,830
Disposals (584,425) (593,549)
Unrealised (losses)/gains 232,848 (116,517)
At end of the year 1,994,197 1,813,057
The Group values all investments in line with its accounting policy.
Assets held at cost
Company
£’000
Cost
At 1 January 2018 57,266
Additions 1,174
At 31 December 2018 58,440
Additions 956
At 31 December 2019 59,396
Net book value
At 1 January 2018 57,266
At 31 December 2018 58,440
At 31 December 2019 59,396
Additions in the year comprise equity share based payment costs of £956,000.
58 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
15 Investments – continued
The directors are satisfied that no impairment has occurred in the carrying value of the non-current asset
investments at 31 December 2019. Details of the investments are as follows:
% of Ordinary
Registered Shares held % of Ordinary
Office Address Principal Country of by parent Shares held
Name of entity 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 company England and Wales 100.00 100.00
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
CB 2019 Limited (A) Provision of England and Wales — 90.00
financial advice
Rivergate Legal Limited (A) Provision of England and Wales — 100.00
legal services
Templemead Property
Solutions Limited (A) Provision of England and Wales — 100.00
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
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
s479 of the Companies Act 2006.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 59
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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 2019
Equity and other variable-yield securities 1,920,595 1,881,632 28,477 10,486
Debt securities and other fixed-income securities 73,602 40,995 25,110 7,497
Cash equivalents 604 416 188 —
Investment property 1,265,784 — — 1,265,784
Total financial investments and investment
property 3,260,585 1,923,043 53,775 1,283,767
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 — — 1,274,452
Total financial investments and investment
property 3,088,851 1,740,366 52,937 1,295,548
There have been no significant transfers between level 1 and level 2 in 2019 (2018: £nil).
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.
60 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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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.
With the exception of £42k (2018: £41k) of investment property, all level 3 investments relate to policyholder
assets and movements in the value of such assets do not therefore impact on shareholder reserves.
Equity and Debt securities and
other variable-yield other fixed income Investment
securities securities Property
2019 2019 2019
Level 3 Investments £’000 £’000 £’000
Fair value
At 1 January 2019 16,907 4,189 1,274,452
Net (losses)/gains for the year recognised in
profit and loss (5,948) 4,759 (12,469)
Purchases/Additions — — 125,848
Disposals — — (122,047)
Transfers into level 3 7,836 966 —
Transfers out of level 3 (8,309) (2,417) —
At 31 December 2019 10,486 7,497 1,265,784
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
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 where observable inputs are no longer
available. 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 2019 alternative assumptions
Current Increase in Decrease in
fair value fair value fair value
Valuation Main inputs 2019 2019 2019
Assets Basis/Technique and assumptions £’000 £’000 £’000
Suspended securities Note 1 Estimated
recoverable
amount 9,992 500 (500)
Unquoted securities Note 1 Price earning
Investment property Note 2 Third party
property index 1,265,784 63,289 (63,289)
multiple 7,991 400 (400)
1,283,767 64,189 (64,189)
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
recoverable
amount 4,326 216 (216)
Unquoted securities Note 1 Price earning
Investment property Note 2 Third party
property index 1,274,452 63,723 (63,723)
multiple 16,770 839 (839)
1,295,548 64,778 (64,778)
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 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
Trade and other receivables
17
Group Company
As at 31 December As at 31 December
2019 2018 2019 2018
£’000 £’000 £’000 £’000
Trade receivables 13,305 10,698 — —
Prepayments and accrued income 5,689 5,811 8 2
Amounts owed by group undertakings — — 70 50
Other receivables 921 1,546 — —
19,915 18,055 78 52
All 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 from 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 31 to the
financial statements.
18 Cash and cash equivalents
As at 31 December 2019 and 2018 cash and cash equivalents were as follows:
Group Company
As at 31 December As at 31 December
2019 2018 2019 2018
£’000 £’000 £’000 £’000
Cash at bank and in hand 31,228 28,018 1,330 1,967
Deposits with credit institutions 389,715 402,216 — —
Cash equivalents 604 1,342 — —
Cash and cash equivalents 421,547 431,576 1,330 1,967
The Group considers potential expected credit losses on cash and cash equivalents to be insignificant.
19 Trade and other payables
Group Company
As at 31 December As at 31 December
2019 2018 2019 2018
£’000 £’000 £’000 £’000
Trade payables 1,553 1,787 47 19
Taxes and social security costs 3,204 2,165 — —
Amounts owed to group undertakings — — 168 27
Other payables 4,974 5,442 — —
Accruals 5,877 5,810 107 174
15,608 15,204 322 220
Trade payables are non-interest bearing and are normally settled on 30 day terms.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 63
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NOTES TO THE FINANCIAL STATEMENTS
continued
20 Borrowings
Group Company
As at 31 December As at 31 December
2019 2018 2019 2018
£’000 £’000 £’000 £’000
Current
Bank loans 28,215 30,005 3,156 3,158
28,215 30,005 3,156 3,158
Non-current
Bank loans 48,911 56,525 8,274 11,396
48,911 56,525 8,274 11,396
Total borrowings 77,126 86,530 11,430 14,554
Bank borrowings
The bank borrowings are repayable as follows:
Group Company
As at 31 December As at 31 December
2019 2018 2019 2018
£’000 £’000 £’000 £’000
Within 1 year 28,215 30,005 3,156 3,158
Between 1 year and 5 years 31,793 38,306 8,274 11,396
After more than 5 years 17,118 18,219 — —
77,126 86,530 11,430 14,554
Bank borrowings of the Company are repayable between January 2020 and January 2021 and bear average coupons
of 1.75% plus LIBOR per annum.
Total borrowings of the Group include liabilities of £65,696,000 (2018: £72,085,000) secured by legal charge over
certain properties held within non-participating investment contracts, and liabilities of £11,430,000 (2018:
£14,554,000) 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 (2018: £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.
2019 2018
Movement in non-participating investment contract liabilities £’000 £’000
As at 1 January 3,405,428 3,561,929
Reserves in respect of new business 112,052 182,532
Amounts paid on surrenders and maturities during the year (277,448) (346,233)
Investment income 365,815 41,677
Expenses (33,943) (34,477)
As at 31 December 3,571,904 3,405,428
These relate to:
2019 2018
£’000 £’000
Self-Invested Personal Pensions 2,500,340 2,355,773
Group Managed Funds – Trustee Investment Plans 65,054 70,172
Group Managed Funds 74,736 76,230
Trustee Investment Plans 931,774 903,253
As at 31 December 3,571,904 3,405,428
Assets held to cover non-participating investment contracts are detailed under separate notes to the
financial statements.
(b)
Investment contract liabilities – investment income
2019 2018
£’000 £’000
Rents receivable 81,697 78,358
Interest receivable 3,326 3,222
Investment and other income 36,378 37,734
Realised gains/(losses) on investments 24,772 (9,689)
Unrealised gains/(losses) on investments 219,642 (67,948)
365,815 41,677
(c)
Investment contract liabilities – expenses
2019 2018
£’000 £’000
Investment management fees 10,322 10,558
Adviser fees 379 315
Management charges – administration 8,807 6,988
Bank fees and charges 180 117
Professional fees and sundries 11,417 13,233
Bad debts 593 663
Interest payable on bank loans and overdrafts 2,245 2,603
33,943 34,477
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 65
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NOTES TO THE FINANCIAL STATEMENTS
continued
21 Non-participating investment contract liabilities – continued
(d)
Reserves in respect of new business
2019 2018
£’000 £’000
Gross premiums
Periodic premiums relating to Self-Invested Personal Pensions 2,270 2,777
Single premiums relating to Self-Invested Personal Pensions 34,164 52,965
Single premiums relating to Group Managed Funds – TIPs 3,274 6,671
Single premiums relating to Group Managed Funds 2,280 8,243
Single premiums relating to Trustee Investment Plans 70,064 111,876
112,052 182,532
(e)
Amounts paid on surrenders and maturities during the year
2019 2018
£’000 £’000
Gross claims paid
Lump sums on death 9,868 28,366
Lump sums on pensions vesting 23,039 21,697
Income withdrawals 33,979 38,341
Annuities purchased 941 856
Transfers out 200,949 247,186
Surrenders of managed funds – Trustee Investment Plans 8,672 9,787
277,448 346,233
22 Deferred tax asset
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
2019 2018
£’000 £’000
Brought forward asset 595 124
Net change in temporary differences on equity share based payments 383 454
Net change in temporary differences on plant and equipment (67) 17
Carried forward asset 911 595
The deferred tax asset with respect to temporary differences is analysed as follows:
Group
As at 31 December
2019 2018
£’000 £’000
Temporary differences on equity share based payments 837 454
Temporary differences on plant and equipment 74 141
911 595
The deferred tax asset assumes a future corporation tax rate of 17% will be applicable to the Group.
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NOTES TO THE FINANCIAL STATEMENTS
continued
23 Provisions
As at 31 December
Other Restructuring Onerous lease Group
provision provision provision Total
Provisions £’000 £’000 £’000 £’000
Balance as at 1 January 2018 — 534 366 900
Amounts introduced 500 — — 500
Amounts utilised — (532) (197) (729)
Amounts written back unused — (2) (169) (171)
Balance as at 31 December 2018 500 — — 500
Amounts introduced — 307 — 307
Amounts utilised (254) — — (254)
Balance as at 31 December 2019 246 307 — 553
Other provision
As part of the consolidation and integration exercise undertaken during the year ended 31 December 2018
management initiated a review of data records relating to commercial properties held within SIPPs administered
by the Group. A provision of £500,000 was made for the estimated costs arising from this exercise. Additionally, a
contingent liability was recognised as disclosed within note 34 to the financial statements.
As at 31 December 2019, the Group had completed its review enabling identification of the total number of cases
potentially requiring remediation. However, the nature and financial impact of the remediation is still not certain
and is therefore included at the Directors’ best estimate of the direct costs the Group may have to bear.
As at 31 December 2019, £254,000 of the original provision had been utilised, and there were no material
variances to the estimate of future remaining direct costs the Group may have to bear.
Restructuring provision
During the year ended 31 December 2018, brought forward amounts associated with the closure of the Group’s
office in Market Harborough were utilised.
During the year ended 31 December 2019, the Group progressed its strategy to deliver its Target Operating Model
by deciding to centralise commercial property administration within one office location. Redundancy costs
associated with this decision are included as amounts introduced to the restructuring provision for the current
year.
Onerous lease provision
During the year ended 31 December 2018, brought forward amounts associated with the closure of the Group’s
office in Market Harborough were utilised. A proportion of the onerous lease provision was written back as unused
following successful sublet of the office to a third party.
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NOTES TO THE FINANCIAL STATEMENTS
continued
24 Issued capital
Group and Company
2019 2018
£’000 £’000
Allotted, called up and fully paid
Ordinary shares of 0.5p each 271 269
271 269
Number Number
Number of Ordinary shares
Brought forward 53,807,346 53,807,346
Issued during the year 335,000 —
Carried forward 54,142,346 53,807,346
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.
25 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 26.
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 £6,922,000 (2018:
£6,937,000).
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 2019, the EBT held 206,286 ordinary shares in the Company, acquired for a total consideration of
£614,084 with a market value of £728,190 (2018: 263,790 ordinary shares acquired for a total consideration of
£793,027 with a market value of £701,681). They are classified as treasury shares in the Consolidated Statement
of Financial Position, their cost being deducted from equity.
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NOTES TO THE FINANCIAL STATEMENTS
continued
26 Equity share based payments
The weighted average exercise price for all options outstanding at 31 December 2019 was 162.17p (2018: 151.71p).
The weighted average exercise price for all options exercised during the year ended 31 December 2019 was 99.32p
(2018: 249.49p).
The weighted average remaining contractual life of all unexercised share options as at 31 December 2019 was 5
years and 8 months (2018: 6 years and 7 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 2019 was £956,000 (year ended 31 December 2018:
£626,000). The total increase in equity arising from equity-settled share-based payment transactions for the year
ended 31 December 2019 was £956,000 (year ended 31 December 2018: £626,000).
The following table sets out each of the Group’s equity share based payments in operation during the year ended
31 December 2019:
Number of Number of
shares under shares under
option at option at Latest
Date of 1 January 31 December Exercise Exercise
Scheme grant 2019 Granted Exercised Lapsed 2019 price Date
EMI15 08/04/15 800,000 — (335,000) — 465,000 62.54p 08/04/25
SS16 28/06/16 80,674 — (61,163) (1,993) 17,518 288.88p 01/02/20
SS17 30/05/17 516,064 — (6,366) (38,205) 471,493 213.60p 01/02/21
SS18 21/05/18 107,306 — — (29,511) 77,795 268.80p 01/02/22
SS19 21/05/19 — 217,704 — (37,119) 180,585 244.80p 01/02/23
CSOP16A 14/09/16 171,616 — — — 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 26/10/17 373,073 — — — 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
3,330,887 217,704 (402,529) (106,828) 3,039,234
Of the total 3,039,234 shares under option as at 31 December 2019, 1,190,130 were exercisable.
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 2019, one employee of Curtis Banks Limited held options under the EMI.
SS16, SS17, SS18 & SS19
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 3 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 2019, four key management personnel of the Group held options under
the CSOP. The CSOP is a performance based option grant.
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 2019, seven key management personnel of the Group held options under
the LTIP.
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NOTES TO THE FINANCIAL STATEMENTS
continued
26 Equity share based payments (continued)
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:
Option Fair value Share price Risk free
vesting per option on grant rate of Expected Dividend
Scheme Date of grant period granted date interest volatility yield
EMI15 08/04/15 3 years 5.64p 62.54p 0.50% 24.00% 0.00%
SS16 28/06/16 3 years 58.76p 302.50p 0.50% 29.00% 1.00%
SS17 30/05/17 3 years 99.77p 282.50p 0.25% 44.29% 1.50%
SS18 21/05/18 3 years 84.09p 316.00p 0.50% 37.39% 1.98%
SS19 21/05/19 3 years 79.37p 308.00p 0.75& 33.05% 2.60%
CSOP16A 14/09/16 1.5 years 45.58p 267.00p 0.25% 39.01% 1.00%
CSOP16B 15/12/16 3 years 52.42p 201.00p 0.25% 42.95% 1.00%
CSOP17 26/06/17 3 years 63.54p 260.00p 0.25% 43.41% 1.50%
LTIP17 26/10/17 3 years 289.25p 310.00p 0.25% 46.66% 1.50%
LTIP18A 18/09/18 3 years 262.35p 287.00p 0.75% 36.05% 2.18%
LTIP18B 05/10/18 3 years 265.09p 290.00p 0.75% 35.98% 2.18%
27 Non-controlling interests
The non-controlling interests reflect the relevant amounts of the trading results and net assets attributable to the
non-controlling shareholders in CB 2019 Limited (see note 15).
As at 31 December
2019 2018
£’000 £’000
Share of net assets brought forward 14 14
Movement in the year – share of profits — 6
Ordinary dividends declared — (6)
Share of net assets 14 14
28 Financial commitments
The future aggregate minimum lease payments under non-cancellable operating leases attributable to shareholder
reserves are as follows:
As at 31 December
2019 2018
Attributable to shareholder reserves £’000 £’000
Land and buildings
Within 1 year — 901
Within 2 – 5 years — 908
— 1,809
From 1 January 2019 the Group has recognised right-of-use assets for the leases disclosed above, which relate to
the Group’s three office locations in the UK. Please see note 14 for further details.
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NOTES TO THE FINANCIAL STATEMENTS
continued
28 Financial commitments (continued)
The following other financial commitments are not subject to IFRS 16.
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
2019 2018
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: 1,490 1,832
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
2019 2018
Attributable to non-participating investment contracts £’000 £’000
Future aggregate minimum lease receivables under non-cancellable operating
leases:
Within 1 year 71,363 70,126
Within 2 – 5 years 139,164 162,679
After more than 5 years 78,786 290,557
289,313 523,362
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is
as follows:
As at 31 December
2019 2018
Attributable to shareholder reserves £’000 £’000
Intangible assets 878 —
29 Pension costs – defined contribution
As at 31 December
2019 2018
£’000 £’000
Contributions payable by the Group for the year 1,704 1,413
30 Dividends
As at 31 December
2019 2018
£’000 £’000
Ordinary interim declared and paid 4,562 3,622
4,562 3,622
An interim share dividend in respect of the year ended 31 December 2019 of 2.50p per share was declared and
paid on 14 November 2019.
A final share dividend in respect of the year ended 31 December 2019 of 6.50p per share is proposed and, if
approved, will be paid on 8 June 2020.
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NOTES TO THE FINANCIAL STATEMENTS
continued
Financial risk management
31
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. There is deemed to be minimal concentration risk present due to revenue
generation being spread over a high volume of individual customers. All risk management included in this note is in
relation to shareholder assets and liabilities, as there is no credit risk, interest risk or liquidity risk on the
policyholder assets and liabilities attributable to shareholder reserves.
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. 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.
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 £31,228k (2018: £28,018k) 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 £11,339k (2018: £14,448k). 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
2019
£ Sterling +100 (146)
£ Sterling —100 146
2018
£ Sterling +100 (176)
£ Sterling —100 176
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.
72 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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NOTES TO THE FINANCIAL STATEMENTS
continued
Financial risk management (continued)
31
Credit risk (continued)
The Group’s credit quality ratings as at 31 December 2019 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 4,370 (187) 4,183
Satisfactory quality 10.01 – 30.00 52 (16) 36
Low quality 30.01 – 99.99 1,043 (793) 250
No expected recovery 100.00 30 (30) —
5,495 (1,026) 4,469
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
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 £13,305,000 at 31 December 2019 (2018: £10,698,000) includes £8,836,000 (2018: £7,196,000)
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 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.
The Group regularly categorises its trade receivables to help determine underlying changes in the level of liquidity
of the SIPP which then drives changes in the estimated loss allowance associated with the trade receivables
balance.
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.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 73
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NOTES TO THE FINANCIAL STATEMENTS
continued
Financial risk management (continued)
31
Credit risk (continued)
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:
Effect on profit
Increase/(decrease) before tax
Year ended 31 December 2019 in loss rates £’000
Loss rate 10% (445)
Loss rate (10%) 240
Effect on profit
Increase/(decrease) before tax
Year ended 31 December 2018 in loss rates £’000
Loss rate 10% (381)
Loss rate (10%) 228
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 and details on the maturity of the
Group’s lease liabilities are as reflected in the consolidated statement of financial position. The undiscounted
value of lease liabilities due <1 year is £890k. The undiscounted value of lease liabilities due >1 year is £4,609k.
Maturity analysis relating to other financial liabilities including trade and other payables and deferred
consideration is as disclosed in the consolidated statement of financial position as these liabilities are all due
<1 year.
32 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 2019 was £55,453k (2018: £49,670k). 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.
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NOTES TO THE FINANCIAL STATEMENTS
continued
33 Related parties
At the year end, Curtis Banks Group PLC owed £167,593 to Curtis Banks Limited (2018: £26,586). 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 £141,007 (2018: £220,374).
During the year ended 31 December 2019, Suffolk Life Group Limited paid dividends totalling £4,000,000 to Curtis
Banks Group PLC (2018: £4,000,000). During the year ended 31 December 2019, Curtis Banks Limited paid
dividends totalling £4,000,000 to Curtis Banks Group PLC (2018: £4,000,000).
During the year ended 31 December 2019, the Group provided an unsecured loan of £20,000 to Rivergate Legal
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.
During the year ended 31 December 2019, the Group paid £50,000 (2018: £138,000) gross emoluments to Chris
Banks, a strategic adviser and significant shareholder of Curtis Banks Group PLC.
During the year ended 31 December 2018 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.
34 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 by SIPP providers 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
During the year ended 31 December 2018, management initiated a review of data records related to commercial
properties held within SIPPs administered by the Group.
This review involved a case by case assessment of each of the commercial properties within the population in
order to assess whether any remedial action was required by the Group in respect of that commercial property or
the associated SIPP.
Provision was made in 2018 for the estimated direct costs that the Group might incur in respect of this exercise, as
disclosed in note 23. The Directors consider that it is possible that the Group may also be exposed to indirect costs
in the future, depending on the ultimate outcome of the case by case reviews.
Following completion of the case by case assessment, the Directors’ best estimate of this contingent liability is
£2.3m (2018: £1.5m). The increase in the estimate has been informed by the more complete data available
following completion of the assessment.
There remain inherent uncertainties in the estimate due to the potential for variations in the assumed action
required to rectify individual positions. This estimate will be reviewed regularly, and any changes or refinements
will be reported as appropriate. The Directors’ current expectation is that any potential material follow up actions
will be completed during 2020.
35 Control
There is no one ultimate controlling party.
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 75
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COMPANY INFORMATION
Directors
Will Self – Chief Executive Officer
Dan Cowland – Chief Financial Officer
Jane Ridgley – Chief Operating Officer
Chris Macdonald – Non-Executive Chairman
Bill Rattray – Non-Executive Director
Jules Hydleman – Non-Executive Director
Strategic Advisers
Chris Banks
Rupert Curtis
Registered Office
3 Temple Quay
Temple Back East
Bristol
BS1 6DZ
Registered Number
07934492
Nominated Advisor and Broker
Peel Hunt LLP
Moor House
120 London Wall
London
EC2Y 5ET
Independent Auditors
PricewaterhouseCoopers LLP
2 Glass Wharf
Bristol
BS2 0FR
Solicitors
Roxburgh Milkins Limited
Merchants House North
Wapping Road
Bristol
BS1 4RW
Registrars
ComputerShare Plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
Joint Broker
N+1 Singer Ltd
1 Bartholomew Lane
London
EC2N 2AX
76 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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SUPPLEMENTARY UNAUDITED INFORMATION
Unaudited IFRS Consolidated Statement of Financial Position as at 31 December 2019 split
between insurance policy holders and the Group’s shareholders
2019 2019 2019 2018
£’000 £’000 £’000 £’000
ASSETS Group Total Policyholder Shareholder Shareholder
Non-current assets
Intangible assets 43,427 — 43,427 44,110
Investment property 1,265,784 1,265,742 42 41
Property, plant and equipment 6,195 — 6,195 1,216
Investments 1,994,197 1,994,197 — —
Deferred tax asset 911 — 911 595
3,310,514 3,259,939 50,575 45,962
Current assets
Trade and other receivables 19,915 10,406 9,509 9,711
Cash and cash equivalents 421,547 390,319 31,228 28,018
Current tax asset 446 446 — —
441,908 401,171 40,737 37,729
Total assets 3,752,422 3,661,110 91,312 83,691
LIABILITIES
Current liabilities
Trade and other payables 15,608 9,642 5,966 6,295
Deferred income 26,192 13,777 12,415 11,407
Borrowings 28,215 25,059 3,156 3,158
Lease liabilities 719 — 719 —
Provisions 553 — 553 500
Deferred consideration 214 — 214 255
Current tax liability 738 — 738 991
72,239 48,478 23,761 22,606
Non-current liabilities
Borrowings 48,911 40,728 8,183 11,290
Lease liabilities 3,915 — 3,915 —
Deferred consideration — — — 125
Non-participating investment
contract liabilities 3,571,904 3,571,904 — —
3,624,730 3,612,632 12,098 11,415
Total liabilities 3,696,969 3,661,110 35,859 34,021
Net assets 55,453 — 55,453 49,670
Equity attributable to owners of
the parent
Issued capital 271 — 271 269
Share premium 33,659 — 33,659 33,451
Equity share based payments 2,313 — 2,313 1,357
Treasury shares (534) — (534) (716)
Retained earnings 19,730 — 19,730 15,295
55,439 — 55,439 49,656
Non-controlling interest 14 — 14 14
Total equity 55,453 — 55,453 49,670
Annual Report and Consolidated Financial Statements for the year ended 31 December 2019 Curtis Banks Group PLC | 77
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SUPPLEMENTARY UNAUDITED INFORMATION
continued
Unaudited IFRS Consolidated Statement of Cash Flows as at 31 December 2019 split between
insurance policy holders and the Group’s shareholders
2019 2019 2019 2018
£’000 £’000 £’000 £’000
Group Total Policyholder Shareholder Shareholder
Cash flows from operating activities
Profit before tax 10,883 — 10,883 10,121
Adjustments for:
Depreciation 1,321 — 1,321 596
Amortisation and impairments 1,379 — 1,379 1,268
Interest expense 523 — 523 467
Share based payment expense 956 — 956 626
Fair value gains on financial investments (232,848) (232,848) — —
Additions of financial investments (532,717) (532,717) — —
Disposals of financial investments 584,425 584,425 — —
Fair value losses on investment
properties 12,469 12,469 — —
Increase in liability for investment
contracts 166,476 166,476 — —
Changes in working capital:
(Increase)/decrease in trade and
other receivables (1,730) (1,843) 113 (772)
Increase in trade and other payables 1,990 898 1,092 833
Taxes paid (2,454) — (2,454) (1,375)
Net cash flows from operating activities 10,673 (3,140) 13,813 11,764
Cash flows from investing activities
Purchase of intangible assets (696) — (696) (785)
Purchase of property, plant & equipment (1,015) — (1,015) (664)
Purchase of investment property (125,848) (125,848) — —
Purchase and sale of shares in the
Group by the EBT 182 — 182 (466)
Receipts from sale of investment property 122,047 122,047 — —
Net cash flows from acquisitions (166) — (166) (421)
Net cash flows from investing activities (5,496) (3,801) (1,695) (2,336)
Cash flows from financing activities
Equity dividends paid (4,562) — (4,562) (3,628)
Net proceeds from issue of ordinary shares 210 — 210 —
Net decrease in borrowings (9,456) (6,298) (3,158) (3,158)
Principal element of lease payments (933) — (933) —
Interest paid (465) — (465) (297)
Net cash flows from financing activities (15,206) (6,298) (8,908) (7,083)
Net (decrease)/increase in cash and
cash equivalents (10,029) (13,239) 3,210 2,345
Cash and cash equivalents at the
beginning of the year 431,576 403,558 28,018 25,673
Cash and cash equivalents at the end
of the year 421,547 390,319 31,228 28,018
78 | Curtis Banks Group PLC Annual Report and Consolidated Financial Statements for the year ended 31 December 2019
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CURTIS BANKS GROUP PLC
3 Temple Quay, Bristol BS1 6DZ l Tel: 0117 910 7910 l www.curtisbanks.co.uk