ANNUAL REPORT
AND FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
30 SEPTEMBER 2020
Resilient.
IntegraFin Holdings plc
Company Registration
Number: 08860879
PERFORMANCE HIGHLIGHTS
OPERATIONAL
FINANCIAL
Funds Under Direction*:
Revenue:
£41.09bn
(2019 – £37.80 billion)
9%
£107.3m
(2019 – £99.2 million)
8%
Net inflows*:
Operating profit attributable
to shareholders:
£3.59bn
(2019 – £3.50 billion)
3%
£55.3m
(2019 – £49.6 million)
11%
Client numbers:
Profit after tax:
191.9k
(2019 – 179.5k)
7%
£45.5m
(2019 – £41.1 million)
11%
Adviser numbers:
Earnings per share:
6.2k
(2019 – 5.9k)
6%
13.7p
(2019 – 12.4p)
10%
Shareholder returns in 2020*:
8.3p
(2019 – 7.8p)
6%
*Certain financial measures include alternative performance measures (APMs) which are indicated with an asterisk.
APMs are financial measures which are not defined by IFRS. They are used in order to provide better insight into the performance
of the Group. Further details are provided in the glossary, on page 168.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 1
2 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
CONTENTS
Performance Highlights
Financial Statements
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Strategic Report
Consolidated Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . 114
Chair’s Statement . . . . . . . . . . . . . . . . . . . 4
Company Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . 115
Chief Executive Officer’s Review . . . . 6
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Transact – Our Business Model . . . . . 8
Company Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Our Strategic Objectives . . . . . . . . . . . 12
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Key Performance Indicators . . . . . . . . 18
Company Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
COVID-19 Statement . . . . . . . . . . . . . . 20
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Business Review . . . . . . . . . . . . . . . . . . . . 22
Company Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Chief Financial Officer’s Review . . . . 26
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Risk and Risk Management . . . . . . . . 38
Going Concern and Viability
Other Information
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Directors, Company Details, Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Corporate Social Responsibility . . . . 50
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Companies Act Section 172 . . . . . . . . 56
Approval of the Strategic Report . . . 58
Governance
Board of Directors . . . . . . . . . . . . . . . . . . 59
Corporate Governance Report . . . . . 63
Audit and Risk Committee
Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Nomination Committee Report . . . . . 73
Directors’ Remuneration Report . . . 76
Directors’ Report . . . . . . . . . . . . . . . . . . . 99
Statement of Directors’
Responsibilities . . . . . . . . . . . . . . . . . . . . 103
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 3
STRATEGIC REPORT
Richard Cranfield
Chair
CHAIR’S STATEMENT
Overview
Our last financial year saw dramatic
events, the biggest being the global
COVID-19 pandemic, but also
continuing global trade tensions
and a bad-tempered and divisive
US Presidential election campaign.
We now seem to be headed into
a significant global recession and this
is even before the more localised
disruption of Brexit plays out. Equity
markets have been buffeted by these
difficulties, but have benefited from
significant quantitative easing and
been more resilient than many would
have expected.
Given the prevailing economic instability,
our performance has been gratifyingly
robust. Alexander Scott comments
on the results in more detail in his
Chief Executive Officer’s Review.
COVID-19
Discussing the emerging pandemic
with Ian Taylor, Alex Scott and
Jonathan Gunby back in January,
I remember them expressing
concerns about the possibility of
being faced with a major lockdown.
When it came to pass in March, the
Group responded with immense hard
work and application and got virtually
everyone in the UK and Australia
working remotely. It was a massive
achievement by everyone involved,
particularly the IT professionals,
who managed this abrupt change in
4 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
working practices. The board thanks
everyone very much indeed for their
efforts and courage in the face of real
adversity.
The Group is proud that it did not
furlough any staff, or take advantage
of any other Government assistance.
The Board
The major change to management
this year has been Ian stepping down
in February, Alex becoming Group
Chief Executive and Jonathan becoming
Chief Executive of Integrated
Financial Arrangements Ltd (IFAL)
and joining the Group board. These
changes have progressed smoothly
and Ian remains on the board as
Executive Director until he retires in
February 2021.
It is difficult to overstate the crucial
role played by Ian in the development
of the Group and Transact since its
foundation in 1999. From a standing
start to a FTSE 250 Group employing
over 500 staff; with 6,200 IFA clients
and, through them, 192,000 ultimate
investors; and Funds Under Direction
(FUD) in excess of £41bn as at
30 September 2020; it is an immense
achievement. We are hugely grateful
for Ian’s leadership, commitment and
example, and will all have to work
hard to maintain the standards he
set. We wish Ian and Frances a very
happy retirement.
The members of the board would like
to thank all our hard working colleagues
for their extended efforts dealing with
the continuing challenge posed by the
pandemic and the social and financial
consequences that are continuing to
flow from it. These results, clients’
satisfaction, and our ranking within
the platform sector are the product of
their efforts and play a vital part in
the growth of the business.
Richard Cranfield
Chair
16 December 2020
to rank so highly in client service
polls undertaken by Investment
Trends and CoreData, and that our
senior staff have such longevity with
the Group.
Remuneration
The Remuneration Report is set out
on page 76.
Dividend
In line with our dividend policy and
in recognition of our financial
performance, we have declared a
second interim dividend of 5.6 pence.
Together with our first interim
dividend paid in June of 2.7 pence
per ordinary share, this takes the
total dividend to 8.3 pence.
Closing
This has been my first year as Chair
and I have thoroughly enjoyed the
challenge and the interaction with
new colleagues across the business.
In particular I have been struck by
their professionalism and
commitment to customers.
The board is pleased that Alex
accepted its invitation to lead the
Group as its new Chief Executive and
that Jonathan did likewise to become
Chief Executive of IFAL. The board is
confident that they both bring the
right skills and knowledge to their
respective roles.
Governance and culture
This is the first year that the 2018
UK Corporate Governance Code
(the Code) has applied to the Group.
Confirmation of how we have complied
with the Code for the year under
review is set out on page 63.
Constructive, transparent and open
engagement with our stakeholders
outside of the boardroom forms a
critical aspect of board-level activity.
On pages 56 to 57, we present our
first Section 172 (s172) statement,
which sets out how we consider
our key stakeholders in our
decision making.
The board is focused on good
governance and we continue to
strengthen all aspects of this throughout
the Group. We have rigorous Audit
and Risk, and Remuneration
Committees which meet regularly
and review in depth the work of the
executives. Strong governance is a
vital ingredient of any successful
company and we commit significant
resources to the process and all its
constituent parts. In particular, the
Nomination Committee was closely
involved in all aspects of the succession
planning and appointment processes
around the board changes referred
to above.
The external board effectiveness
review is discussed on page 67.
We take great care of our corporate
culture and values – which are
reflected both in our staff relations
and in our interactions with customers
and other key stakeholders. It is
particularly pleasing that we continue
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 5
STRATEGIC REPORT
continued
Alexander Scott
Chief Executive Officer
CHIEF EXECUTIVE
OFFICER’S REVIEW
I am pleased to introduce my first
review as Chief Executive.
Mike Howard and Ian built the business
on a foundation of recruiting high
calibre staff to deliver the highest
quality customer service as efficiently
as possible. I picked up the mantle
from Ian in early March as we
entered a period of significant change
to the operating environment and my
primary concerns have been to
ensure the ongoing wellbeing of our
staff, and the continuing delivery of
that service to our clients. This will
be an ongoing theme as we negotiate
our way through the coming months.
With the secure foundation we have
built over many years, I believe we
can continue to develop our offering
to the benefit of all our stakeholders.
Headlines
Given the events that unfolded over
the second half of our financial year,
we are very pleased to deliver a robust
set of results.
Gross inflows of £5.75 billion remained
at broadly the same level as last
year, while net inflows of £3.59 billion
were 3% higher. The increase in net
inflows was driven by a reduction in
outflows, as clients’ spending patterns
reduced in the second half of the year.
FUD at the year-end totalled
£41.09 billion, an increase of 9%
over the year. Other key metrics
also continued to demonstrate
positive performance, with client
numbers passing 190k (+7%) and
adviser numbers passing 6k (+6%).
This drove an increase in revenue
to £107.3 million (+8%) and, coupled
with sensible expense management,
has enabled us to report that profit
before tax increased by 11% to
£55.3 million.
Market background
Strong equity market performance,
where the FTSE All Share Index rose
5% from October through to early
March was matched by growth in
inflows in the platform market,
reversing the softening that had
occurred throughout much of our
previous financial year. This continued
through to the tax year end, but changed
rapidly as the impact of government
measures to address COVID-19
took effect.
The second half, in a completely
different, unparalleled operating
environment, was difficult for clients
and their advisers. Inflows fell across
the retail advised platform sector as
advisers focused on delivery of service
to their current clients. Despite the
difficulties, the market continued to
function, with services previously
provided face-to-face being provided
virtually, and paper-based processes
being replaced by digital processes.
6 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Over the full year, the retail advised
platform market FUD grew by 6%
from £433.61 billion (restated
September 2019. Revised from
£427.7 billion, as stated in FY19’s
accounts, due to the inclusion of two
more competitors) to £460.52 billion
(September 2020).
Our activity
Against this backdrop, we have seen
a small increase in our market share
of FUD, and we consistently rank in
the top three firms for gross inflows.
According to Fundscape statistics we
have achieved the highest 2020 net
flows to date among retail advised
platforms.
We achieved this by enhancing our
service offering with incremental
additions to functionality and
responsible price reductions creating
more value for money for our clients.
For the eleventh year running,
Transact retained the top spot in the
annual independent research studies
by Investment Trends and CoreData.
This was especially rewarding as we
have had to adapt to delivering our
service whilst working from home.
As owners of proprietary platform
software, we were in full control of
the realignment of our technology
development – so, from early March,
we concentrated on digital processing
enhancements, better enabling clients
and advisers to manage financial
plans with reduced need for physical
documents and wet signatures.
The outlook
The outlook is clearly heavily
dependent upon the economic effects
of the measures being taken to
combat COVID-19 and their impact
upon equity markets, FUD and flows.
The operating environment has
become more difficult and
unpredictable and this seems likely
to remain the case in the coming
months. Additionally, there is still
little certainty on the shape of the
UK’s trading relationship with the
European Union, despite the proximity
of the end of the transition period.
However, none of this changes the
fundamental need of individuals and
their families to plan and take care
of their financial future, so we will
continue to refine our systems and
processes and further develop and
expand the financial infrastructure
and associated services that we have
successfully delivered for twenty
years, through both internal investment
and consideration of acquisition
opportunities. We will keep investing
in our staff and supporting them,
being especially mindful of their
mental welfare in these difficult
times. We will continue to manage
our cost base prudently, to deliver
fair returns for all of our stakeholders,
and we will leverage the agility that
has helped shape our approach to the
events of the last few months, as we
advance into the new year.
Alexander Scott
Chief Executive Officer
16 December 2020
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 7
STRATEGIC REPORT continued
TRANSACT – OUR BUSINESS MODEL
A specialist platform provider –
making financial planning easier
Transact is a market-leading
investment platform that delivers an
infrastructure which enables advisers
to implement financial plans as
simply and efficiently as possible.
Its leading platform functionality is
supported by a high-touch client
service team, which provides real
time, consistent day-to-day and
technical support no matter how
basic, or complex, the query may be.
A key feature of our operation is the
control we have over every aspect of
what we do. We strive always to
insource the components of our
service and technology, to enable us
to maintain control over the quality
and cost of our whole operation.
The main components of our business
model are:
Operational
excellence
▪ Award-winning client servicing model
▪ High-touch, regionally allocated client service teams
▪ 180 highly trained client service staff
▪ Staff are not product-centric but are client-centric
▪ Highly efficient client and adviser experience
▪ Strong adviser relationships
In-house
wrappers
We provide a wide range of in-house tax-efficient
wrappers, including:
▪ ISAs (including the LISA and JISA)
▪ Pensions
▪ Onshore life insurance bonds
▪ Offshore life insurance bonds
▪ General Investment Accounts
8 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
In-house
technology
▪ Proprietary software systems technology
▪ Ownership of the software development company
▪ Full control of development direction and priorities
and costs
▪ Full control of the client experience
▪ We set our own development priorities
▪ Agility
Open
architecture
We are whole of market and provide access to a wide
range of investment types, including:
▪ Mutual funds
▪ Investment trusts
▪ Exchange traded funds
▪ Other shares
▪ Gilts and bonds
▪ Venture capital trusts
▪ Cash and term deposits
Proven
reputation
▪ A long-established, financially secure,
investment platform
▪ Consistently high level of service for 20 years
▪ Numerous awards received, including best adviser
platform in adviser surveys run by CoreData and
Investment Trends
▪ The fair treatment of clients, shareholders
and employees
Trusted by
independent
advisers
▪ Long-standing relationships with many financial
planning firms across the UK
▪ Over 6,200 advisers have independently chosen
Transact as an administration platform for their clients
Strong balance
sheet
▪ Highly cash generative business model
▪ No debt on the balance sheet
▪ Closely managed expenses in line with the
business plan
▪ Strong regulatory capital position that remains stable
through the economic cycle
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 9
STRATEGIC REPORT continued
Using our resources to create value
1. Investing in our people
3. Growing FUD by attracting and
retaining clients
Our client service teams receive
extensive training through our internal
training programmes and have been
instrumental in our success and the
many accolades and awards Transact
has received. These teams are
supported by a dedicated technical
specialist department that has the
expertise to deal with more complex
queries as they arise.
2. Building our infrastructure
Our systems and processes are
designed to meet the needs of our
clients and their advisers. We listen to
user feedback when considering the
improvements we will make to our
bespoke systems. The development
and implementation of these
enhancements has been carried out in
a steady, controlled manner over the
past twenty years and this proven
approach is expected to continue for
the foreseeable future.
The Transact business model
incorporates ‘responsible pricing’,
which means sharing profits with our
clients through price reductions, when
circumstances permit. We do this when
we are comfortable that doing so will
not have a negative impact on service
levels and it means that the best
service in the platform market continues
to be even better value for money.
We do not outsource any component of
our service or technology which gives
us absolute control over the quality
and cost of our whole operation.
By closely managing expenses, in line
with the business plan, and regularly
implementing process efficiencies, our
per unit cost base has been growing at
a slower rate than business volumes.
Transact has been consistently
differentiated from its competitors over
the years through sustained customer
service excellence. It is a trusted
investment platform and we currently
work with over 6,200 advisers who
have independently selected Transact
for their clients.
4. Growing earnings from increasing
levels of FUD
Our revenue is generated from the
fees paid by clients for using our
platform. We are confident that the
business model we operate is truly
sustainable, as over 97% of revenue,
as detailed on page 29 in the Financial
Review, is recurring and has been for
many years.
10 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
5. Managing costs
Shareholder returns
In respect of financial year 2020, the
first interim dividend of 2.7p per share
(£8.9 million in total) was paid in June,
and the second interim dividend,
as detailed in the Chair’s statement,
of 5.6p per share (£18.6 million in
total), has been declared.
The dividends in respect of financial year
2020 equate to a return to shareholders
of 60.5% of post-tax profit, which is in
line with our dividend policy.
Insourcing the key components of
our service and technology means we
have total control over the quality,
development and cost of our proposition.
In particular, control of our software
systems development is crucial to
our business model, as it enables
our client service teams to operate
particularly effectively.
6. Delivering fair returns for all
stakeholders
Central to our business model is the
fair treatment of clients, employees,
suppliers and shareholders. As previously
mentioned, we often reduce charges
to share our success with clients.
We have introduced a Share Incentive
Plan (SIP) that is open to all staff and
a Performance Share Plan (PSP) for
management. The schemes aim to
reward performance, recognising the
contribution all staff have made to
the success of the firm, and to
encourage loyalty. We also aim to
deliver fair returns to shareholders
by delivering on our dividend policy,
in line with Strategic Objective 6 on
page 15, whilst maintaining a strong
and stable regulatory capital base.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 11
STRATEGIC REPORT continued
OUR STRATEGIC OBJECTIVES
The IntegraFin Holdings plc (IHP Group) is focused on the
delivery of financial services infrastructure and associated
services to UK advisers and our mutual clients.
We aim to create, maintain and improve value for our
four principal groups of stakeholders – our clients, our
employees, our suppliers and our shareholders. To do
this we need to maintain our reputation for delivering a
high quality, value for money service. This is achieved
by keeping our offering relevant to current and future
new clients through ongoing development which
ensures we meet the needs of clients and their
advisers. The key risks mentioned below are described,
along with risk management activities and controls,
on pages 16 and 17.
12 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
1. Drive growth
We aim to grow FUD by attracting and retaining clients
through their advisers, due to delivering a superior service
and value for money.
The business considers developments to the core
proposition and business plan, where such changes are
likely to improve the operation of financial plans for clients
and their advisers. The business targets the implementation
of new wrappers and services where it can see opportunities
that will benefit all customers.
We will also review and consider potential acquisition
opportunities where there is an expectation of accelerated
growth, or augmentation of the current proposition that
would enhance shareholder value. We have a high hurdle
for taking any such opportunities forward, applying a
rigorous and disciplined approach.
Financial year 2020 progress:
FUD ended the year at £41.09 billion (2019: £37.80 billion),
growing 9% over the year.
Financial year 2021 outlook:
We will continue to target advisers not yet using our service
that are in our identified core market. We also expect that
adviser users will continue to move their clients onto
Transact, as they experience the benefits that our service
brings, and those clients already using us will put more
money into their portfolios.
Key risks:
▪ Service standards failure
▪ Stock market volatility
£
2. Invest in the business
A history of investment in our staff and our technological infrastructure has
ensured our service quality has been award winning and operationally resilient.
This will not change. We recognise that high calibre, well-trained staff and an
intuitive, progressive system are critical to our ongoing success.
Aside from the work required to keep up to date with statutory and regulatory
change every year, we are guided by feedback from clients and advisers when
prioritising changes to Transact. The emergence of new investor practices and
product, wrapper and functionality additions may all require the deployment of
new technologies. We continue to adapt to these changes and invest in our
software in a steady and controlled manner, building on our development
experience from the past twenty years.
Where new opportunities have been identified, the business looks to introduce
insourced solutions. New developments must:
▪ Not risk Group capital beyond reasonable levels;
▪ Not bring us into commercial conflict with our customers’ advisers; and
▪ Not make it difficult for us to meet our regulatory responsibilities.
Through these measures we aim to continue to grow profits and generate the
best returns we can for our shareholders.
Financial year 2020 progress:
£9.8 million (2019: £9.0 million) invested in platform development in the year.
This is comprised of platform developer and management cost, acquisition of
new equipment and training costs.
Financial year 2021 outlook:
We look forward to making further enhancements that benefit the client and
adviser online experience in financial year 2021, as well as other system
improvements which are already designed and timetabled.
Key risk:
▪ Diversion of resources
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 13
STRATEGIC REPORT continued
£
3. Grow earnings
4. Maintain cash generation
We are a highly cash generative business because all our
fees are received in cash, which we collect directly from
client portfolios as they become due. Combined with
sensible expense management, we expect to continue
generating cash profits.
Financial year 2020 progress:
Operating profit attributable to shareholders, generating
profits from the cash received, in financial year 2020
was £55.3 million, which is an increase of 11% from
£49.6 million in FY2019.
Financial year 2021 outlook:
We will continue to manage expenses and it is expected
the Group’s strong liquidity profile will be maintained.
Key risks:
▪ Stock market volatility
▪ Uncontrolled expenses
We expect to continue growing FUD and revenue by
attracting more assets onto our platform. We aim to
achieve this through:
▪ Our on-platform advisers and clients. The wealth managed
by Transact’s current adviser base is expected to increase
through stock market growth and new contributions.
▪ Increasing penetration of Transact’s current adviser
base. That is, increasing the share of wallet from
advisers on our platform by winning new clients.
▪ Attracting new advisers by maintaining leading ratings
amongst advisers and keeping our platform relevant to
new advisers and clients by constantly developing the
service to meet their needs.
The expectation that the UK wealth management market
will continue to grow, leading to a consequential growth in
investable assets managed by advisers, provides a positive
outlook for the demand for investment platform services.
Financial year 2020 progress:
Revenue increased by 8% to £107.3 million
(2019: £99.2 million).
Financial year 2021 outlook:
Client numbers grew by 7% and adviser numbers by 6%
in financial year 2020. We aim to maintain this level of
growth and potentially increase both metrics in the
coming year, but recognise that the economic outlook
is challenging.
Key risks:
▪ Service standards failure
▪ Stock market volatility
▪ Increased competition
14 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
5. Maintain strong balance sheet
6. Deliver on dividend policy
We continue to maintain robust capital resources, which
are supported by emerging profit. We have no debt and
our regulatory capital position remains resilient through
the economic cycle.
Financial year 2020 progress:
The Group capital position grew 16% and ended the year
at £140.9 million, up from £121.9 million at 2019 year end.
Financial year 2021 outlook:
We will continue to manage our capital prudently to
enable us to meet our regulatory capital requirements as
the business grows.
Key risks:
▪ Stock market volatility
▪ Capital strain
Our policy is to pay 60% to 65% of full year profit after tax
as two interim dividends.
Financial year 2020 progress:
A first interim dividend was paid of 2.7p per ordinary share
and a second interim dividend declared of 5.6p per share,
in line with our dividend policy.
Financial year 2021 outlook:
Our dividend policy remains unchanged, but our income
may be impacted by continuing market uncertainty,
as a result of the ongoing COVID-19 pandemic and Brexit.
Key risks:
▪ Stock market volatility
▪ Uncontrolled expenses
▪ Capital strain
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 15
STRATEGIC REPORT continued
KEY RISKS
There are factors within and outside
of our control that may affect the
achievement of our strategic objectives.
We aim to mitigate exposures that
are outside our risk appetite where
possible. The key risks associated
with our strategic objectives are:
16 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
1. Stock market volatility:
The COVID-19 pandemic created
immense uncertainty in stock markets
throughout the year, with large
fluctuations from day to day, as news
emerged. The shape and implementation
of the Brexit deal the UK agrees with
the EU may also continue to have a
negative impact on stock markets for
some time. Stock market volatility
impacts the value of our FUD.
Risk management and control:
The risk of stock market volatility, and
the impact on revenue, is mitigated
through a wide asset offering which
ensures we are not wholly correlated
with one market, and which enables
clients to switch assets in times of
uncertainty. In particular, clients are
able to switch into cash assets, which
remain on our platform. Our wrapper
fees are not impacted by stock market
volatility as they are a fixed quarterly
charge. We also closely monitor and
control expenses, which assists in
maintaining profit in turbulent times.
2. Service standards failure:
Our high levels of client and adviser
retention are dependent upon our
consistent and reliable levels of
service. Failure to maintain these
service levels would affect our ability
to attract and retain business.
Risk management and control:
We manage the risk of service standards
failure by ensuring our service standards
do not deteriorate. This is achieved by
providing our client service teams with
extensive initial and ongoing training,
supported by experienced subject
matter experts and managers. Service
levels are monitored and quality checked
and any deviation from expected service
levels is addressed. We also conduct
satisfaction surveys to ensure our service
levels are still perceived as excellent by
our clients and their advisers. Service
standards are also dependent on resilient
operations, both current and forward
looking, ensuring that risk management
is in place. Please see the Risk and Risk
Management section on page 38.
3. Increased competition:
We operate in a competitive market.
Increased levels of competition for
clients and advisers; improvements
in offerings from other investment
platforms; and consolidation in
the adviser market may all make
it more challenging to attract and
retain business.
5. Uncontrolled expenses:
Higher expenses than expected and
budgeted for would adversely impact
cash profits. The key constituent of
expenses is salary costs, but other
expenses are more likely to change
unexpectedly, for example legal,
compliance or regulatory costs
and levies.
Risk management and control:
The most significant element of
our expense base is staff costs.
These are controlled through
modelling staff requirements
against forecast business volumes,
factoring in efficiencies that it is
expected will emerge through platform
development. Any expenditure
request that deviates from plan is
rigorously challenged and must be
approved before it is incurred.
6. Capital strain:
Unexpected, additional capital
requirements imposed by regulators
may negatively impact our solvency
coverage ratio.
Risk management and control:
We continuously monitor the current
and expected future regulatory
environment and ensure that all
regulatory obligations are or will be
met. This provides a proactive control
to mitigate this risk. Additionally, we
carry out an assessment of our capital
requirements, which includes assessing
the regulatory capital required.
We retain a capital buffer over and
above the regulatory minimum
solvency capital requirements.
Risk management and control:
Competitor risk is mitigated by
focusing on providing exceptionally
high levels of service and being
responsive to client and financial
adviser demands through an efficient
expense base. This allows us to continue
to increase the value for money of
our service by reducing client charges,
subject to profit and capital parameters
when deemed appropriate.
4. Diversion of resources:
Maintaining our quality and relevance
requires ongoing investment.
Any reduction in investment due
to diversion of resources to other
non-discretionary expenditure
(for example, a change in the
taxation regime or other regulatory
developments) may affect our
competitive position.
Risk management and control:
The risk of reduced investment
in the platform is managed through
a disciplined approach to expense
management and forecasting.
We horizon scan for upcoming
regulatory and taxation regime
changes and maintain contingency
to allow for unexpected expenses
e.g. UK Financial Services
Compensation Scheme (FSCS)
levies, which ensures we do not
need to compromise on investment
in our platform to a degree that
affects our offering.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 17
STRATEGIC REPORT continued
KEY PERFORMANCE
INDICATORS
The key performance indicators that
follow are the quantifiable measures
that we use to gauge the
performance of our business.
We consider the measures to be key
to our business due to: our current
and future revenue streams and
market position are linked to FUD;
increasing market share through new
advisers and clients, and ensuring
existing clients do not want to leave
(client retention), is also key to our
success; investment in the platform
is crucial to ensure we continue to
deliver and improve our outstanding
customer service; and, we require
sufficient capital to ensure we meet
our regulatory requirements and
can continue to support and invest
in the business.
All metrics meet our expectations,
taking into consideration the
challenging economic environment
in the second half of financial
year 2020.
FUD* increased by £3.29 billion (9%)
The value of FUD is a primary driver of revenue as it forms the basis of annual
commission payable which, as detailed on page 27 in the Financial Review, is
the largest component of Group revenue.
37.8bn
41.1bn
33.1bn
TOTAL FUD
45bn
40bn
35bn
30bn
25bn
20bn
15bn
10bn
5bn
0bn
)
£
(
D
U
F
FY18
FY19
Financial Year (end)
FY20
Net inflows were up 3%, and Transact had the largest share of
adviser net flows
We achieved the highest net inflows of all advised platforms in each of the
first three quarters of 2020, according to Fundscape statistics.
NET INFLOWS
)
£
(
s
w
o
l
f
n
i
t
e
N
5bn
4bn
3bn
2bn
1bn
0bn
4.1bn
3.5bn
3.6bn
FY18
FY19
Financial Year (end)
FY20
* Our KPIs include alternative performance measures (APMs) which are indicated with an
asterisk. APMs are financial measures which are not defined by IFRS. They are used in
order to provide better insight into the performance of the Group. Further details are
provided in the glossary, on page 168.
18 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Client numbers were up 7% to 191,900
The increase in the number of clients is testament to the continued quality of
our service.
CLIENT NUMBERS
s
r
e
b
m
u
n
t
n
e
i
l
C
200k
180k
160k
140k
120k
100k
166k
FY18
179k
192k
FY19
Financial Year (end)
FY20
Client retention remained at 96% per annum
Client retention is an important measure of satisfaction. It is also a driver of
ongoing revenue and we attribute our high level of client retention to
satisfaction with our service and offering.
Financial year
Levels of client retention
2018
96%
2019
96%
2020
96%
Adviser numbers were up 6% to over 6,200
We have experienced steady growth in the number of advisers using the
platform. We help advisers to “onboard” their clients through a mixture of
face-to-face local support (until lockdown) and phone and online assistance
via our extensive servicing and technical teams. Once again we retained the
highest Net Promoter Score (NPS) of the adviser platforms in the annual
Investment Trends survey. The rate of growth of adviser numbers continues to
increase steadily year-on-year.
ADVISER NUMBERS
s
r
e
b
m
u
n
r
e
s
i
v
d
A
6,500
6,000
5,500
5,000
4,500
5,453
FY18
5,871
6,205
FY19
Financial Year (end)
FY20
Investment in the
business continued*
In financial year 2020 we invested
£9.8 million (2019: £9.0 million) in
platform development, including
software development, platform
infrastructure and staff training.
Ongoing investment ensures the
proposition remains award winning
and operationally resilient.
Operating profit attributable to
shareholder returns increased to
£55.3 million (11%)
We maintained income growth in
a challenging market and expenses
remained stable.
Capital stability was maintained
The Group maintained a strong
balance sheet with capital increasing
to £140.9 million. We retained a
sensible capital base, with capital
resources predominantly in cash and
UK gilts generated from the core
business. In order to determine the
capital base, we consider the capital
position after dividends, investment
and meeting increases in regulatory
capital requirements.
*Our KPIs include alternative performance
measures (APMs) which are indicated with
an asterisk. APMs are financial measures
which are not defined by IFRS. They are
used in order to provide better insight into
the performance of the Group. Further
details are provided in the glossary,
on page 168.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 19
STRATEGIC REPORT continued
Our people
It is of paramount importance to us
that we safeguard our colleagues.
As mentioned above, we implemented,
across the entire Group, a remote
working operating model with only
a small number of essential staff
continuing to work at the London,
Melbourne and Isle of Man offices.
We made special efforts to ensure all
our colleagues were kept informed
and engaged through regular
management communications.
We established a dedicated staff
portal, “Transact Together Hub”,
which provides a central point of
information for process changes,
key policies and useful tips to help
colleagues make the transition and
preserve our culture and collaborative
team working ethos. We maintained
an open and collaborative engagement
with colleagues and actively sought
their views. As a consequence,
following the initial relaxation of the
UK Government lockdown rules in
July, we retained the remote working
model. All our offices were modified
to meet social distancing and health
and safety standards. Our Isle of Man
office reopened on 29 June following
the IoM Tynwald removing restrictions.
However, our UK and Melbourne
offices still only have a presence for
essential workers in order to maintain
the continuity of the business operations
and key systems. In all instances
government advice and guidelines
have been followed and strict
premises controls are still in place.
COVID-19
Principal risks and uncertainties
We are very aware of the potential
impact on the health and safety of
our colleagues, advisers and clients
that follows recurring spikes of the
COVID-19 pandemic and of the
financial uncertainty that the current
circumstances present. We have
worked hard to support the wellbeing
of our colleagues and to maintain
the quality services expected of us.
We continue to strive to make the
management of client portfolios
efficient and secure.
In our response to the pandemic we
invoked parts of our business continuity
measures. In addition, we reacted
responsively by implementing a
series of procedural and processing
changes for employees, operating
procedures and IT systems and
infrastructure. These combined
measures ensured we were able to
continue the running of our operations
throughout the period of government-
imposed lockdowns. We continue to
operate, in line with the recommended
government guidelines in the UK,
Isle of Man and Australia.
20 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Our operating procedures
Our IT systems and infrastructure
The change in the operating model
required a number of process and
control changes to be put into place
at short notice. These were assessed
by Risk Management and detailed
reports presented to the Audit and
Risk Committee. The opportunity was
taken to accelerate planned changes
to our business processes and to
refresh our continuity strategy and
arrangements. In the event of any
further lockdowns, we will respond
in line with our updated business
process and continuity arrangements.
The increased threat from cyber-
attacks remains high on the agenda
and to this end we actively reinforced
procedures on virus and phishing
threats and increased the level of
monitoring and surveillance controls.
Our systems remained resilient and
this allowed us to maintain all of our
key business services throughout the
period. We delivered enhancements
to Transact Online (TOL), strengthening
the adviser interface. By embracing
other technology in conjunction
with TOL, such as digital signatures
and electronic document uploads,
we further reduced our paper-based
processing requirements. We ensured
communication and video facilities
were in place to enable colleagues
and the business to interact effectively.
We remain confident that our
business processes and controls are
resilient and sufficiently responsive
to meet the uncertainties under
current conditions.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 21
STRATEGIC REPORT continued
By 23 June, the FTSE All Share Index
had risen to 3,498 and our FUD was
£39.71 billion. We were delighted to
be rated the top overall platform in
two independent research surveys
(CoreData and Investment Trends),
at a time when the vast majority of
our people were working from home.
The July to September quarter was
more challenging in terms of gross
flows, as advisers across the industry
were focused on servicing their
existing clients and were spending
less time engaging with new ones.
However, the quarter still resulted
in positive net flows of £730.8 million
(albeit lower than FY19 June to
September net flows of £891.0 million).
At the end of our financial year,
the FTSE All Share Index had fallen
to 3,282. By contrast, our FUD had
risen to its highest ever level of
£41.09 billion. Other metrics were
also robust: the number of clients
had risen to 192,000, brought to us
by over 6,200 advisers.
In conclusion, it was a challenging
year, which still produced many
positive results that stand as
testament to the strength and
stability of the business.
BUSINESS REVIEW
A game of two halves
The evolving platform market
Even in this most challenging of
years, the advised platform market
grew to £460.52 billion from
£433.61 billion (revised from
£427.70 billion as reported in 2019)
a year earlier. Investors continued to
place great value on financial
planning and advice, and advisers
continued to place the majority of
their clients’ investment flows via
investment platforms.
How the year unfolded
First half
(October 2019 to March 2020)
The FTSE All Share Index started the
year at 4,038 (1 October 2019) and,
by 17 January 2020, had reached
4,258. Advisers are usually very
busy ahead of the tax year end and
early 2020 saw business as usual.
Gross inflows were £3.23 billion,
our highest ever in the first half of
the year (first half of 2019 (1H19):
£2.84 billion) and net inflows were
£2.06 billion (1H19: £1.81 billion).
Client numbers grew to 187,000 and
FUD to £34.99 billion.
However, the seriousness of
COVID-19 then became apparent,
the UK went into lockdown, and,
by 23 March, the FTSE All Share
Index had fallen to a low of 2,728.
Second half
(April 2020 to September 2020)
With advisers and their colleagues
working from home, they did
remarkably well to continue servicing
clients and managing their businesses.
Correspondingly, at £797.3 million,
our net flows for the April to June
quarter were consistent with the
same period in FY19.
22 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Transact vs the market
MARKET GROSS FLOWS
FUD growth
Market FUD at 30 September 2020 was
£460.52 billion, growth of 6% on prior
year. Transact FUD at 30 September
2020 was £41.09 billion, growth of 9%
on prior year (£37.80 billion).
Pension business continues to
represent a higher proportion of assets
year on year, now making up 46% of
FUD on Transact, whilst GIAs and ISAs
are at 22% and 25% respectively.
Insurance bonds as a proportion have
remained steady at 7%, with the
offshore bond making up the majority.
Inflows
Despite the first and second halves of
the financial year being very different,
we were pleased to finish the year with
both gross and net inflows very slightly
ahead of the prior year.
Market gross inflows were £58.22 billion,
growth of 1% on prior year. Transact
gross inflows for the year were £5.75
billion, which was a shade ahead of
£5.70 billion achieved in the prior year.
Market net inflows were £24.26 billion,
growth of 8% on prior year. Transact
net inflows for the year were £3.59
billion, which was an increase of 3%
on prior year (£3.50 billion).
We have consistently ranked in the top
three firms for gross inflows and we
have achieved the highest 2020 net
flows to date of all retail advised
platforms according to Fundscape
statistics. This has been sourced in
four ways:
)
£
(
s
w
o
l
f
s
s
o
r
G
18,000m
15,000m
12,000m
9,000m
6,000m
3,000m
0m
Q1
FY20
Q3
Q2
FY20
FY20
Financial year 2020
Q4
FY20
TRANSACT GROSS FLOWS
)
£
(
s
w
o
l
f
s
s
o
r
G
1,800m
1,500m
1,200m
900m
600m
300m
0m
Q1
FY20
Q3
Q2
FY20
FY20
Financial year 2020
Q4
FY20
MARKET NET FLOWS
)
£
(
s
w
o
l
f
t
e
N
8,000m
7,000m
6,000m
5,000m
4,000m
3,000m
2,000m
1,000m
0m
Q1
FY20
Q3
Q2
FY20
FY20
Financial year 2020
Q4
FY20
TRANSACT NET FLOWS
▪ Advisers who have used Transact for
more than one year bringing across
new clients;
▪ Clients already on Transact for more
than one year making further
contributions to their portfolios;
)
£
(
s
w
o
l
f
t
e
N
▪ New clients from advisers new to
Transact;
▪ Outflows remaining broadly stable as
a percentage of opening FUD and
comparing favourably with the rest
of the industry.
1,200m
900m
600m
300m
0m
Q1
FY20
Q3
Q2
FY20
FY20
Financial year 2020
Q4
FY20
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 23
STRATEGIC REPORT continued
Our market share among retail
advised platforms was 10% of gross
inflows and 15% of net inflows.
Another positive indicator was the
ratio of client asset transfers onto
the platform versus off the platform.
For the financial year, this was 5.1:1
in our favour. Defined contribution
pension transfers onto the platform
made up almost 75% of our pension
transfers in financial year 2020.
Award-winning service
Our performance is attributable to
the power of the overall offering
including the consistently superior
levels of service we achieve, and this
has resulted in Transact retaining
the top spot in annual independent
research studies, Investment Trends
and CoreData, for the eleventh year
running (2010-2020 inclusive),
as well as consistently performing
strongly in quarterly and annual
Platforum surveys.
TRANSACT ADVISER RATINGS
Category:
Large Platforms
(> £12bn FUD)
Category:
Large Platforms
(> £10bn FUD)
Category:
Large Platforms
(> £10bn FUD)
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
1st
2020
2019
2018
2017
2016
2015
A core element of our proposition
is the ownership of our software.
We regularly deploy releases of new
software (eleven in financial year
2020), which contain enhancements
to existing code, as well as new
functionality which benefits our
clients and their advisers.
24 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Adviser and client numbers
The number of advisers using our platform increased by 6% over the financial
year to 6,205. The rate of growth is steady, year on year, and represents
a sustainable level of change that enables us to help advisers efficiently
“onboard” their clients.
Our adviser Net Promoter Score increased marginally to 61%, and remained
the highest score for an advised platform.
ADVISER NUMBERS
s
r
e
b
m
u
n
r
e
s
i
v
d
A
7,000
6,000
5,000
4,000
3,000
2,000
6,205
1
1
Y
F
2
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
Financial year (end)
Client numbers have also grown solidly, increasing by 7% during the year
to 192,000.
In our own client satisfaction survey, in which over 2,000 clients participated,
90% of respondents rated Transact’s quality of service as either “very good”,
or “good”, and 80% of respondents stated they were “very likely” or “likely”
to recommend Transact to friends, family or colleagues.
CLIENT NUMBERS
s
r
e
b
m
u
n
t
n
e
i
l
C
200k
170k
140k
110k
80k
50k
192k
1
1
Y
F
2
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
9
1
Y
F
0
2
Y
F
Financial year (end)
Jonathan Gunby
Executive Director
16 December 2020
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 25
STRATEGIC REPORT continued
FINANCIAL REVIEW
A robust set of results
The FTSE All Share Index was
buoyant at the end of our first
quarter, in part due to the decisive
UK election result in December 2019.
It peaked in mid-January, at 4,258
points, before crashing 36% by late
March, as the COVID-19 pandemic
took hold, many countries went into
lockdown and the economic impact
was priced into the markets.
Recovery from the March low point
was erratic, but FUD ended the year
9% up, aided by solid net flows.
This has resulted in increased
revenue and increased profits.
FUD increased to £41.09 billion
(2019: £37.80 billion) with
gross inflows of £5.75 billion
(2019: £5.70 billion). Outflows
decreased slightly to £2.16 billion
(2019: £2.20 billion) resulting
in increased net inflows of
£3.59 billion (2019: £3.50 billion).
Income continued to grow.
We generated revenue of £107.3 million
(2019: £99.2 million) up 8%,
leading to an 11% increase in operating
profit attributable to shareholders of
£55.3 million (2019: £49.6 million).
This performance was achieved
through continuing focus on doing
what we do well, and continuing to
make it better and more efficient for
the future. We continued to develop
the delivery of our high quality
service by investing in our people and
our proprietary technology. These
developments allowed us to benefit
from ongoing process efficiencies
which are reflected in our increased
operating margin.
26 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
FUD, inflows and outflows
For the financial year ended
30 September
Opening FUD
Inflows
Outflows
Net flows
Market movements
Other movements1
Closing FUD
2020
£m
37,799
5,750
(2,160)
3,590
(224)
(72)
2019
£m
33,113
5,700
(2,203)
3,497
1,197
(8)
41,093
37,799
1Other movements includes dividends, interest, fees and tax charges and rebates.
Financial year 2020 saw extreme levels
of market volatility. Despite this,
the level of client inflows onto
Transact marginally improved when
compared with FY19. Outflow rates
for the year, as a percentage of
opening FUD, fell slightly from FY19,
resulting in strong net flows which
were up 3% year on year. FUD ended
the year at £41.09 billion, up £3.29
billion from 2019, an increase of 9%.
Financial performance
Financial year 2020 was another year
of robust financial performance.
By continuing to generate positive
net inflows, through our ability to
attract new inflows and retain
business already on the platform,
we increased FUD. This drove revenue
growth and, when coupled with
careful management of our expense
base, resulted in increased profits.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 27
STRATEGIC REPORT continued
Income
For the financial year ended
30 September
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit attributable to
shareholder returns
Net interest income
Profit before tax attributable to
shareholder returns
Change in investment contract liabilities
Fee and commission expenses
Investment returns
Net policyholder income attributable to
policyholder returns
Policyholder tax
Tax on ordinary activities
Profit after tax
2020
£m
107.3
(0.8)
106.5
(51.2)
55.3
0.0
55.3
82.9
(137.6)
54.7
(3.1)
3.1
(9.8)
45.5
2019
£m
99.2
(0.8)
98.4
(48.8)
49.6
0.3
49.9
(554.8)
(125.6)
680.4
7.1
(7.0)
(8.9)
41.1
Total gross profit in the financial year
to 30 September 2020 increased by
£8.1 million, or 8%, to £106.5 million
from £98.4 million. This increase was
achieved after reductions in the
annual commission income charge
and the threshold at which we rebate
buy commission, and reflects the
increases in the value of FUD,
number of clients and number of tax
wrappers held on the platform.
Profit after tax for financial year 2019
has been restated to £41.1 million,
an increase from £40.1 million,
and an adjustment to 2019 opening
retained earnings has been made
of £5.4 million.
The restatement of profit after tax
across prior years is due to the
identification of an error in the
calculation of the policyholder tax
provision (over) in the subsidiary,
IntegraLife UK Limited (ILUK),
which is one of the elements of the
Group’s insurance and life assurance
segment. The error was due to
corporate expenses being deducted
in the policyholder tax calculation
resulting in an overprovision of tax
reserves due back to policyholders.
As a result, there has been a release
of the policyholder tax provision to
the retained earnings as at 1 October
2018 and to the statement of profit
or loss and other comprehensive
income in 2019.
In addition to the restatement
explained above, certain comparatives
have been reclassified due to an
error in presentation in prior years.
This has the effect of reflecting items
of income, expenses, gains and losses
relating to the Group’s insurance and
life assurance segment on a gross
basis, rather than on a net basis.
In addition, cash held by the Group’s
insurance and life assurance segment
for the benefit of policyholders has
been separately disclosed in cash and
cash equivalents.
These changes have no effect on net
assets or overall profit.
28 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Components of revenue
For the financial year ended
30 September
Annual commission income
Wrapper fee income
Other income
Total fee income
Our revenue comprises three elements
and two of these elements, annual
commission income (an annual, tiered
fee on FUD) and wrapper fee income
(quarterly wrapper fees for each of
the tax wrapper types clients hold)
constitute our recurring revenue.
The third element is other income
and includes buy commission charged
on asset purchases.
Annual commission income increased
by £7.8 million, or 9%, to £94.5 million
(2019: £86.7 million). This growth
was achieved through growth in
average FUD of 12%, despite volatile
market conditions affecting asset
values throughout the year.
2020
£m
94.5
9.7
3.1
107.3
2019
£m
86.7
9.0
3.5
99.2
Wrapper administration fee income
increased by £0.7 million, or 8%,
to £9.7 million (2019: £9.0 million).
This reflects the net increase in the
number of open tax wrappers on
the platform.
Recurring revenue streams constituted
97% (2019: 97%) of total fee income.
Other income, mainly buy
commission and dealing charges,
reduced by 11%, £0.4 million, to
£3.1 million (2019: £3.5 million).
The primary reason for this fall was
the reduction in the buy commission
rebate threshold, this was introduced
to make our charging structure more
competitive. The required portfolio
value for clients to receive the
rebate was reduced from £0.5 million
to £0.4 million, with effect from
March 2020.
IHP FEE INCOME
)
£
(
e
m
o
c
n
i
e
e
F
110m
105m
100m
95m
90m
85m
80m
75m
70m
65m
60m
£3.5m
£9.0m
£86.7m
£3.9m
£8.1m
£79.2m
£3.1m
£9.7m
£94.5m
FY18
FY19
Financial year (end)
FY20
Annual Commission Wrapper Fee
Buy & Dealing
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 29
STRATEGIC REPORT continued
Operating expenses
Total operating expenses increased by
£2.4 million, or 5%, to £51.3 million
(2019: £48.8 million). The increase
was mainly due to an increase in
regulatory fees, professional fees and
staff costs.
Operating expenses
For the financial year ended
30 September
Staff costs
Occupancy
Regulatory and professional fees
Other income – tax relief due to
shareholders
Other costs
Total expenses
Depreciation and amortisation
Total operating expenses
2020
£m
36.9
2.0
7.0
(1.1)
3.8
48.6
2.6
51.2
2019
£m
36.3
3.6
5.5
(1.0)
3.7
48.1
0.7
48.8
Staff costs
Occupancy
Occupancy costs decreased by
£1.6 million due to the implementation
of the new lease accounting standard,
IFRS 16, which came into effect
on 1 October 2019.
IFRS 16 brings leases on-balance
sheet and, in our case, applies to the
IHP Group property leases for offices in
London, the Isle of Man and Australia.
The accounting standard replaces rent
expense with straight line depreciation
on a right of use asset and notional
interest expense on a corresponding
lease liability.
Staff costs increased by
£0.6 million, or 2%, to £36.9 million
(2019: £36.3 million).
Average staff numbers decreased from
509 to 492, a drop of 3%. The reduction
was the result of natural attrition and
efficiency gains delivered through
platform development. The small rise
in staff costs in the period was
attributable to the net effects of
general inflationary increases.
Staff share scheme costs, both the
Share Incentive Plan (SIP) for all
staff and the Performance Share Plan
(PSP) for management, did not
increase materially.
We operate a defined contribution
pension scheme for our staff.
The company-paid contribution was
increased to 9% of annual salary
in FY19, it was not further increased
in FY20.
30 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Net income attributable to
policyholder returns, and
policyholder tax
Net income attributable to
policyholder returns decreased by
£10.1 million, from income of
£8.1 million in FY19 to an expense of
£2.0 million in FY20. Policyholder tax
decreased by £10.0 million, from a
tax charge of £7.0 million in FY19 to
a tax credit of £3.1 million in FY20.
Both of these reductions were due to
a decrease in the gains on investments
held for the benefit of policyholders,
as a result of the downturn in
financial markets during FY20.
Regulatory and professional fees
Regulatory and professional fees
increased by £1.5 million, or 27%,
to £7.0 million. The most significant
increase was in FSCS levies, which
increased by £0.9 million, or 82%,
year on year. There was a smaller
increase in professional fees of
£0.6 million, attributable to ad hoc
project work performed throughout
the year.
Other income – tax relief due to
shareholders
This relates to the release of tax
provisions due back to policyholders.
Details of the 2019 restatement can
be seen on page 28.
Depreciation and amortisation
Depreciation and amortisation charges
increased by £1.9 million and £1.6 million
of this was attributable to the
depreciation arising on the right of use
asset on the balance sheet, required
by IFRS 16.
An element of the remaining £300k
increase in depreciation was due to the
purchase of new equipment required
to enable staff to work from home,
but the majority was due to a full year
of deprecation on equipment bought in
the latter half of financial year 2019.
Total capitalised expenditure for the
financial year was £0.9 million compared
with £1.3 million in the prior year.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 31
STRATEGIC REPORT continued
IHP – PROFIT BEFORE TAX
x
a
t
e
r
o
f
e
b
t
i
f
o
r
P
£55m
£50m
£45m
£40m
£35m
£2.6m
£49.9m
£55.3m
£40.9m
FY18
FY19
Financial year (end)
FY20
Operating Profit
IPO Adjustment
Profit before tax attributable to
shareholder returns
In the financial year to 30 September
2020 our operating margin increased
to 52%.
After including interest income on
corporate cash, the interest expense
arising from the implementation of
IFRS 16, and returns on corporate
gilt holdings, profit before tax in the
financial year to 30 September 2020
was £55.3 million, an increase of
11% on the prior year.
Tax
The Group has operations in three
tax jurisdictions, being UK, Australia
and Isle of Man, meaning profits are
subject to tax at three different rates.
However, the vast majority of the
Group’s income, 95%, is earned in
the UK.
Tax on ordinary activities described
below solely comprises the Group’s
’shareholder corporation tax’, which is
distinguished from the ‘policyholder
tax’ that the Group collects and
remits to HMRC in respect of ILUK,
which is taxed under the “I minus E”
tax regime.
Tax for the year increased by
£0.8 million, or 9%, to £9.8 million
(2019: £9.0 million) due to increased
profits. Our effective rate of tax over
the period remained stable at 18%.
Our tax strategy can be found at:
www.integrafin.co.uk/
legal-and-regulatory-information/
32 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Earnings per share
Operating profit attributable to
shareholder returns
Net interest income
Profit before tax attributable to
shareholder returns
Net policyholder income attributable to
policyholder returns
Policyholder tax
Tax on ordinary activities
Profit after tax for the period
2020
£m
55.3
0.0
55.3
(3.1)
3.1
(9.8)
45.5
2019
(restated)
£m
49.6
0.3
49.9
7.1
(7.0)
(8.9)
41.1
Number of shares in issue
Earnings per share – basic and diluted
331.3m
13.7p
331.3m
12.4p
Earnings per share increased to
13.7 pence, an increase of 10% on
prior year.
The 2019 EPS has been restated in
line with the restatement of profit
after tax noted on page 28.
IHP – EARNINGS PER SHARE
)
e
c
n
e
p
(
S
P
E
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
9.9p
FY18
12.4p
13.7p
FY19
Financial year (end)
FY20
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 33
STRATEGIC REPORT continued
Consolidated statement of
financial position
In the consolidated statement of
financial position, the material items
that merit comment include the
following:
Intangible assets (note 13)
The Group’s intangible asset as at
30 September 2020 of £13.0 million
(2019: £13.0 million) comprises
goodwill arising from the purchase of
Integrated Application Development
Pty Ltd (IAD) in July 2016. Goodwill
is tested for impairment each
financial year.
Right of use asset and corresponding
lease liability (notes 15 and 26)
On 1 October 2019, the Group
recognised a right of use asset and a
lease liability on adoption of IFRS 16.
The right of use asset has been
depreciated through the year and ends
the year at £4.0 million. The lease
liability has also reduced from the
net effect of rent payments under
the terms of the respective lease
agreements and interest charges,
and ends the year at £6.1 million.
Deferred acquisition costs and
deferred income liability (notes 17
and 27)
Deferred acquisition costs and
deferred income liability arise in our
life insurance subsidiaries, IntegraLife
UK Limited (ILUK) and IntegraLife
International Ltd (ILInt). They are
driven by the level of adviser fees
payable by clients from new insurance
wrappers opened in each year.
These two line items are required to
be shown under IFRS, however, the
timing and magnitude of movement
in the items always nets off exactly,
resulting in zero net effect in each of
the companies and in the consolidated
statements of financial position.
Both items increased by £3.1 million
to £53.5 million over the financial year.
Investments and cash held for the
benefit of policyholders and liabilities
for linked investment contracts
(notes 19, 20 and 21)
ILUK and ILInt write only unit-linked
insurance policies. They match the
assets and liabilities of their linked
policies such that, in their own
individual statements of financial
position, these items always net off
exactly. These line items are required
to be shown under IFRS in the
consolidated statement of profit or
loss, the consolidated statement of
financial position and the consolidated
statement of cash flows, but have
zero net effect.
Investments and cash held for the
benefit of policyholders have increased
to £16.73 billion (2019: £15.45 billion)
and £1.38 billion (2019: £1.21 billion)
respectively. Liabilities for linked
investment contracts increased to
£18.11 billion (2019: £16.66 billion).
This reflects the increase in the value
of FUD held in life insurance wrappers.
Deferred tax liabilities (note 28)
Deferred tax liabilities decreased
by £4.2 million to £9.0 million
(2019: £13.2 million). This decrease
was primarily due to market
movements in the assets held in the
ILUK’s onshore bond tax wrappers
during the year. Sufficient cash is
held by ILUK to meet this liability.
Provisions (note 30)
Provisions have increased in financial
year 2020 by £6.9 million. This is
largely due to tax charges deducted
from clients not becoming payable to
HMRC due to the downturn in the
financial markets. If no tax liability
arises in the future then these charges
will be refunded to policyholders.
34 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Cash and cash equivalents (note 21)
Shareholder cash increased from
£132.3 million at 30 September 2019
to £154.1 million at 30 September 2020.
The increase of 16% reflects the
cash-generative nature of the
business and the strength of the
liquidity within the Group.
Liquidity and capital management
At 30 September 2020 the Group
held cash and cash equivalents of
£154.1 million (2019: £132.3 million).
Cash generated through trading also
covered dividend payments totaling
£26.2 million. This comprised
£17.2 million second interim dividend
in respect of the financial year 2019,
paid in January 2020 and £8.9 million
first interim dividend in respect of
the first half of financial year 2020
(2019: £8.6 million), paid in June 2020.
To enable the Group to offer a wide
range of tax wrappers there are three
regulated entities within the Group;
a UK investment firm, a UK life
insurance company and an Isle of
Man life insurance company. Each
regulated entity maintains capital
well above the minimum level of
regulatory capital required, ensuring
sufficient capital remains available to
fund ongoing trading and future
growth. Cash and investments in
short-dated gilts are held to cover
regulatory capital requirements and
tax liabilities.
The regulatory capital requirements
and resources in ILUK and ILInt are
calculated by reference to economic
capital-based regimes, and therefore
do not directly equate to IFAL’s
expense-based regulatory capital
requirements. These bases are
determined by the appropriate
regulations that apply for each of
the companies.
Regulatory Capital
For the financial
year ended
30 September 2020
Regulatory
Capital
requirements
Regulatory
Capital
resources
Regulatory
Cover
IFAL
ILUK
ILInt
£m
24.0
170.4
18.5
£m
34.1
239.3
33.4
%
141.8
140.4
180.7
All of the company’s regulated
subsidiaries continue to hold
regulatory capital resources in excess
of their regulatory capital requirements.
We will maintain sufficient regulatory
capital and an appropriate level of
working capital. We will use retained
capital to further invest in the delivery
of our service to clients, pay dividends
to shareholders and provide fair
rewards to staff.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 35
STRATEGIC REPORT continued
£m
140.9
(22.0)
118.9
(18.6)
100.3
(63.5)
36.9
Capital
For the financial year ended
30 September 2020
Total equity
Loans and receivables, intangible assets and property,
plant and equipment
Available capital pre dividend
Interim dividend declared
Available capital post dividend
Additional risk appetite capital
Surplus
Additional risk appetite capital is
capital the IHP Board considers to be
appropriate for it to hold to ensure
the smooth operation of the business
such that it is able to meet future
risks to the business plan and future
changes to regulatory capital
requirements without recourse to
additional capital – see the Going
Concern and Viability Statement on
page 48.
The board considers the impact of
regulatory capital requirements and
risk appetite levels on prospective
dividends from all of its regulated
subsidiaries. Our Group’s Pillar 3
document contains further details
and can be found on our website at:
www.integrafin.co.uk/
legal-and-regulatory-information/
Pillar 3 Disclosures.
36 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
As stated in the Chair’s report,
the board has declared a second interim
dividend for the year of 5.6 pence
per ordinary share, taking the total
dividend for the year to 8.3 pence
per share (2019: 7.8 pence).
Given the net cash, liquidity and
capital coverage positions as set out
above, the Group is well positioned
to fund the £18.6 million dividend.
Dividend Type
Share Class
Ordinary
All
Per share
Ordinary –
first interim
Ordinary –
second interim
All
All
16 December 2020
2020
£m
27.5
2019
£m
25.8
2.7 pence
2.6 pence
5.6 pence
5.2 pence
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 37
STRATEGIC REPORT continued
RISK AND RISK
MANAGEMENT
“The process which aims
to help us understand,
assess, assign ownership,
manage and take action on
all our risks. This allows us
to perform risk monitoring
and reporting, with a view
to increasing the probability
of success and reducing the
likelihood of failure of the
Group or its regulated
subsidiaries.”
Overview
The risk management framework
defines the risk principles of the
Group and is designed to support
the delivery of the Group’s strategic
objectives. It assists the board in
understanding its current and future
risks and provides appropriate
information that is incorporated
into our strategic decision making
and business planning processes.
It encompasses all financial, strategic
and operational risks that may
prevent us from fulfilling our business
objectives. In this context, the key
risks facing the business given the
nature of the activities we undertake,
are non-financial risks (comprising
operational risk, competitor risk,
regulatory risk, reputational risk,
and geopolitical risk) and financial
risks (comprising market risk,
liquidity risk, outflow risk, expense
risk and credit risk).
How risks are managed
The risk management framework is
developed, managed and embedded
throughout the Group in a consistent
manner, promoting a culture of risk
awareness and risk ownership.
It comprises our systems of
governance, risk appetite and risk
management processes.
Governance
The board is responsible for
establishing the risk strategy and
approving the risk appetite.
The board has established a
non-executive committee, the Audit
and Risk Committee, to provide
guidance and oversight on risk matters.
This committee of the company is
responsible for reviewing the manner
in which the Group implements and
monitors the adequacy of the Risk
Management Framework. For risk
oversight of the regulated subsidiaries
it is supported by the IFAL Group Risk
Committee, itself made up of
independent non-executive directors
of IFAL. Together they assist the
board and senior management in
fostering a culture that encourages
good stewardship of risk and
emphasizes and demonstrates the
benefits of a risk-based approach to
management of the Group.
The framework is supported by the
Risk Management Policy which
provides general guidelines for the
design and implementation of risk,
with the senior management
responsible for its implementation.
The Risk Management Policy is
overseen by the IHP Chief Executive
Officer (CEO) and is reviewed at least
on an annual basis. Any material
changes are approved by the board
following guidance from the Audit
and Risk Committee and approval
by the boards of the regulated
subsidiaries, which receive guidance
from the IFAL Group Risk Committee.
38 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Risk appetite
▪ we do not actively seek to take
operational risk to generate returns.
We accept a level of operational risk
that means the controls in place
should prevent material losses,
but should not excessively restrict
business activities;
▪ we aim to have a zero risk appetite
for unfair client outcomes arising
from systematic failures in our
cultural outlook or in any element
of the client life cycle; and
▪ we have a risk appetite for zero
material regulatory breaches.
Actual risk exposures are regularly
assessed by the Group’s risk
management function against risk
appetite using a comprehensive set
of key risk indicators which are
reported to the Audit and Risk
Committee, the IFAL Group Risk
Committee and senior management.
Our risk appetite is the degree of risk
that we are prepared to accept in
pursuit of our strategic and operational
objectives. Our Risk Management
Policy and Framework provides the
mechanism to define our risk appetite.
From this, each of our operating
companies sets its own appetite within
this framework to meet the common
aims of the Group. We have generally
adopted an overall conservative
approach which is reflected in our
risk appetite values and preferences
and in the overall approach to risk
management. Our risk preferences
can be articulated as follows:
▪ we ensure risks that are taken are
aligned with our strategic aims and
provide an acceptable level of return;
▪ we accept certain risks and ensure
that these are appropriately
managed, mitigated and monitored;
▪ we have a prudent capital
management approach and we
currently invest shareholder assets
in high quality, highly liquid,
short-dated investments;
▪ we have a preference for products
with low capital requirements and
without financial guarantees.
Additionally, we have a preference
for secondary market risk through
charges determined based on
clients’ portfolio values. This is
central to our proposition and we
accept the potential impact on
financial performance;
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 39
STRATEGIC REPORT continued
The risk management process
The CEO, with support from the
senior management team, is
accountable to the board and the
Group’s regulators for the effective
management of risk across the
business. We have established our
Risk Management Framework with
consideration of the Committee of
Sponsoring Organisation of the
Treadway Commission (COSO)
Integrated Framework Principles,
providing a consistent, proactive
approach to identification,
assessment, mitigation and reporting
of risks throughout the Group.
The CEO is responsible for ensuring
an embedded and consistent
approach is adopted for the overall
management of risk controls,
including the monitoring of risk
exposures, reporting in relation to
risk management arrangements and
for assessing the adequacy and
effectiveness of policies and
procedures designed to detect any
risk of failure to comply with
regulatory obligations. In this regard,
we have implemented a comprehensive
“top down” and “bottom up”
approach to managing risks through
regular assessments, monitoring
(including horizon scanning) and
reporting in conjunction with senior
management and risk owners.
For risk management to be effective,
it is important that the roles and
responsibilities of all those involved
are clearly defined. Accordingly, the
Group’s Risk Management Framework
is designed along the “three lines of
defence” model which provides at
least three stages of oversight to
ensure that all companies operate
within their risk appetites.
40 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Our Risk Management Framework is shown below:
OVERSIGHT
ENTERPRISE RISK MANAGEMENT
OWNERSHIP
RISKS
Risk and governance framework
Board
Strategy/Business
Market
Credit
Operational
Insurance
Liquidity
Concentration
Group
e
c
n
e
f
e
D
f
o
e
n
L
i
d
r
3
–
t
i
d
u
a
l
a
n
r
e
t
n
I
e
c
n
e
f
e
D
f
o
e
n
L
i
d
n
2
–
e
c
n
a
i
l
p
m
o
C
d
n
a
t
n
e
m
e
g
a
n
a
m
k
s
i
R
Model
governance and
data quality
Risk
management
policies
Board with
Risk Committee
guidance
Systems and controls policies
(Group policy, process and procedures
principles and guidance documents)
e
c
n
e
f
e
D
f
o
e
n
L
i
t
s
1
Procedures, manuals,
operational limits, methodology,
specifications, control activities,
training, reporting
Actuarial, Business
Intelligence, Client Operations,
Corporate and Client
Accounting, Facilities, Human
Resources, Information
Technology, Legal Management,
Marketing, Operational
Resilence, Sales, System
and Service Development,
Technical, Trading Operations,
Training, Transact Support,
Quality Control
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 41
STRATEGIC REPORT continued
The “three lines of defence”
risk governance model
First line of defence
Our first line of defence is the
business departments which have
responsibility for managing and
controlling their risks, in accordance
with agreed risk appetites through
the implementation of a sound set
of processes and controls.
Responsibility for risk management
resides at all levels within our business,
from the senior management team
to departmental and team managers.
All staff members are accountable for
managing risks within the business
areas for which they are responsible,
ensuring compliance with prescribed
company plans, policies and prevailing
regulatory and legislative requirements.
The business lines are also responsible
for complying with the policies and
standards which comprise the Group’s
Risk Management Framework.
Current key risks and issues facing
us are considered by the business,
recorded into the Group risk register
with each key risk owned by the
member of the management team
responsible for the strategic
management of that risk across
the Group.
The directors consider the totality of
the risk register and carry out a
robust assessment of the emerging
and principal risks facing the Group,
including those that would threaten
its business model, future
performance, solvency and liquidity.
Second line of defence
Our second line of defence comprises
two functions: the risk management
function and the compliance function.
The risk management function is
responsible for coordinating all the
risk management activities within the
business. This includes the development,
maintenance and enhancement
of the Risk Management Policy
and Framework. Additional risk
responsibilities include ensuring that
the business risk owners maintain up
to date and accurate risk and control
data within the Group risk register.
The output from the risk register
forms part of the risk management
reporting process to the Audit and
Risk Committee and IFAL Group Risk
Committee.
The compliance function is primarily
responsible for supporting the Group
to ensure that its activities are
conducted in accordance with all
applicable regulatory requirements.
The Risk Management and Compliance
functions provide reports to the
Audit and Risk Committee and the
IFAL Group Risk Committee, on at
least a quarterly basis, with information
and analysis on the key risks the Group
faces (including forward-looking
risks), capital requirements and
comparison against risk appetite.
The chairs of the Committees then
provide a summary to the members
of the boards.
42 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Third line of defence
Emerging risk focus
Our third line of defence is internal
audit, which provides independent
assurance on the adequacy and
effectiveness of the Group’s risk
management and major business
process control arrangements.
It performs regular audits across
the business, reporting to the Audit
Committees on the implementation
and effectiveness of the Risk
Management Policy, framework and
internal controls. The Head of
Internal Audit reports directly to the
Audit Committee chairs.
The board is satisfied that internal
audit provides sufficient assurance
on the Risk Management Policy and
Framework and internal controls.
Our stakeholders expect us to be
resilient in our operations. We actively
manage our risk exposure against
appetite across our defined principal
risk categories. These are overseen
by management and governance
committees to ensure exposures are
adequately identified and acted upon
in a timely manner. In this regard
we ensure through our Risk Capital
frameworks that our regulated
entities hold adequate capital to
meet obligations.
The management approach to
risk ensures that we identify and
monitor a series of emerging risks.
These have a degree of uncertainty
around the likelihood and impact on
the business. The more significant
emerging risks in the near, medium
and longer term are set out below
and are regularly reported and
assessed through the governance
committees.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 43
STRATEGIC REPORT continued
Near-term
risks
Cyber-attack
The threat of malicious external 3rd party attacks on our systems, leading
to ransom threats, denial of service or loss of client data and information.
Financial Crime
Fraud
The emergence of more sophisticated instances of financial crime impacting
our security and reputation across the client base.
Medium-term
risks
Prolonged
economic
downturn
Severe and prolonged worldwide economic downturn resulting in volatile
equity markets. Investors losing confidence in equity markets and seeking
alternative investment assets impacting our FUD.
Regulatory
changes and
a shifting focus
Changing expectations of the UK and Isle of Man regulators especially
in the light of the impending departure from the EU. Increasing regulatory
scrutiny or focus impacting our business model.
Longer-term
risks
Disruptive
market
influences
The independent adviser model is dramatically impacted as a result of
prolonged economic factors, new technological entrants and a more
aggressive acquisition by vertically integrated firms reducing our adviser/
client base.
Environmental,
Social and
Governance
(ESG)
requirements
Increasing government and stakeholder focus on requirements for ESG
metrics. The emerging uncertainty and complexity of the data requirements
and disclosure obligations of environmental factors, such as climate
change, are likely to require additional significant investment of effort
across our business.
We use the emerging risk insight
from management and other reliable
external sources, to undertake stress
and scenario testing. These are used
to identify additional impacts on the
ability of the Group and its regulated
subsidiaries to meet capital and
liquidity needs as a result of changes
in the external environment that are
over and above the amount of capital
held. More details of these are set
out in our viability statement.
44 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Isle of Man Risk Based Capital
regime
As at 30 September 2020, ILInt,
an Isle of Man based life company
in the Group, has Own Funds of
£33.4 million (2019: £33.1 million)
and SCR of £18.5 million
(2019: £19.4 million) which gives
a SCR coverage ratio of 181%
(2019: 171%).
During the reporting period,
ILInt was fully compliant with the
SCR. Additionally, the Risk Based
Capital balance sheet and SCR are
regularly monitored and in line with
standard regulatory requirements
reported to the Isle of Man Financial
Services Authority (IoM FSA) on a
quarterly basis.
During the reporting period, IFAL was
fully compliant with its regulatory
capital requirement. Additionally,
regulatory capital resources and
capital requirements were regularly
monitored and in line with standard
regulatory requirements reported to
the FCA on an annual basis.
Solvency II
ILUK, a UK based life company in
the Group, has adopted the standard
formula approach in calculating the
Solvency Capital Requirement (SCR),
and has not adopted any of the
transitional measures in the calculation
of the Solvency II balance sheet.
As at 30 September 2020, ILUK
has own funds of £239 million
(2019: £227 million) and an SCR of
£170 million (2019: £173 million)
which gives a solvency coverage ratio
of 140% (2019: 131%).
During the reporting period, ILUK
was fully compliant with the SCR.
Additionally, the Solvency II balance
sheet and SCR were regularly
monitored and in line with standard
regulatory requirements reported to
the Prudential Regulation Authority
(PRA) on a quarterly basis.
Risk Capital Frameworks
The company’s regulated subsidiaries
fall under various risk capital regimes.
All of the regimes are guided by
similar underlying risk principles,
albeit the results and reporting
requirements are regime specific.
The company’s regulated subsidiaries
maintain a sound and appropriate
system of capital management in
order to meet their strategic capital
objectives. They have a preference
for a simple system of capital
management which reflects the
nature of their businesses. At a legal
entity level, the regulated subsidiaries
are capitalised at the required regulatory
minimum plus an adequate buffer
defined as part of their capital
management, risk appetite and
dividend policies.
Common Reporting Framework
Under the Financial Conduct Authority’s
(FCA) Prudential sourcebook for
Investment Firms (IFPRU), IFAL is
an IFPRU 125K limited licence firm.
IFPRU requires that such firms as
IFAL comply with the European
Union’s (EU) rules, except where the
FCA has expanded on the underlying
rules or specifically exempted IFPRU
firms from compliance. This means
that IFAL manages its capital and risk
requirements using the Basel III
framework of the Basel Committee
on Banking Supervision (“Basel
Committee”) as applied by the EU to
investment firms in amendments to
the Capital Requirements Directive
(CRD), and the Capital Requirements
Regulation (CRR).
As at 30 September 2020, IFAL has
regulatory capital resources of
£34.1 million (2019: £30.9 million)
and a regulatory capital requirement
of £24.0 million (2019: £23.5 million)
which gives a capital requirement
coverage ratio of 142% (2019: 131%).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 45
STRATEGIC REPORT continued
PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks and uncertainties
to which the Company is exposed
relate to the upstream of capital,
predominantly from its regulated
subsidiary, IFAL, in order to support
its dividend-paying capacity to its
shareholders. The key drivers of this
upstream of capital are the underlying
financial performance and solvency
position of IFAL and its regulated
subsidiaries. In summary, due to the
nature of the business written by
IFAL and the other regulated
subsidiaries, profitability arises
primarily from charges on the assets
held in the portfolios less the
expenses of administering those
portfolios. As a consequence, the
predominant risks to which the
Company is exposed are market risk,
liquidity risk, outflow risk, expense
risk and operational risk. The Company
seeks to limit its exposure to these
and any other applicable financial
and non-financial risks.
The following tables (split between
financial and non-financial risks)
describe the key risks of the
Company with a summary description
of how we manage and mitigate the
risks and an assessment of the
change over the year:
FINANCIAL RISKS
KEY RISK DESCRIPTION
MANAGEMENT AND CONTROLS
Market risk – the impact changes in
equity and property market values,
currency exchange rates, credit
spreads, interest rates and inflation,
may have on the value of clients’
portfolios, resulting in a reduction
in future charges or an increase in
future expenses.
The upstream of capital to the Company is exposed to
second order impacts from market movements as future
charges are predominantly determined based on clients’
portfolio values. The Regulated Subsidiaries of the Group
do not offer any guarantees on portfolio values and
currently invest their shareholder assets in high quality,
highly liquid, short-dated investments.
Expense inflation risk is mitigated through regular stress
testing, monitoring of expenditure and closely managing
expenses in line with the business plan.
CHANGE OVER
THE YEAR
Increased as stock
market volatility
and uncertainty
has impacted FUD.
Liquidity risk – this is the risk of the
Company not having available
sufficient financial resources to enable
it to meet its obligations as they fall
due, or can secure such resources only
at excessive cost.
Outflow risk – loss of future profits
due to more clients than expected
terminating policies or more outflows
(e.g. withdrawals or transfers) than
expected.
The Company’s principal liquidity risk is limited to paying
out dividends and operating expenses as they occur.
No change.
There are robust controls in place to mitigate liquidity
risk, for example, holding corporate cash across a range
of banks, in order to mitigate the risk of a single point of
counterparty default failure.
The Group seeks to mitigate outflow risk by focusing on
providing the highest level of service that it can. Outflow
rates are closely monitored and unexpected experience
is investigated.
Increased due to
the growth of
funds under
direction.
Despite the current challenging and uncertain economic
and geopolitical environment, net inflows remained
positive.
Expense risk – administration costs
exceed expense allowance, which can
occur due to costs increasing faster
than expected or from one-off
expense “shocks”.
As a significant percentage of the Group’s expenses are
staff-related, the key inflationary risk arises from salary
inflation. Expense risk is mitigated through regular
stress testing, monitoring of expenditure and closely
managing expenses in line with the business plan which
is set and approved by the board on an annual basis.
Credit risk – loss due to defaults from
holdings of cash and cash equivalents,
deposits, formal loans and reinsurance
treaties with banks and financial
institutions.
The Group seeks to invest its shareholder assets in high
quality, highly liquid, short-dated investments. Maximum
counterparty limits are set for banks and minimum
credit quality steps are also set.
Marginal increase
due to the one off
nature of
managing
operations under
the COVID-19
pandemic.
No change.
46 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
NON - FINANCIAL RISKS
KEY RISK DESCRIPTION
MANAGEMENT AND CONTROLS
Regulatory risk – the risk of new
regulatory requirements having
adverse impacts on the Group’s
business model, or the Group failing to
comply with existing or new
regulations resulting in a fine or
regulatory censure.
Regulatory risk is mitigated through regular monitoring
of regulatory developments and maintaining open and
transparent dialogue with the regulators to which the
different regulated subsidiaries are subject.
Ongoing compliance with existing rules is monitored by
the Compliance function with additional assurance
provided by the Internal Audit function for the key
regulatory risks on a regular basis.
Operational risk – the risk of loss
arising from inadequate or failed
internal processes, people and
systems, or from external events.
The key operational risks are information security, IT
infrastructure and business continuity related, all of
which include exposures to cyber risks.
The Group aims to minimise its operational risks at all
times through a strong and well-resourced control and
operational structure. In particular, the Group has in
place a dedicated financial crime team and an ongoing
fraud and cyber risk awareness programme.
Additionally, the Group carries out regular IT system
maintenance, and system vulnerability testing.
The Crisis Management Team (CMT) effectively
invoked the Group’s business continuity plans during
the course of the year.
Robust process documentation and an effective risk and
control framework, has supported the Group during the
difficult second half year operating period allowing
management to make effective and informed risk based
operational decisions.
CHANGE OVER
THE YEAR
Regulatory scrutiny,
as a result of
COVID-19 has
increased. This is
expected to continue
in the near term.
Increasing risk
associated with the
ongoing operating
approach of
working remotely.
Competition risk – the risk of
competitor activity resulting in loss of
new business, increased outflows of
business or pressure on profit
margins.
Competitor risk is mitigated by focusing on providing
exceptionally high levels of service and being
responsive to client and financial adviser demands
through an efficient expense base.
No change.
Geopolitical risk – the risk of
changes in the political landscape
disrupting the operations of the
business or resulting in significant
development costs.
Geopolitical risk cannot be directly mitigated by the
Group. However, through close monitoring of
developments through its risk horizon scanning
process, potential impacts are taken into consideration
as part of the business planning process.
Reputational risk – the risk that
current and potential clients’ desire to
do business with the Group reduces
due to perception of the Transact
service in the market place.
The Risk Management Framework provides the
monitoring mechanisms to ensure that reputational
damage controls operate effectively and reputational
risk is mitigated, to some extent, by internal
operational risk controls, error management and
complaints handling processes as well as root cause
analysis investigations.
Unchanged, there
remains near term
uncertainty from
the geopolitical
environment, e.g.
the end of the
transitional period
with the EU at the
end of this year.
Unchanged for the
year.
The directors have carried out a robust assessment of the principal and emerging risks facing the Group, including
those that would threaten its business model, future performance, solvency or liquidity.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 47
STRATEGIC REPORT continued
GOING CONCERN AND
VIABILITY STATEMENT
In accordance with the Code, the
directors have assessed whether the
Group is considered a going concern
over the following twelve month
period, as well as the prospects and
viability of the Group over a period
of three years.
Going concern
The Strategic Report sets out the
Group’s business model, its strategic
objectives and the associated risks,
and the annual financial review on
pages 26 to 37.
Going concern is assessed over the
12-month period from when the
Annual Report is approved, and the
board has concluded that the Group
has adequate resources to continue
in operational existence for the next
12 months. As detailed in the going
concern disclosure in the financial
statements, on page 122, this is
supported by:
liquidity, profitability and regulatory
capital, taking account of the
COVID-19 pandemic and further
possible adverse changes in trading
performance, the board is satisfied
that the Group is well placed to
manage its business risks. The board
is also satisfied that it will be able to
operate within the regulatory capital
limits imposed by regulators, being
the FCA, PRA, and IoM FSA.
The board has concluded that the
Group has adequate resources and
there are no material uncertainties
to the Group’s ability to continue to
operate for the foreseeable future,
being a period of at least twelve
months from the date this Annual
Report is approved. For this reason,
they have adopted the going concern
basis for the preparation of the
financial statements.
Viability
The key factors affecting the Group’s
viability and prospects are its market
position and recurring revenue.
▪ The current financial position of
the Group;
Market position
▪ Detailed cash flow and working
capital projections; and
▪ Stress-testing of liquidity,
profitability and regulatory capital,
taking account of possible adverse
changes in trading performance,
including the impact of COVID-19.
When making this assessment, the
board has taken into consideration
both the Group’s current performance
and the future outlook, including the
impact of the COVID-19 pandemic.
Market volatility and uncertainty is
expected to continue for some time,
due to the pandemic and the effect of
measures taken to combat it, but the
Group’s fundamentals remain strong.
Having conducted detailed cash flow
and working capital projections,
and appropriate stress-testing on
Market position can be assessed as
follows: independent research
consistently rates Transact as the top
platform in the market (page 24);
the number of advisers using the
platform increased by 6% during the
year; the number of clients on the
platform increased by 7%; and, our
Net Promoter Score remained the
highest score for an advised platform.
The above measures all demonstrate
adviser and client satisfaction with
the service provided.
Recurring revenue
The absolute level of revenue is
dependent on market values, but key
to the recurrence is the retention of
FUD which is achieved through
retaining client and advisers through
our service delivery. 97% of revenue
is of recurring nature (page 29).
48 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
The directors’ assessment has
been made with consideration and
reference to: the Group’s current
position and three year business
plan; the Group’s risk appetite;
the Group’s financial projections;
and, the Group’s principal risks and
uncertainties, including uncertainty
caused by the COVID-19 pandemic
and geopolitical uncertainty,
as detailed in the strategic report.
In accordance with the Code,
the directors have assessed the
Group’s prospects by reference to
the three-year planning period to
September 2023. The directors have
a reasonable expectation that the
Group will continue to meet its
liabilities as they fall due, and that it
will be able to operate within the
regulatory capital limits imposed by
the regulators over the period of this
assessment and beyond.
By order of the board,
Helen Wakeford
Company Secretary
16 December 2020
markets due to an extended period of
pandemic, combined with the end of
the transitional period with the EU.
Decline in investment adviser
numbers – considers: prolonged
economic downturn, with a reduced
investor propensity for savings, which
dramatically impacts the investor/
independent adviser model; and, the
impact of vertically integrated firms
increasing acquisition activity.
Combined scenario – considers the
impact of the combination of internal
cyber-attack and loss of investor
confidence scenarios.
The results of the above stress and
scenario tests led to the following
conclusions:
▪ Under a range of stressed scenarios
no expected profit or liquidity issues
are expected to arise in the Group
over the three year business
planning period and beyond;
▪ Each of the regulated entities has
sufficient available capital to cover
its regulatory solvency requirements,
and this is expected to continue
over the three year business
planning period and beyond; and
▪ Under a range of stressed scenarios
the entities are still able to meet their
capital and liquidity requirements
over the three year business
planning period and beyond.
We are targeting organic revenue
growth, with moderate margin
improvements that are driven by
efficiency delivered from process and
system enhancement.
Assessment period and measures
It is the board’s view that a three
year time horizon is an appropriate
period over which to assess its viability
and prospects, and to execute its
business plan. This assessment
period is consistent with the Group’s
current business plan projections
and the Internal Capital Adequacy
Assessment Process (ICAAP) and
Own Risk and Solvency Assessments
(ORSA) of the Group’s regulated
entities. Consideration is also given
to projections beyond this period,
though this does not form part of the
formal assessment.
The strategy and business plan is
approved annually by the board and
updated as appropriate. It considers
the Group’s profitability, cash flows,
capital requirements, dividend
payments, and other key variables
such as liquidity and the solvency
requirements of the regulated entities.
These are considered under stress and
scenario tests, to ensure the business
has sufficient flexibility to withstand
such impacts by adjusting its plans
within the normal course of business.
The stress and scenario tests applied
are severe, yet plausible, and both
individual and combined. The key
scenarios are as follows:
Internal cyber-attack – considers
the impact of a contractor or
employee using their access to the
site to steal personal/sensitive data.
System failure – considers the
damage caused by insufficient
controls within the bespoke operating
system, “the platform”.
Loss of investor confidence
–
considers the impact on investor
confidence in capital and investment
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 49
STRATEGIC REPORT continued
With the above in mind, we have
taken steps to ensure staff are fully
supported and have resources they
can call upon, should they need
additional help. We have accessible,
fully trained mental health first aiders
in our Human Resources Department,
we have promoted the Employee
Assistance Programme and the
Executive has given staff frequent
updates and assurance on the future
shape of working safely, as far as
we are able, and bearing in mind
government guidelines. We have
also conducted a staff survey, in order
to understand how our people feel
about a future return to an office
environment and this will be considered
when we take steps to transition back
to the office.
We have invested in staff engagement
and contact through technology,
which has facilitated the ability to
stay in touch with fellow team
members, face to face, through
frequent virtual meetings, as well as
the usual telephone calls. We have
also launched a more informal,
magazine style bulletin for all staff,
called the “Transact Together Hub”,
which has reported some of the more
lighthearted aspects of Transact
culture and its translation to a home
environment.
We are proud to say that the firm’s
culture is thriving, despite challenging
circumstances for all.
We believe the culture that is
promoted from the board down is one
that helps instil staff engagement.
This is due to an open culture and a
relatively flat structure, which ensures
all employees are able to share
ideas and suggestions for improving
the offering.
We encourage staff to maintain open
dialogue with direct management,
not just concerning work issues, but
other issues that may impact their
day at work. Our Human Resource
business partners also provide
support for staff when they need
extra assistance and, in addition,
there is an Employee Assistance
Programme that staff can use if they
wish to speak to an independent
party, in confidence, about any
issues that may be impacting them.
The Group aims for a collegiate,
industrious and sociable work
environment, and this is supplemented
by various social and charity events.
Human rights are respected by
management and all staff and other
stakeholders are treated equitably.
Staff welfare during the
COVID-19 pandemic
From late March onwards, the COVID-19
pandemic resulted in all staff working
from our London, Isle of Man and
Melbourne offices moving to working
remotely. The agility, hard work and
determination of our people to
ensure operations continued
seamlessly, from a myriad locations,
has been hugely impressive and we
are indebted to staff.
We are, however, cognisant of the toll
on staff as they deal with concern for
their family’s and their own health
and wellbeing, adapt to the change in
working environment, and process
daily media reporting on the pandemic,
vaccination and the long term impact
on the global economy.
CORPORATE SOCIAL
RESPONSIBILITY
We are wholly committed to acting
ethically and with integrity and
transparency in all business dealings
and in all our employment practices.
These are core principles by which
all entities within the Group abide.
The Group demonstrates its social
responsibilities primarily through
Group companies that operate
ethically and deliver commercial
benefits to the four groups of
stakeholders: clients, staff, suppliers
and shareholders. We also acknowledge
our responsibilities more widely in
relation to effects on environmental
and social wellbeing.
Our people and our culture
One of our main assets is the staff
we employ and we aim to ensure all
staff are respected, motivated and
safeguarded whilst at work. This is
achieved through a corporate culture
of which we are proud, one of:
▪ aiming for as little hierarchy as
possible, through a relatively flat
organisational structure;
▪ emboldening staff to voice opinions
and ideas;
▪ encouraging all staff to develop and
progress, be it through internal training,
or professional qualifications; and
▪ considering any additional
requirements staff may have, or
additional support they may need.
50 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Diversity
We recognise that diversity is not
restricted to gender and, as reflected
in the Nomination Committee report
on page 73, the board acknowledges
that we have not met the targets
set out in the Hampton Alexander
or the Parker review on diversity
and is proactively reviewing the
subsidiary boards.
Gender pay gap
Across the Group we employed 487
staff and six NEDs are officers of the
Company. The breakdown by gender
as at September 2020 was as follows:
Board Directors1
Senior Managers
Direct Reports
All Staff
Total
Male
%
80
33
61
68
67
Female
%
20
67
41
32
33
2
4
12
143
161
8
2
19
304
333
1 Michael Howard, an Executive Director, is included in the gender pay reporting figures
as he is an officer of the Company. He is not however an employee and the total
employee count is 487.
In 2020 the Company has changed
the basis of reporting. The Code
provides for the gender and diversity
of senior management to be reported
either by reference to the Company’s
executive committee, or by reference
to the layer below the board,
including the Company Secretary.
In prior years the Company has
reported Senior Management in
accordance with the definition used
in the prospectus, however we have
changed this basis in 2020 to better
reflect the management structure of
the Group and have moved to reporting
the layer below the board, including
the Company Secretary, in accordance
with the definition in the Code.
IntegraFin Services Ltd, the
Company’s services provision
subsidiary, published its gender pay
gap report in April 2020. The report
can be found on our website, at
www.integrafin.co.uk/
legal-and-regulatory-information
Our reported mean gender pay gap
rose slightly to 13%, and still compares
favourably with results reported by
others in the sector in which we
operate and the national average.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 51
STRATEGIC REPORT continued
Equality and inclusion
Payment practices
Modern slavery
We believe in equality. We treat all
stakeholders fairly and with respect.
The Group remains committed to
continuous improvement by ensuring
that: recruitment is not discriminatory,
we employ the best person for the
role; all staff are treated equitably;
all staff have equal opportunities to work
flexibly, regardless of seniority or role;
and, all staff are remunerated fairly
and in line with the role they perform.
We endeavour to pay all suppliers
within agreed payment terms.
We do not seek to disadvantage,
or compromise, suppliers with whom
we conduct business, in line with
one of our core principles of ethical
behaviour. In financial year 2020,
the Group paid suppliers, on average,
within 14 days (2019: 15 days) and
the Group paid 90% (2019: 92%) of
suppliers within 30 days.
Our policy regarding the employment,
training, career development and
promotion of disabled employees,
and employees who became disabled
whilst in employment, is to make
reasonable adjustments as necessary
in order that they can embrace
opportunities in the Group.
Anti-bribery and anti-corruption
The Group strives to maintain high
standards of governance, personal
and corporate ethics, compliance with
laws and regulations and values
integrity, fairness and honesty when
dealing with employees, clients,
financial advisers and suppliers. The
Group has a zero tolerance for bribery
and corruption and takes all
reasonable steps to ensure its staff
and Third Parties understand what is
and what is not permitted and act
with integrity at all times. The Group
has implemented an Anti-Bribery and
Corruption policy and has put
appropriate contractual and other
controls in place to manage all forms
of bribery and corruption risk.
We do not tolerate modern slavery,
servitude, human trafficking or forced
labour. The Group’s modern slavery
statement is found at:
www.integrafin.co.uk/
modern-slavery/
Environmental impact
We recognise the importance of
managing and minimizing the Group’s
environmental impact as much as
reasonably possible, and we became
Energy Savings Opportunities Scheme
(ESOS) Phase 2 certified in 2019.
Financial year 2020 is a year in which
the Group’s key processes and work
streams were modified to accommodate
staff working from home for six months
of the financial year. This led to agile
development of processes that did
not require paper and could rely on
electronic signatures. This is a positive
development for the Group and
initiatives to further implement a
paperless working environment will
be actively sought going forward.
Over the course of the year we saved
157 trees (FY19: 287) through recycling
confidential waste, obviously with
remote working there has been a
significant reduction in paper
consumption; we recycled 41% of
total waste (FY19: 51%); and,
maintained environmental initiatives
previously introduced, such as a
green energy supplier and chemical
free cleaning systems.
52 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Streamlined Energy and
Carbon Reporting
The Group has adopted the reporting
requirements of the Streamlined Energy
and Carbon Reporting (SECR) policy
as implemented by the government,
and with effect for financial years
commencing after 1 April 2019.
It is, therefore, the Group’s first year
reporting under the SECR regime.
Our emissions data for financial year
2020 and 2019 is presented below.
We have calculated the emissions in
line with the Greenhouse Gas Protocol
Corporate standard.
Emissions tables
For the financial year ended
30 September 2020
Scope 1
Printer emissions
Scope 1
Purchase of gas
Scope 1
Purchase of electricity
Scope 3
Business flights
Scope 3
Vehicle usage
UK
6
212
189
5
44
CO2 Tonnes
Aus
IoM
Total
-
24
72
11
0
-
2
3
1
0
7
6
238
264
17
44
570
Total
456
107
Emissions Intensity Ratio
(CO2 tonnes per member of staff)
1.1
1.3
0.9
1.2
Energy consumption in the UK
('000 kWh)
1,469.1
For the financial year ended
30 September 2019
Scope 1
Printer emissions
Scope 1
Purchase of gas
Scope 1
Purchase of electricity
Scope 3
Business flights
Scope 3
Vehicle usage
Total
CO2 Tonnes
Aus
IoM
Total
-
-
-
-
-
0
-
3
3
3
0
9
10
219
254
84
95
662
UK
10
216
251
80
95
653
Emissions Intensity Ratio
(CO2 tonnes per member of staff)
1.6
0.0
1.4
1.6
Energy consumption in the UK
('000 kWh)
1,712.5
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 53
STRATEGIC REPORT continued
Waste
Not recycled
Recycled
Total
CO2 Tonnes
2020
2019
7
4
11
16
18
34
We believe number of staff is an
appropriate business specific metric
for calculating the Emissions Intensity
Ratio, as it is the main driver of our
energy consumption and, therefore,
emissions.
We generate Scope 1 emissions
directly through purchasing electricity
and gas and general waste from running
the premises in London, Melbourne
and Douglas in the Isle of Man. Scope 3
emissions are generated through
business flights and driving for work.
We have restated the financial year
2019 emissions comparative as the
numbers had been incorrectly totalled
in the Annual Report.
It should be noted that the largest
fall in emissions is due to the
reduction in business travel, due to
staff working from home during the
COVID-19 pandemic.
The general waste statistics are
included above and the sharp fall,
year on year, is due to six months of
the reporting year being worked from
home. In the previous year we
recycled more waste than not, and it
is expected that in financial year 2020
this trend would have continued. This
is due to all confidential waste being
recycled and numerous recycling bins
placed on office floors in order that
food and drink packaging can be
collected and recycled.
The Group has not made progress in
formulating a plan to reduce emissions,
due to the focus on maintaining business
as usual from home. However, the
Group is aware of its duty to reduce
its impact on the environment and will
renew efforts in financial year 2021,
with the goal of reducing its carbon
footprint where it realistically can.
54 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Community
A variety of events is organised
each year to raise money for, and
awareness of, a number of charities
chosen from staff suggestions,
to which staff donate voluntarily.
Non-financial information
statement
The Corporate Social Responsibility
report includes information in
accordance with sections 414 CA and
CB of the Companies Act 2006.
Political donations
The Group does not make political
donations.
Tax strategy
We manage our tax affairs to the
same high ethical, legal and professional
standards as the delivery of our
services to clients. In summary,
our tax strategy is to comply fully
with all statutory obligations, make
full disclosure to tax authorities in all
appropriate jurisdictions, and to pay
all tax when it is due. The full tax
strategy document is available at:
www.integrafin.co.uk/
group-tax-strategy/
We pay all tax as it falls due and
make full disclosure to all relevant tax
authorities. The UK corporation tax
and employer’s national insurance
payable in respect of the year ended
30 September 2020 was £12.5 million
(2019: £11.8 million). In addition
other taxes such as VAT and business
rates were paid.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 55
STRATEGIC REPORT continued
COMPANIES ACT SECTION 172
The directors have a duty, under
Section 172 of the Companies Act,
to act in a way and in good faith,
to promote the success of the Company
for the benefit of its members as
a whole.
The table below sets out the different
matters that the directors must have
regard to and how they have fulfilled
their duties during the financial year.
The board considers the key stakeholders
to be our clients, our shareholders,
our staff and our suppliers. These
groups are considered key as they are
fundamental to the continuing success
of the Group.
Consideration
What the directors have done
Long term
consequences of
decisions
IHP Group’s primary strategic objective is stated in the Strategic Objectives section on page 12.
How this strategy has been delivered during the financial year and the forward looking risks to
being able to deliver it in future are set out. The directors make strategic decisions on future
direction, investment and stakeholder value, based on the clear, sustainable, long term Group
objective of delivering financial services infrastructure and associated services to UK advisers and
mutual clients.
By successfully achieving strategic objectives, which results in the ongoing and increased success
of the offering, the directors are able to take decisions which share the Group’s success with the
key stakeholders.
Key decisions taken by the directors in financial year 2020 include, but are not limited to:
▪ the responsible pricing strategy, which benefits our clients;
▪ the ability to maintain the dividend policy, which benefits out shareholders;
▪ resourcing the company with sufficient, appropriately skilled and expert employees to deliver the
strategy of being the best platform; and
▪ the approach of treating our suppliers fairly by always striving to pay them within payment
terms, and often more quickly, as detailed in the Corporate Social Responsibility (CSR) report on
page 50.
Decisions taken by the board in financial year 2020 include:
▪ the decision not to use any of the Government financial support schemes during the COVID-19
pandemic, as the Group does not require financial assistance and all staff have been fully
employed throughout the pandemic;
▪ the decision to award all those employees the annual discretionary bonus, especially when they
have continued to deliver outstanding customer service from home, due to the pandemic; and
▪ the decision to approve the interim dividend, paid in June 2020 and relating to the first half of
financial year 2020, as the Group’s financial performance was strong.
56 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Consideration
What the directors have done
The interests of
the Group’s
employees
The directors value our people and the Directors’ Remuneration Report on page 76, sets out the
Group’s approach to remuneration, which is intended to ensure equitable remuneration across the
Group and which improves value for employees. The Corporate Social Responsibility disclosure on
page 50 also outlines the value directors place on staff welfare and the culture of the Group.
A critical contributor to the success of the Group is the high standard of client service delivered,
collectively, by our staff. The directors recognise and value the contribution made by staff and this
is evidenced by resourcing the business at a level that ensures employees are able to deliver the
Group’s objective of high touch customer service with expert technical back office support, and by
offering a basic salary and benefits package which attracts the right calibre of employee,
supplemented with a cash bonus scheme and initiatives such as the board decision to implement
an all staff Share Incentive Plan, to enable staff to directly share in the success of the Group.
Staff engagement is important to the directors. Staff surveys are undertaken in order to gain
direct feedback on some of the issues affecting staff. For example in financial year 2020, all staff
were asked for their feedback on a number of key topics regarding their experience of working
from home during the pandemic and if anything feasible could be done to assist them.
Fostering
business
relationships
The Group does not tolerate unethical behaviour, as stated on page 50 of the Corporate Social
Responsibility section. It ensures suppliers are paid within payment terms and does not seek to
disadvantage or compromise suppliers with whom we do business.
An integral part of the service offering is the provision of regular relationship management to
advisers as they are the platform’s target market.
This is achieved through regular market updates, dedicated adviser firm centric customer service
teams, named contacts and personal support through our regionally based business development
managers and adviser support managers.
The impact of
operations on
the community
and environment
The Corporate Social Responsibility report on pages 50 to 55 sets out the impact of operations on
the environment.
The directors recognise that we have a responsibility to minimise the impact of the Group’s
business conduct on the environment and community.
Due to the focus in the second half of financial year 2020 shifting to ensuring the business was
conducted from home to the same high standards as when staff are in the office, consideration of
improving our impact on the community and environment took a back seat. However, there will
be renewed focus in the coming financial year and beyond. It is recognised that taking meaningful
decisions to reduce impact in both areas will take time to formulate. The board is, however,
committed to doing so.
Maintaining a
reputation for
high standards
of business
conduct
The business model and strategic objectives of the Group are set out on pages 8 to 15 and make
clear the focus of the business on delivering impeccable service to clients and their advisers
through investment in infrastructure and staff. The directors recognise that the service is only as
good as the technology and people behind it and that the Group’s reputation is built on high
standards of business conduct which must be maintained in order for the business to thrive and
grow. The directors also recognise that as the business is regulated by three separate regulators,
as detailed on page 122, then maintaining strong, open and productive relationships with the
respective regulators is also business critical.
Acting fairly
between members
of the Group
All shareholders are treated equally, with all information being made available to all shareholders
in a consistent manner.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 57
The directors believe that the
Strategic Report on pages 4 to 58
meets all relevant statutory objectives
and requirements.
By order of the board,
Helen Wakeford
Company Secretary
16 December 2020
APPROVAL OF THE
STRATEGIC REPORT
A statutory requirement of the
Annual Report is that the directors
produce a Strategic Report.
Section 172 of the Companies Act
states that the purpose of the report
is to inform members of the Company
and help them assess how the
directors have performed their duty.
To fulfil this, directors must act in a
way they consider, in good faith,
would be most likely to “promote the
success of the company for the
benefit of its members as a whole”.
The Strategic Report should provide
shareholders with a comprehensive
and balanced overview of the Group’s
business model, strategy, development,
performance, position and future
prospects. The Strategic Report should
be clear, concise and unambiguous,
and should demonstrate how the
Company has considered the interest
of employees, and the impact of the
Company’s operations on the
community and environment.
58 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
GOVERNANCE
BOARD OF DIRECTORS
Richard Cranfield
Alexander Scott
Jonathan Gunby
Non-Executive Chair
Chief Executive Officer (CEO)
Executive Director
Appointed to the board:
26 June 2019
Experience includes:
▪ Henderson High Income Trust Plc
– Director since March 2020
▪ Allen & Overy LLP – Partner 1985 to
present
Committees:
Nomination Committee (Chair),
Remuneration Committee.
Appointed to the board:
11 February 2014
Appointed to the board:
2 March 2020
Joined the Group in 2011 as Chief
Development Officer and became
an Executive Director in March 2020.
Experience includes:
▪ NMG Holdings – Executive Director
1999 – 2011.
Joined the Group as Actuary and
Head of Group Technical Operations
in October 2009. From November
2010 he was Chief Financial Officer
and Head of Risk, becoming a
director in July 2011. Alexander
became Chief Executive Officer in
March 2020.
Experience includes:
▪ Sterling Insurance Group – Life Director
and Chief Actuary 2004-2009
▪ Criterion Assurance Group –
Non-Executive Director 2003-2010,
Group Director 2002-2003,
Director 1999-2002,
Actuary 1997-1999
Committees:
Nomination Committee.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 59
GOVERNANCE continued
Michael Howard
Ian Taylor
Caroline Banszky
Executive Director
Executive Director
Appointed to the board:
11 February 2014
Appointed to the board:
24 January 2014
Executive Director and General
Manager until April 2002 when he
became Chief Executive Officer,
until he stepped down from the
position in March 2020.
Experience includes:
▪ AIB Govett Asset Management –
Marketing Director 1992-1999
▪ Royal Life Fund Management –
Marketing Development Manager
1990-1992
Co-founded the Group in 1999,
Executive Chair of the Group from
2001 until stepping down in
October 2017 and becoming an
Executive Director. Founded
ObjectMastery in Australia in April
1992 which developed the software
underpinning Transact.
Experience includes:
▪ Norwich Union Life Insurance –
responsible for marketing and
administration of investment funds
including the launch of the platform
Navigator in 1990
▪ Touche Ross – Audit division in
Melbourne office 1984-1986, in London
office 1980-1984.
Independent
Non-Executive Director
Appointed to the board:
22 August 2018
Experience includes:
▪ 3i Group plc - Chair of Audit &
Compliance Committee 2014 to present
▪ Gore Street Energy Storage Fund plc
– Chair of Audit Committee 2017 to
present
▪ The Open University – Member of the
Investment Committee 2016 to present
▪ The Law Debenture Corporation plc
- Chief Executive 2002-2016
▪ SVB Holdings PLC (now Novae Group
plc) – COO 1997-2002
▪ N M Rothschild & Sons Limited
– Finance Director 1995-1997
Committees:
Audit and Risk Committee (Chair).
60 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Victoria Cochrane
Neil Holden
Robert Lister
Senior Independent
Non-Executive Director
Appointed to the board:
28 September 2018
Independent
Non-Executive Director
Appointed to the board:
11 February 2014
Independent
Non-Executive Director
Appointed to the Board:
26 June 2019
Experience includes:
Experience includes:
Experience includes:
▪ Euroclear Bank SA/NV –
▪ Stanbic International Insurance Limited
▪ Credit Suisse Asset Management (UK)
Non-Executive Director 2016 to present
– Non-Executive Director 2003 to present
Limited – Non-Executive Director
▪ Perpetual Income and Growth
▪ Saffron Building Society –
2012 to present
Investment Trust plc –
Non-Executive Director 2014 to present
▪ Investec Wealth and Investment
Non-Executive Director 2015-2020
▪ Albaco Limited –
Limited – Non-Executive Director
▪ HM Courts and Tribunal Service –
Non-Executive Director 2018 to present
2010 to present
Non-Executive Director 2014 to present
▪ Sberbank CIB (UK) Limited –
▪ Aberdeen Smaller Companies Income
▪ Bowater Industries Ltd –
Senior Adviser 2014-2017
Non-Executive Director 2018 to present
Trust PLC – Director 2012 to present
▪ Calmindon Limited – Director 2010-2017
▪ The Salvation Army International
▪ Gloucester Insurance Ltd –
▪ Bank of London and The Middle East Plc
Trustee Company – Director 2016
Non-Executive Director 2008-2013
– Non-Executive Director 2006-2018
to present
▪ Ernst & Young (Global) – Global
▪ Quadrant Risk Management
▪ Rensburg Sheppards PLC – Director
Executive Board Member 2008-2013
International Limited –
– 2008-2010
▪ Ernst & Young (NEMIA and UK)
Non-Executive Director 2006-2009
▪ Dresdner Kleinwort Wasserstein
– Executive Board Member 2006-2008
▪ Standard Bank Group and Standard
–1998-2008
Committees:
Audit and Risk Committee,
Nomination Committee.
Bank Plc – Consultant 2006-2008,
▪ Barclays de Zoete Wedd – 1983-1998
Managing director in Corporate and
Investment Banking Financial Risk
1999-2006
Committees:
▪ WestLB – Director and Head of Risk
Audit and Risk Committee.
Management Support & Control
1996-1998.
Committees:
Audit and Risk Committee,
Remuneration Committee.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 61
GOVERNANCE continued
Christopher Munro
Independent Non-Executive
Director
Appointed to the board:
1 February 2017.
Experience includes:
▪ London and Continental Partners LLP
– Founding Partner 2016
▪ Pembroke Square Freeholders
Association Limited – Director 2013
to present
▪ Pacific Capital Partners – Director
2004 to present
▪ Beckwith Asset Management
– Director 1994-2016
▪ Jupiter Enhanced Income Trust
– Director 1996-2009
▪ River & Mercantile Investment
Management – CEO 1994-1996
▪ Robert Fleming Holdings Limited
- Director 1988-1994
▪ Jardine Fleming Holdings – Director
1983-1986.
Committees:
Remuneration Committee (Chair),
Nomination Committee.
Jonathan Gunby was appointed as an
executive director on 2 March 2020.
All other directors were in office
throughout the financial year up to
the date of the report.
62 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
CORPORATE GOVERNANCE
REPORT
Introduction
On behalf of the board, I am pleased
to present the report setting out the
Group’s corporate governance
arrangements which reflect the
standards of practice required by the
2018 UK Corporate Governance Code
(the Code) in relation to the
management of the Group.
IHP Group’s purpose is the successful
delivery of financial services
infrastructure and associated services
to UK advisers and our mutual clients.
To achieve this we have a number of
strategic objectives set out on pages
12 to 15 and these are supported by
the corporate culture set out in the
Corporate Social Responsibility report
on page 50.
We have adopted the new 2018 Code,
which has applied to the Company
since 1 October 2019. IHP has abided
by the overriding principles which are
designed to:
▪ Promote long term sustainable
success of the Company, business
effectiveness, efficiency, responsibility
and accountability. Further details
relating to this are set out in the long
term consequences of decisions
section in the Companies Act Section
172 statement, on page 56;
▪ Provide suitable opportunity for
employee engagement in the
business. Further details relating to
this are set out in the interests of the
Group’s employees section in the
Companies Act Section 172
statement, on page 57;
▪ Assist the effective review and
monitoring of the Group’s activities;
▪ Help identify and mitigate significant
risks to the Group; and
▪ Provide the necessary disclosures to
stakeholders to make a meaningful
analysis of the Group’s business
activities and its financial position.
Statement of compliance
The Code sets out the principles and
provisions relating to good governance
of UK listed companies and can be
found on the Financial Reporting
Council (FRC)’s website at
www.frc.org.uk
The following report sets out
how the Company has complied
with the provisions of the Code,
and an explanation of any areas of
noncompliance.
The areas of noncompliance comprise
the following:
▪ The non-executive directors did not
undertake an evaluation of the Chair
of the board. Further explanation is
set out in the board effectiveness
review below;
▪ The Company’s remuneration structure
does not mandate post-employment
shareholding and the Company’s
remuneration policy for all staff,
including executive directors, permits
employees to contribute a portion
of cash bonus into their pension.
None of the executive directors take
advantage of this provision.
▪ The Company does not have a work
force council, an employee
representative on the board and has
not designated responsibility for
employee engagement to a non-
executive director. The Company
believes that it has implemented
sufficient and appropriate measures
for employee engagement without
adopting one of these measures.
Further information is available in
the Directors’ Report on page 101.
The Company did not evaluate the
Chair of the board because an
external evaluation of the board was
undertaken. The board will undertake
an evaluation of the Chair in 2021.
The Company does not intend to
amend its approach to mandate
post-employment shareholdings at
this time.
The Company does not intend to
change the policy on pension sacrifice
at this time.
The Directors’ Remuneration Policy is
be subject to review in 2021.
Detailed reporting on remuneration,
and the composition of the
Remuneration Committee, can be
found in the Directors’ Remuneration
Report on page 76.
With the exception of the areas
of noncompliance set out above,
the Company has complied with
the principles and the provisions
of the Code.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 63
GOVERNANCE continued
Board composition
The Company has four executive
directors and six independent
non-executive directors (including
the Chair) and therefore complies
with the Code in respect of board
composition.
Board and committee meetings
and attendance
The board met eight times,
in accordance with its terms of
reference. Eligibility to attend,
and attendance, by each member of
the board as at 30 September 2020
is set out below.
Board Meetings
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Caroline Banszky
Victoria Cochrane
Richard Cranfield
Neil Holden
Michael Howard
Robert Lister
Christopher Munro
Alexander Scott
Ian Taylor
Jonathan Gunby
1 Chair
6
6
6
6
6
6
6
6
6
4
6
6
6
6
4
6
6
6
6
4
6
6
-
6
-
6
-
-
-
-
6
6
-
6
-
6
-
-
-
-
-
2
2
-
-
-
2
1
1
-
-
2
2
-
-
-
2
1
1
-
-
-
3
4
-
-
4
-
-
-
-
-
3
4
-
-
4
-
-
-
2 Mr Gunby joined the board on 2 March 2020
3 Mr Cranfield joined the Remuneration Committee on 17 December 2019
4 Mr Howard was unable to attend the February board meeting relating to the preparation for the AGM, due to the
timing of board meeting and his residence in Australia. He was not able to attend the June board for personal reasons.
64 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
The role of the board
Board leadership
The board is responsible for leading
and controlling the Company and has
overall authority for the management
and conduct of the Group’s business,
strategy and development. The board
is also responsible for ensuring the
maintenance of a sound system of
internal controls and risk management
(including financial, operational and
compliance controls) and for reviewing
the overall effectiveness of systems
in place as well as for the approval of
any changes to the capital, corporate
and/or management structure of
the Group.
The board promotes the long term
success of the Company and the Group
and ensures effective operational
management and strategic development
of the proposition, having due
regard to all stakeholders including
safeguarding of its clients’ interests.
To achieve these goals the board:
▪ Ensures the Company acts within
the articles of association;
▪ Ensures that the Company and the
Group implements good management
policies and practices to ensure that
the Company and the Group are
managed in an accountable,
efficient and effective manner;
▪ Considers and scrutinises advice
and reports from the executive and,
where appropriate to the Company
and Group, matters escalated by
the Committees;
▪ Reviews and approves the Annual
Report and financial statements,
half-yearly reports and quarterly
financials for the Company on a
stand-alone basis and on a
consolidated basis in relation to
the Group;
▪ Ensures the Company and the
▪ Considers recommendations from
the Nomination Committee and
approves appointments to the board;
▪ Approves the remuneration
arrangements for non-executive
directors; and
▪ Approves the appointment of any
providers of outsourced services to
the Company or Group and considers
reviews of their performance.
Relations with shareholders
The board maintains close
relationships with the Company’s
institutional shareholders through
periodic meetings with the executive
directors. Board members receive
copies of analysts’ and brokers’
reports on the Company along with a
quarterly Investor Analytics report
which details the top shareholders,
shareholder history, top buyers and
sellers, market analysis and share
price performance to aid familiarity
with details of shareholdings.
The Chair and CEO hosted shareholder
roadshows at which the Company’s
half year and annual results were
presented to institutional investors
invited by the Company’s brokers.
The Company secretarial and investor
relations functions engage with private
shareholders, providing support and
information as required, whilst the
Company’s registrar provides a range
of shareholder services.
The Chair, senior independent
non-executive director and other
non-executive directors are available
for consultation with shareholders
upon request and will attend and be
available for questions at and after
the Annual General Meeting (AGM),
further details of which will be sent
out in the Notice of AGM.
Independence
Group as a whole remains compliant
with all applicable statutory
standards, rules and guidelines;
The Code recommends that at least
of half the board of directors of a UK
listed company, excluding the chair,
should comprise non-executive
directors determined by the board to
be independent in character and
judgement and free from relationships
or circumstances which may affect, or
could appear to affect, this judgement.
Taking into account the provisions of
the Code, the board has considered
the independence of each of the
non-executive directors and has
determined that all are “independent
non-executive directors” within the
meaning of the Code.
Neil Holden was appointed to the
board of Integrated Financial
Arrangements Limited (IFAL) in 2011.
IFAL is the Group’s main operating
company and was the Group’s parent
company until the incorporation of
IHP in 2014. As a result, Neil Holden
has been appointed to the board of
the Group’s ultimate parent company
for a total period of ten years. In the
light of this, and when repeating the
review of Neil’s independence, the
board once again gave particular
consideration to whether his long
standing relationship with the
executive directors had in any way
impacted upon his independence and
his ability to constructively challenge
the executive through questions,
insist on high quality responses and
remain aligned with the interests of
shareholders. The board found that
Neil continued to exhibit a robust
approach and maintained an objective
and independent viewpoint. The board
concluded that Neil Holden should
remain as an independent director
and a valued member of the board.
The Code recommends that a Chair
should meet the independence
criteria set out in the Code on
appointment. The board has
concluded that the Chair, Richard
Cranfield, is independent for Code
purposes. Mr. Cranfield’s other
commitments are listed in his
biography and the Company has
concluded these do not affect his
ability to undertake the role.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 65
GOVERNANCE continued
Committees
There are three Committees of the
board: Audit and Risk; Nomination;
and Remuneration. The Audit and
Risk Committee and the Remuneration
Committee are wholly non-executive
committees and the members are all
independent non-executive directors.
The Chair of the board is a member
of, and chairs, the Nomination
Committee. The other members of the
Nomination Committee comprise the
senior independent non-executive
director, the CEO and one other
independent non-executive director.
The membership and terms of
reference of these board Committees
are reviewed annually and are
available on the Company’s website
(www.integrafin.co.uk) or on
request from the Company Secretary.
Any significant commitments must
be disclosed to the board as and
when they arise for consideration.
Conflicts of interest
The Company’s articles of association
permit the board to consider and
authorise situations where a director
has an actual or potential conflict of
interest in relation to the Group.
The Company maintains a conflicts of
interest register which is reviewed
annually by the board. In addition,
prior to each board meeting, the
directors are asked to declare any
conflicts they may have with regard
to the business meeting. Directors
who declare a conflict of interest may
be authorised by the rest of the
board to participate in decision
making in accordance with section
175 of the Companies Act 2006.
The board considers and, if appropriate,
authorises any conflicts or potential
conflicts of interests of directors and
imposes any limitations, qualifications
or restrictions as required. Additionally,
when making new appointments,
the board takes into account other
demands on directors’ time.
Significant commitments are
disclosed with an indication of time
involved and any additional external
appointments must be approved in
advance by the Company.
The board has reviewed the other
commitments of the non-executive
directors and concluded it is satisfied
that the non-executive directors
remain able to commit sufficient time
to the Company’s business.
66 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Matters reserved for the board
The board is the main decision
making and review body for the
Company. It determines the overall
strategic direction of the Company
and is responsible for the overall
management of the Company and the
business operations for its subsidiaries.
The board’s remit is documented in
its terms of reference which include
details of matters reserved for the
board and matters delegated by the
board. The terms of reference are
reviewed and updated annually.
Matters which are reserved for the
board include strategy and
management, structure and capital,
financial reporting and controls,
internal controls, contracts,
communication, board membership
and appointments, remuneration and
corporate governance matters.
The board makes decisions as to
delegating to committees of the
board and the management team.
Matters which are delegated to the
management team include changes
to the Company’s management
structure and the approval of
resolutions and corresponding
documentation to be put to
shareholders at general meetings.
Setting the business model
and strategy
The board retains responsibility for
the overall management of the
Company and approval of any
long-term objectives of the Company.
A review of performance against the
Company’s strategy, objectives,
business plans and budgets is
considered at each board meeting.
Maintaining oversight of the Company’s
operations, ensuring competent and
prudent management, sound planning,
an adequate system of control,
adequate accounting in addition to
reviewing any significant risks faced
by the Company and establishing
and maintaining risk management
systems in co-ordination with the
Audit and Risk Committee ensures
the Company fulfils its business
objectives. The board also retains
responsibility for considering the
balance of interests between
shareholders, employees,
customers and the community.
Board effectiveness review – 2020
The board conducts an annual
evaluation of its own effectiveness
and that of individual board members.
FTSE350 companies are required
by the Code to have an externally
facilitated board effectiveness
evaluation at least every three years.
In 2020 the Company engaged
Independent Audit to undertake an
external evaluation of the performance
of the board. The Independent Audit
has no connection with the Company
or its individual directors. The findings
and any action points were discussed
in the September board meeting and
actions agreed.
The non-executive directors did not
undertake a review of the Chair
during the annual evaluation process.
The purpose of the evaluation is to
appraise the performance of the
Chair over the financial year and to
provide feedback to the Chair with a
view to continuous improvement and
this formed part of the report from
Independent Audit. A separate
internal evaluation was therefore not
considered necessary at this time.
Each board member is responsible for
identifying training appropriate to
their needs, and the non-executive
directors maintain individual annual
training logs. The effectiveness
of the board and its committees;
the experience, independence and
knowledge of the directors; the
diversity of the board; how the board
works together; and other factors
relevant to its effectiveness were
all considered as part of the
external evaluation.
Some minor recommendations came
out of this evaluation and the board
has agreed an implementation plan.
Election and re-election of
directors
The Company’s articles of association
require all existing directors to retire
from office at each AGM and be
eligible for re-election. Following the
announcement of his retirement,
Ian Taylor will not be standing for
re-election at the AGM.
Annual General Meeting
The Company convened a general
meeting on 30 September to propose
a change to the articles to enable it
to hold general meetings, including
annual general meetings, where
members may choose to attend either
in person or electronically (known as
‘hybrid’ shareholder meetings).
The Company used the provisions
of the Corporate Insolvency and
Governance Act 2020 (the “Act”) to
hold this general meeting as a closed
meeting by telephone. Votes were
cast in advance and the resolution
was passed with 100% of the votes
cast being in favour.
The AGM provides shareholders with
an opportunity to communicate with
the board both formally during the
AGM and informally afterwards.
Notice of the AGM will be sent in
accordance with the Companies Act
2006 and made available on our
dedicated shareholder website
integrafin.co.uk/
shareholder-information
along with any other relevant
documentation.
By order of the board,
Richard Cranfield
Chair
16 December 2020
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 67
GOVERNANCE continued
AUDIT AND
RISK COMMITTEE REPORT
Statement from the Chair of the
Audit and Risk Committee
I am pleased to present the Audit
and Risk Committee’s report for
2020. The report sets out Committee
governance and the work the
Committee has undertaken this year.
We meet at least four times each
year, in line with the Company’s
governance schedule. We met six
times during this financial year, with
all committee members in attendance,
and maintained focus on the Group’s
risk management, internal controls
and accounting procedures, to ensure
there are continuing, appropriate
levels of external and internal audit
and risk assessment to cover all
material risks and controls, including
financial, operational and compliance
processes and procedures.
There were a number of operational,
governance and regulatory reporting
audits undertaken throughout the
year by the internal audit team and
we discussed and commented on the
findings, requesting follow up actions
where necessary. The audits included:
a rolling programme of audits of the
Group’s key critical processes, Group
Brexit preparation, cyber security
controls, key regulatory reporting
processes and outputs and a review
of the effectiveness and independence
of the internal audit function.
The internal audit team also
conducted regular assessments of
any changes to business critical
processes implemented due to all
staff working from home.
A third party was appointed in order
to undertake a Group wide penetration
test of the Group’s IT systems.
The Committee received a presentation
from the third party of its findings and
management’s response, this was in
addition to the quarterly IT dashboard.
The Committee evaluates and
challenges the Group’s going concern
and viability assessment annually and
this was especially important in a year
of such global economic uncertainty
due to the COVID-19 pandemic.
The viability work performed by the
Committee is outlined in the table
setting out the Committee’s work
throughout the year on page 70.
The IHP CEO, the IFAL CEO, Group
Chief Financial Controller, Group
Counsel and the Group Head of
Internal Audit were routinely invited
to and attended the majority of
Committee meetings, although the
Committee reserves the right to
request any of these individuals to
leave the meeting. The Group’s
external auditor, BDO, also attended
specific Committee meetings for
external audit planning and reporting
purposes. I met privately with the
Group Chief Financial Controller,
Head of Internal Audit, external Audit
Partner and Head of Assurance at
BDO to discuss issued reports and
relevant financial reporting and
regulatory developments.
Caroline Banszky
Chair, Audit and Risk Committee
16 December 2020
68 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Governance
Committee membership during the year
Name
Date of appointment
Caroline Banszky (Chair)
22 August 2018
Neil Holden
Victoria Cochrane
Robert Lister
22 August 2018
28 September 2018
04 September 2019
Role of the
Audit and Risk Committee
Composition of the
Audit and Risk Committee
All members of the Committee,
including the Chair, are independent
non-executive directors. In adherence
with the Code, both the Audit and
Risk Committee Chair and Neil Holden
have recent and relevant financial
experience, and are also qualified
accountants.
On an ongoing basis, membership
of the Committee is reviewed by
the Chair of the Committee,
in collaboration with the Nomination
Committee, and any recommendations
for new appointments are made to
the board.
The Group also provides initial and
ongoing training for Committee
members to support them in carrying
out their duties effectively.
The purpose of the Committee is
to provide oversight and advice to
the IHP board and it has overall
responsibility for the risk management
and internal control processes of the
Group. This aids the board of IHP in
fulfilling its responsibilities of:
presenting a fair, balanced and
understandable assessment of the
Group’s position and prospects; and,
establishing financial and operational
controls and risk management across
IHP Group.
The Committee reports its findings to
the board, identifying any matters in
respect of which it considers that
action or improvement is needed,
and makes recommendations on the
steps to be taken.
The role and responsibilities
of the Audit and Risk Committee are
set out in its terms of reference,
which can be found at
www.integrafin.co.uk/
corporate-governance.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 69
GOVERNANCE continued
Area of focus
Work conducted
Going concern
and viability
▪ In their Annual Report the directors are required to make a statement on IHP’s long term
viability. The Committee provided the board with advice on the form and content of that
statement. In advance of the year end the Committee reviewed the Group’s proposed stress test
scenarios and the assumptions underlying them, used to support the Viability statement.
▪ At the year-end, management provided a report to the Committee setting out its view of IHP’s
long-term viability and the proposed Viability statement based on Group’s three year business
plan. This report included, at both an individual company and consolidated group level, forecast
outcomes of the business plan under the stress scenarios agreed with the Committee, detailing
capital and liquidity performance against an assessment of risk appetite. The report was
produced on financial data to 30 September 2020 and included consideration of a range of
COVID-19 outcomes and other stresses undertaken, both individually and combined.
▪ The Committee discussed whether the choice of a three-year period remained appropriate.
It concluded that this remained appropriate due to the nature of the business. Taking account
of the assessment of the Group’s stress testing results, the Committee agreed to recommend
the Viability statement and three-year viability period to the board for approval.
▪ The Committee concluded that the Group has sufficient financial resources and liquidity and is
well placed to manage business risks in the current economic environment, having considered
the potential impacts of COVID-19 together with other risks, and can continue operations for the
foreseeable future.
Risk
management
▪ Oversaw the risk management framework and reviewed its effectiveness in relation to IHP, and
how Group companies have implemented the framework.
▪ Reviewed the work undertaken by Risk management to ensure the changes in the working
processes implemented to successfully move the business from office based to home working did
not introduce unexpected risks or cause client detriment.
▪ Reviewed and challenged the Risk Reports provided by the Head of Actuarial and Risk for IHP, and
considered the progress of management action taken in order to address management points
raised on IHP specific risks.
▪ Assurance was sought from the Chair of the IFAL Risk Committee that management points raised
have been addressed through appropriate management actions.
▪ Assisted the board in maintaining an appropriate culture within the Group which emphasises and
demonstrates the benefits of the risk-based management of the Group.
▪ Considered the points escalated from the Group company boards or committees which affect IHP,
or which may affect the Group as a whole.
70 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Area of focus
Work conducted
Financial
reporting
▪ Reviewed and challenged the financial reporting undertaken by the Group, with input and support
from the Group’s external auditor.
▪ Reviewed the Annual Report and financial statements, half-year reports, interim management
statements and other formal announcements relating to financial performance.
▪ Reviewed and recommended the Annual Report and financial statements and the half-year report
to the board with an emphasis on ensuring that the report is fair, balanced and understandable.
▪ Considered the consistency of accounting policies and the financial reporting process.
▪ Reviewed the key accounting and financial risks and the steps taken by management to address
them. Further information on the key financial and non-financial risks can be found on pages 46
to 47.
▪ Reviewed the External Auditor report. The report confirmed that the External Auditor found no
issues with non-compliance with Group accounting policies, and that there has been no material
change to accounting policies during the financial year.
▪ Considered the disclosures in particular under IFRS 16.
▪ Considered the prior year error and subsequent restatement to reflect critical judgements and
estimates in respect of the calculation and treatment of the policyholder tax provision.
▪ Considered the prior year error in presentation which has been corrected. This has the effect of
reflecting items of income, expenses, gains and losses relating to the Group’s insurance and life
assurance segment on a gross basis, rather than on a net basis. In addition, cash held by the
Group’s insurance and life assurance segment, for the benefit of policyholders, has been separately
disclosed in cash and cash equivalents.
Policyholder
tax provision
overstatement
error
Presentation
restatement
Internal audit
effectiveness
and reporting
▪ Received and challenged Internal Audit reports at each committee meeting. The reports detailed
audits of IHP recently completed, including the co-sourced IT Audit and any control
recommendations made to management, and management response;
▪ Reviewed all formal internal audit reports escalated by the IFAL Audit Committee, or activities within
other companies in the Group, which represent a significant risk to the Group as a whole.
▪ Approved the Group Internal Audit Plan, including specific areas of review on matters relating to IHP.
▪ Received updates from the Chair of the IFAL Audit Committee on the management actions in
response to the findings and recommendations of internal audit reports.
▪ Assurance sought on the adequacy and security of the Group’s arrangements for employees and
contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or
other matters.
▪ Assurance sought that these arrangements allow proportionate and independent investigation of
such matters and appropriate follow up action.
▪ Received reports on matters relevant to the financial reporting processes including assurances on
internal controls, processes and fraud risk.
▪ Based on the scale and focus of the work conducted by Internal Audit during the year, and the
Committee’s annual and ongoing review and ongoing discussion of the audit approach, work and
findings, the Committee concluded that the Internal Audit function is working effectively and
independently and that the team is appropriately qualified and staffed.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 71
GOVERNANCE continued
Area of focus
Work conducted
Effectiveness and
independence
of the external
auditor
▪ Evaluated the External Auditor’s independence, objectivity and compliance with ethical and
regulatory requirements.
▪ Made recommendations on appointment, reappointment and removal of External Auditors to the
board to be put to shareholders for approval at the AGM.
▪ Reviewed the External Auditor’s remuneration and whether fees for audit and/or non-audit
services are appropriate.
▪ There are no contractual or similar obligations restricting the Group’s choice of External Auditor,
and IHP’s External Auditor, BDO, has confirmed that it remains independent.
▪ A new audit partner (Justin Chait) was interviewed and selected by management and the chair
of the Committee and rotated onto the financial year 2020 Group audit, due to the former audit
partner (Neil Fung-On) having served ten years.
▪ As reported in 2019, BDO has been the Group External Auditor for ten years. The Company had
intended to put the external audit contract out for tender during 2020, but due to the COVID-19
pandemic, the Company applied to the FRC for, and was granted, an extension for the financial
year 2021. The Company will put the external audit contract to tender in the financial year 2021.
▪ The Committee remains satisfied with the performance and effectiveness of BDO and has
concluded that BDO continues to display the necessary attributes of independence and
objectivity. The Company is in compliance with the requirements of The Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014, in the year ended 30 September 2020.
The external auditors did not provide non-audit services, they provided Other Assurance Services
which were required by regulation, in line with the FRC’s revised 2019 ethical standards. The cost of
Other Assurance Services are disclosed in note 8. In addition, KPMG provides audit services to the
Company’s life company subsidiaries, ILUK and ILInt.
Whistleblowing
▪ The Group encourages employees to raise their concerns within the existing line management
structure but, recognising that not all concerns can be effectively managed through those channels,
the Company also provides the means for confidential reporting of concerns by contacting any of
three nominated internal individuals who will investigate the issues raised. The Company provides
for employees to make anonymous reports of suspected wrongdoing via a portal.
▪ Neil Holden, as a member of the Audit and Risk Committee, is a key contact in the Whistleblowing
Policy and fulfils the role of “whistleblower’s champion” under the Senior Managers’ Regime.
▪ The Committee reviewed the Whistleblowing Policy and the framework for reporting, and confirmed
that they are appropriate to the Group structure and organisation.
Committee self-evaluation
The Audit and Risk Committee did not
conduct a self-assessment of its own
effectiveness because the board
undertook an external evaluation
which involved a review of the manner
in which the committee escalated
matters to the board. The Committee
has considered the findings of the
external evaluator and will be agreeing
any enhancements with the board.
72 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Ian has since announced his intention
to retire from the board in the
New Year. We believe that with Alex
in the role of CEO and Jonathan’s
appointment, the board is well resourced
to take the Company forward.
In all our activities we give due
consideration to laws and regulations,
the provisions of the Code, the
requirements of the UK Listing
Authority’s Listing, Prospectus and
Disclosure Guidance and Transparency
Rules and any other applicable rules,
as appropriate.
Richard Cranfield
Chair, Nomination Committee
16 December 2020
NOMINATION COMMITTEE
REPORT
Statement from the Chair of
the Nomination Committee
I am pleased to present the
Nomination Committee’s report
for 2020.
The primary purpose of the Committee
is to develop and maintain a formal,
rigorous and transparent procedure
and to lead the process for board
and Committee appointments and
reappointments, including making
recommendations to the board.
To achieve a balanced board,
the Committee considers the board’s
size and composition, the extent
to which skills, experience and
attributes are represented and the
need to maintain high standards of
corporate governance.
We meet at least once a year in
accordance with the Company’s
governance schedule and the
Committee’s terms of reference.
We met twice during the financial year.
During the year Ian stepped down
as CEO and Alex acceded to the role.
At the same time, Jonathan became
CEO of IFAL and was appointed to the
Company’s board.
Having implemented the 2019
succession plan during 2020, the
Committee has now commenced a
review of the skills and experience of
the board and senior management
team. The Committee will recommend
to the board a new succession plan
which will ensure orderly succession
to both the board and senior
management team in the future.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 73
GOVERNANCE continued
Governance
Committee membership during the year
The members of the Nomination Committee at 30 September 2020 were:
Name
Date of appointment
Richard Cranfield (Chair with effect
from 3 December 2019)
1 August 2019
Victoria Cochrane
28 September 2018
Christopher Munro
2 February 2018
Alexander Scott
2 March 2020
Role of the
Nomination Committee
The role and responsibilities of the
Nomination Committee are set out in
its terms of reference which can be
found at www.integrafin.co.uk/
corporate-governance.
Composition of the
Nomination Committee
In adherence with the Code,
the majority of members of the
Nomination Committee are independent
non-executive directors. The Chair of
the board chairs the Committee.
However, he does not chair when the
Committee is dealing with nominating
a successor to the Chair.
The Group also provides initial and
ongoing training for Committee
members, to support them in carrying
out their duties effectively. This is
delivered by in-house technical staff,
through the attendance at formal
conferences as required, and an
in-house training programme.
74 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Area of focus
Work conducted
Board
appointments
▪ Considered the independence of the non-executive
directors and made recommendations to the board.
External
evaluation of
the board
Succession
planning
▪ Independent Audit conducted external evaluation of the
board. They interviewed all board members and some
senior managers and attended board and Committee
meetings. A written report was provided to the Chair,
which was shared with the board and actions were agreed.
▪ In light of the implementation of the 2019 Succession
Plan, reviewed the skills, experience, expertise and
composition of the new board with a view to
recommending to the board, succession plans for the
board and senior management team.
Diversity
▪ When reviewing the composition of the board, considered
the diversity of board members.
▪ The gender diversity of the board and senior management
is on page 51.
▪ The board acknowledges that we have not met the targets
set out in the Hampton Alexander or the Parker review
and is proactively reviewing the subsidiary boards.
▪ It is the board’s policy that new appointments to any
board are made on merit, taking into account the different
skills, industry experience, independence, knowledge and
background required to achieve a balanced and effective
board; and
▪ In identifying suitable candidates for appointment to the
board, the Committee will consider candidates on merit
against objective criteria and with due regard for the
benefits of diversity on the board.
▪ No appointments have been made to the board this year,
however the Committee has reviewed the diversity of the
board following the changes to executive roles and the
recent resignation of Ian Taylor and is considering the
composition of the board in the context of age, gender,
education and experience.
▪ Future appointments will be considered in the context of
this information.
Composition of the board
The board membership comprises a
mix of long-standing and more recent
appointments who collectively deliver a
balance of historical knowledge and
industry experience.
Age profile of the board
Tenure of the board
50-55
55-60
60-65
65-70
70+
0-3 years
3-6 years
9-12 years
18-21 years
Committee self-evaluation
The Nomination Committee did not
conduct a self-assessment of its own
effectiveness because the board
undertook an external evaluation
which involved a review of the manner
in which the committee escalated
matters to the board. The committee
has considered the findings of the
external evaluator and will be agreeing
any enhancements with the board.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 75
GOVERNANCE continued
DIRECTORS’
REMUNERATION REPORT
Statement by the Chair of the
Remuneration Committee
On behalf of the board, I am
pleased to present the Directors’
Remuneration Report for the year
ended 30 September 2020.
We were delighted to receive a vote of
96% for our remuneration report at
the 2020 AGM.
Since the 2019 report, Transact has
continued to grow despite the effects
of the COVID-19 pandemic and, as at
30 September 2020, has 192,000 client
investment portfolios, £41.09 billion of
funds under direction and 487 staff
across the Group companies.
We continue to retain a loyal work
force, with more than 29% of our staff
having 10 years’ service or more.
It remains one of our key principles to
create, maintain and improve value
provided to our principal stakeholders
– customers, shareholders and
employees. Whenever possible we are
committed to sharing profits between
all three of these stakeholders, and
we believe all three should benefit
from any of the Group’s activities.
Against this background we take
a very distinctive approach to
remuneration. The key features of our
reward framework are as follows:
▪ Base salary – Our remuneration
is structured so the level of base
salary represents a sufficiently high
proportion of the total remuneration,
so employees are not required to
maximise their income through
significant variable remuneration
awards.
▪ Relatively modest additional
incentives – Above basic salary, our
maximum total additional incentive
opportunity is only 100% of salary
per annum. Ordinarily, we do not
expect total annual variable
remuneration awards to exceed 65%
of salary.
▪ Distinctive approach to
performance measurement – We
do not have mechanical performance
targets which apply to variable pay
awards, because we believe that
applying formulaic measures can
lead to undesirable behaviours and/
or outcomes. Instead, the Committee
exercises independent judgement
and discretion when authorising
remuneration outcomes, taking into
account the Company and individual
performance. Our performance
measurement framework considers
at least four “quantitative anchors”
– financial performance, stakeholder
outcomes, risk, regulation and ESG,
and strategy delivery.
▪ Alignment with wider workforce
– Our approach to remuneration for
executive directors is consistent with
that for all employees. Our incentive
structure is aligned across the
workforce and all employees are made
awards under the same performance
framework. The pension policy for
executive directors is equivalent to
that of the workforce and at 2% for
the CEO and 2% for Jonathan, the
actual employer pension contributions
made in respect of executive directors
are well below the 9% of salary
contribution available to all-
employees. Employees (including the
executive directors) may elect to
sacrifice their remuneration and
receive additional employer
contributions. Our current pension
arrangements therefore align with
the new Code.
▪ Share ownership – Our executive
directors are significant shareholders
in the Company and all UK and Isle
of Man based staff with the required
accrued service are invited to
become shareholders by way of the
all staff Share Incentive Plan (SIP)
which we are delighted to report,
76 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
during financial year 2020, has once
again had a 100% uptake for Free
Shares and has had an 87% uptake
for Partnership and Matching shares.
The Group operates a parallel plan
for our Australian employees who
are not eligible to join the HMRC
approved plan. The Company also
operates a discretionary deferred
bonus share option scheme which is
open to all employees, at the
discretion of the Committee or the
CEO. In financial year 2020 awards
were made to all members of the
management team in the UK, Isle of
Man and Australia.
In summary, we believe in simple and
transparent reward linked to Group
success and personal performance
and delivered in a way that does not
drive undesirable behaviours or
encourage excessive risk taking:
▪ The Group’s deferred bonus
Performance Share Plan has a
maximum award opportunity of 33%
of salary.
▪ We do not operate a long-term
incentive plan, as we believe that
applying formulaic measures can
lead to undesirable behaviours and/
or outcomes.
▪ For executive directors, we reference
performance against four key areas
– financial performance, stakeholder
outcomes, risk, regulation and ESG,
and strategy delivery, taking a
holistic approach to reviewing
performance.
▪ We operate an HM Revenue & Customs
tax-advantaged SIP for UK and Isle
of Man employees, as well as a
parallel scheme for our Australian
employees.
We believe our distinctive approach
to remuneration supports both the
objectives of the Group, our shareholders
and our other stakeholders and is
aligned to the key principles shared
between us.
Application of the Directors’
Remuneration Policy
The Directors’ Remuneration Policy
(the Policy), as set out on pages 60
to 76 of the Annual Report and
financial statements for the year
ended 30 September 2018, was
approved at the Company’s Annual
General Meeting (AGM) held on
21 February 2019. The Policy will
remain in force until the AGM in 2022,
unless the board proposes a new
policy for shareholder approval.
We were delighted to welcome
Alexander Scott into the role of CEO
and to welcome Jonathan Gunby
(IFAL CEO) to the board as executive
director. Ian Taylor who had previously
held both CEO positions stepped down
from these roles, but continued as an
executive director. The Committee
considered proposals for the
remuneration to reflect their new
responsibilities, further details of
which are set out in this report.
The Company achieved strong
financial results despite the COVID-19
pandemic, with an increase in profit
before tax of £5.4 million (11%).
Directors’ salary and bonus awards
were made in accordance with the
Policy. Salary increases were in line
with the payrise awarded to all staff
at 3% for Alexander, Ian and
Jonathan, compared to the 3%
payrise awarded to all those UK and
IoM based staff who were eligible for
an award. Directors’ bonuses were
awarded within the parameters of the
Policy. Alexander was awarded a
cash bonus of 32% and a bonus
award deferred into shares of 31%.
Jonathan was awarded a cash bonus
of 32% and a bonus award deferred
into shares of 31%. Ian was awarded
a cash bonus of 30% and a bonus
award deferred into shares of 30%.
Michael Howard did not receive
a bonus.
In making these awards, the
Remuneration Committee considered
the quantitative anchors and in
particular the financial performance of
the Company over the financial year,
the delivery of the business strategy,
the impact of the reduction in charges
to clients and maintenance of staff
engagement, as evidenced by the
stable turnover levels.
Ian has recently announced his
retirement from the board, with effect
from the end of February 2021. I
would like to extend my thanks to Ian
for his contribution and I wish him
well in his retirement. Details of all
executive directors’ remuneration can
be found on page 84 of this report.
Chris Munro
Chair, Remuneration Committee
16 December 2020
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 77
GOVERNANCE continued
DIRECTORS’ REMUNERATION
POLICY
The Directors’ Remuneration Policy
was approved by ordinary resolution
at the Company’s AGM held on
21 February 2019 and can be found
on pages 61 to 71 of the Company’s
Annual Report and financial
statements for the year ended
30 September 2018, which is
available at www.integrafin.co.uk/
annual-reports/
A summary of the policy is
provided below.
Policy table
Element
Link to Strategy
Operation
Opportunity
Base salary is reviewed annually.
Salary
The purpose of the
base salary is to attract
and retain executive
directors with the
necessary skills,
experience and
expertise.
There is no overall
maximum monetary
opportunity or cap on
annual increase. Directors’
salary increases will
normally be in line with
salary increases awarded to
other staff.
Increases will take into
account a number of factors
including, but not limited to,
the scale of the role and the
individual’s experience.
Performance
Measures
None
There is no maximum
monetary value.
None
Benefits
The purpose of the
Company’s staff benefits
arrangements is to
attract and retain
executive directors and
employees with the
necessary skills,
experience and expertise
and to support their
wellbeing.
The Company offers a Death in
Service scheme with benefits set at
four times base salary.
The Company also offers all employees
and their families the opportunity to
participate in a private medical
insurance scheme. The executive
directors have all participated in
the plan.
Other benefits may include buying
and selling of holiday, season ticket
loans, child care vouchers and
discounts on local retailers, eye tests
and discounts for those with portfolios
on the Transact platform. The benefits
provided may be subject to minor
amendment from time to time by the
Committee within this policy.
The Company provides overnight
accommodation to the CEO during
the week.
In appropriate circumstances benefits
may include relocation and tax
equalisation.
78 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Element
Link to Strategy
Operation
Opportunity
Performance
Measures
Pension
The purpose of the
employer contribution to
pension arrangements is
to attract and retain
directors for the long
term and to contribute
to retirement income.
Contributions are by way of a defined
contribution to the Group’s contractual
enrolment pension arrangement and
by way of employer matching
contributions to a salary sacrifice
personal pension arrangement.
Annual
bonus and
deferred
bonus plan
The purpose of the cash
bonus is to reward staff
by reference to the
financial success of the
Group with an
adjustment for
individual performance.
The purpose of the
deferred bonus is to
support long-term
retention of senior staff
and alignment with
share price performance.
Cash bonus and deferred awards are
considered annually after the end of
the financial year.
All bonus awards to executive
directors are made at the discretion
of the Committee. The Committee
retains flexibility to determine each
year the proportion in cash and the
proportion as deferred shares.
Where awarded, vesting of the
deferred bonus awards will usually
be on the third anniversary of the
grant date.
Dividends do not accrue on the
shares that are the subject of the
awards.
In circumstances of significant
individual misconduct or poor Group
performance the Committee has the
right to reduce or withhold the
deferred bonus award and has
limited rights to recover deferred
bonus awards already made.
The maximum company
contribution is in line with
that of the wider workforce.
None
The maximum contribution
is 17.14% of salary.
In line with our approach
for all employees, executive
directors may choose to
sacrifice an element of their
annual bonus into the Group
pension. The Company
wide policy (applied to all
employees) is that in these
circumstances a minor
uplift is made to reflect the
benefit of the NI saving to
the employer.
The overall maximum
limit in respect of the total
annual bonus is 100% of
salary. However this level
of award would only be
made in exceptional
circumstances.
Deferred bonus awards
would normally be made
under the Performance
Share Plan rules, where
awards are capped at 33%
of base salary.
Performance is
assessed within a
framework which
includes consideration
of:
- Profitability
- Customer
- Risk and Regulation
- Strategy delivery
Individual
performance is also
considered.
There are no
prescribed targets.
Instead, the Committee
considers qualitative
and quantitative
actual performance
within the above
performance
framework.
All employee
share plan
The purpose of the SIP
is to align the interests
of all employees –
including executive
directors – and
shareholders.
Executive directors are eligible to
participate in the all-employee share
incentive plan (SIP) in place on the
same terms as all employees. The
scheme is operated in line with HMRC
guidance.
The SIP is subject to the
limits set by HMRC from
time to time.
None
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 79
GOVERNANCE continued
Chair and Non-Executive Directors
Approach to Fees
Operation
Opportunity
Other Items
To attract non-executive
directors with relevant
experience to ensure the
appropriate balance on the
board and the effective
management of the Company.
Non-executive director fees are
reviewed annually. The review
is by reference to the time
commitment and responsibility
of the role and will not necessarily
result in an increase.
There is no maximum fee.
The fees are subject to
maximum aggregate limits,
as set out in the Articles of
Association (£1,500,000).
The fee for the Chair of the
board will be recommended to
the board by the Committee.
The fees for non-executive
directors will be determined by
the Chair and the CEO.
None of the non-executive
directors, including the Chair, is
eligible for performance related
remuneration or share awards.
The Company reimburses
reasonable expenses incurred by
the Chair and non-executive
directors in the performance of
their duties. This includes (but is
not limited to) travel expenses
and tax thereon.
80 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
ANNUAL REMUNERATION REPORT
Committee membership during the year
The members of the Remuneration Committee at 30 September 2020 were:
Name
Date of appointment
Christopher Munro (Chair with effect
from 2 March 2020)
19 January 2018
Neil Holden
19 January 2018
Richard Cranfield
11 December 2019
In all its activities, the Committee
gives due consideration to laws and
regulations, the provisions of the
Code, the requirements of the UK
Listing Authority’s Listing, Prospectus
and Disclosure Guidance and
Transparency Rules and other
applicable rules, as appropriate,
and to shareholder feedback.
Composition of the
Remuneration Committee
Since our last annual report the
board has appointed Richard
Cranfield, the non-executive Chair
of the Company, to the Committee.
The Committee ensures that
members take individual
responsibility for identifying training
appropriate to their needs and for
keeping appropriate records of such
training. Each Committee member
provides copies of their training
record to the Company Secretary
annually and undertakes all
regulatory training requested by
the Group.
Role of the
Remuneration Committee
The purpose of the Committee is to
review, set and agree aspects of the
overall remuneration policy and
strategy for the Group and the total
compensation package for certain
officers and employees within the
Group. It does so with a view to
aligning remuneration with the
successful achievement of the
Group’s long-term objectives while
taking into account the Code,
relevant regulatory requirements,
market rates and value for money.
The Group monitors the list of
employees who are considered to be
Code Staff by reference to the FCA
Remuneration Code. To the extent
that the Committee does not approve
the remuneration of Code Staff
individually, the Committee considers
whether the total reward for each
Code Staff employee remains
compliant with the provisions of the
Remuneration Code. The Committee
is also responsible for reviewing a
remuneration policy statement (RPS)
prepared by IFAL setting out how the
UK regulated companies within the
Group comply with UK regulatory
requirements on remuneration.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 81
GOVERNANCE continued
Committee meetings and
attendance
The Committee’s work
throughout the year
The Remuneration Committee
meets at least twice annually and
more frequently when required.
The Committee has met four times
during this financial year. Attendance
by each member of the Committee as
at 30 September 2020 is set out in
the board and committee attendance
table on page 64 of this report.
Only members of the Committee
have the right to attend Committee
meetings. However, other individuals
such as the CEO, directors of
subsidiaries, the Company Secretary,
the Group Counsel, the Head of
Human Resources and external
advisers may be invited to attend
for all or part of any meeting.
The Committee has performed its duties
with a view to aligning remuneration
with the successful achievement of
the Group’s long-term objectives
while taking into account the Code,
relevant regulatory requirements,
market rates and value for money.
The Committee has undertaken the
following this financial year:
Area of focus
Work conducted
Governance
▪ Reviewed the Committee Terms of Reference to ensure
their continuing appropriateness.
▪ Considered the provisions of the Code and its application.
Awards
▪ Reviewed the appropriateness of the proposed annual
staff pay award by reference to the RPS and the
Remuneration Policy.
▪ Approved the proposed remuneration for the executive
directors and senior managers.
▪ Considered the proposed remuneration of the new CEO
upon appointment.
▪ Considered the proposed remuneration of the new
executive director upon appointment.
▪ Considered the proposed adjusted remuneration for the
outgoing CEO upon his stepping down from the role.
▪ Considered the appropriateness of remuneration for
Code staff and the staff pay and bonus awards.
▪ Reviewed and approved the making of PSP awards to
executive directors and senior managers.
▪ Approved the grant of the 2019 Free Share Award.
Committee self-evaluation
The Remuneration Committee did
not conduct a self-assessment of its
own effectiveness because the board
undertook an external evaluation
which involved a review of the
manner in which the committee
escalated matters to the board.
The committee has considered the
findings of the external evaluator and
will be agreeing any enhancements
with the board.
82 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
UK Corporate Governance Code
– Provision 40
When developing the proposed
Remuneration Policy and considering
its implementation, the Committee
was mindful of the UK Corporate
Governance Code and considers that
the executive remuneration
framework appropriately addresses
the following considerations:
Area of focus
Work conducted
Clarity
Simplicity
Risk
Our distinctive approach to remuneration supports the
strategic objectives of the Company, and we seek to
communicate with stakeholders, shareholders and
employees in a clear and transparent way.
We consider that our remuneration framework is simple
and effective. Our incentive framework comprises only a
cash bonus award and a deferred share bonus award.
We believe our distinctive approach to performance
measurement supports appropriate consideration
of risk management and a long-term view of the
business. The annual bonus rewards performance against
four quantitative anchors for the business, ensuring a
holistic view of business performance.
Predictability
The maximum opportunities are outlined in the
Remuneration Policy. Taking into account our more modest
approach to incentives, total remuneration is more
predictable in comparison with other listed companies.
Proportionality
Executive director remuneration is modest compared to
practice in other listed companies, and our approach is
aligned with that of the wider workforce.
Alignment to
culture
Our approach to remuneration for executive directors is
consistent with that for all employees. Our incentive
structure and pension policy is aligned across the
workforce. We consider that our approach is fully aligned
with our culture.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 83
GOVERNANCE continued
Remuneration ‘at a glance’
Element
Operation
Out-turns 2020 and implementation in 2021
Base salary
▪ Increases will take into account a
number of factors including the scale of
the role and the individual’s experience
and wider workforce increases.
The salary increase awarded was 3% for the CEO and 3% for the
two UK executive directors which was in line with the UK and IoM
workforce increase of 3%.
Salary with effect from 1 June 2020:
▪ Alexander Scott: £422,300
▪ Jonathan Gunby: £417,108
▪ Ian Taylor: £278,100
Benefits1
▪ Includes, for example, death in service
and private medical insurance.
Benefits for Alexander Scott, Jonathan Gunby and Ian Taylor
comprise private healthcare.
Overnight accommodation in London was provided for Ian Taylor,
save for the duration of the COVID-19 stay at home advice.
Pension
▪ The pension provision is equivalent to
Alexander Scott received a £7,000 pension contribution (2%).
that of the wider workforce.
▪ The executive director’s current pension
arrangements are lower than those of
the workforce.
Jonathan Gunby received a £7,000 pension contribution (2%).
Ian Taylor elected not to receive a pension contribution.
Annual bonus and
deferred bonus
award of shares
▪ Total maximum opportunity is 100%
▪ Ordinarily, we do not expect awards to be in excess of 65%
of salary.
of salary.
▪ The Committee retains flexibility to
▪ The Committee uses judgement and discretion when
adjust the balance between cash and
deferred bonus awards.
determining outcomes under the annual bonus and deferred
bonus awards.
▪ The deferred bonus awards will usually
vest on the third anniversary of the
grant date.
▪ Outcomes are made by reference to the four quantitative
anchors – financial performance; stakeholder outcomes; risk,
regulation and ESG, and strategy delivery.
▪ Deferred bonus awards granted under
the Company’s PSP are subject to
malus and clawback provisions as
described below.
▪ For 2020 Alexander Scott was awarded a cash bonus of 32%
and a bonus award deferred into shares of 31%. Jonathan
Gunby was awarded a cash bonus of 32% and a bonus award
deferred into shares of 31% and Ian Taylor was awarded a cash
bonus of 30% and a bonus award deferred into shares of 30%.
All employee share
incentive plan
▪ The plan is operated in line with
HMRC guidance.
Executive directors are eligible to participate in the all-employee
SIP on the same terms as all employees.
1 Directors are entitled to receive an employee discount on platform charges, in line with all employees.
84 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
2020 remuneration outcomes for our executive directors (audited)
Alexander Scott, CEO
Fixed – £372k
Ian Taylor, Executive Director
Cash bonus – £135k
Deferred bonus – £132k
Fixed – £367k
Cash bonus – £83k
Deferred bonus – £85k
Jonathan Gunby, Executive Director
Fixed – £367k
Cash bonus – £134k
Deferred bonus – £130k
Total
remuneration
£639k
£535k
£631k
Statement of voting at the AGM
The Company remains committed to
ongoing shareholder dialogue and takes
a close interest in voting outcomes.
The following table sets out voting
outcomes in respect of the resolutions
relating to approving directors’
remuneration matters at the Company’s
AGM on 21 February 2020:
Year
Resolution
Votes for/
discretionary
% of vote
Votes
against
% of vote
2020
2019
Approve the Remuneration Policy
190,331,885
96.47
6,967,430
Approve the Remuneration Report
182,738,516
97.98
3,768,710
3.53
2.02
Votes
withheld
4,682,400
307,516
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 85
GOVERNANCE continued
How the Policy was applied in 2020
Summary of total remuneration – executive directors (audited)
Gross
Basic
Salary Benefits Pension
Total
fixed
pay
Annual Bonus
LTIP Other2
Cash
bonus
Deferred
shares
Total
variable
pay
Total
Director
Year £’000
£’000
£’000
£’000 £’000
£’000
£’000
£’000
£’000
£’000
Alexander
Scott
Ian
Taylor
Jonathan
Gunby
Michael
Howard
2020
2019
2020
2019
2020
2019
2020
2019
356
263
331
400
351
-
0
0
1
1
281
471
1
-
0
0
7
10
0
5
7
-
0
0
364
274
359
452
359
-
0
0
135
81
83
164
134
-
0
0
132
82
85
128
130
-
0
0
0
0
0
0
0
-
0
0
8
7
8
7
8
-
0
0
275
170
176
299
272
-
0
0
639
444
535
751
631
-
0
0
1 Benefits for Ian Taylor were £27,553 for 2020 and £46,945 for 2019
Benefits for Alexander Scott were £665 for 2020 and £630 for 2019
Benefits for Jonathan Gunby were £665 for 2020
The difference is the value of overnight accommodation for Ian Taylor.
2 Other remuneration relates to Share Incentive Plan awards and the employee discount on platform charges.
Michael Howard receives nil remuneration from the Group, but his employer, ObjectMastery Services Pty Ltd, receives
a fee of AUD 80k for his executive appointment to IAD Pty, a company within the Group.
86 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Within these broad categories,
the Remuneration Committee considers
a wide variety of management
information available to the board
and its committees. The Committee
is not constrained by particular
metrics as these can change year on
year. The essence of the process is
to use the quantitative anchors to
arrive at a balanced judgement as to
whether an award is warranted and,
if so, at what level.
Base salary (audited)
Incentives
Alexander was appointed to the role
of CEO on an equivalent salary to
Ian, with a subsequent 3% salary
increase which was in line with
the company wide pay review.
Ian’s salary was adjusted downwards
to reflect the change in his role and
responsibilities. The basic salary for
Jonathan was set taking into account
his new role and responsibilities.
These adjustments resulted in the
following changes to the annualised
salary figures:
Basic
annual
salary as
at 1 June
2020
Salary
effective
as at
1 June
2019
£’000
£’000
422
270
278
410
417
265
Director
Alexander
Scott
Ian
Taylor
Jonathan
Gunby
Benefits
Ian is entitled to overnight
accommodation in London during the
working week. Otherwise, executive
directors do not receive any benefits
which are not available to all employees.
Benefits for the executive directors
comprise private health care and an
employee discount on platform
charges, in line with all employees.
The Group has a distinctive culture
focused on our principal stakeholders
– customers, shareholders and
employees. Our incentive structure
has been developed to support this
culture:
▪ Alignment across all staff –
All staff are eligible for an annual
cash bonus award. Our incentive
structure is aligned across the
workforce and all employees are
made awards under the same
performance framework.
▪ Modest incentive opportunity
– Our maximum total variable
remuneration opportunity for
executive directors is only 100%
of salary, and ordinarily in practice
we do not expect awards to exceed
65% of salary.
▪ Deferred bonus awards – Part of
the incentive award is in cash and
part of it is in shares through deferred
bonus awards. We maintain flexibility
on the proportion of each award.
Deferred bonus awards is our
preferred long-term alignment
mechanism as we do not operate a
long-term incentive plan because
we believe long-term targets have
the potential to drive inadvertent
behaviours.
▪ Our performance framework is
also distinctive – We do not set
predefined targets. Instead, the
Committee considers qualitative and
quantitative actual performance
against at least four ‘quantitative
anchors’:
- Financial performance
- Stakeholder outcomes
- Risk and Regulation
(including Environmental Social
and Governance)
- Strategy delivery
We also consider individual performance.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 87
GOVERNANCE continued
Annual bonus (cash and deferred share)
awards for financial year 2020 (audited)
Director
Cash award
Deferred award
Alexander Scott
£135k
32% of salary
£132k
31% of salary
Ian Taylor
£83k
30% of salary
£85k
30% of salary
Jonathan Gunby
£134k
32% of salary
£130k
31% of salary
The cash and deferred award
percentages are by reference to the
basic salary on 30 September 2020.
This is aligned to the approach taken
for all employees.
The bonus for Alexander is
recommended by the board Chair.
The bonus for Ian and Jonathan
are recommended by Alex.
The Remuneration Committee
members considered detailed
information which covers factors
such as financial performance, risk,
compliance, conduct, internal
controls, client and client adviser
metrics, and delivery of strategy.
This year, as in past years, the
Committee reviewed the board
Chair’s and the CEO’s proposals in
that context, and considered whether
the executive directors had delivered
appropriate stakeholder, financial and
strategic performance, whilst also
managing risk and maintaining
internal controls.
Each year the Committee refers to
the quantitative anchors described
previously to frame that discussion
and challenge. The approach to
performance assessment is part of
our distinctive approach to incentives,
with relatively modest incentive
opportunity and a structure which
is aligned across the workforce.
The Committee believes that applying
formulaic measures and targets can
lead to inadvertent behaviours and
outcomes which are not in the
interests of long term sustained
performance. Instead, the Committee
exercises independent judgement
and discretion when considering
remuneration outcomes.
For 2020, the assessment of whether
cash and deferred bonus awards
were justified was informed by the
following metrics and performance in
the year:
88 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Quantitative anchor (metrics and performance)
Financial
performance
Stakeholder
outcomes
▪ Well managed costs and headcount in a challenging market.
▪ Financial performance was delivered against both original and adjusted forecasts despite effects of
COVID-19 global pandemic and impact on stock markets.
▪ Dividend flow and distributable reserves/regulatory capital from subsidiaries to support group
dividend managed effectively.
▪ Improved financial performance in other metrics (net inflows, earnings per share, expense ratio,
profit margin, share price and market cap) has also been delivered.
▪ Forward looking projections indicate that the Company is well placed to sustain performance over
the coming year taking into account stress-tested scenarios regarding the uncertainty of the
ongoing impact of COVID-19.
Clients and Advisers
▪ Market share of gross inflows remained above 12% and net flows make up approximately one fifth
of the market.
▪ Net promoter score increased in the year and at 61% is the highest of all platforms.
▪ The Group received the 5* Investment award in the Financial Adviser Service Awards.
▪ Topped the Platforum User Leaderboard in September 2020.
▪ Achieved top position in both the CoreData Investment Platform Study and the Investment Trends
UK Adviser Technology & Business Report for the eleventh year running.
▪ Introduced Upload Document tool in response to demand for paperless processes during
COVID-19 pandemic.
Employees
▪ Employees remain loyal and committed to the organisation with over 45% having service of more
than 5 years and over 29% having service of more than 10 years.
▪ 100% of eligible employees took up the SIP free share award and 87% took up the Partnership
Share award.
Shareholders
▪ The Company has distributed dividends in accordance with its dividend policy.
Suppliers
▪ The Group settled 90% of its invoices within 30 days of receipt.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 89
GOVERNANCE continued
Risk and
regulation
and ESG
▪ Remote working solution implemented whilst sustaining regulatory compliance in order to adapt to
the impact of the COVID-19 pandemic.
▪ Maintained capital liquidity and operational resilience during alternative working arrangements and
economic pressures related to the COVID-19 pandemic.
▪ Ongoing engagement with the FCA, the PRA and the IoM FSA regarding sustainability during
COVID-19 pandemic.
▪ Complaint and error and fraud rates are low and stable.
▪ Internal Audit programme completed.
▪ Risks including regulatory compliance have been managed within appetite and minor risk appetite
breaches have been promptly identified and addressed.
The above achievements are also underpinned by the following:
▪ The Company has undertaken an external evaluation of the board with no significant areas of
concern identified.
▪ The Group has shown appropriate adherence to internal, legal and regulatory policies, laws and
rules and board reports demonstrate appropriate understanding and implementation of regulatory
change projects.
▪ Monitoring, auditing and other assurance activities demonstrate appropriate attention to
maintaining the internal control environment.
▪ Significant improvement in online platform functionality, widening the scope of the online offering
for clients and their advisers.
▪ Enhanced resilience of core platform and associated services.
▪ Growth in both the number of advisers and clients whilst improving efficiency.
▪ Continuing with the “matchmaking service” for advisers and collaboration with a third party lender
where finance is required.
Strategy
delivery
the right to reduce or withhold the
deferred bonus award. This includes
but is not limited to where there
has been a material misstatement
and/or significant downward revision
in the financial results, where the
calculated number of shares awarded
to an individual director is determined
to be too high, or where the
Award Holder has engaged in
misconduct justifying the director’s
summary dismissal.
Based on a holistic assessment of
Group performance, including
consideration of the 2020 outcomes
set out in the quantitative anchors
table above, and individual
performance, the Committee granted
Alexander, Ian and Jonathan the cash
bonus and deferred bonus awards set
out on page 85.
The deferred bonus award will be
granted following the announcement
of the Group’s annual results.
Awards will vest after three years
and will be subject to malus and
clawback provisions as detailed in
the Remuneration Policy. In certain
circumstances the Committee has
90 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
SIP
Executive directors are able to
participate in the SIP. The board may
make an award to participants of
Free Shares up to the value of 3% of
salary or £3,600 (whichever is lower)
and may permit participants to
subscribe for Partnerships Shares
up to the value of 1.5% of salary or
£1,800 (whichever is lower). For every
Partnership Share purchased,
two Matching Shares were awarded.
The £3,600 and £1,800 limits are set
by applicable legislation and will be
revised automatically in the event of
any changes to the legislation.
During financial year 2020, the
maximum SIP award was granted to
qualifying employees (including
Alexander, Ian and Jonathan).
The Partnership and Matching Share
Award was made on an evergreen
basis and therefore all qualifying
employees will be able to continue
to participate in the plan unless it is
revoked by the Committee. Based on
the Group’s performance in 2020 the
board has not revoked that award.
The board has considered the Group’s
performance in financial year
2020 and, with the approval of the
Remuneration Committee, has
approved the making of a further
maximum SIP Free Share award to
qualifying employees (including
Alexander, Ian and Jonathan) when
the company is not in a closed
period. This will be following the
announcement of the Group’s
financial results.
How the Committee’s discretion
was applied
In determining the award for the
CEO, the Committee considered the
performance of the Group in difficult
market conditions, in particular the
effects of the COVID-19 pandemic
and the extent to which the Group
met its strategic objectives.
The Committee weighed up the
performance of the Company in 2020
and the future projections in 2021
in the context of the COVID-19
pandemic and considered whether
the awards were sustainable given
the projections. The Committee
concluded that the Company
delivered its objectives for the year
and that based on a review of
performance in the year, the award
was appropriate.
The Committee also sought
assurance that the recommendations
were made in accordance with a
balanced view of future profitability
and in the interests of all stakeholders,
not just based on backward looking
performance. The Committee concluded
that payment of the award was
sustainable in light of the forward
looking projections and the forecast
performance of the Company over
the coming year.
In the light of these factors,
the Committee is satisfied that the
performance of the CEO and the
Group as a whole justifies an overall
award of 63%.
LTIPs
In line with the Group’s approach to
remuneration, no awards will be
made to executive directors that are
dependent on performance conditions
relating to more than one year and
no such award was made in financial
year 2020.
Pension contributions
Pension contributions for Alexander,
Ian and Jonathan are currently made
by reference to the relevant personal
allowance. In the 2020 performance
year the employer’s pension
contribution for Alexander was
£7,000 and for Jonathan was £7,000.
Ian elected not to receive any
employer’s pension contributions.
In line with our remuneration principles,
pension contributions for executive
directors are aligned with those
available to the wider workforce.
The minimum employer contribution
available to all-employees in 2020
was 9%. For employees other than
executive directors the Group has
made contributions to personal
pension arrangements for those
employees who have sacrificed
salary. Whilst this benefit is available
to executive directors, none of the
current executive directors has
sacrificed salary.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 91
GOVERNANCE continued
Percentage change in
remuneration of directors
compared to the average
employee
The table below shows the percentage
movement in the salary, benefits and
annual bonus for the directors
compared to that for the average
Group employee from FY2018 to
FY2019 and FY2019 to FY2020.
Director
Alexander Scott
Ian Taylor
Jonathan Gunby
Mike Howard
Caroline Banszky
Robert Lister
Christopher Munro
Neil Holden
Richard Cranfield
Victoria Cochrane
Average employee
The SIP scheme is provided to all
staff, including executive directors,
and is not included above.
Salary and fees
Benefits
Annual bonus
2020
56.4%
2019
0.0%
2020
0.0%
2019
(9.4%)
2020
63.8%
(32.2%)
(3.0%)
(41.4%)
(9.9%)
(42.5%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
26.8%
5.5%
1.1%
12.8%
2019
3.8%
3.8%
n/a
n/a
119.1%
n/a
n/a
n/a
0.0%
0.0%
25.8%
(30.0%)
0.0%
n/a
0.0%
3.6%
0.0%
0.0%
0.0%
2.9%
Notes to the table:
Ian Taylor stepped down from the role of CEO to become a director of IHP in
March 2020, and Alexander Scott took on the role of CEO in March 2020.
Ian Taylor received a lower annual bonus in 2020 as a result of the reduction
of his basic salary, following stepping down as CEO and his accommodation
costs were reduced during the work from home requirements due to COVID-19.
Jonathan Gunby was appointed in 2020 and there is therefore no comparable
data for 2019.
Michael Howard receives nil remuneration from the Group.
Chris Munro was appointed to interim chair in 2019 and then stood down from
this position in 2020.
The change in salary for the directors is based on the salary as at 30 September
for each financial year.
The average staff annual cash bonus was 19% in 2020, compared to 18%
in 2019. Some employees received a deferred share bonus award.
The table does not include salary and benefits movement for Australian
employees as their employment benefit package differs from the UK staff
package in recognition of different compensation and benefit rules in
Australia. It has therefore been deemed inappropriate to include their
remuneration in this comparison.
92 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
CEO pay ratio table
The following table sets out the ratio
of the CEO’s pay to each of the
Group’s median, lower quartile and
upper quartile pay for UK employees.
Financial year
2020
Method
25th
Percentile
Pay Ratio
Median
Pay Ratio
75th
Percentile
Pay Ratio
Salary
Option A
Total remuneration
Option A
17:1
18:1
13:1
15:1
9:1
10:1
The salary and total remuneration
ratios above are based on the
following figures:
Financial year
2020
CEO*
25th
Percentile
Pay Ratio
Median
Pay Ratio
75th
Percentile
Pay Ratio
Salary
414,100
31,400
39,717
55,300
Total remuneration
718,922
42,515
54,176
76,550
* CEO figures are based on the salary and total remuneration of Alexander
Scott and Ian Taylor for the period for which they were each CEO.
The CEO pay ratios were calculated
using ‘Option A’, set out in the
Companies (Miscellaneous Reporting)
Regulations 2018. Under this method,
the full pay and benefits of each UK
employee were used to identify those
employees that represented the
Group’s median, lower quartile and
upper quartile pay for UK employees.
The full pay and benefits of these
employees were then used to calculate
the ratios as at 30 September 2020.
The Group elected to use Option A
as its method of calculation as it felt
that using the full pay and benefits of
all employees was the most accurate
method of identifying those employees
that represented the Groups’ mean
median, lower quartile and upper
quartile pay for UK employees.
To determine the full time equivalent
pay and benefits of non-standard
workers, part-time workers’
remuneration was grossed up to
the equivalent full time pay.
Executive director remuneration
compared to wider workforce
Our approach to remuneration for
executive directors is consistent with
that for all employees.
▪ Incentives – our incentive structure
is aligned across the workforce and
all employees are made awards under
the same performance framework.
For more senior employees a
portion is deferred into shares.
▪ Pension – for all employees the
maximum company contribution
available in financial year 2020 was
15.2%. Whilst executive directors
are eligible to receive the same
level as (but no more than) all
employees, the pension currently
provided to executive directors is
less than 2% of salary, considerably
lower than the pension provided to
the workforce.
▪ SIP – all-employees receive SIP
shares based on Company
performance. This year the
maximum of 3% of salary (up to a
maximum of £3,600) was awarded,
with additional partnership and
matching shares available.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 93
GOVERNANCE continued
Relative importance of spend
on pay
The following table sets out the
percentage change in profit,
dividends paid and overall spend on
pay in the year ending 30 September
2020, compared to the year ending
30 September 2019.
2020
£’000
2019
(restated)
£’000
Percentage
Change
IFRS profit after tax
45,484
41,107
Dividends
26,1652
29,8071
Employee remuneration costs
30,946
30,233
11%
-12%3
2%
1 This figure represents the full year interim dividend for 2018 plus half year
interim dividend for 2019, both paid during FY19.
2 This figure represents one half year interim dividend for 2019 and one half
year interim dividend for 2020, both paid during FY20.
3 Shareholder returns in respect of FY18 were 6.4p per share and in respect
of FY19 were 7.8p per share. This represented a percentage change of 22%.
Future years will reflect dividends on a like for like basis.
Payments to past directors
(audited)
There were no payments to
past directors.
Payments for loss of office
(audited)
There were no payments for
loss of office.
94 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Share awards made during the year (audited)
Type of interest
awarded
Basis on which award
made1,2
Date of
award
Face value
awarded3
Percentage
receivable
for minimum
performance
Number
of
shares
awarded
End
of
deferral
period
Alexander
Scott
Deferred
bonus
Conditional
share award
33% salary less award of SIP
Free and Matching shares
19.12.18 £81,896.45
100% 17,797 24.12.22
SIP
Free
Shares
Partnership
Shares
Matching
Shares
Dividend
Shares
3% (Free and Matching
shares) of Salary subject to
maximum of £3,600 each per
annum pro-rated for the period
that the Company was listed
and 1.5% (for Partnership
Shares) subject to a maximum
of £1,800 per annum
02.01.19
£3,599.60
100% 791 (Free)
N/A4
21.01.20
£1,798.56
21.01.20
£3,597.12
24.01.20
26.06.20
23
19
Ian
Taylor
Deferred
bonus
Conditional
share award
33% salary less award of SIP
Free and Matching shares
24.12.18 £128,097.52
100% 27,837 24.12.22
SIP
Free
Shares
Partnership
Shares
Matching
Shares
Dividend
Shares
3% (Free and Matching
shares) of Salary subject to
maximum of £3,600 each
per annum pro-rated for the
period that the Company was
listed and 1.5% (for Partnership
Shares) subject to a maximum
of £1,800 per annum
02.01.19
£3,599.6
100% 791 (Free)
N/A4
21.01.20
£1,798.56
21.01.20
£3,597.12
24.01.20
26.06.20
23
19
Jonathan
Gunby
Deferred
bonus
Conditional
share award
33% salary less award of SIP
Free and Matching shares
24.12.19 £80,249.05
100% 17,439 24.12.22
SIP
Free
Shares
Partnership
Shares
Matching
Shares
Dividend
Shares
3% (Free and Matching
shares) of Salary subject to
maximum of £3,600 each
per annum pro-rated for the
period that the Company
was listed and 1.5%
(for Partnership Shares)
subject to a maximum of
£1,800 per annum
02.01.20
£3,599.60
100% 791 (Free)
N/A4
21.01.20
£1,798.56
21.01.20
£3,597.12
24.01.20
26.06.20
23
19
1 Deferred share awards form part of the annual incentive, for which awards were determined based on performance to
30 September 2019.
2 SIP Free Share awards were determined based on Group performance to 30 September 2019. SIP Partnership and
Matching awards are loyalty awards and were granted in January 2020 and will continue unless revoked by the
Remuneration Committee.
3 The face value of the deferred bonus share award is calculated using average share price from 19 December 2019 to
23 December 2019 which was £4.60. The face value of the Free Shares is calculated using the share price paid by the
SIP administrator on the date of purchase which was £4.55. The face value of the Partnership and Matching Share
award is calculated using the total number of Partnership and Matching Shares bought on behalf of the relevant
individuals during the financial year and an average share price for matching share purchases.
4 The SIP is operated in line with HMRC guidance.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 95
GOVERNANCE continued
Shareholding requirements and
directors’ share interests
(audited)
No share awards other than the all
staff Share Incentive Plan and the
deferred bonus Performance Share
Plan share award were awarded to
executive directors during the
financial year.
There are no minimum shareholding
requirements in place for the
Company’s directors.
Director/
Connected
person
1p
ordinary
shares
SIP
shares
Deferred bonus
share scheme
(no performance
conditions)
Vested but
unexercised
Options
exercised
1,148,260
3,780
47,152
12,308,732
208,8801
73,518
836,031
3,780
46,677
Alexander
Scott
Ian
Taylor
Jonathan
Gunby
Michael
Howard
35,538,247
Christopher
Munro
1,003,324
Neil
Holden
Caroline
Banszky
Victoria
Cochrane
Richard
Cranfield
Robert
Lister
15,000
7,500
0
10,000
6,015
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Shares
held at
30.09.2020
Total
Shares
held at
30.09.2019
Total
1,199,192
1,179,389
12,591,130
13,057,813
886,488
0
35,538,247
50,038,247
1,003,324
1,426,324
15,000
15,000
7,500
7,500
0
0
10,000
10,000
6,015
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1 Includes 205,100 shares held in the Company’s 2005 Share Incentive Plan prior to the IPO
96 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Shareholder return Performance
Graph and CEO pay over the
same period
This graph shows the Company’s total
shareholder return performance from
Admission to 30 September 2020
The Company has chosen to show
total shareholder return against the
FTSE250 total return over the same
period, as the board considers this to
be the most appropriate comparator.
Total shareholder return performance vs FTSE250 since 2 March 2018
IHP vs FTSE250 Total return
250
200
150
100
50
0
e
g
n
a
h
c
e
g
a
t
n
e
c
r
e
P
8
1
0
2
/
3
0
8
1
0
2
/
6
0
8
1
0
2
/
9
0
8
1
0
2
/
2
1
9
1
0
2
/
3
0
9
1
0
2
/
6
0
9
1
0
2
/
9
0
9
1
0
2
/
2
1
0
2
0
2
/
3
0
0
2
0
2
/
6
0
0
2
0
2
/
9
0
IHP
FTSE250 TR
The following table shows the
Chief Executive Officer’s remuneration
for FY2020:
CEO
remuneration
CEO single figure
of remuneration
Annual bonus
payout
(as a % of
maximum
opportunity)
LTIP vesting
out-turn
(as a % of
maximum
opportunity)
20201
2019
2018
£639k
£751k
£769k
72%
82%
83%
N/A
N/A
N/A
1 The CEO remuneration reflected in the table is for the incumbent CEO at that
financial year end.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 97
GOVERNANCE continued
Chair and non-executive director
remuneration (audited)
There has been no increase to the
remuneration paid to the Chair and
non-executive directors during the
financial year. In respect of the
financial year ending 30 September
2020 the amounts are as follows.
Element of remuneration by director
Richard Cranfield
Caroline Banszky
Victoria Cochrane
Neil Holden
Robert Lister
Christopher Munro
ADVISERS
Deloitte LLP (“Deloitte”) is retained
as adviser to the Remuneration
Committee. Deloitte was appointed
by the Committee, and the
Committee is satisfied the advice
provided by Deloitte is objective and
independent. Deloitte is a founding
member of the Remuneration
Consultants Group and voluntarily
operates under the Code of Conduct
in relation to executive remuneration
consulting in the UK.
Deloitte has provided advice in
relation to reviewing the Directors’
Remuneration Report. For 2020, total
fees were £7,400, with fees on a
time and materials basis. Deloitte has
provided no other services to the
Company during the financial year.
In addition to Deloitte, Helen
Wakeford, Head of Legal and
Company Secretary, has provided
material advice and services to the
Committee during the year.
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Fees
£’000
Expenses
£’000
100
27
60
60
60
60
60
60
60
16
70
100
1
0
0
0
0
0
0
0
0
0
0
0
De minimis expenses are for reimbursement of extraordinary communication
costs and taxable travel expenses grossed up for the tax payable thereon.
98 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
DIRECTORS’ REPORT
Directors
The directors present their report and
financial statements for the year
ending 30 September 2020.
The content of the “Management
Report” required by the FCA
Disclosure and Transparency Rule
DTR4.1 is in the Strategic Report and
the Governance section of the Annual
Report and financial statements,
which also contains details of likely
future developments identified by the
board. This information is shown in
the Strategic Report rather than in
the Directors’ Report under sections
414 C (11) of the Companies Act.
The Corporate Governance Report on
pages 63 to 67 forms part of the
Directors’ Report.
Information disclosed in accordance
with the requirements of the
applicable sections of the FCA Listing
Rule LR9.8 (Annual Financial Report)
can be found here:
Details of Long-Term Incentive Schemes
– The Directors’ Remuneration Report
Directors’ Interests in the
Company’s Shares
– The Directors’ Remuneration Report
Major Shareholders’ Interests
– Directors’ Report
Directors’ unexpired contract terms
– Directors’ Report
Directors transactions in the
Company’s Shares
– Directors’ Report
Details of non-financial reporting
– Corporate Social Responsibility
Report
The review of the business and
principal risks and uncertainties are
disclosed in the Strategic Report.
The directors who served during the
financial year were as follows:
Richard Cranfield
Alexander Scott
Jonathan Gunby
(Appointed 2 March 2020)
Mike Howard
Ian Taylor
Caroline Banszky
Victoria Cochrane
Neil Holden
Robert Lister
According to the Register of
Directors’ Interests in the Company,
no rights to subscribe for shares were
granted or exercised by any of the
directors or their immediate families
during the financial year.
Rights for share options were granted
to Alexander, Jonathan and Ian,
under the Company’s deferred bonus
Performance Share Plan.
Ian has informed the board of his
intention to resign on 26 February
2021. He will therefore not be
standing for re-election at the
upcoming AGM.
All other directors are standing for
re-election at the upcoming AGM.
The appointment and replacement
of directors is governed by the
Company’s Articles of Association,
the UK Corporate Governance Code,
the Companies Act 2006 and related
legislation. The directors may exercise
all the powers of the Company.
are terminable on six months’ notice
on either side. In the event that notice
is given to terminate the executive
director’s contract, the Company may
make a payment in lieu of notice
or place the individual on garden
leave. Entitlement to any variable
remuneration arrangements will be
determined in accordance with the
relevant plan rules and the Directors’
Remuneration Policy. Executive
directors’ service contracts do not
make any other provision for
termination payments.
Details of unexpired Non-Executive
Directors’ contract terms
The following non-executive directors
will have the stated unexpired
contract terms when they stand for
re-election at the AGM:
Director
Christopher Munro
Neil Holden
Caroline Banszky
Victoria Cochrane
Richard Cranfield
Robert Lister
Unexpired
Contract Term
(years)
3 years
1 year
0.75 years
0.75 years
1.25 years
1.25 years
Status of company
The Company is registered as a
public limited company under the
Companies Act 2006.
Stakeholders
Executive directors’ service
agreements
All executive directors have written
service contracts in place with an
employing company in the Group.
Executive directors’ service contracts
The Group considers its principal
stakeholders to be the customers
using the platform, the employees
of the Group and the Company’s
shareholders. The Group also has
longstanding relationships with a
number of key suppliers.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 99
GOVERNANCE continued
Diversity and inclusion
Restrictions on share transfers
There are currently no restrictions
on the transfer of shares held by
executive directors and senior
managers.
Purchase of own shares
At the 2020 AGM, shareholders
authorised the Company to buy back
up to 10% of its own ordinary shares
by market purchase at any time prior
to the conclusion of the AGM to be
held in 2021.
Whilst such authority would only be
used if the board was satisfied that to
do so would be in the interests of
shareholders, the board considers it
desirable to have the general authority
in order to maintain compliance with
the regulatory capital requirements
or targets applicable to the Group.
The Company did not purchase
any of its own shares during the
financial year.
Substantial shareholders
As at 15 December 2020, the
Company had been notified of the
following interests in 3% or more of
the Company’s issued ordinary share
capital disclosed to the Company
under Disclosure Guidance and
Transparency Rule 5. The information
provided below was correct as at the
date of notification. It should be
noted that these holdings are likely
to have changed since notified to the
Company. However, notification of
any change is not required until the
next applicable threshold is crossed.
The Group recognises the benefits of
companies having a diverse board
and sees diversity at board level as
important in maintaining good
corporate and board effectiveness.
The Group has an established diversity
policy dealing with appointments to
the board.
The objective of the Group’s diversity
policy is to ensure that new
appointments to any board within the
Group are made on merit, taking into
account the different skills, industry
experience, independence, knowledge
and background required to achieve a
balanced and effective board.
When determining the composition
of the board, consideration is given
to the diversity of board members
and, when possible, appointments
are made with a view to achieving
a balance of skills with diversity.
Share capital
Structure of the Company’s capital
The Company has 331,322,014
ordinary £0.01 shares in issue.
There are no treasury shares, other
than those held by the Employee
Benefit Trust to satisfy options
awarded under the PSP scheme.
Voting rights
At any General Meeting, on a show of
hands, any member present in
person has one vote and every proxy
present, who has been duly
appointed by a member entitled to
vote on a resolution, has one vote.
On a poll vote every person present
in person or by proxy has one vote
for every share held. All shares carry
equal voting rights and there are no
restrictions on voting rights.
100 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Shareholder
BlackRock Inc
Number of
Ordinary
Shares at 30
September
2020
% of
voting
rights at
30 September
2020
Number of
Ordinary
Shares at
15 December
2020
% of
voting
rights at
15 December
2020
Nature of
Holding
Indirect
21,518,605
6.49%
24,185,878
7.30%
Securities
Lending
Contracts for
difference
4,054,052
1,765,074
0.53%
658,420
0.20%
Montanaro Asset Management Limited
Direct
10,129,500
Liontrust Investment Partners LLP
Ninety One
Jupiter Asset Management
Troy Asset Management
Michael Howard
Direct
Direct
Direct
Direct
Direct
18,241,627
11,873,819
11,762,312
10,076,532
29,450,000
The percentage provided was correct at the date of notification.
1.22%
3.06%
5.51%
3.58%
3.55%
3.04%
8.89%
3,551,580
10,129,500
18,241,627
11,873,819
11,762,312
10,076,532
29,450,000
1.07%
3.06%
5.51%
3.58%
3.55%
3.04%
8.89%
The interests of the directors, and any persons closely associated, in the issued share capital of the Company are
shown on page 96.
Directors’ interests
Indemnity provision
Save for the shareholding details set
out in the Directors’ Remuneration
Report, there has been no change to
the interests of any of the directors
or their Persons Closely Associated
during the financial year.
Dividends
In financial year 2020 the Company
paid two interim dividends. Both
dividends were paid by reference to
the Company’s issued and allotted
share capital on the record date.
An interim dividend of 5.2 pence per
share, which equates to £17.2 million,
was paid on 24 January 2020.
An interim dividend of 2.7 pence per
share, which equates to £8.9 million,
was paid on 26 June 2020.
An interim dividend of 5.6 pence per
share, which equates to £18.6 million,
has been declared by the board and
will be paid in January 2021.
Directors’ and officers’ insurance
is in place to indemnify the directors
against liabilities arising from the
discharge of their duties as directors
of the Company.
Employee information and
engagement
The Company has no employees
(2019: nil), but the Group had 487
employees at year end (2019: 486).
The Group continues to promote a
culture whereby employees are
encouraged to develop and contribute
to the overall aims of the business.
The Company has considered the
requirements of s.172 of the
Companies Act on page 57, to ensure
that the interests of employees are
considered by the board in discussions
and decision making, and the
associated provisions of the 2018
Corporate Governance Code regarding
the method of engagement with
the workforce.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 101
GOVERNANCE continued
The Company and individual directors
engage with the work force on an
informal and regular basis. The work
force is predominantly based in the
London office and the CEO usually
provides opportunities for all UK
based staff to attend presentations
following the publication of the
interim and year end results.
However, it was not possible to
present the interim results this way
in May 2020 due to COVID-19
restrictions. The CEO communicates
with all staff following each quarterly
market announcement, and in the
event of any developments within the
business. The CEO is available to all
staff and the Group’s culture is one
of openness and inclusivity.
Given the size and location of the
workforce; the flat and accessible
structure of the management team;
and the many long and close working
relationships that exist within the
Group; the board has determined
that it is appropriate to continue
engaging with staff through collegiate
and continuous collaboration
combined with more formal staff
surveys as and when necessary.
The Group provides the opportunity
for all staff to make suggestions
for improvements to our operating
environment and the Board and
senior management team have
an open door policy for all staff
and encourage constructive and
frank discussion.
Engagement with suppliers
Post Year End Events
The Group monitors its relationships
with key suppliers and relationship
meetings are held with suppliers of
critical business services. The Group
monitors its payment performance
with suppliers and further details
are set out in the Corporate Social
Responsibility report on page 52 above.
Articles of Association
The Articles of Association may be
amended by special resolution of
the shareholders.
Greenhouse gasses
For commentary on greenhouse
gasses, please see the Corporate
Social Responsibility report on
page 53.
Political donations
As per the Corporate Social
Responsibility report on page 55 the
Group does not make political donations.
Employment of disabled people
For commentary on the Group’s
policy regarding the employment
of disabled people, please see the
Corporate Social Responsibility report
on page 52.
Events after the reporting date are
detailed in note 37. There are no
reportable events (2019: none).
Auditor
BDO LLP has indicated its willingness
to continue in office, however, the
audit contract will be up for tender
in 2021 in compliance with the
requirements of The Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and
Audit Committee Responsibilities)
Order 2014.
Each of the persons who is a director
at the date of approval of this report
confirms that:
▪ So far as the director is aware,
there is no relevant audit information
of which the Company’s auditor is
unaware; and
▪ The director has taken all the steps
that they ought to have taken as a
director in order to make themselves
aware of any relevant audit information
and to establish that the Company’s
auditor is aware of that information.
This confirmation is given in accordance
with the provisions of section 418 of
the Companies Act 2006.
By order of the board,
Alexander Scott
Chief Executive Officer
16 December 2020
102 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with the Companies Act 2006 and for
being satisfied that the Annual Report
and financial statements, taken as a
whole, give a fair, balanced and
understandable view which provides
the information necessary for
shareholders to assess the Company’s
position and performance, business
model and strategy.
Company law requires the directors to
prepare financial statements for each
financial year.
Under that law the directors are required
to prepare the Group financial
statements and have elected to prepare
the 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 for 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;
▪ make judgements and estimates that
are reasonable and prudent;
▪ state whether they have been prepared
in accordance with IFRSs as adopted
by the European Union, subject to any
material departures disclosed and
explained in the financial statements;
▪ prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company and Group will continue in
business; and
▪ prepare a directors’ report, a strategic
report and directors’ remuneration
report which comply with the require-
ments of the Companies Act 2006.
The directors are responsible for keeping
adequate accounting records that show
and explain the Group’s transactions,
disclose with reasonable accuracy at
any time the financial position of the
Company and enable them to ensure
that the financial statements comply
with the Companies Act 2006 and, as
regards the Group financial statements,
Article 4 of the IAS Regulation.
They are also responsible for safeguarding
the assets of the Company and Group
and hence for taking reasonable steps
for the prevention and detection of
fraud and other irregularities.
The directors are responsible for
ensuring the Annual Report and the
financial statements are made available
on a website. Financial statements are
published on the Company’s website
in accordance with legislation in the
United Kingdom governing the
preparation and dissemination of
financial statements, which may vary
from legislation in other jurisdictions.
The maintenance and integrity of the
Company’s website is the responsibility
of the directors. The directors’
responsibility also extends to the
ongoing integrity of the financial
statements contained therein.
Directors’ responsibilities pursuant
to DTR4
The directors confirm to the best of
their knowledge:
▪ The Group financial statements have
been prepared in accordance with
International Financial Reporting
Standards (IFRSs) as adopted by the
European Union and Article 4 of the
IAS Regulation and give a true and
fair view of the assets, liabilities,
financial position and profit and loss
of the Group.
The Annual Report includes a fair
review of the development and
performance of the business and the
financial position of the Group and the
parent company, together with a
description of the principal risks and
uncertainties that they face.
The current directors, whose names and
functions are listed on pages 59 to 62,
at the date of approval of this report,
confirm that:
▪ they have taken all of the steps that
they ought to have taken as directors
to make themselves aware of any
information needed by the Company’s
auditor for the purposes of the audit,
and to establish that the auditor is
aware of that information;
▪ they are not aware of any relevant
audit information of which the auditor
is unaware;
▪ to the best of their knowledge,
the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss
of the issuer and the undertakings
included in the consolidation taken as
a whole;
▪ the management report includes a
fair review of the development and
performance of the business and the
position of the issuer and the under-
takings included in the consolidation
taken as a whole, together with a
description of the principal risks and
uncertainties that they face; and
▪ 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
performance, strategy and business
model of the Company and Group.
The directors consider it appropriate
to adopt the going concern basis of
accounting in preparing the consolidated
financial statements as they believe
the Group will continue to be in
business, and meet any liabilities as
they fall due, for a period of at least
twelve months from the date of
approval of the financial statements.
By order of the board,
Helen Wakeford
Company Secretary
16 December 2020
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 103
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS OF
INTEGRAFIN HOLDINGS PLC
Opinion
We have audited the financial
statements of IntegraFin Holdings plc
(the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year
ended 30 September 2020 which
comprise the Consolidated Profit
or Loss and Other Comprehensive
Income, Company Profit or Loss
and Other Comprehensive Income,
Consolidated Statement of Financial
Position, Company Statement of
Financial Position, Consolidated
Statement of Cash Flows,
Company Statement of Cash Flows,
Consolidated Statement of Changes
in Equity, Company Statement of
Changes in Equity and notes to the
financial statements, including a
summary of significant accounting
policies. The financial reporting
framework that has been applied in
their preparation is applicable law
and International Financial Reporting
Standards (IFRSs) as adopted by the
European Union.
In our opinion the
financial statements:
▪ give a true and fair view of the
state of the Group’s and of the
Parent Company’s affairs as at
30 September 2020 and of the
Group’s and Parent Company’s
profit for the year then ended;
▪ have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
▪ have been prepared in accordance
with the requirements of the
Companies Act 2006; and, as
regards the Group financial
statements, Article 4 of the
IAS Regulation.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities
under those standards are further
described in the Auditor’s responsibilities
for the audit of the financial statements
section of our report. We are independent
of the Group and the Parent Company
in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in
the UK, including the FRC’s Ethical
Standard as applied to listed public
interest entities, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
Conclusions relating to principal
risks, going concern and viability
statement
We have nothing to report in respect
of the following information in the
Annual Report, in relation to which
the ISAs (UK) require us to report
to you whether we have anything
material to add or draw attention to:
▪ the directors’ confirmation set out
on page 42 in the Annual Report
that they have carried out a robust
assessment of the Group’s emerging
and principal risks and the disclosures
in the Annual Report that describe
the principal risks and the procedures
in place to identify emerging risks
and explain how they are being
managed or mitigated;
▪ the directors’ statement set out on
page 48 in the financial statements
about whether the directors
considered it appropriate to adopt
the going concern basis of
accounting in preparing the financial
statements and the directors’
identification of any material
uncertainties to the Group and the
Parent Company’s ability to continue
to do so over a period of at least
twelve months from the date of
approval of the financial statements;
▪ whether the directors’ statement
relating to going concern required
under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is
materially inconsistent with our
knowledge obtained in the audit; or
▪ the directors’ explanation set out
on page 48 in the Annual Report
as to how they have assessed the
prospects of the Group, over what
period they have done so and why
they consider that period to be
appropriate, and their statement as
to whether they have a reasonable
expectation that the Group will be
able to continue in operation and
meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures
drawing attention to any necessary
qualifications or assumptions.
Key audit matters
Key audit matters are those matters
that, in our professional judgment,
were of most significance in our 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) that we identified, 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
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.
104 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Risk description
How our audit addressed the risk
Completeness, existence,
and accuracy of revenue
There are various performance
incentive schemes in place which mean
management may be incentivised to
overstate revenue. We therefore
consider the existence of revenue to
be a significant risk.
Revenue is automatically calculated by
the IT system based on Transact
(Integrated Financial Arrangement Ltd’s
(IFAL’s) trading name) published rates.
There is a risk that revenue may be
misstated due to errors in system
calculations or manual processes. The
key risks in IFAL, IntegraLife UK
Limited and IntegraLife International
Limited is that fees are not calculated
in line with commissions and charges
schedules in place. We therefore
consider the completeness, existence
and accuracy of revenue to be a
significant risk.
As disclosed in note 1d and note 5 of
the financial statements, management
and the board categorise revenue into
three sub categories:
▪ Annual commission income charged
for the administration of products on
the Transact platform (“IAS”);
▪ Wrapper fee income charged for
each of the tax wrappers held by
clients; and
▪ Other income comprising
buy commission and
dealing charges.
Controls testing:
We tested the controls in place over accuracy of inputs into the Integrated
Administration System (IAS) IT platform, as these represent key controls over the
accuracy and completeness of revenue recognition. These procedures included:
▪ Testing the controls over the opening of new client portfolios, as the number of
clients impacts the value of the Funds under Direction (FUD) and the number of
wrappers on wrappers (investment products) on which revenue is generated from;
▪ Testing the execution controls in place over trade instructions from clients to
provide assurance over accuracy and existence of revenue generated from
these trades;
▪ Testing the controls in place covering the identification and resolution of rejected
trades to provide assurance over the accuracy of revenue recognised; and
▪ Testing the controls in place covering the approval of fee exceptions (e.g. staff
discounts) as changes in rates could affect revenue recognised.
We tested the controls in place covering client money and custody asset records
held within the IAS IT system as revenue is generated from these balances which
comprise the Funds Under Direction (FUD). The control procedures provided assurance
over the integrity of the data within the IAS IT system: These procedures included:
▪ Testing the controls over external and internal client money reconciliations
▪ Testing the controls over external and physical custody asset reconciliations; and
▪ Testing the controls in place covering the Internal System Evaluation Monitoring
procedures (“ISEM”) which encompasses management’s controls in place over
completeness and accuracy of IAS records, for both individual client records and
for aggregate records of assets. These controls also cover the systems and controls
in place that identify and resolve discrepancies in any records of custody assets.
Tests of detail procedures:
▪ We tested the accuracy and completeness of revenue by performing a recalculation
of key income streams comprising annual commission; buy commission and
wrapper fee income, with reference to stated commission rates. This was then
compared against the amount recognised in the financial statements.
▪ We agreed a sample of off balance sheet FUD holdings to third party
custodian statements.
▪ We agreed a sample of share prices in the IAS system to third party sources.
▪ We validated the key inputs into the revenue recalculation by corroborating them
to supporting documentation and testing the report logic within the IAS IT system,
and
▪ We assessed the revenue accounting policies and confirmed they are applicable
to International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
Separately, we reviewed the breaches register, complaints register and FCA
correspondence in the year in respect of IFAL to determine whether there was any
indication of control failures.
Key observations:
From testing we have concluded revenue to be appropriately stated and categorised.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 105
FINANCIAL STATEMENTS continued
Risk description
How our audit addressed the risk
Our application of materiality
Accuracy of the provision for
IntegraLife UK Limited (‘ILUK’)
policyholder tax (Note 30 of the
financial statements)
ILUK holds life policies which are
subject to the ‘I minus E’ tax regime.
This regime determines how much
tax should be paid to HMRC and aims
to tax both the policyholders and
shareholders (Notes 11 and 12 of the
financial statements).
Given complexities in insurance tax
regimes there is a risk that the
provision for policyholder tax is
incorrectly calculated.
An overstatement error in the
policyholder tax provision was
identified by the Component auditor
which has led to a prior year
restatement as outlined in note 39.
We apply the concept of materiality
both in planning and performing our
audit, and in evaluating the effect
of misstatements. We consider
materiality to be the magnitude by
which misstatements, including
omissions, could influence the
economic decisions of reasonable
users that are taken on the basis of
the financial statements. Importantly,
misstatements below these levels
will not necessarily be evaluated as
immaterial as we also take account
of the nature of identified
misstatements, and the particular
circumstances of their occurrence,
when evaluating their effect on the
financial statements as a whole.
Based on professional judgement,
we determined materiality for the
financial statements as a whole
as follows:
In order to address this risk we
performed the following procedures:
▪ Inquiries with executive management
to understand the nature of the matter
identified and their view on the
principles to be applied in the
policyholder tax calculation which
results in the provision.
▪ We consulted with our insurance tax
specialist and directed them to engage
directly with executive management of
ILUK and the Component auditor’s
specialists.
▪ Based on the above, directed our
insurance tax specialist to form a view
on the tax principles identified resulting
in the error
▪ We carried out a detailed review of the
work of the Component auditor in this
regard, which included a review
performed by our insurance tax
specialist which included:
▪ A review of the component auditor tax
specialists memorandum to the
component audit team; and
▪ A review of the component auditors
working papers on the policyholder
tax provision, including their work on
the correcting journal entry.
▪ Reviewed the appropriateness of
disclosure in terms of IAS 8 Accounting
Policies, Changes in Accounting
Estimates and Errors relating to the
prior year adjustment disclosed in note
39 of the financial statements.
Key observations:
Based on the work undertaken we
consider the prior year restatement as
outlined in note 39 to the financial
statements to be appropriate.
106 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Materiality
Basis for determining materiality
Parent company
financial statements
Overall materiality:
£460k (2019: £415k)
Performance materiality:
£345k (2019: (£311k)
We used 1% of total assets of
£45.99m (2019: £41.5m) as
the basis of materiality as the
Company is the parent entity of
the Group, and does not earn
any income other than dividends
from subsidiary entities.
Performance materiality was
calculated using 75% of overall
materiality based on our risk
assessment procedures and the
expectation of a low level of
misstatements.
Group financial statements
Overall materiality:
£2.71m (2019: £2.45m)
Performance materiality:
£2.03m (2019: £1.84m)
The principal measure considered
in both the current and prior year
was a benchmark of 5% of profit on
ordinary activities before taxation
attributable to shareholders of £54.21m
(2019: £48.9m).
Profit on ordinary activities before
taxation attributable to shareholders
has been used as we consider this to be
the most significant determinant of the
Group’s financial performance used by
shareholders and other users of the
financial statements.
Performance materiality was calculated
using 75% of overall materiality based
on our risk assessment procedures
and the expectation of a low level
of misstatements.
Materiality for policyholder assets
and liabilities
Overall materiality:
£183.65m (2019: £168.86m)
Not applicable
Basis for determining materiality
Not applicable
Performance materiality:
£137.74m (2019: £126.6m)
Based on the guidance on the audit of
insurers issued in the United Kingdom
issued by the Financial Reporting Council
(FRC) we have applied a higher materiality
for policyholder assets and liabilities, 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.
The entities manage investment linked
assets on behalf of their clients (long
term insurance business). Any liability
owed to its client is covered by the assets
held by the entities and the investment
return derived on the associated assets
is offset by the change in provision for
investment contract liabilities.
Therefore using 1% of total assets
is appropriate for determining this
materiality level.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 107
FINANCIAL STATEMENTS continued
For each component in the scope
of our Group audit, we allocated
a materiality that is less than our
overall Group materiality.
Audits of the components were
performed at a materiality level
calculated by reference to a proportion
of group materiality appropriate to
the relative scale of the business
concerned. All significant components
were audited to an overall materiality
of £2.44m (2019: £2.21m) and
£165.28m (£151.97m) was used for
the application of a higher materiality
for the policyholder assets and liabilities.
We agreed with the Audit Committee
that we would report to them all
individual audit differences identified
during the course of our audit in
excess of £54,000 (2019: £49,000).
For policyholder assets and
liabilities and associated income
statement line items we agreed
with the Audit Committee that we
would report to the Committee all
individual audit differences identified
during the course of our audit in
excess of £3.31m (2019: £3.4m).
We also agreed to report differences
below these thresholds that, in our
view, warranted reporting on
qualitative grounds.
An overview of the scope
of our audit
Our audit approach was developed
by obtaining an understanding of the
Group’s activities and the overall
control environment. Based on this
understanding we assessed those
aspects of the Group’s transactions
and balances which were most likely to
give rise to a material misstatement.
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.
We performed an assessment to
determine which components were
significant to the Group. All components
which financially contributed greater
than 15% of the Group’s profit before
tax, net assets or total expenses
were identified as significant and
subject to a full scope audit of their
complete financial information.
Five components were considered
to be financially significant to the
Group, with four of them being
located in the United Kingdom and
one being located in the Isle of Man.
All five components were subject to
a full scope audit. The work for three
of the components: Integrated
Financial Arrangements Ltd,
IntegraFin Services Limited and
Transact IP Limited (all within the
United Kingdom) was performed by
the Group audit team and the other
two: ILUK and IntegraLife International
Limited were performed by the
component auditors in the Isle of
Man, outside of the BDO network.
We had overall responsibility for
directing and supervising the work
of component auditors.
108 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
There are inherent limitations in the
audit procedures described above and
the further removed non-compliance
with laws and regulations is from the
events and transactions reflected in
the financial statements, the less
likely we would become aware of it.
We also addressed the risk of
management override of internal
controls, including testing journals
and evaluating whether there was
evidence of bias by the directors that
represented a risk of material
misstatement due to fraud.
As part of our audit strategy,
as Group auditors we undertook
the following:
▪ Detailed Group reporting
instructions were sent to the
component auditor, which included
the significant areas to be covered
by the audit (including areas that
were considered to be key audit
matters as detailed above), and set
out the information required to be
reported to the Group audit team.
▪ We performed a review of the
component audit files remotely and
held calls and meetings with the
component audit team during the
planning, execution and completion
phases of their audit.
▪ The Group audit team was actively
involved in the direction of the
audits performed by the component
auditors for Group reporting
purposes, along with the
consideration of findings and
determination of conclusions drawn.
For components that we considered
to be non-significant, these
components were principally subject
to analytical review procedures
performed by BDO as the Group
auditor, together with additional
testing over audit risk areas.
Capability of the audit to detect
irregularities, including fraud
We gained an understanding of the
legal and regulatory framework
applicable to the Group and the
industry in which it operates, and
considered the risk of acts by the
Group which were contrary to
applicable laws and regulations,
including fraud. These included but
were not limited to compliance with
Companies Act 2006, IFRSs as
adopted by the European Union, the
Financial Conduct Authority’s
regulations and the Listing Rules.
We designed audit procedures to
respond to the risk, recognising that
the risk of not detecting a material
misstatement due to fraud is higher
than the risk of not detecting one
resulting from error, as fraud may
involve deliberate concealment by, for
example, forgery, misrepresentations
or through collusion.
We focused on laws and regulations
that could give rise to a material
misstatement in the financial
statements. Our tests included,
but were not limited to:
▪ agreement of the financial
statement disclosures to underlying
supporting documentation;
▪ enquiries of management regarding
instances of non-compliance and
contingent liabilities;
▪ review of correspondence
with the regulator;
▪ review of minutes of board
meetings for discussions around
potential irregularities throughout
the period; and
▪ considering the effectiveness of the
control environment in monitoring
compliance with laws and regulations
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 109
FINANCIAL STATEMENTS continued
Other information
The directors are responsible for
the other information. The other
information comprises the information
included in the Annual Report, other
than the financial statements and our
auditor’s report thereon. Our opinion
on the financial statements does not
cover the other information and,
except to the extent otherwise
explicitly stated in our report, we do
not express any form of assurance
conclusion 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 such material
inconsistencies or apparent material
misstatements, we are required to
determine whether there is a material
misstatement in 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 the other information, we are
required to report that fact.
We have nothing to report in
this regard.
In this context, we also have
nothing to report in regard to our
responsibility to specifically address
the following items in the other
information and to report as
uncorrected material misstatements
of the other information where we
conclude that those items meet the
following conditions:
▪ Fair, balanced and understandable
set out on page 103 – the
statement given by the directors
that they consider 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’s
position, performance, business
model and strategy, is materially
inconsistent with our knowledge
obtained in the audit; or
▪ Audit committee reporting set
out on pages 69 to 72 – the
section describing the work of
the audit committee does not
appropriately address matters
communicated by us to the audit
committee; or
▪ Directors’ statement of
compliance with the UK
Corporate Governance Code set
out on page 49 – the parts of the
directors’ statement required under
the Listing Rules relating to the
Company’s compliance with the
UK Corporate Governance Code
containing provisions specified for
review by the auditor in accordance
with Listing Rule 9.8.10R(2) do not
properly disclose a departure from
a relevant provision of the UK
Corporate Governance Code.
110 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Opinions on other
matters prescribed by the
Companies Act 2006
In our opinion, the part of the
directors’ remuneration report
to be audited has been properly
prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
▪ the information given in the
strategic report and the directors’
report for the financial year for
which the financial statements are
prepared is consistent with the
financial statements; and
▪ the strategic report and the
directors’ report have been
prepared in accordance with
applicable legal requirements.
Responsibilities of directors
As explained more fully in the
directors’ responsibilities statement
set out on page 103, the directors
are responsible for the preparation
of the financial statements and for
being satisfied that they give a true
and fair view, and for such internal
control as the directors 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 Parent
Company’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern and
using the going concern basis of
accounting unless the directors either
intend to liquidate the Group or the
Parent Company or to cease operations,
or have no realistic alternative but to
do so.
Matters on which we are required
to report by exception
In the light of the knowledge and
understanding of the Group and
Parent Company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect
of the following matters in relation
to which the Companies Act 2006
requires us to report to you if, in
our opinion:
▪ adequate accounting records have
not been kept by the Parent
Company, or returns adequate for
our audit have not been received
from branches not visited by us; or
▪ the Parent Company financial
statements and the part of the
directors’ remuneration report to be
audited are not in agreement with the
accounting records and returns; or
▪ certain disclosures of directors’
remuneration specified by law are
not made; or
▪ we have not received all the
information and explanations we
require for our audit.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 111
FINANCIAL STATEMENTS continued
Auditor’s responsibilities for the
audit of the financial statements
Other matters which we are
required to address
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 auditor’s 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 Financial Reporting Council’s
website at: www.frc.org.uk/
auditorsresponsibilities.
This description forms part of our
auditor’s report.
Following the recommendation of the
Audit Committee, we were appointed
by the Board of Directors to audit the
financial statements for the year ending
30 September 2011 and subsequent
years. We were reappointed by the
members at the AGM on 20 February
2020 to audit the financial statements
for the year ending 30 September 2020.
The period of total uninterrupted
engagement, including previous
renewals and reappointments of the
firm, is 10 years, covering the years
ending 30 September 2011 to
30 September 2020.
The non-audit services prohibited by
the FRC’s Ethical Standard were not
provided to the Group or the Parent
Company and we remain independent
of the Group and the Parent Company
in conducting our audit.
In addition to the statutory audit,
we have provided the following
permissible audit related services to
the Group in the period; an interim
review for the Group; quarterly profit
reviews, two SIPP audits, country by
country reporting review and a client
money audit for the subsidiary
Integrated Financial Arrangements Ltd.
Our audit opinion is consistent
with the additional report to the
audit committee.
112 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Use of our report
This report is made solely to the Parent
Company’s members, as a body,
in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Parent Company’s
members those matters we are required
to state to them in an auditor’s report
and for no other purpose. To the fullest
extent permitted by law, we do not accept
or assume responsibility to anyone
other than the Parent Company and
the Parent Company’s members as a
body, for our audit work, for this report,
or for the opinions we have formed.
Justin Chait
(Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
London, UK
16 December 2020
BDO LLP is a limited liability partnership
registered in England and Wales
(with registered number OC305127).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 113
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Fee income
Cost of sales
Gross profit
Administrative expenses
Credit loss allowance on financial assets
Net income attributable to policyholder returns
Operating profit
Note
5
8
23
12
2020
£’000
2019
(restated)
£’000
107,320
(865)
106,455
99,165
(806)
98,359
(51,016)
(48,773)
(176)
(3,066)
52,197
(20)
7,115
56,681
Operating profit attributable to policyholder returns
12
(3,066)
7,115
Operating profit attributable to shareholder returns
55,263
49,566
Change in investment contract liabilities
Fee and commission expenses
Investment returns
Interest expense
Interest income
Profit on ordinary activities before taxation
Profit on ordinary activities before taxation
attributable to policyholder returns
Profit on ordinary activities before taxation
attributable to shareholder returns
Policyholder tax
Tax on profit on ordinary activities
Profit for the financial year
Other comprehensive income
Exchange gains/(losses) arising on translation of foreign operations
Total other comprehensive income for the financial year
Total comprehensive income for the financial year
Earnings per share
Earnings per share – basic and diluted
All activities of the Group are classed as continuing.
Notes 1 to 40 form part of these financial statements
114 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
20
20
10
26
9
82,895
(137,536)
54,677
(233)
256
(554,767)
(125,618)
680,422
-
308
52,256
57,026
12
(3,066)
7,115
12
11
55,322
49,911
3,066
(6,969)
(9,838)
45,484
(8,950)
41,107
22
22
(20)
(20)
45,506
41,087
7
13.7p
12.4p
COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Cost of sales
Gross profit
Administrative expenses
Credit loss allowance on financial assets
Operating loss
Dividend income
Interest income
Profit on ordinary activities before taxation
Tax on profit on ordinary activities
Profit for the financial year
Other comprehensive income
Total comprehensive income for the financial year
All activities of the Company are classed as continuing.
Note
2020
£’000
2019
£’000
-
-
-
-
-
-
(1,208)
(85)
(1,293)
(1,096)
(24)
(1,120)
32,326
30,118
91
66
31,124
29,064
-
-
31,124
29,064
-
-
31,124
29,064
8
18
38
9
11
Notes 1 to 40 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 115
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Non-current assets
Loans
Intangible assets
Property, plant and equipment
Right of use assets
Deferred tax asset
Deferred acquisition costs
Current assets
Financial assets at fair value through profit or loss
Other prepayments and accrued income
Trade and other receivables
Investments held for the benefit of policyholders
Cash and cash equivalents
Current tax asset
Current liabilities
Trade and other payables
Lease liabilities
Liabilities for linked investment contracts
Current tax liabilities
Non-current liabilities
Provisions
Lease liabilities
Deferred income liability
Deferred tax liabilities
Net assets
Capital and reserves
Called up equity share capital
Capital redemption reserve
Share-based payment reserve
Employee Benefit Trust reserve
Foreign exchange reserve
Non-distributable reserves
Non-distributable insurance reserves
Profit or loss account
Total equity
Note
18
13
14
15
28
17
22
23
24
19
21
25
26
20
30
26
27
28
31
32
33
34
34
34
2020
£’000
2,647
12,951
2,313
3,961
489
53,482
75,843
5,051
14,412
3,556
16,727,208
1,539,843
53
18,290,123
18,366
2,375
18,112,935
-
18,133,676
25,208
3,712
53,482
8,968
91,370
2019
(restated)
£’000
1 October
2018
£’000
1,185
12,951
2,405
-
157
50,443
67,141
5,066
13,082
7,189
15,454,769
1,342,619
-
16,822,725
17,024
-
16,665,048
3,987
16,686,059
18,230
-
50,443
13,248
81,921
1,189
12,966
1,813
-
44
46,073
62,085
6,219
11,471
4,591
13,376,481
1,230,301
-
14,629,063
14,764
-
14,489,933
3,702
14,508,399
13,756
-
46,073
12,570
72,399
140,920
121,886
110,350
3,313
2
1,698
(1,103)
(22)
5,722
501
130,809
140,920
3,313
2
1,008
(275)
(44)
5,722
501
111,659
121,886
3,313
2
530
-
(24)
5,722
501
100,306
110,350
These financial statements were approved by the Board of Directors on 16 December 2020 and are signed on their
behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 40 form part of these financial statements
116 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
COMPANY STATEMENT OF FINANCIAL POSITION
Non-current assets
Investment in subsidiaries
Loans
Current assets
Prepayments
Other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net assets
Capital and reserves
Called up equity share capital
Profit or loss account
Share-based payment reserve
Employee Benefit Trust reserve
Total equity
Note
2020
£’000
2019
£’000
16
18
23
24
25
32
33
16,832
2,647
19,479
56
342
26,090
26,488
491
491
15,800
1,184
16,984
30
86
24,342
24,458
518
518
45,476
40,924
3,313
41,962
1,070
(869)
45,476
3,313
37,006
880
(275)
40,924
These financial statements were approved by the Board of Directors on 16 December 2020 and are signed on their
behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 40 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 117
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit before tax
Adjustments for:
Amortisation and depreciation
Share-based payment charge
Interest on cash held
Interest charged on lease
Investment returns
Increase in policyholder tax recoverable
Decrease in current asset investments
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Increase in provisions
Decrease in share-based payment reserve
2020
£’000
2019
(restated)
£’000
52,256
57,026
2,571
1,776
(256)
234
(36)
(1,515)
15
55,045
2,305
3,858
6,978
(1,126)
669
1,237
(308)
-
(37)
-
1,153
59,740
(4,211)
2,260
5,041
-
Increase in investments held for the benefit of policyholders
Increase in liabilities for linked investment contracts
(1,272,440)
(2,078,288)
1,447,887
2,175,115
Cash generated from operations
242,507
159,657
Income taxes paid
Interest paid on lease liabilities
(13,803)
(15,633)
(234)
-
Net cash flows from operating activities
228,470
144,024
Investing activities
Acquisition of tangible assets
Decrease/(increase) in loans
Interest on cash held
Investment returns
Net cash used in investing activities
Financing activities
Purchase of own shares in Employee Benefit Trust
Settlement of share-based payment reserve
Equity dividends paid
Repayment of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gain/(losses) on cash and cash equivalents
Cash and cash equivalents at end of year
Notes 1 to 40 form part of these financial statements
118 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
(859)
(1,462)
256
36
(1,246)
3
308
37
(2,029)
(898)
(828)
-
(275)
(706)
(26,158)
(29,807)
(2,244)
-
(29,230)
(30,788)
197,211
112,338
1,342,619
1,230,301
13
(20)
1,539,843
1,342,619
COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Loss before interest and dividends
Adjustments for:
Increase in trade and other receivables
Decrease in trade and other payables
Net cash flows from operating activities
Investing activities
Dividends received
Interest received
Decrease/(increase) in loans
Net cash generated from investing activities
Financing activities
Purchase of own shares in Employee Benefit Trust
Settlement of share-based payment reserve
Equity dividends paid
Net cash used in financing activities
2020
£’000
2019
£’000
(1,293)
(1,120)
(306)
(4)
(30)
(205)
(1,603)
(1,355)
32,326
91
(1,462)
30,955
30,118
66
3
30,187
(594)
(843)
(275)
(706)
(26,167)
(29,818)
(27,604)
(30,799)
Net increase/(decrease) in cash and cash equivalents
1,748
(1,967)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
24,342
26,090
26,309
24,342
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 119
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
distrib-
utable
reserves
£’000
Share
capital
£’000
Other
reserves
£’000
Share-
based
payment
reserve
£’000
Non-
distrib-
utable
insurance
reserves
£’000
Employee
Benefit
Trust
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 October 2018
3,313
5,722
(22)
Correction of retained earnings
-
-
-
Restated balance at 1 October 2018
3,313
5,722
(22)
530
-
530
501
-
501
-
-
94,899 104,943
5,408
5,408
- 100,307 110,351
Comprehensive income for
the year:
Profit for the year
Movement in currency translation
Total comprehensive income
for the year
Distributions to owners:
Dividends
Share based payment reserve
Settlement of share based
payment expense
Purchase of own shares in EBT
Other movement
Total distributions to owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(20)
(20)
-
-
-
-
-
-
-
-
-
-
1,237
(707)
-
(52)
478
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(275)
41,107
41,107
-
(20)
41,107
41,087
(29,807)
(29,807)
-
-
-
1,237
(707)
(275)
-
-
52
(275) (29,755) (29,552)
Balance at 1 October 2019
3,313
5,722
(42)
1,008
501
(275) 111,659 121,886
Impact of IFRS 16
Deferred tax on IFRS 16
Adjusted balance at 1 October
2019
Comprehensive income for
the year:
Profit for the year
Movement in currency translation
Total comprehensive income
for the year
Distributions to owners:
Share-based payment expense
Settlement of share based
payment
Purchase of own shares in EBT
Excess tax relief charged to equity
Other movement
Dividends paid
Total distributions to owners
-
-
-
-
-
-
-
-
-
-
-
-
(240)
(240)
31
31
3,313
5,722
(42)
1,008
501
(275) 111,450 121,677
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22
22
-
-
-
-
-
-
-
-
-
-
1,776
(1,126)
-
73
(33)
-
690
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(828)
-
-
-
45,484
45,484
-
22
45,484
45,506
-
-
-
-
33
1,776
(1,126)
(828)
73
-
(26,158)
(26,158)
(828) (26,125) (26,263)
Balance at 30 September 2020
3,313
5,722
(20)
1,698
501 (1,103) 130,809 140,920
Notes 1 to 40 form part of these financial statements
120 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
Share-
based
payment
reserve
£’000
Share capital
£’000
Employee
Benefit Trust
£’000
Retained
earnings
£’000
Total equity
£’000
Balance at 1 October 2018
3,313
350
Comprehensive income for the year:
Profit for the year
Total comprehensive income for the year
Distributions to owners:
Dividends
Share-based payment expense
Settlement of share-based payments
Purchase of own shares in EBT
Total distributions to owners
-
-
-
-
-
-
-
Balance at 1 October 2019
3,313
Comprehensive income for the year:
Profit for the year
Total comprehensive income for the year
Distributions to owners:
Dividends
Share-based payment expense
Settlement of share-based payments
Purchase of own shares in EBT
Total distributions to owners
-
-
-
-
-
-
-
-
-
-
1,237
(707)
-
530
880
-
-
-
1,032
(843)
-
189
-
-
-
-
-
-
(275)
37,760
41,423
29,064
29,064
29,064
29,064
(29,818)
(29,818)
-
-
-
1,237
(707)
(275)
(275)
(29,818)
(29,563)
(275)
37,006
40,924
-
-
-
-
-
(594)
31,124
31,124
31,124
31,124
(26,167)
(26,167)
-
-
-
189
-
(594)
(594)
(26,167)
(26,572)
Balance at 30 September 2020
3,313
1,069
(869)
41,963
45,476
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 121
FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
General information
IntegraFin Holdings plc (the “Company”), a public limited company incorporated and domiciled in the United Kingdom
(“UK”), along with its subsidiaries (collectively the “Group”), offers a market leading investment platform which
enables advisers to implement financial plans as simply and efficiently as possible.
The registered office address, and principle place of business, is 29 Clement’s Lane, London, EC4N 7AE.
a) Basis of preparation
The financial statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards (“IFRS”) as endorsed by the European Union (“EU”) and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain
financial instruments, which are stated at their fair value, have been prepared in pound sterling, which is the
functional currency of the Company and are rounded to the nearest thousand.
Going concern
The financial statements have been prepared on a going concern basis, following an assessment by the board.
Going concern is assessed over the 12 month period from when the Annual Report is approved, and the board
has concluded that the Group has adequate resources to continue in operational existence for the next 12 months.
This is supported by:
▪ The current financial position of the Group;
▪ The Group maintains a conservative balance sheet and manages and monitors solvency and liquidity on an
ongoing basis, ensuring that it always has sufficient financial resources for the foreseeable future.
▪ As at 30 September 2020, the Group had £154 million of shareholder cash on the balance sheet,
demonstrating that liquidity remains strong.
▪ Detailed cash flow and working capital projections; and
▪ Stress-testing of liquidity, profitability and regulatory capital, taking account of possible adverse changes in trading
performance, including the impact of COVID-19.
When making this assessment, the board has taken into consideration both the Group’s current performance and the
future outlook, including the impact of the COVID-19 pandemic. Market volatility and uncertainty is expected to
continue for some time, due to the pandemic and the effect of measures taken to combat it, but the Group’s
fundamentals remain strong.
As detailed in the Going Concern and Viability Statement (page 48), stress and scenario testing has been carried out,
in order to understand the potential financial impacts of severe, yet plausible, scenarios on the Group. The following
scenarios have been considered that give specific consideration to COVID-19:
▪ A prolonged economic downturn as COVID-19 cases increase, leading to a reduced investor propensity for savings;
▪ Loss of investor confidence in capital and investment markets due to an extended period of pandemic, combined
with the end of the transitional period with the EU;
▪ Loss of investor confidence (as above), combined with an internal cyber-attack.
Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and
regulatory capital, taking account of the impact of the COVID-19 pandemic and further possible adverse changes
in trading performance, the board is satisfied that the Group is well placed to manage its business risks.
122 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
The board is also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial
Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle Man Financial Services Authority (IoM FSA).
Accordingly, the board does not believe a material uncertainty exists that would have an effect on the going concern
of the Group and have prepared the financial statements on a going concern basis.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee
if all three of the following elements are present: power over the investee, exposure to variable returns from
the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there may be a change in any of these elements of control.
Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are deconsolidated
from the date that control ceases. Acquisitions are accounted for under the acquisition method. Intercompany
transactions, balances, income and expenses, and profits and losses are eliminated.
The financial statements of all of the wholly owned subsidiary companies are incorporated into the consolidated
financial statements. Two of these subsidiaries, IntegraLife International Limited (ILInt) and IntegraLife UK Limited
(ILUK) issue contracts with the legal form of insurance contracts, but which do not transfer significant insurance risk
from the policyholder to the Company, and which are therefore accounted for as investment contracts.
In accordance with IFRS 9, the contracts concerned are therefore reflected in the consolidated statement of financial
position as investments held for the benefit of policyholders, and a corresponding liability to policyholders.
b) New accounting standards
IFRS 16 Leases
The Group adopted IFRS 16 on 1 October 2019. The Group used the modified retrospective approach of transition,
which uses the net effect of applying IFRS 16 on the first day of the first accounting period in which the new standard
is applied.
The recognised right of use assets all relate to rental leases for the offices of the Group previously classified as
“operating leases”. Such leases have varying terms, clauses and renewal rights.
The Group recognises a right of use asset and corresponding lease liability on the date a leased asset is made
available for use by the Group, except for short term leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expenses
on a straight line basis over the term of lease.
On commencement date, the Group measured the lease liability as the present value of all future lease payments,
discounted using the incremental borrowing rate of 3.2% at the date of transition. The Group’s incremental borrowing
rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms
and conditions.
The standard allows companies to apply practical expedients when using the modified retrospective approach of
transition. The Group has chosen to use a single discount rate to its portfolio of leases as they all have reasonably
similar characteristics.
The right of use asset was measured at its net book value, assuming it had been capitalised and depreciated from
inception. The net effect is recognised through an adjustment to retained earnings. Prior periods have not been restated.
The table below shows the impact on retained earnings of recognising the asset and the corresponding liabilities for
each of the leases, and the release of the rent free reserve.
Right of use assets – 1 October 2019
Lease liabilities – 1 October 2019
Release of rent free reserve liability
Reduction to retained earnings – 1 October
£5.6m
(£8.3m)
£2.5m
(£0.2m)
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 123
FINANCIAL STATEMENTS continued
Details of the right of use asset and the lease liability are set out in Notes 15 and 26 respectively.
The following is a reconciliation of total operating lease commitments at 30 September 2019 (as disclosed in the
Annual Report to 30 September 2019) to the lease liabilities recognised at 1 October 2019:
Lease commitments - 1 October 2019
Discounted using incremental borrowing rate
Lease liabilities on adoption of IFRS 16 – 1 October 2019
£’000
8,841
(505)
8,336
No other standards or amendments adopted in the period had a material effect on the financial statements.
c) Future standards, amendments to standards, and interpretations not early-adopted in the 2020 annual
financial statements.
IFRS 17 Insurance Contracts
IFRS 17 was issued in May 2017 and will replace IFRS 4 Insurance Contracts. An exposure draft was issued in
June 2019. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of
insurance contracts within the scope of the Standard. The Group would be required to provide information that
faithfully represents those contracts, such that users of the financial statements can assess the effect insurance
contracts have on the entity’s financial position, financial performance and cash flows. The standard is effective
for accounting periods beginning on or after 1 January 2023, subject to EU endorsement.
The Group has performed a preliminary assessment regarding the impact of IFRS 17 on the financial statements
and, due to the vast majority of contracts written by the business being investment contracts, it is expected such
impact will be negligible.
No other future standards, amendments to standards, or interpretations are expected to have a material effect on the
financial statements.
d) Principal accounting policies
Revenue from contracts with customers
Revenue represents the fair value of services supplied by the Company. All fee income is recognised as revenue in line
with the provision of the services.
Fee income comprises:
Annual commission income
Annual commission is charged for the administration of products on the Transact platform, and is levied monthly
in arrears on the average value of assets and cash held on the platform in the month.
Wrapper fee income
Wrapper fees are charged for each of the tax wrappers held by clients, and are levied quarterly in arrears based on
fixed fees for each wrapper type.
Annual commission and wrapper fees relate to services provided on an ongoing basis, and revenue is therefore
recognised on an ongoing basis to reflect the nature of the performance obligations being discharged.
Accrued income on both annual commission and wrapper fees is recognised as a trade receivable on the statement
of financial position, as the Group’s right to consideration is conditional on nothing other than the passage of time.
Other income
This comprises buy commission and dealing charges. These are charges levied on the acquisition of assets, due upon
completion of the transaction. Revenue is recorded on the date of completion of the transaction, as this is the date the
services are provided to the customer.
124 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Deferred acquisition costs and deferred income liabilities
Incremental costs directly attributable to securing investment contracts are deferred. These costs consist of fees
paid to policyholders’ financial advisers. The costs relating to Pension, Onshore Life and Offshore Life contracts are
capitalised as deferred acquisition costs and are amortised over the Directors’ best estimates of the lives of the
contracts which are deemed to be fourteen, sixteen and eighteen years respectively (2019: fourteen, sixteen and
eighteen years), over which the services are provided. Equal service provision is assumed over the lifetime of the
contract and, as such, the deferred costs are amortised on a linear basis over the expected life of the contract,
adjusted for expected persistency.
A corresponding deferred income liability is recognised in respect of charges taken from customers of the Company
at the contract’s inception to meet obligations to financial advisers. Deferred income liabilities are also amortised over
the Directors’ best estimates of the lives of the contract, which are again deemed to be fourteen, sixteen and eighteen
years. At the end of each reporting period, deferred acquisition costs are reviewed for recoverability, against future
margins from the related contracts at the statement of financial position date. An impairment loss is recognised in the
statement of profit or loss and other comprehensive income if the carrying amount of the deferred acquisition costs is
greater than the future margins from the related contracts.
Deferred acquisition costs and deferred income liability are required to be shown under IFRS, however, the timing and
magnitude of movement in the items always nets off exactly, resulting in zero net effect in each of the companies and
in the consolidated statements of financial position.
Investment income
Interest on cash and coupon on shareholder gilts are the two sources of investment income received. Interest income
is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to that financial asset’s carrying amount.
Investments
Fixed asset investments in subsidiaries are stated at cost less any provision for impairment.
Other investments comprise UK Government fixed interest securities backing insurance contracts or held as
shareholder investments. These investments are mandatorily held at ‘fair value through profit or loss’ at initial
recognition and are stated at quoted bid prices which equates to fair value, with any resultant gain or loss
recognised in profit or loss. Purchases and sales of securities are recognised on the trade date.
Investment contracts – investments held for the benefit of policyholders
Investment contracts are comprised of unit-linked contracts in ILInt and ILUK. Investment contracts result in financial
liabilities whose fair value is dependent on the fair value of underlying financial assets. They are designated at
inception as financial liabilities at ‘fair value through profit or loss’ in order to reduce an accounting mismatch with the
underlying financial assets.
Valuation techniques are used to establish the fair value at inception and each reporting date. The Company’s main
valuation techniques incorporate all factors that market participants would consider and are based on observable
market data. The financial liability is measured both initially and subsequently at fair value. The fair value of a
unit-linked financial liability is determined using the fair value of the financial assets contained within the funds linked
to the financial liability.
Dividends
Equity dividends are recognised in the accounting period in which the dividends are declared.
Intangible non-current assets
Intangible non-current assets, excluding goodwill, are stated at cost less accumulated amortisation and comprise
intellectual property software rights. The software rights were amortised over seven years on a straight line basis, as it
was estimated that the code would be replaced every seven years, and therefore have a finite useful life. The software
rights are now fully amortised, but due to ongoing system development and coding updates no replacement is required.
Goodwill is held at cost and, in accordance with IFRS, is not amortised but is subject to annual impairment reviews.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 125
FINANCIAL STATEMENTS continued
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included
in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Company and the cost can be measured reliably. Repairs
and maintenance costs are charged to the profit and loss and other comprehensive income statement during the
period in which they are incurred.
The major categories of property, plant, equipment and motor vehicles are depreciated as follows:
Asset class
All UK and Isle of Man entities
Australian entity
Leasehold improvements
Straight line over the life of the lease Straight line over 40 years
Fixtures & Fittings
Straight line over 10 years
Reducing balance over 2 to 8 years
Equipment
Motor vehicles
Straight line over 3 to 10 years
Reducing balance over 3 to 10 years
N/A
Reducing balance over 2 to 8 years
Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
Impairment of non-financial assets
Property, plant and equipment, right of use assets and intangible assets are tested for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable. Recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash
flows of the relevant asset).
The Group evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
Goodwill is tested for impairment annually, and once an impairment is recognised this cannot be reversed. For more
detailed information in relation to this, please see note 13.
Pensions
The Group makes defined contributions to the personal pension schemes of its employees. These are chargeable to
profit or loss in the year in which they become payable.
Foreign currencies
Transactions in foreign currencies are translated into the functional currency at the exchange rate in effect at the date
of the transaction. Foreign currency monetary assets and liabilities are translated to sterling at the year end closing
rate. Non-monetary assets denominated in a foreign currency that are measured in terms of historical cost are
translated using the exchange rate in effect at the date when the fair value was determined. Foreign exchange rate
differences that arise are reported net in profit or loss as foreign exchange gains/losses.
The assets and liabilities of foreign operations are translated to sterling using the year end closing exchange rate.
The revenues and expenses of foreign operations are translated to sterling at rates approximating the foreign
exchange rates ruling at the relevant month of the transactions. Foreign exchange differences arising on retranslation
are recognised directly in the reserves.
Taxation
The taxation charge is based on the taxable result for the year. The taxable result for the year is determined in
accordance with enacted legislation and taxation authority practice for calculating the amount of corporation tax payable.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of
financial position differs from its tax base. Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by
the reporting date and are expected to apply when the deferred tax assets/liabilities are recovered/settled.
126 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance
of the operating segments and has been identified as the chief executive officer of the Company.
For the year ended 30 September 2020, the business of ILUK and ILInt was the direct insurance of investment linked
pensions business, written by single premium in the United Kingdom, single premium life assurance linked bonds and
linked qualifying investment plans written in the United Kingdom. Insurance risk is minimal as all contracts have been
classed as investment contracts.
ILInt and ILUK policyholder assets and liabilities
Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the
statement of financial position. They are designated as financial assets at ‘fair value through profit or loss’ in order to
reduce an accounting mismatch option with the equivalent financial liabilities. Gains and losses arising from changes
in fair value are presented in the consolidated profit and loss and other comprehensive income statement within
“investment returns”.
Investment inflows received from policyholders are invested in funds selected by the policyholders. The resulting
liabilities for linked investment contracts are accounted for under the ‘fair value through profit or loss’ option, in line
with the corresponding assets as permitted by IFRS 9.
As all investments held for the benefit of policyholders are matched entirely by corresponding linked liabilities,
any gain or loss on assets recognised through the consolidated profit and loss and other comprehensive income
statement are offset entirely by the gains and losses on linked liabilities, which are recognised within the “change in
investment contract liabilities” line. The overall net impact on profit is therefore £nil.
Client assets and client monies
IFAL client assets and client monies are not recognised in the parent and consolidated statements of financial position
(see Note 29) as they are owned by the clients of IFAL.
Lease agreements
Prior year rental costs were recognised as operating leases and charged to the statement of profit or loss and other
comprehensive income on a straight line basis over the term of the lease. Where an incentive to sign the lease had
been taken, the incentive was spread on a straight line basis over the lease term. However, with the introduction of
IFRS 16 from 1 October 2019, rental costs are now recognised on the balance sheet under ‘Lease liabilities’, with
interest charged to the statement of profit or loss. A corresponding asset is recognised and depreciation is charged to
the statement of profit or loss on a straight line basis over the lease term. Details of the lease commitments are set
out in Note 26.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances from instant access and notice accounts, call deposits, and other
short-term deposits with an original maturity of three months or less. The carrying amount of these assets
approximates to their fair value.
Cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to corresponding liabilities.
Financial instruments
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or
have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial
liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 127
FINANCIAL STATEMENTS continued
At initial recognition, the Company classifies its financial instruments in the following categories, based on the
business model in which the assets are managed and their cash flow characteristics:
(i) Financial assets and liabilities at fair value through profit or loss
This category includes financial assets and liabilities acquired principally for the purpose of selling or repurchasing in
the short-term.
Financial instruments in this category are recognised on the trade settlement date, and subsequently, at fair value.
Purchases and sales of securities are recognised on the trade date. Transaction costs are expensed in the consolidated
profit and loss and other comprehensive income statement. Gains and losses arising from changes in fair value are
presented in the consolidated profit and loss and other comprehensive income statement within “investment returns”
for corporate assets and “net income attributable to policyholder returns” for policyholder assets in the period in which
they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except for the portion
expected to be realised or paid beyond twelve months of the balance sheet date, which are classified as long-term.
(ii) Financial assets at amortised cost
This category includes non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. This is comprised of accrued fees, trade and other receivables, loans, and cash and cash equivalents.
These are included in current assets due to their short-term nature, except for loans which are included in non-
current assets.
Assets held at amortised cost are initially recognised at fair value. Subsequent measurement is at amortised cost
using the effective interest method less any expected credit losses.
(iii) Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other payables. These are initially recognised at fair value.
Subsequent measurement is at amortised cost using the effective interest method. They are classified as current
liabilities due to their short-term nature.
Impairment of financial assets
Expected credit losses are required to be measured through a loss allowance at an amount equal to:
▪ the 12-month expected credit losses (expected credit losses from possible default events within 12 months after the
reporting date); or
▪ full lifetime expected credit losses (expected credit losses from all possible default events over the life of the
financial instrument).
A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that
financial instrument has increased significantly since initial recognition, as well as to contract assets or trade
receivables that do not constitute a financing transaction.
For all other financial instruments, expected credit losses are measured at an amount equal to the 12-month expected
credit losses.
Impairment losses on financial assets carried at amortised cost are reversed in subsequent periods if the expected
credit losses decrease.
Provisions
Provisions are recognised when the Company has an obligation, legal or constructive, as a result of a past event, and
it is probable that the Company will be required to settle that obligation. Provisions are estimated at the Directors’
best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present
values where the effect is material.
Trade and other payables
Other payables are short-term, not interest-bearing and are stated at their amortised cost which is not materially
different to cost and approximates to fair value.
128 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Share-based payments
Equity-settled share-based payment awards granted to employees are measured at fair value at the date of grant.
The awards are recognised as an expense, with a corresponding increase in equity, spread over the vesting period
of the awards, which accords with the period for which related services are provided.
The total amount expensed is determined by reference to the fair value of the awards as follows:
(i) SIP shares
The fair value is the market price on the grant date. There are no vesting conditions, as the employees receive the shares
immediately upon grant.
(ii) PSP share options
The fair value of share options is determined by applying a valuation technique, usually an option pricing model, such as
Black Scholes. This takes into account factors such as the exercise price, the share price, volatility, interest rates, and
dividends.
At each reporting date, the estimate of the number of share options expected to vest based on the non-market vesting
conditions is assessed. Any change to original estimates is recognised in the statement of comprehensive income, with a
corresponding adjustment to equity reserves.
2. Critical accounting estimates and judgements
Critical accounting estimates are those where there is a significant risk of material adjustment in the next 12 months, and
critical judgements are those that have the most significant effect on amounts recognised in the accounts.
In preparing these financial statements, management has made judgements, estimates and assumptions about the
future that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income
and expenses. Management uses its knowledge of current facts and applies estimation and assumption techniques that are
aligned with relevant accounting policies to make predictions about the future. Actual results may differ from these estimates.
The area where judgements and estimates have the most significant effect in these financial statements is the tax
provision for its subsidiary, ILUK.
In assessing whether to recognise a provision, the Group has evaluated the likelihood of a constructive or legal obligation,
and whether that obligation can be estimated reliably.
The provision required has been calculated based on an estimation of tax payable to HMRC (through detailed calculations
on the forecasted income and expenses for the financial year) and refunds payable back to policyholders. As explained in
note 39, the balances relating to prior years have been restated due to an error attributable to changes in the treatment of
tax reserves. Further details regarding the current year provision can be found in note 30.
3. Financial instruments
(i) Principal financial instruments
The principal financial instruments, from which financial instrument risk arises, are as follows:
▪ Trade and other receivables
▪ Accrued fees
▪ Cash and cash equivalents
▪ Investments in quoted debt instruments
▪ Listed shares and securities
▪ Trade and other payables
▪ Loans
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 129
FINANCIAL STATEMENTS continued
(ii) Financial instruments by category
As explained in Note 1, financial assets and liabilities have been classified into categories that determine their basis
of measurement and, for items measured at fair value, whether changes in fair value are recognised in the statement
of profit or loss and other comprehensive income. The following tables show the carrying values of assets and
liabilities for each of these categories for the Group:
Financial assets:
Cash and cash equivalents
Listed shares and securities
Loans
Fair value through profit or loss
Amortised cost
2020
£’000
-
92
-
2019
£’000
-
69
-
2020
£’000
2019
£’000
1,539,843
1,342,619
-
2,647
-
10,244
786
-
-
1,185
-
9,768
3,444
-
Investments in quoted debt instruments
4,959
4,997
Accrued income
Trade and other receivables
-
-
-
-
Investments held for the policyholders
16,727,208
15,454,769
Total financial assets
16,732,259
15,459,835
1,553,520
1,357,016
Financial liabilities:
Trade and other payables
Accruals
Lease liabilities
Fair value through profit or loss
Amortised cost
2020
£’000
2019
£’000
-
-
-
-
-
-
2020
£’000
8,660
7,792
6,087
-
2019
£’000
5,893
6,908
-
-
Liabilities for linked investments contracts
18,112,935
16,665,048
Total financial liabilities
18,112,935
16,665,048
22,539
12,801
The following tables show the carrying values of assets and liabilities for each of these categories for the Company:
Financial assets:
Cash and cash equivalents
Loans
Total financial assets
Financial liabilities:
Trade and other payables
Accruals
Total financial liabilities
Fair value through profit or loss
Amortised cost
2020
£’000
2019
£’000
-
-
-
-
-
-
2020
£’000
26,090
2,647
28,737
Fair value through profit or loss
Amortised cost
2020
£’000
2019
£’000
-
-
-
-
-
-
2020
£’000
56
311
367
2019
£’000
24,342
1,185
25,527
2019
£’000
49
390
439
130 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade
and other receivables, and trade and other payables. Due to their short-term nature and/or expected credit losses
recognised, the carrying value of these financial instruments approximates their fair value.
(iv) Financial instruments measured at fair value – fair value hierarchy
The table below classifies financial assets that are recognised on the statement of financial position at fair value in
a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy are
disclosed below.
Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the
statement of financial position. The assets are classified using the ‘fair value through profit or loss’ option with any
resultant gain or loss recognised through the statement of profit or loss and other comprehensive income.
Assets held at fair value also comprises investments held in gilts, and these are held at fair value through profit and loss.
The following table shows the three levels of the fair value hierarchy:
Fair value
hierarchy
Level 1
Level 2
Description of hierarchy
Quoted prices (unadjusted) in active markets
for identical assets
Types of investments classified at
each level
Cash and cash equivalents, listed equity
securities, gilts, actively traded pooled
investments such as OEICS and unit trusts
Inputs other than quoted prices included
within Level 1 that are observable for the
asset either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
Actively traded unlisted equity securities where
there is no significant unobservable inputs,
structured products and regularly priced but
not actively traded instruments
Level 3
Inputs that are not based on observable
market data (unobservable inputs)
Unlisted equity securities with significant
unobservable inputs, inactive pooled investments
For the purposes of identifying level 3 assets, unobservable inputs means that fair values of the assets may be based
on estimates and assumptions that cannot be corroborated with observable market data.
The following table shows the Group’s assets measured at fair value and split into the three levels:
2020
Investments and assets held for the
benefit of policyholders
Policyholder cash
Investments and securities
Bonds and other fixed-income securities
Holdings in collective investment schemes
Other investments
Total
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,385,736
506,286
12,404
15,930,106
17,834,532
4,959
17,839,491
-
154,810
1,891
120,026
276,727
-
276,727
-
751
15
910
1,676
-
1,676
1,385,736
661,847
14,310
16,051,042
18,112,935
4,959
18,117,894
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 131
FINANCIAL STATEMENTS continued
2019
Investments and assets held for the
benefit of policyholders
Policyholder cash
Investments and securities
Bonds and other fixed-income securities
Holdings in collective investment schemes
Other investments
Total
Level 1 valuation methodology
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,213,371
444,076
4,485
14,731,562
16,393,494
5,066
16,398,560
-
140,991
9,320
109,714
260,025
-
260,025
-
2,447
3,005
6,077
11,529
-
11,529
1,213,371
587,514
16,810
14,847,353
16,665,048
5,066
16,670,114
Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the
reporting date and are traded in active markets. These financial assets are mainly collective investment schemes
and listed equity instruments.
Level 2 and Level 3 valuation methodology
The Group regularly reviews whether a market is active, based on available market data and the specific
circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more
valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices
where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.
Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that
have been assessed as not active enough to be included in Level 1.
Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation
methodology are not based on observable market data. The key unobservable input is the pre-tax operating margin
needed to price asset holdings.
Level 3 sensitivity to changes in unobservable measurements
For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any
change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower
fair value measurement at year end, and therefore would not have a material impact on its reported results.
Changes to valuation methodology
There have been no changes in valuation methodology during the year under review.
Transfers between Levels
The Company’s policy is to assess each financial asset it holds at the current financial year end, based on the last
known price and market information, and assign it to a Level.
The Company recognises transfers between Levels of the fair value hierarchy at the end of the reporting period in
which the changes have occurred. Changes occur due to the availability of (or lack thereof) quoted prices, whether
a market is now active or not, and whether there are indications of impairment.
Transfers between Levels between 30 September 2020 and 30 September 2019 are presented in the table below at
their valuation at 30 September 2020:
Transfers from
Transfers to
Level 1
Level 2
Level 2
Level 1
132 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
£’000
3,493
7,834
The reconciliation between opening and closing balances of Level 3 assets are presented in the table below:
Opening balance
Unrealised gains or losses in the year ended 30 September 2020
Transfers in to Level 3 at 30 September 2020 valuation
Transfers out of Level 3 at 30 September 2020 valuation
Purchases, sales, issues and settlement
Closing balance
£’000
11,529
(57)
224
(8,280)
(1,740)
1,676
Any resultant gains or losses on financial assets held for the benefit of policyholders are offset by a reciprocal
movement in the linked liability.
The Group regularly assesses assets to ensure they are categorised correctly and FVH levels adjusted accordingly.
The Group monitors situations that may impact liquidity such as suspensions and liquidations while also actively
collecting observable market prices from relevant exchanges and asset managers. Should an asset price become
observable following the resumption of trading the FVH level will be updated to reflect this.
(v) Capital maintenance
The regulated companies in IntegraFin Group are subject to capital requirements imposed by the relevant regulators.
As detailed in the CFOR, Group capital requirements for 2020 were £212.9 million (2019: £216.3 million).
The Group has complied with the requirements set by the regulators during the year. The Group’s policy for managing
capital is to ensure each regulated entity maintains capital well above the minimum requirement.
4. Risk and risk management
This note supplements the details provided in the Risk and Risk Management section of this report on pages 38 to 45.
Risk assessment
Risk assessment is the determination of quantitative values and/or qualitative judgements of risk related to a
concrete situation and a recognised threat. Quantitative risk assessment requires calculations of two components of
risk, the magnitude of the potential impact, and the likelihood that the risk materialises. Qualitative aspects of risk,
despite being more difficult to express quantitatively, are also taken into account in order to fully evaluate the impact
of the risk on the organisation.
(1) Market risk
Description of risk
Market risk is the risk of loss arising either directly or indirectly from fluctuations in the level and in the volatility
of market prices of assets, liabilities and other financial instruments.
(a) Price risk
Market price risk from reduced income
The Company’s dividend income from its regulated subsidiary IFAL is exposed to market risk. The Group’s main source
of income is derived from annual management fees and transaction fees which are linked to the value of the clients’
portfolios, which are determined by the market prices of the underlying assets. The Group’s revenue is therefore affected
by the value of assets on the platform, and consequently it has exposure to equity market levels and economic conditions.
The Group mitigates the second order market price risk by applying fixed charges per tax wrapper in addition to
income derived from the charges based on clients’ linked portfolio values. This approach of fixed and variable charging
offers an element of diversification to its income stream. The risk of stock market volatility, and the impact on
revenue, is also mitigated through a wide asset offering which ensures the Group is not wholly correlated with one
market, and which enables clients to switch assets, including into cash on the platform, in times of uncertainty.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 133
FINANCIAL STATEMENTS continued
Sensitivity testing has been performed to assess the impact of market movements on the Group’s Profit for the year.
The sensitivity is applied as an instantaneous shock at the start of the year, and shows the impact of a 10% change in
values across all assets held on the platform.
10% increase in asset values
10% decrease in asset values
Market risk from direct asset holdings
Impact on profit for the year
2020
£’000
6,931
(6,931)
2019
£’000
6,145
(6,145)
The Group and the Company have limited exposure to primary market risk as capital is invested in high quality,
highly liquid, short-dated investments.
(b) Interest rate risk
The Group and the Company’s balance sheet and capital requirements are relatively insensitive to first order impacts
from movements in interest rates.
(c) Currency risk
The Company is not directly exposed to significant currency risk. The table below shows a breakdown of the material
foreign currency exposures for the unit-linked policies within the Group:
Currency
GBP
USD
EUR
Others
Total
2020
£’000
17,983,651
106,532
13,862
8,890
2020
%
99.3
0.6
0.1
0.0
2019
£’000
16,564,270
79,716
14,263
6,799
2019
%
99.4
0.5
0.1
0.0
18,112,935
100.0
16,665,048
100.0
99.3% of investments and cash held for the benefit of policyholders are denominated in GBP, its base currency.
Remaining currency holdings greater than 0.1% of the total are shown separately in the table. A significant rise
or fall in sterling exchange rates would not have a significant first order impact on its results since any adverse or
favourable movement in policyholder assets is entirely offset by a corresponding movement in the linked liability.
(2) Credit (counterparty default) risk
Credit risk is the risk that the Group or Company is exposed to a loss if another party fails to meet its financial
obligations. For the Company, the exposure to counterparty default risk arises primarily from loans directly held
by the Company.
Assets held at amortised cost
(a) Accrued income
This comprises fees owed by clients. These are held at amortised cost, less expected credit losses (“ECLs”).
Under IFRS 9, a forward-looking approach is required to assess ECLs, so that losses are recognised before the
occurrence of any credit event. The Group estimates that pending fees three months or more past due are unlikely
to be collected and are written off. Based on management’s experience, pending fees one or two months past due
are generally expected to be collected. However, consideration is also given to potential losses on these fees.
Historical loss rates have been used to estimate expected future losses, while consideration is also given to
underlying economic conditions, in order to ensure that expected losses are recognised on a forward-looking basis.
This has led to the additional recognition of an immaterial amount of ECLs.
Details of the ECLs recognised in relation to accrued income can be seen in note 23.
134 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
(b) Loans
Loans subject to the 12 month ECL are £2.7m (2019: £1.2m). While there is increased economic uncertainty in the
current climate, leading to potentially higher credit risk, there is not considered to be a significant increase in credit
risk, as all of the loans are currently performing to schedule, and there are no concerns regarding the borrowers.
There is therefore no need to move from the 12 month ECL model to the lifetime ECL model. Expected losses are
recognised on a forward-looking basis, which has led to the additional recognition of an immaterial amount of ECLs.
Details of the ECLs recognised in relation to loans can be seen in note 18.
(c) Cash and equivalents
The Group has a low risk appetite for credit risk, which is limited to exposures to credit institutions for its bank
deposits. A range of major regulated UK high street banks is used. A rigorous annual due diligence exercise is
undertaken to assess the financial strength of these banks with those used having a minimum credit rating of A
(Fitch). In order to actively manage the credit and concentration risks, the Board has agreed risk appetite limits for
the regulated entities of the amount of corporate and client funds that may be deposited with any one bank; which
is represented by a set percentage of the respective bank’s total customer deposits. Monthly monitoring of these
positions along with movements in Fitch ratings is undertaken, with reports presented to the Directors for review.
Collectively these measures ensure that the Group diligently manages the exposures and provides the mitigation
scope to be able to manage credit and concentration exposures on behalf of itself and its customers.
Counterparty default risk exposure to loans
The Company has loans of £2,647k (2019: £1,185k). There are no other loans held by the Group.
Counterparty default risk exposure to Group companies
As well as inconvenience and operational issues arising from the failure of the other Group companies, there is
also a risk of a loss of assets. The Company is due £342k (2019: £86k) from other Group companies.
Counterparty default risk exposure to other receivables
The Company has no other receivables arising, due to the nature of its business, and the structure of the Group.
Across the Group, there is exposure to counterparty default risk arising primarily from:
▪ corporate assets directly held by the Group;
▪ exposure to clients; and
▪ exposure to other receivables.
The other exposures to counterparty default risk include a credit default event which affects funds held on behalf
of clients and occurs at one or more of the following entities:
▪ a bank where cash is held on behalf of clients;
▪ a custodian where the assets are held on behalf of clients; and
▪ Transact Nominees Limited (TNL), which is the legal owner of the assets held on behalf of clients.
There is no first order impact on the Group from one of the events in the preceding paragraph. This is because any
credit default event in respect of these holdings will be borne by clients, both in terms of loss of value and loss of
liquidity. Terms and conditions have been reviewed by external lawyers to ensure that these have been drafted
appropriately. However, there is a second order impact where future profits for the Group are reduced in the event
of a credit default which affects funds held on behalf of clients.
There are robust controls in place to mitigate credit risk, for example, holding corporate and client cash across a
range of banks in order to minimise the risk of a single point of counterparty default failure. Additionally, maximum
counterparty limits and minimum credit quality steps are set for banks.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 135
FINANCIAL STATEMENTS continued
Corporate assets and funds held on behalf of clients
There is no significant risk exposure to any one UK clearing bank.
Counterparty default risk exposure to clients
The Group is due £10.2m (2019: £9.8m) from fee income owed by clients.
Impact of credit risk on fair value
Due to the limited direct exposure that the Group and the Company have to credit risk, credit risk does not
have a material impact on the fair value movement of financial instruments for the year under review. The fair
value movements on these instruments are predominantly due to changes in market conditions.
(3) Liquidity risk
Liquidity risk is the risk that funds are not accessible such that the Company, although solvent, does not have sufficient
liquid financial resources to meet obligations as they fall due, or can secure such resources only at excessive cost.
As a holding company, the Company’s main liquidity risk is related to paying out shareholder dividends and operating
expenses it may incur. Additionally, the Company has made short term commitments, in the form of a capped facility
arrangement, to Vertus Capital SPV1 Limited (‘Vertus’) (as one of Vertus’ sources of funding) to assist Vertus in
developing its business, which is to provide tailored niche debt facilities to adviser firms to fund acquisitions,
management buy-outs and other similar transactions.
Across the Group, the following key drivers of liquidity risk have been identified:
▪ liquidity risk arising due to failure of one or more of the Group’s banks;
▪ liquidity risk arising due to the bank’s system failure which prevents access to Group funds; and
▪ liquidity risk arising from clients holding insufficient cash to settle fees when they become due.
The Group’s liquidity risk arises from a lack of readily realisable cash to meet debts as they become due. This takes
two forms – clients’ liabilities coming due and other liabilities (e.g. expenses) coming due.
The first of these, clients’ liabilities is primarily covered through the terms and conditions with clients’ taking their own
liquidity risk, if their funds cannot be immediately surrendered for cash.
Payment of other liabilities depends on the Group having sufficient liquidity at all times to meet obligations as they
fall due. This requires access to liquid funds, i.e. working banks and it also requires that the Group’s main source of
liquidity, charges on its clients’ assets, can also be converted into cash.
The Company has set out two key liquidity requirements: first, to ensure that clients maintain a percentage of
liquidity in their funds at all times, and second, to maintain access to cash through a spread of cash holdings in
bank accounts.
There are robust controls in place to mitigate liquidity risk, for example, through regular monitoring of expenditure,
closely managing expenses in line with the business plan, and, in the case of the Vertus facility, capping the value
of loans. Additionally, the Group holds corporate and client cash across a range of banks in order to mitigate the risk
of a single point of counterparty default failure.
136 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Maturity schedule
The following table shows an analysis of the financial assets and financial liabilities by remaining expected maturities
as at 30 September 2019 and 30 September 2020.
Financial assets:
2019
Up to
3 months
£’000
3-12
months
£’000
Investments held for the policyholders
15,454,769
16,810,475
188
6,189
Up to
3 months
£’000
3-12
months
£’000
Investments held for the policyholders
16,727,208
Investments
Accrued income
Trade and other receivables
Loans
Cash
Total
2020
Investments
Accrued income
Trade and other receivables
Loans
Cash
Total
Financial liabilities:
2019
69
9,768
3,250
-
1,342,619
92
10,244
614
-
1,539,843
Up to
3 months
£’000
Liabilities for linked investment contracts
16,665,048
Trade and other payables
Total
2020
9,391
16,674,439
Up to
3 months
£’000
Liabilities for linked investment contracts
18,112,935
Trade and other payables
Lease liabilities
Total
16,257
614
18,129,806
1-5
years
£’000
-
4,997
-
7
1,185
-
1-5
years
£’000
-
4,959
-
7
2,647
-
Over
5 years
£’000
-
-
-
-
-
-
-
Over
5 years
£’000
-
-
-
-
-
-
-
Total
£’000
15,454,769
5,066
9,768
3,445
1,185
1,342,619
16,816,852
Total
£’000
16,727,208
5,051
10,244
786
2,647
1,539,843
18,285,779
-
-
-
188
-
-
-
-
-
165
-
-
3-12
months
£’000
-
3,407
3,407
3-12
months
£’000
-
195
1,761
1,956
1-5
years
£’000
Over
5 years
£’000
Total
£’000
-
-
-
1-5
years
£’000
-
-
3,712
3,712
-
-
-
16,665,048
12,798
16,677,846
Over
5 years
£’000
Total
£’000
-
-
-
-
18,112,935
16,452
6,087
18,135,473
18,278,001
165
7,613
Financial assets held in portfolio investments and the corresponding liabilities are deemed to have a maturity of up
to three months since the liabilities are repayable on demand. In practice the contractual maturities of the underlying
assets may be longer than three months, but the majority of assets held within portfolios are highly liquid.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 137
FINANCIAL STATEMENTS continued
Undiscounted cash flows
2020
Lease liabilities
Total
Up to
3 months
£’000
689
689
3-12
months
£’000
1,936
1,936
1-5
years
£’000
3,883
3,883
Over
5 years
£’000
-
-
Total
£’000
6,508
6,508
Carrying
amount
£’000
6,087
6,087
The undiscounted cash flows are in relation to the lease liabilities and are presented at their gross undiscounted
contractual amounts i.e. the principle amounts to be paid for the periods stated.
There is no comparative for the 2019 financial year as the Group did not have any lease liabilities.
(4) Outflow risk
Outflows occur when funds are withdrawn from the platform for any reason. Outflows typically occur where clients’
circumstances and requirements change. However, these outflows can also be triggered by operational failure,
competitor actions or external events such as regulatory or economic changes.
Outflow risk is mitigated by focusing on providing exceptionally high levels of service. Outflow rates are closely
monitored and unexpected experience is investigated. Despite the current challenging and uncertain economic
and geopolitical environment, outflow rates remain stable and within historical norms.
(5) Expense risk
Expense risk arises where costs increase faster than expected or from one-off expense “shocks”. The Group and the
Company has exposure related to expense inflation risk, where actual inflation deviates from expectations. As a significant
percentage of the Group’s expenses are staff related, the key inflationary risk arises from salary inflation. The Group
and the Company have no exposures to defined benefit staff pension schemes or client related index linked liabilities.
The Group’s expenses are governed at a high level by the Group’s Expense Policy. The monthly management
accounts are reviewed against projected future expenses by the Board and by senior management and action
is taken where appropriate.
5. Disaggregation of revenue
Annual commission income
Wrapper fee income
Other income
Total fee income
For the financial year ended
30 September
2020
£’000
94,468
9,743
3,109
2019
£’000
86,715
8,961
3,489
107,320
99,165
Total fee income relates to both classes of business (see note 6 for details).
6. Segmental reporting
The revenue and profit before tax are attributable to activities carried out in the UK.
The Group has two classes of business as follows:
▪ provision of investment administration services
▪ transaction of ordinary long term insurance and underwriting life assurance
Analysis by class of business is given overleaf.
138 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Statement of profit or loss on continuing operations – segmental information for the year ended
30 September 2020:
Revenue
Fee income
Cost of sales
Expenses
Admin expenses
Impairment losses
Net income attributable
to policyholders
Change in investment
contract liabilities
Fee and commission expenses
Investment returns
Interest expense
Interest income
Investment
administration
services
Insurance
and life
assurance
business
Other
income
Consolidated
adjustments
£’000
£’000
£’000
£’000
Total
£’000
55,923
(543)
51,355
(323)
42
-
-
-
107,320
(865)
(61,170)
(55,760)
(109)
(67)
-
-
-
-
(120)
121
(3,066)
82,895
(137,536)
54,677
(113)
135
-
-
-
-
-
-
-
-
-
-
-
-
65,914
(51,016)
-
-
-
-
-
-
-
(176)
(3,066)
82,895
(137,536)
54,677
(233)
256
(32,326)
52,256
-
-
3,066
(9,838)
(32,326)
45,484
Profit before tax
41,402
43,180
Policyholder tax
-
3,066
Tax on profit on ordinary activities
(4,641)
(5,197)
Profit for the financial year
36,761
41,048
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 139
FINANCIAL STATEMENTS continued
Statement of profit or loss on continuing operations – segmental information for the
year ended 30 September 2019:
Investment
administration
services
Insurance
and life
assurance
business
Other
income
Consolidated
adjustments
£’000
£’000
£’000
£’000
Revenue
Fee income
Cost of sales
Expenses
Admin expenses
Impairment losses
Net income attributable
to policyholders
Change in investment
contract liabilities
Fee and commission expenses
Investment returns
Interest expense
Interest income
52,045
(495)
47,120
(312)
(58,722)
(53,404)
(3)
(17)
-
-
-
-
-
146
7,115
(554,767)
(125,618)
680,422
-
162
Profit before tax
38,198
48,946
Policyholder tax
Tax on profit on ordinary activities
-
(4,230)
(6,969)
(4,720)
Profit for the financial year
33,969
37,256
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
99,165
(806)
-
-
63,353
(48,773)
-
-
-
-
-
-
-
(20)
7,115
(554,767)
(125,618)
680,422
-
308
(30,118)
57,026
-
-
(6,969)
(8,950)
(30,118)
41,107
The figures above comprise the results of the companies that fall directly into each segment, as well as a proportion
of the results from the other Group companies that only provide services to the revenue-generating companies.
This therefore has no effect on revenue, but has an effect on the profit before tax.
140 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Disaggregation of revenue by segment – for the financial year ended 30 September 2020
Annual commission income
Wrapper fee income
Other income
Total fee income
Investment
administration
services
Insurance
and life
assurance
business
£’000
51,873
2,337
1,713
£’000
42,595
7,406
1,354
55,923
51,355
Other
£’000
-
-
42
42
Total
£’000
94,468
9,743
3,109
107,320
Disaggregation of revenue by segment - for the financial year ended 30 September 2019
Annual commission income
Wrapper fee income
Other income
Total fee income
Investment
administration
services
Insurance
and life
assurance
business
£’000
48,013
2,137
1,895
£’000
38,702
6,825
1,593
Total
£’000
86,715
8,961
3,489
52,045
47,120
99,165
Statement of financial position – segmental information for the years ended 30 September 2020 and
30 September 2019:
Net assets
Investment administration services
Insurance and life assurance business
Segmental information: Split by geographical location
Revenue
United Kingdom
Isle of Man
Total
Non-current assets
United Kingdom
Isle of Man
Total
2020
£’000
68,434
72,486
2019
£’000
61,009
60,877
140,920
121,886
2020
£’000
103,089
4,231
107,320
2020
£’000
19,128
97
19,225
2019
£’000
95,192
3,974
99,165
2019
£’000
15,310
46
15,356
The non-current assets excludes the deferred acquisition costs and deferred tax assets.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 141
FINANCIAL STATEMENTS continued
7. Earnings per share
Profit
2020
£’000
2019
(restated)
£’000
Profit for the year and earnings used in basic and diluted earnings per share
£45.5m
£41.1m
Weighted average number of shares
Weighted average number of Ordinary Shares
Weighted average numbers of Ordinary Shares held by Employee Benefit Trust
Weighted average number of Ordinary Shares for the purposes of
basic EPS
Adjustment for dilutive share option awards
Weighted average number of Ordinary Shares for the purposes of
diluted EPS
Earnings per share
Basic earnings per share
Earnings per share – basic and diluted
331.3m
(0.1m)
331.3m
-
331.2m
331.3m
0.1m
-
331.3m
331.3m
13.7p
13.7p
12.4p
12.4p
Earnings per share (“EPS”) is calculated based on the share capital of IntegraFin Holdings plc and the earnings of the
consolidated Group.
Basic EPS is calculated by dividing profit after tax attributable to ordinary equity shareholders of the Company by the
weighted average number of Ordinary Shares outstanding during the year. The weighted average number of shares
excludes shares held within the Employee Benefit Trust to satisfy the Group’s obligations under employee share awards.
Diluted EPS is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume
conversion of all potentially dilutive Ordinary Shares.
As noted in note 39, the 2019 EPS was restated due to the identification of an error in the calculation of the
policyholder tax provision.
142 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
8. Expenses by nature
The following expenses are included within administrative expenses:
Group
Depreciation
Amortisation
Wages and employee benefits expense
Other staff costs
Auditor’s remuneration:
▪ Auditing of the financial statements of the Company pursuant to the legislation
▪ Auditing of the financial statements of subsidiaries
▪ Other assurance services
Other Auditor’s remuneration:
▪ Auditing of the financial statements of subsidiaries
▪ Other assurance services
Other professional fees
Regulatory fees
Operating lease costs:
▪ Land and buildings
▪ Equipment
Other occupancy costs
Other costs
Other income – tax relief due to shareholders
Total administrative expenses
2020
£’000
2,561
-
36,732
200
78
99
118
154
97
2019
(restated)
£’000
654
15
36,093
241
70
91
100
115
147
2,808
3,643
2,314
2,689
4
3
2,001
3,589
(1,071)
51,016
1,822
3
1,817
3,555
(953)
48,773
“Other income – tax relief due to shareholders” relates to the release of policyholder tax provisions to the statement
of profit or loss and other comprehensive income. Details of the 2019 restatement can be found in note 39.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 143
FINANCIAL STATEMENTS continued
Company
Wages and employee benefits expense
Other staff costs
Auditor’s remuneration:
▪ Auditing of the financial statements of the Company pursuant to the legislation
▪ Other assurance services
Other professional fees
Regulatory fees
Other costs
2020
£’000
2019
£’000
475
24
78
18
422
30
161
514
59
70
17
314
16
106
Total administrative expenses
1,208
1,096
Wages and employee benefits expense
The average number of staff (including executive directors) employed by the Group during the financial year
amounted to:
CEO
Client services staff
Finance staff
Legal and compliance staff
Sales, marketing and product development staff
Software development staff
Technical and support staff
The Company has no employees (2019: nil).
2020
No.
1
213
60
31
40
104
45
494
2019
No.
1
230
57
30
43
96
52
509
Wages and employee (including executive directors) benefits expenses during the year, included within administrative
expenses, were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payment costs
2020
£’000
29,307
3,085
2,714
1,626
2019
£’000
28,987
3,203
2,657
1,246
36,732
36,093
144 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Compensation of key management personnel
Key management personnel are defined as those persons having authority and responsibility for planning, directing and
controlling the activities of the entity and as such, only Directors are considered to meet this definition.
Short term employee benefits*
Post employment benefits
Share based payment
Other benefits
Social security costs
Highest paid Director:
Short term employee benefits*
Other benefits
Post employment benefits
Number of Directors for whom pension contributions are paid
*Short term employee benefits comprise salary and cash bonus.
9. Interest income
Group
2020
£’000
194
62
256
Company
2020
£’000
29
62
91
Interest income on bank deposits
Interest income on loans
10. Investment returns
Interest on fixed-interest securities
Realised losses on fixed-interest securities
Unrealised losses on fixed-interest securities
Change in fair value of underlying assets
Investment income
Total investment returns
2020
£’000
2,622
40
522
33
211
2019
£’000
2,331
47
192
4
322
3,428
2,896
491
140
7
2
564
86
5
5
Group
2019
£’000
272
36
308
2020
£’000
80
-
(44)
(73,093)
127,734
54,677
Company
2019
£’000
30
36
66
2019
£’000
95
(34)
(24)
546,149
134,236
680,422
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 145
FINANCIAL STATEMENTS continued
11. Tax on profit on ordinary activities
Group
a) Analysis of charge in year
The income tax expense comprises:
Corporation tax
Current year – corporation tax
Adjustment in respect of prior years
Deferred tax
Current year
Adjustment in respect of prior years
Change in deferred tax charge/(credit) as a result of lowered tax rate
2020
£’000
2019
(restated)
£’000
9,879
125
10,004
(38)
(113)
(15)
8,994
7
9,001
29
(95)
15
Total tax charge for the year
9,838
8,950
b) Factors affecting tax charge for the year
The tax on the Group’s profit before tax differs from the amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
Profit on ordinary activities before tax
Policyholder tax
Effect of gross overseas withholding tax
Profit on ordinary activities multiplied by
effective rate of Corporation Tax 19% (2019: 19%)
Effects of:
Non-taxable dividends
Income / expenses not taxable/deductible for tax purposes
multiplied by effective rate of corporation tax
Adjustments in respect of prior years
Effect of lower tax rate
Rate differences
Other adjustments
146 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
2020
£’000
52,256
3,066
-
55,322
2019
(restated)
£’000
57,026
(6,969)
-
50,057
10,511
9,511
(187)
(141)
(17)
(356)
(15)
30
(128)
9,838
12
(459)
15
12
-
8,950
Company
a) Analysis of charge in year
Deferred tax charge/(credit) (see note 28)
Total
b) Factors affecting tax charge for the year
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by
effective rate of Corporation Tax 19% (2019: 19%)
Effects of:
Non-taxable dividends
Income/expenses not taxable/deductible for tax purposes
multiplied by effective rate of Corporation Tax
Group loss relief to ISL
12. Policyholder income and expenses – Group
Net income attributable to policyholder returns
Policyholder tax
2020
£’000
-
-
2020
£’000
31,124
2019
£’000
-
-
2019
£’000
29,064
5,914
5,522
(6,142)
(5,722)
9
219
-
19
181
-
2020
£’000
(3,066)
3,066
2019
(restated)
£’000
7,115
(6,969)
This relates to income and expenses, and the associated tax charges, on policyholder assets and liabilities.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 147
FINANCIAL STATEMENTS continued
13. Intangible assets – Group
Cost
At 1 October 2019
At 30 September 2020
Amortisation
At 1 October 2019
Charge for the year
At 30 September 2020
Net Book Value
At 30 September 2019
At 30 September 2020
Cost
At 1 October 2018
At 30 September 2019
Amortisation
At 1 October 2018
Charge for the year
At 30 September 2019
Net Book Value
At 30 September 2018
At 30 September 2019
Software and
IP rights
£’000
12,505
12,505
12,505
-
12,505
-
-
£’000
12,505
12,505
12,490
15
12,505
Goodwill
£’000
12,951
12,951
-
-
-
12,951
12,951
£’000
12,951
12,951
-
-
-
Total
£’000
25,456
25,456
12,505
-
12,505
12,951
12,951
£’000
25,456
25,456
12,490
15
12,505
15
-
12,951
12,951
12,966
12,951
Amortisation of the software and IP rights is recognised within administrative expenses in the statement of profit or
loss and comprehensive income.
148 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Goodwill impairment assessment
In accordance with IFRS, the goodwill is not amortised, but is assessed for impairment on an annual basis.
The recoverable amount is determined based on value in use calculations. The use of this method requires
the estimation of future cash flows and the determination of a discount rate in order to calculate the present
value of the cash flows.
The goodwill relates to the acquisition of IAD Pty in July 2016.
The carrying amount of goodwill is allocated to the two cash generating units (“CGUs”) that are benefitting from the
acquisition as follows:
Investment administration services
Insurance and life assurance business
Total
Other assumptions are as follows:
Discount rate
Period on which detailed forecasts are based
Long term growth rate
2020
£’000
7,256
5,695
12,951
2020
8.8%
5 years
1.0%
2019
£’000
7,313
5,638
12,951
2019
4.6%
5 years
-
The recoverable amounts of the above CGUs have been determined from value in use calculations based on cash flow
projections from formally approved budgets covering a five year period to 30 September 2025. Post the five year
business plan, the growth rate used to determine the terminal value of the cash generating units was based on a long
term growth rate of 1.0%.
Based on management’s experience, the key assumptions on which management has calculated its projections are
net inflows, market growth and expense inflation.
The annual impairment test showed that there was significant headroom in the recoverable amount over the carrying
value of the CGUs. There is therefore no indication of impairment.
A sensitivity analysis has been performed, which showed that there were no reasonable foreseeable changes in the
assumptions which would result in the recoverable amount falling below the carrying amount.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 149
FINANCIAL STATEMENTS continued
14. Property, plant and equipment – Group
Cost
At 1 October 2019
Additions
Disposals
Foreign exchange
At 30 September 2020
Depreciation
At 1 October 2019
Charge in the year
Disposals
Foreign exchange
Leasehold
improvements
Equipment
Fixtures and
Fittings
£’000
1,728
-
-
4
£’000
2,607
852
(152)
7
£’000
186
-
-
-
1,732
3,314
186
1,008
148
-
1
1,020
758
(149)
5
127
18
-
-
At 30 September 2020
1,157
1,634
145
Net Book Value
At 30 September 2019
At 30 September 2020
720
575
1,587
1,680
59
41
Motor
Vehicles
£’000
111
-
(9)
1
103
72
22
(9)
1
86
39
17
Total
£’000
4,632
852
(161)
12
5,335
2,227
946
(158)
7
3,022
2,405
2,313
Cost
£’000
£’000
£’000
£’000
£’000
At 1 October 2018
Additions
Disposals
Foreign exchange
At 30 September 2019
Depreciation
At 1 October 2018
Charge in the year
Disposals
Foreign exchange
At 30 September 2019
Net Book Value
At 30 September 2018
At 30 September 2019
1,731
-
-
(3)
1,728
842
167
-
(1)
1,008
2,461
1,228
(1,077)
(5)
2,607
1,705
395
(1,077)
(3)
1,020
889
720
756
1,587
208
-
(22)
-
186
130
19
(22)
-
127
78
59
120
38
(46)
(1)
111
30
73
4,520
1,266
(1,145)
(9)
4,632
2,707
654
(31)
(1,130)
-
72
93
39
(4)
2,227
1,813
2,405
The Company holds no property, plant and equipment.
150 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
15. Right of use assets – Property – Group
At 1 October 2019
Capital contributions in the year
At 30 September 2020
Net Book Value
At 30 September 2019
At 30 September 2020
At 1 October 2018
Capital contributions in the year
At 30 September 2019
Net Book Value
At 30 September 2018
At 30 September 2019
Cost
Additions on adoption of IFRS 16 – 1 October 2019
Australian dollar foreign exchange adjustment
At 30 September 2020
Depreciation
Charge in the year
Foreign exchange adjustment
At 30 September 2020
Net Book Value
At 30 September 2019
At 30 September 2020
Depreciation is calculated on a straight line basis over the term of the lease.
Total
£’000
15,800
1,032
16,832
15,800
16,832
Total
£’000
14,563
1,237
15,800
14,563
15,800
£’000
5,581
5
5,586
1,615
10
1,625
-
3,961
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 151
FINANCIAL STATEMENTS continued
16. Investment in subsidiaries
Company
Name of Company
Holding
% Held
Incorporation
and significant
place of business Business
Direct holdings
Integrated Financial Arrangements Ltd
Ordinary Shares
100%
United Kingdom
IntegraFin Services Limited
Ordinary Shares
100%
United Kingdom
Transact IP Limited
Ordinary Shares
100%
United Kingdom
Integrated Application Development Pty Ltd Ordinary Shares
100%
Australia
Investment
Administration
Services
Company
Software
provision &
development
Software
maintenance
Objective Asset Management Limited
Ordinary Shares
100%
United Kingdom
Dormant
Indirect holdings
IntegraFin Limited
Ordinary Shares
100%
United Kingdom
Non-trading
Transact Nominees Limited
Ordinary Shares
100%
United Kingdom
Non-trading
IntegraLife UK Limited
Ordinary Shares
100%
United Kingdom
Life Insurance
IntegraLife International Limited
Ordinary Shares
100%
Isle of Man
Life Assurance
ObjectMastery (UK) Limited
Ordinary Shares
100%
United Kingdom
Consultancy
Objective Funds Limited
Ordinary Shares
100%
United Kingdom
Dormant
Objective Wealth Management Limited
Ordinary Shares
100%
United Kingdom
Dormant
IntegraFin (Australia) Pty Limited
Ordinary Shares
100%
Australia
Non-trading
Transact Trustees Limited
Ordinary Shares
100%
United Kingdom
Non-trading
The Group has 100% voting rights on shares held in each of the subsidiary undertakings.
All the UK subsidiaries have their registered office address at 29 Clement’s Lane, London, EC4N 7AE. ILInt’s registered
office address is at 18-20 North Quay, Douglas, Isle of Man, IM1 4LE. IntegraFin (Australia) Pty’s registered office
address is at Level 4, 854 Glenferrie Road, Hawthorn, Victoria, Australia 3122. Integrated Application Development
Pty Ltd’s registered office address is 19-25 Camberwell Road, Melbourne, Australia.
The above subsidiaries have all been included in the consolidated financial statements. The results of ILInt and ILUK
are included as described in the basis of consolidation accounting policy in note 1.
Integrated Financial Arrangements Ltd is authorised and regulated by the Financial Conduct Authority. The principal
activity of the Company and its subsidiaries is the provision of ‘Transact’, a wrap service that arranges and executes
transactions between clients, their financial advisers and financial product providers including investment managers
and stockbrokers.
IntegraFin Services Limited (ISL), is the Group services company. All intra-group service contracts are held by this
services company.
Integrated Application Development Pty Ltd (IAD Pty) provides software maintenance services to the Group.
IntegraFin Limited is the trustee of the IntegraSIP Share Incentive Plan, which was set up to allocate Class C Shares
in the capital of the Company to staff. IntegraFin Limited undertakes no other activities.
152 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Transact Nominees Limited holds customer assets as a nominee company on behalf of
Integrated Financial Arrangements Ltd.
IntegraFin (Australia) Pty Limited is currently non-trading.
Transact IP Limited licenses its proprietary software to other members of the IntegraFin Group.
IntegraLife UK Limited is authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority. Its principal activity is the transaction
of ordinary long term insurance business within the United Kingdom.
IntegraLife International Limited is authorised and regulated by the Isle of Man Financial Services Authority
and its principal activity is the transaction of ordinary long term insurance business within the United Kingdom
through the Transact Offshore Bond.
17. Deferred acquisition costs
Opening balance
Capitalisation of deferred acquisition costs
Amortisation of deferred acquisition costs
Change in deferred acquisition costs
Closing balance
18. Loans
2020
£’000
50,443
10,615
(7,576)
3,039
53,482
2019
£’000
46,073
11,668
(7,298)
4,370
50,443
This note analyses the loans and advances the Company has made. The carrying amounts of loans and advances are
as follows:
Loans to third parties
Interest receivable on loans
Total gross loans
Credit loss allowance
Total net loans
2020
£’000
2,716
16
2,732
(85)
2,647
2019
£’000
1,203
9
1,209
(24)
1,185
The loans are measured at amortised cost with the credit loss allowance charged straight to the profit or loss account.
The total movement in the credit loss allowance can be seen in Note 23.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 153
FINANCIAL STATEMENTS continued
19. Investments held for the benefit of policyholders
ILInt
2020
Cost
£’000
2020
Fair value
£’000
2019
Cost
£’000
2019
Fair value
£’000
Investments held for the benefit of policyholders
1,346,990
1,534,080
1,218,143
1,440,852
1,346,990
1,534,080
1,218,143
1,440,852
ILUK
Investments held for the benefit of policyholders
13,482,294
15,193,128
11,994,153
14,013,917
13,482,294
15,193,128
11,994,153
14,013,917
Total
16,727,208
15,454,769
All amounts are current as customers are able to make same-day withdrawal of available funds and transfers to
third-party providers are generally performed within a month.
These assets are held to cover the liabilities for unit linked investment contracts. All contracts with customers are
deemed to be investment contracts and, accordingly, assets are 100% matched to corresponding liabilities.
20. Liabilities for linked investment contracts
ILInt
Unit linked liabilities
ILUK
Unit linked liabilities
Total
Analysis of change in liabilities for linked investment contracts
Opening balance
Investment inflows
Investment outflows
Compensation
Changes in fair value of underlying assets
Investment income
Other fees and charges – Transact
Other fees and charges – third parties
Closing balance
154 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
2020
Fair value
£’000
2019
Fair value
£’000
1,636,781
1,541,917
1,636,781
1,541,917
16,476,154
15,123,131
16,476,154
15,123,131
18,112,935
16,665,048
2020
£’000
2019
£’000
16,665,048
14,489,933
2,415,445
2,515,577
(834,454)
(850,772)
47
(72,990)
127,734
(50,360)
679
545,902
134,236
(44,888)
(137,535)
(125,619)
18,112,935
16,665,048
The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the
return on their selected collective fund investments, whose underlying investments include equities, debt securities,
property and derivatives. This investment mix is unique to individual policyholders. When the diversified portfolio of
all policyholder investments is considered, there is a clear correlation with the FTSE 100 index and other major world
indices, providing a meaningful comparison with the return on the investments.
The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date.
There will be no difference between the carrying amount and the maturity amount at maturity date.
21. Cash and cash equivalents
Bank balances – Instant access
Bank balances – Notice accounts
Cash and cash equivalents held for the benefit of the policyholders –
instant access – ILUK
Cash and cash equivalents held for the benefit of the policyholders –
term deposits – ILUK
Cash and cash equivalents held for the benefit of the policyholders –
instant access – ILINT
Cash and cash equivalents held for the benefit of the policyholders –
term deposits – ILINT
Total
2020
£’000
148,617
5,500
2019
£’000
132,340
-
1,231,043
1,048,129
51,982
61,085
100,716
98,083
1,985
2,982
1,539,843
1,342,619
Bank balances held in instant access accounts are current and available for use by the Group.
All of the bank balances held in notice accounts require less than 35 days’ notice before they are available for use by
the Group.
The cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to corresponding liabilities.
22. Financial assets at fair value through profit or loss
Listed shares and securities
Gilts
Investments are all UK and sterling based and held at fair value.
Group
2020
£’000
92
4,959
5,051
Group
2019
£’000
69
4,997
5,066
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 155
FINANCIAL STATEMENTS continued
23. Other prepayments and accrued income
Accrued income
Less: credit loss allowance
Accrued income - net
Prepayments
Group
2020
£’000
10,956
(712)
10,244
4,168
14,412
Company
2020
£’000
-
-
-
56
56
Group
2019
£’000
10,390
(622)
9,768
3,314
13,082
Movement in the credit loss allowance (for accrued income and loans receivable) is as follows:
Opening credit loss allowance
Reduction in credit loss allowance
(Increase)/decrease during the year
Balance at 30 September
24. Trade and other receivables
Amounts owed by Group undertakings
Amounts due to HMRC
Amount due from policyholders
to meet current tax liability
Other receivables
2020
£’000
(646)
-
(176)
(822)
Group
2020
£’000
-
2,227
-
1,329
3,556
Company
2020
£’000
342
-
-
-
342
Group
2019
(restated)
£’000
-
1,384
3,098
2,707
7,189
Amount due from HMRC is in respect of tax claimed on behalf of policyholders for tax deducted at source.
25. Trade and other payables
Trade payables
PAYE and other taxation
Due to Group undertakings
Other payables
Accruals and deferred income
Group
2020
£’000
1,716
1,420
-
7,436
7,794
18,366
Company
2020
£’000
7
67
56
49
312
491
Group
2019
£’000
498
1,343
-
8,242
6,941
17,024
Company
2019
£’000
-
-
-
30
30
2019
£’000
(796)
170
(20)
(646)
Company
2019
£’000
86
-
-
-
86
Company
2019
£’000
-
70
9
49
390
518
Other payables mainly comprises £6.2m (2019: £5.1m) in relation to bonds awaiting approval and the rent free
reserve of £2.5m in 2019.
156 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
26. Lease liabilities
Lease liabilities – Property:
Lease liabilities on adoption of IFRS 16 – 1 October 2019
Lease payments
Interest expense
Foreign exchange adjustment
Balance at 30 September 2020
Amounts falling due within one year
Amounts falling due after one year
£’000
8,336
(2,477)
233
(5)
6,087
2,375
3,712
The above table provides a reconciliation of the financial liabilities arising from financing activities.
The total future minimum lease payments of operating leases are due as follows:
Group
Within 1 year
Within 2-5 years
Over 5 years
Land and
Buildings
2020
£’000
Land and
Buildings
2019
£’000
-
-
-
2,511
6,257
-
The introduction of IFRS 16 has meant that for financial year to 30 September 2020, the land and building lease
commitments (which related to the leasehold premises at 29 Clement’s Lane, ILInt leasehold premises at 18/20
North Quay on the Isle of Man, and the IAD Pty leasehold premises at 19-25 Camberwell Road, Melbourne, Australia)
are not classified as operating leases, but rather finance leases which have been recognised on the balance sheet.
Short term, low value leases include a car park at the ILInt leasehold premises (£4,000) and a franking machine at
the ISL premises (£3,000). These lease payments have been charged to the profit or loss account on a straight line
basis over the lease terms.
27. Deferred income liability
Opening balance
Capitalisation of deferred income
Amortisation of deferred income
Change in deferred acquisition costs
Closing balance
2020
£’000
50,443
10,615
(7,576)
3,038
53,482
2019
£’000
46,073
11,668
(7,298)
4,370
50,443
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 157
FINANCIAL STATEMENTS continued
28. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2019: 17%).
Deferred Tax Asset
At 1 October 2018
Charge to income
At 30 September 2019
Adjustment in
respect of prior year
Adjustment to
opening balances
Excess tax relief
charged to equity
Charge to income
At 30 September 2020
Deferred Tax Liability
At 1 October 2018
Charge to income
At 30 September 2019
Charge to income
At 30 September 2020
Accelerated
capital
allowances
£’000
Share
based
payments
£’000
Policyholder
tax
£’000
Other
deductible
temporary
differences
£’000
44
(44)
-
-
-
-
-
-
-
110
110
108
-
60
124
402
-
-
-
-
-
-
-
-
-
47
47
18
32
-
(10)
87
Accelerated
capital
allowances
£’000
Share
based
payments
£’000
Policyholder
tax
£’000
Other
deductible
temporary
differences
£’000
-
60
60
61
121
-
-
-
-
-
13,187
1
13,188
(4,341)
8,847
-
-
-
-
-
Total
£’000
44
113
157
127
32
60
113
489
Total
£’000
13,187
61
13,248
(4,280)
8,968
The Company has no deferred tax assets or liabilities.
29. Client monies and client assets
2020
Client monies
Client assets
2019
Client monies
Client assets
£’000
3,106,978
Amounts due to clients
37,985,921
Corresponding liability
£’000
2,626,624
Amounts due to clients
35,172,798
Corresponding liability
£’000
3,106,978
37,985,921
£’000
2,626,624
35,172,798
The above client monies are held separately (off balance sheet) in client bank and the above client assets are held on
behalf of Integrated Financial Arrangements Ltd by Transact Nominees Limited.
158 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
30. Provisions
Balance brought forward
Increase in dilapidations provision
Increase in ILInt non-linked unit provision
Increase/(decrease) in ILUK tax provision
Release of rent provision
Other provisions
Balance carried forward
Dilapidations provisions
ILInt non-linked unit provision
ILUK tax provision
Group 2020
£’000
18,230
52
2
6,924
-
-
Group 2019
(restated)
£’000
13,756
38
3
4,632
(102)
(97)
25,208
18,230
464
41
24,703
25,208
413
39
17,778
18,230
The dilapidation provisions relate to the current leasehold premises at 29 Clement’s Lane, and the current ILInt
leasehold premises at 18/20 North Quay, on the Isle of Man. The Group is committed to restoring the premises to
their original state at the end of the lease term. Whilst it is probable that payments will be required for dilapidations,
uncertainty exists with regard to the amount and timing of these payments, and the amounts provided represent
management’s best estimate of the Group’s liability.
ILUK tax provision comprises claims received from HMRC that are yet to be returned to policyholders, charges taken
from unit-linked funds and claims received from HMRC to meet current and future policyholder tax obligations.
These are expected to be paid to policyholders over the course of the next seven years.
31. Capital redemption reserve – Group
Balance brought forward
Balance carried forward
2020
£’000
2
2
2019
£’000
2
2
On 12 December 2013 IFAL was granted authority by shareholders to repurchase £4,500,000 worth of ordinary
shares from shareholders. IFAL purchased 45,917 shares, and they were then cancelled, giving rise to a capital
redemption reserve of £2,271.
32. Share-based payments
Share-based payment reserve
Balance brought forward
Movement in the year
Transfer to profit and loss reserve
Balance carried forward
Group 2020
£’000
Company 2020
£’000
Group 2019
£’000
Company 2019
£’000
1,008
723
(33)
1,698
880
190
-
530
531
(53)
1,070
1,008
350
530
-
880
The reduction in reserves of £33k (2019: £53k) is due to former members of staff leaving the SIP 2005 scheme.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 159
FINANCIAL STATEMENTS continued
Share schemes
(i) SIP 2005
IFAL implemented a SIP trust scheme for its staff in October 2005. The SIP is an approved scheme under Schedule 2
of the Income Tax (Earnings & Pensions) Act 2003.
This scheme entitled all the staff who were employed in October 2005 to Class C shares in IFAL, subject to their
remaining in employment with the company until certain future dates.
The Trustee for this scheme is IntegraFin Limited, a wholly owned non-trading subsidiary of IFAL.
Shares issued under the SIP may not be sold until the earlier of three years after issue or cessation of employment by
the Group. If the shares are held for five years they may be sold free of income tax or capital gains tax. There are no
other vesting conditions.
The cost to the Group in the financial year to 30 September 2020 was £nil (2019: £nil). There have been no new
share options granted.
(ii) SIP 2018
The Company implemented an annual SIP awards scheme in January 2019. This is an approved scheme under
Schedule 2 of the Income Tax (Earnings & Pensions) Act 2003, and entitles all eligible employees to ordinary shares
in the Company. The shares are held in a UK Trust.
The scheme includes the following awards:
Free Shares
The Company may give Free Shares up to a maximum value, calculated at the date of the award of such Free Shares,
of £3,600 per employee in a tax year.
The share awards are made by the Company each year, dependent on 12 months continuous service at 30 September.
The cost to the Group in the financial year to 30 September 2020 was £649k (2019: £641k).
Partnership and Matching Shares
The Company provides employees with the opportunity to enter into an agreement with the Company to enable such
employees to use part of their pre-tax salary to acquire Partnership Shares. If employees acquire Partnership Shares,
the Board grants relevant Matching Shares at a ratio of 2:1.
The cost to the Group in the financial year to 30 September 2020 was £555k (2019: £427k).
(iii) Performance Share Plan
The Company implemented an annual PSP scheme in December 2018. Awards granted under the PSP take
the form of options to acquire Ordinary Shares for nil consideration. These are awarded to Executive Directors,
Senior Managers and other employees of any Group company, as determined by the Remuneration Committee.
The exercise of the PSP awards is conditional upon the achievement of a performance condition set at the time
of grant and measured over a three year performance period.
The cost to the Group in the financial year to 30 September 2020 was £423k (2019: £194k). This is based on the fair
value of the share options at grant date, rather than on the purchase cost of shares held in the Employee Benefit
Trust reserve, in line with IFRS 2 Share-based Payment.
160 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
Details of the share awards outstanding are as follows:
SIP 2018
Shares in the plan at start of the year
Granted
Shares withdrawn from the plan
Shares in the plan at end of year
Available to withdraw from the plan at end of year
2020
Shares
(number)
251,541
275,249
(53,107)
473,683
83,569
2019
Shares
(number)
-
264,661
(13,120)
251,541
61,446
Details of the movements in the share scheme during the year are as follows:
SIP 2005
Outstanding at start of the year
Shares withdrawn from the plan
Shares in the plan at end of year
Available to withdraw from the plan
at end of year
2020
Weighted
average
exercise price
(pence)
0.00
0.00
0.00
2019
Weighted
average
exercise price
(pence)
0.00
0.00
0.00
2020
Shares
(number)
1,630,190
(428,967)
1,201,223
2019
Shares
(number)
2,307,274
(677,084)
1,630,190
0.00
1,201,223
0.00
1,630,190
The weighted average share price at the date of withdrawal for shares withdrawn from the plan during the year was
487.76p (2019: 342.39p).
At 30 September 2020 the exercise price was £nil as they were all nil cost options.
PSP
Outstanding at start of the year
Granted
Forfeited
Outstanding at end of year
Exercisable at end of year
2020
Weighted
average
exercise price
(pence)
2020
Share
options
(number)
2019
Weighted
average
exercise price
(pence)
0.00
0.00
0.00
0.00
0.00
269,511
165,132
-
434,643
-
0.00
0.00
0.00
0.00
0.00
2019
Share
options
(number)
-
275,481
(5,970)
269,511
-
The fair value of options granted during the year has been estimated using the Black-Scholes model. The principal
assumptions used in the calculation were as follows:
PSP
Share price at date of grant
Exercise price
Expected life
Risk free rate
Dividend yield
Weighted average fair value per option
2020
454.5
Nil
3 years
0.52%
1.7%
431.7 p
2019
276.5
Nil
3 years
0.73%
1.4%
265.1 p
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 161
FINANCIAL STATEMENTS continued
33. Employee Benefit Trust reserve
Group:
Balance brought forward
Purchase of own shares
Balance carried forward
Company:
Balance brought forward
Purchase of own shares
Balance carried forward
2020
£’000
(275)
(828)
(1,103)
2020
£’000
(275)
(594)
(869)
2019
£’000
-
(275)
(275)
2019
£’000
-
(275)
(275)
The Employee Benefit Trust (“EBT”) was settled by the Company pursuant to a trust deed entered into between the
Company and Intertrust Employee Benefit Trustee Limited (“Trustee”). The Company has the power to remove the Trustee
and appoint a new trustee. The EBT is a discretionary settlement and is used to satisfy awards made under the PSP.
The Trustee purchases existing Ordinary Shares in the market, and the amount held in the EBT reserve represents
the purchase cost of IHP shares held to satisfy options awarded under the PSP scheme. IHP is considered to be the
sponsoring entity of the EBT, and the assets and liabilities of the EBT are therefore recognised as those of IHP.
Shares held in the trust are treated as treasury shares and shown as a deduction from equity.
34. Other reserves – Group
Foreign exchange reserves
Non-distributable reserves
Non-distributable insurance reserves
2020
£’000
(22)
5,722
501
2019
£’000
(44)
5,722
501
Foreign exchange reserves are gains/losses arising on retranslating the net assets of IAD Pty into sterling.
Non-distributable reserves relate to share premium held by one of the Company’s subsidiaries, IFAL, which is
classified within other reserves on a Group level.
Non-distributable insurance reserves arose due to the transition from UK GAAP to IFRS in financial year 2015,
whereupon actuarial reserving required under the old standards became impermissible under new standards.
162 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
35. Related parties
During the year the Company did not render nor receive any services with related parties within the Group, and at the
year end the Company had the following intra-Group receivables:
Company
Integrated Financial Arrangements Ltd
IntegraFin Services Limited
IntegraFin Limited
IntegraLife UK Limited
Integrated Application Development Pty Limited
Amounts owed by/(to)
related parties
2020
£’000
2019
£’000
8
277
(9)
4
6
11
70
(9)
4
1
The Group has not recognised any expected credit losses in respect of related party receivables, nor has it been given
or received any guarantee during 2020 or 2019 regarding related party transactions.
Payments to key management personnel, defined as members of the Board, are shown in the Remuneration Report.
Directors of the Company received a total of £4.3m in dividends during the year. The number of IHP shares held at
the end of the year by key management personnel was 51,256,896, a decrease of 14,477,377 from last year.
All of the above transactions are commercial transactions undertaken in the normal course of business.
36. Contingent liabilities
In January 2020 the Group received notice from HMRC that the inclusion of Integrated Application Development Pty
Ltd (IAD) in the UK VAT group was terminated with effect from 16 July 2016. The Group included IAD in the UK VAT
group having taken specialist advice to ensure its actions were in accordance with the relevant laws. The consequence
of the exclusion of IAD from the UK VAT group is that the services provided from Australia would now be subject to
reverse-charge VAT.
The Group has challenged this notification and opened a discussion with HMRC about its intention to exclude IAD from
the UK VAT group, therefore the financial implications of this notice, including the timing of any potential payment,
remain uncertain, pending the outcome of the reconsideration of the exclusion.
HMRC’s notice states that the VAT due since July 2016 until October 2019 will be approximately £4.3m and that going
forward there would be an additional annual VAT charge of approximately £1.4m. The Group does not yet know
whether HMRC will charge interest and/or a penalty if the appeal to the notification is unsuccessful.
Due to the ongoing uncertainty around the additional VAT charges, pending the outcome of the dialogue with HMRC,
the Directors do not believe it would be appropriate to recognise a provision in these financial statements. Payment of
the additional VAT charges is considered to be less than probable and this is supported by both the original VAT advice
received from specialists when the VAT group was created, and subsequent specialist advice following HMRC’s
challenge in January 2020.
37. Events after the reporting date
As per the Chair’s statement on page 4, a second interim dividend of 5.6 pence per share was declared on
16 December 2020.
38. Dividends
During the year to 30 September 2020 the Company paid interim dividends of £26.2m (2019: £29.8m) to
shareholders. The Company received dividends from subsidiaries of £32.3m (2019:£30.1m).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 163
FINANCIAL STATEMENTS continued
39. Restatement of prior years
Profit after tax for financial year 2019 has been restated to £41.1 million, an increase from £40.1 million, and an
adjustment to 2019 opening retained earnings has been made of £5.4m.
The restatement of profit after tax across prior years is due to the identification of an error in the calculation of the
policyholder tax provision (over) in the subsidiary, ILUK, which is one of the elements of the Group’s insurance and
life assurance segment. The error was due to corporate expenses being deducted in the policyholder tax calculation
resulting in an overprovision of tax reserves due back to policyholders. As a result, there has been a release of the
policyholder tax provision to the retained earnings as at 1 October 2018 and to the statement of profit or loss and
other comprehensive income in 2019.
The above change has been reflected by restating each of the affected financial statement line items for the periods
as follows:
a) Statement of Profit or Loss and Other Comprehensive Income (extract)
Other income included within administration expenses
Operating profit attributable to shareholder returns
Profit on ordinary activities before taxation
Profit before shareholder taxation
Policyholder tax
Shareholder tax
Profit after policyholder and shareholder tax
Earnings per share – basic and diluted
b) Statement of Financial Position (extract)
Trade and other receivables
Total current assets
Provisions
Current tax liability
Total liabilities
Net assets
Retained earnings
Total equity attributable to equity holders
2019
£’000
(49,726)
48,613
56,073
48,958
(7,115)
(8,811)
40,147
12.1
Increase
to profit
£’000
953
953
953
953
146
(139)
960
0.3p
2019
(restated)
£’000
(48,773)
49,566
57,026
49,911
(6,969)
(8,950)
41,107
12.4p
2019
£’000
6,510
16,822,046
24,564
3,342
Increase/
(decrease)
£’000
679
679
(6,334)
645
2019
(restated)
£’000
7,189
16,822,725
18,230
3,987
16,773,669
(5,690)
16,767,979
115,518
105,291
115,518
6,369
6,369
6,369
121,887
111,660
121,887
164 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
c) Statement of Financial Position (extract)
Trade and other receivables
Total current assets
Provisions
Current tax liability
Total liabilities
Net assets
Retained earnings
Total equity attributable to equity holders
40. Restatement of presentation
1 October
2018
£’000
Increase/
(decrease)
£’000
4,058
14,628,530
19,137
3,195
533
533
(5,381)
507
1 October
2018
(restated)
£’000
4,591
14,629,063
13,756
3,702
14,585,672
(4,874)
14,580,798
104,943
94,899
104,943
5,407
5,407
5,407
110,350
100,306
110,350
In addition to the restatement explained above, certain comparatives have been reclassified due to an error in
presentation in prior years.
This has the effect of reflecting items of income, expenses, gains and losses relating to the Group’s insurance and life
assurance segment on a gross basis, rather than on a net basis.
In addition, cash held by the Group’s insurance and life assurance segment, for the benefit of policyholders has been
separately disclosed in cash and cash equivalents.
These changes have no effect on net assets or overall profit.
Details of these changes are shown below.
a) Statement of Profit or Loss and Other Comprehensive Income (extract)
Investment returns
Fee and commission expenses
Change in investment contract liabilities
b) Statement of Financial Position (extract)
Cash and cash equivalents
2019
£’000
37
-
-
Increase
to profit
£’000
680,385
(125,618)
(554,767)
2019
(restated)
£’000
680,422
(125,618)
(554,767)
2019
£’000
Increase/
(decrease)
£’000
2019
(restated)
£’000
132,340
1,210,279
1,342,619
Investments held for the benefit of policyholders
16,665,048
(1,210,279)
15,454,769
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 165
FINANCIAL STATEMENTS continued
c) Statement of Financial Position (extract)
1 October
2018
£’000
Increase/
(decrease)
£’000
1 October
2018
(restated)
£’000
Cash and cash equivalents
116,849
1,113,452
1,230,301
Investments held for the benefit of policyholders
14,489,933
(1,113,452)
13,376,481
d) Statement of Cash Flows (extract)
2019
£’000
Increase/
(decrease)
£’000
2019
(restated)
£’000
Cash flows from operating activities
(Increase) in investments held for the benefit of policyholders
Increase in liabilities for linked investment contracts
-
-
(2,078,288)
(2,078,288)
2,175,115
2,175,115
Increase in cash
15,511
96,827
112,338
Cash and cash equivalents at the beginning of the year
116,849
1,113,452
1,230,301
Cash and cash equivalents at the end of the year
132,340
1,210,279
1,342,619
166 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
OTHER INFORMATION
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Corporate Advisers
Ian Taylor
Michael Howard
Alexander Scott
Jonathan Gunby (appointed 2nd March 2020)
Non-Executive Directors
Richard Cranfield
Christopher Munro
Neil Holden
Caroline Banszky
Victoria Cochrane
Robert Lister
Company Secretary
Helen Wakeford
Independent Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Solicitors
Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Peel Hunt LLP
Moor House
120 London Wall
London
EC2Y 5ET
Principal Bankers
NatWest Bank Plc
135 Bishopsgate
London
EC2M 3UR
Registrars
Equiniti Group plc
Sutherland House
Russell Way
Crawley
RH10 1UH
Registered Office
29 Clement’s Lane
London
EC4N 7AE
Investor Relations
Jane Isaac
020 7608 4900
Website
www.integrafin.co.uk
Company number
08860879
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 167
OTHER INFORMATION
GLOSSARY OF TERMS
AGM Annual General Meeting
Net inflow Net new business onto the platform
CASS Client Assets Sourcebook
OEIC Open Ended Investment Company
CEO Chief Executive Officer
ORSA Own Risk and Solvency Assessment
CFO Chief Financial Officer
Outflow Business leaving the platform
COO Chief Operating Officer
SCR Solvency Capital Requirement
TCF Treating Customers Fairly
The Company IntegraFin Holdings plc
The Group
IntegraFin Holdings plc and
its subsidiaries
VCT Venture Capital Trust
COREP
Common Reporting, as required by the
Capital Requirements Directive IV
COSO
Committee of Sponsoring Organisation
of the Treadway Commission
ETF Exchange-traded Fund
FCA Financial Conduct Authority
FRC Financial Reporting Council
FUD Funds Under Direction
GDPR General Data Protection Regulation
GIA General Investment Account
HMRC Her Majesty’s Revenue and Customs
IAD
Integrated Application Development
Pty Ltd
ICA Individual Capital Assessment
ICAAP
Internal Capital Adequacy
Assessment Process
IFAL Integrated Financial Arrangements Ltd
IFRS
International Financial
Reporting Standards
ILInt IntegraLife International Limited
ILUK IntegraLife UK Limited
Gross inflow Gross new business onto the platform
IntegraFin IntegraFin Holdings Limited
IP Intellectual Property
ISA Individual Savings Account
ISAs (UK) International Standards on Auditing (UK)
IT Investment Trust
MiFID II
Second Markets in Financial
Instruments Directive
NED Non-Executive Director
168 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020
ALTERNATIVE PERFORMANCE MEASURES
Various alternative performance measures are referred
to in the Annual Report, which are not defined by IFRS.
They are used in order to provide better insight into
the performance of the Group. Further details are
provided below.
FUD – represents the total market value of all cash and
investments on the platform. The value of FUD is the
primary driver of revenue as it forms the basis of annual
commission payable which is the largest component of
Group revenue.
Net inflows – represent the net new business onto the
platform, which is the gross new business onto the platform
less the business leaving platform. Net inflows are a key
driver of FUD, and therefore revenue.
Investment in the business – represents the total
amount spent on platform development in the year. This is
a combination of staff costs and training, as well as capital
and operating expenditure on software and equipment.
Operating Margin – represents operating profit divided
by revenue. Operating margin is a measurement of the
efficiency of the Group’s business model in converting
revenue into profits.
Shareholder returns – represent the total dividend
per share relating to a financial year. There are generally
two dividend payments relating to each financial year,
so shareholder returns represent the total dividend per
share of the two dividends.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2020 169
M137 September 2020
IntegraFin Holdings plc,
29 Clement’s Lane, London, EC4N 7AE
Tel: (020) 7608 4900 Fax: (020) 7608 5300
(Registered office: as above; Registered in England and Wales under number: 08860879)
The holding company of the Integrated Financial Arrangements Ltd group of companies.