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Annual Report
and Accounts 2020
INVESTMENT
EVOLVED
Tatton Asset Management plc has achieved a third successive year
of growth in revenue, profits and assets under management (“AUM”)
since IPO.
Over the three-year period, AUM has increased by 70% from £3.9bn
to £6.7bn. We are proud to be working with 595 IFA firms, which
has doubled over the same period.
Contents
Corporate Governance
36 Board of Directors
38 Corporate Governance
Statement
40 Directors’ Remuneration
Report
43 Directors’ Report
47
Independent
Auditor’s Report
Financial Statements
53 Consolidated
Statement of Total
Comprehensive Income
54 Consolidated Statement
of Financial Position
55 Consolidated Statement
of Changes in Equity
56 Consolidated Statement
of Cash Flows
57 Notes to the Consolidated
Financial Statements
92 Company Statement
of Financial Position
93 Company Statement
of Changes in Equity
94 Notes to the Company
Financial Statements
Strategic Report
01 Highlights
02 At a glance
04 Chairman’s Statement
06 Chief Executive’s Review
10 Chief Investment
Officer’s Report
12 Engaging with
our stakeholders
14 Our market share
and trends
16 Our business model
18 Our strategy for growth
26 Key Performance Indicators
28 Risk management
29 Risk management
processes
30 Principal risks
32 Chief Financial
Officer’s Report
34 Corporate Responsibility
01
Highlights
FINANCIAL
— Group revenue increased 22.0% to £21.369m (2019: £17.518m)
— Adjusted Operating Profit* up 24.2% to £9.076m (2019: £7.308m)
— Adjusted Operating Profit* margin increased to 42.5% (2019: 41.7%)
— Operating Profit increased to £10.302m (2019: £5.925m)
— Profit before tax increased to £10.296m (2019: £6.112m)
— Final dividend increased by 14.3% to 6.4p (2019: 5.6p), giving a full year dividend of 9.6p
— Fully diluted adjusted earnings per share (“EPS”)* increased by 19.8% to 12.00p (2019: 10.02p)
— Healthy financial position, strong balance sheet and £12.757m of net cash (2019: £12.192m)
OPERATIONAL
— Tatton’s discretionary assets under management (“AUM”) increased 9.6%
to £6.651bn (2019: £6.068bn)
— Organic net inflows of £1.129bn (2019: £1.106bn) or 18.6% of opening AUM, an average
of £94.1m per month
— The Group responded swiftly to the COVID-19 outbreak and efficiently implemented
comprehensive business continuity plans
— The Group made its first acquisition: Sinfonia Asset Management Limited, five
risk-targeted funds that complement the current fund range proposition
— Tatton increased its firms by 33.7% to 595 (2019: 445) and number of accounts
to 66,100 (2019: 58,500)
— Tatton’s long-term business partnership with Tenet, which was announced in June 2019,
is developing well with 81 new Independent Financial Adviser (“IFA”) firms and initial
business activity has resulted in AUM of £226m
— Amalgamation of Consulting and Mortgages creating a simplified IFA support
services business, allowing the Group to better meet the needs of IFAs through an
integrated approach
— Paradigm Mortgage Services increased gross lending via its channels by 17.5%
to £9.86bn (2019: £8.39bn)
— Paradigm Consulting increased the number of member firms to 394 (2019: 390)
Financials
Group revenue
Adjusted Operating Profit
Adjusted EPS
£21.369m
£9.076m
+22.0%
+24.2%
12.00p
+19.8%
Profit before tax
Proposed final dividend
AUM
£10.296m
+68.5%
6.4p
+14.3%
£6.651bn
+9.6%
* See note 23 for details of alternative performance measures.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 02
At a glance
A BROADER
PROPOSITION
Tatton Asset Management plc offers
on-platform only discretionary fund
management as well as regulatory,
compliance and business consulting
services and a whole of market mortgage
proposition to IFAs across the UK.
This is achieved through two operating
divisions: Tatton, the Group’s investment
management division, and Paradigm,
the Group’s IFA support services business.
— Market
leading on-platform discretionary
fund
management service
— Full range of risk-rated investment portfolios
— Multi-Manager funds complement portfolios
— Highly experienced investment team
— Exclusively available for the clients of IFAs
— Clients benefit from gaining access to full discretionary
management of their investments
— Platform agnostic – now available on 14 platforms
— Financial compliance support to directly authorised
wealth managers, IFAs and mortgage advisers
— Comprehensive mortgage offering to directly
authorised firms, including a whole of market
lender panel
Group revenue breakdown
Tatton
Paradigm
15,924
10,567
12,521
4,904
4,949
5,426
2018
2019
2020
Tatton Asset Management plc Annual Report and Accounts 2020 03
TWO DISTINCT
DIVISIONS
Tatton Asset
Management plc
“TAM plc” or “Group”
25%
75%
Tatton Investment Management Division
Paradigm – IFA Support Services Division
An investment manager providing discretionary
fund management to the clients of IFAs
Paradigm Mortgage Services is one of the UK’s
leading mortgage distributor businesses, with
through wrap-platform technology. It manages
membership of over 1,500 directly authorised
£6.651 billion of assets for the private clients from
firms, representing c.3,900 regulated IFAs.
595 UK IFA firms.
Paradigm Mortgage Services provides access
IFAs benefit by being able to offer their clients full
to a whole of market lender panel as well as a
discretionary asset management whilst retaining
wide range of mortgage and related support
complete control of those relationships, together
services, such as specialist lending distributors,
with the ability to manage their clients’ portfolios
conveyancing partners and general insurance via
through existing platform arrangements.
Paradigm Protect.
Paradigm Consulting is a leading provider of
support services, such as compliance, and other
related products/services to directly authorised
IFAs in the UK.
In a highly regulated, fast changing industry,
Paradigm Consulting is setting new standards in
service, strategic and technical solutions, ensuring
its adviser partners have access to the best
propositions from across the financial market.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 04
Chairman’s Statement
CONTINUED PROGRESS
AGAINST OUR STRATEGY
R O G E R C O R N I C K Chairman
The financial year ended 31 March 2020 was a
challenging period beginning amid the political
turmoil caused by Brexit and concluding with
the onset of an unprecedented global health
crisis. Nevertheless TAM plc has achieved a third
successive year of growth in revenue, profits and
assets under management (“AUM”).
COVID-19 began to affect financial markets across
the world at the end of January 2020, and we
have included a separate report on its impact
on our businesses in the section immediately
following this statement. The Board would like
to express our sincere hope that all shareholders,
staff, clients, advisors and suppliers, have been
able to keep safe during this unprecedented
development and will be able to get through the
pandemic in as positive a manner as is possible.
OUR PEOPLE
On behalf of the Board, I would like to take the opportunity
to acknowledge the very high level of contribution from each
member of staff that has made it possible to achieve the position
outlined in this statement, and to offer our grateful thanks.
At the same time, I should draw attention to the positive and
effective leadership provided by the Executive, in unprecedented
circumstances, which has enabled the Group to sustain the
service levels and high standards needed to maintain positive
trading over the last few months, and will equip us to meet
the challenges ahead.
RESULTS
The impact of COVID-19 in the period under review has been
to reduce the value of AUM during February and March 2020,
although flows of net new funds, and revenues, held up well.
Group revenues increased by 22.0% to £21.369 million
(2019: £17.518 million). Adjusted Operating Profit* increased
by 24.2% to £9.076 million (2019: £7.308 million) and profit
before tax, after incurring exceptional items and share-based
payment charges, was £10.296 million (2019: £6.112 million).
The resulting impact on fully diluted adjusted earnings per share
was an increase of 19.8% to 12.00p (2019: 10.02p). Basic earnings
per share were 14.98p (2019: 8.69p).
Tatton Investment Management (“Tatton”), our on-platform
discretionary asset manager, increased AUM by 9.6% to
£6.651 billion (2019: £6.068 billion) with strong net inflows of
£1.129 billion. Paradigm, the Group’s IFA support business, has
enjoyed another year of growth, increasing both the number
of member firms and revenue flows. Mortgage Services, the
Group’s mortgage distribution and support services business,
continued to grow well. Member firms increased 10.9% to 1,544
with associated gross lending from completions increasing
17.5% to £9.86 billion (31 March 2019: £8.39 billion).
STRATEGY
The Group’s strategic objectives have not been materially
affected by recent events. We retain our focus on organic
growth through the provision of products and services that are
designed to enable Independent Financial Advisers (“IFAs”) to
advise their clients, and we continue to invest in both people and
technology that will steadily grow the business by enhancing
our support for them.
Our operating systems have been designed in such a way that
staff, working from home, are able to maintain service levels
and standards that sustain the broad product offering of all
our underlying businesses. We are now focused on reinforcing
resilience in our operational, business development, and financial
management capabilities.
Tatton Asset Management plc Annual Report and Accounts 2020 05
Challenging market conditions create opportunities and threats
in diverse areas and we are acutely conscious of the possibility
DIVIDENDS
Given the Group’s performance this year; the strong cash
of further consolidation in our industry. We have evaluated
generation; and our confidence that we can adapt to meet
several acquisition opportunities during the period under
changing market circumstances, the Board is proposing a final
review but remain committed to pursuing only those which
dividend of 6.4p per share, bringing the total ordinary dividend
are complementary, strategically aligned to the existing model,
for the year to 9.6p per share, an increase of 14.3%, which is
earnings enhancing and accretive to shareholder value.
1.9 times covered by adjusted earnings per share. The Board
BOARD AND CORPORATE GOVERNANCE
TAM plc remains committed to the highest standards of corporate
governance. The Board and its Committees are key to guiding
the Company and leading its strategy, and we are determined
to ensure that we have the right mix of skill sets to steer the
continues to operate a progressive dividend policy and targets
a payout ratio in the region of 70% of annual adjusted earnings
per share over the medium term.
OUTLOOK
While the trading period immediately in front of us is not easy to
Group forward. In a business evolving in the current challenging
read, the Group remains well-positioned to execute our strategy.
environment, we will maintain a governance structure that
underpins and encourages growth, while ensuring effective
controls and safeguards are in place.
As the new financial year progresses, we will adapt where necessary
to meet changing trading conditions, while continuing to build
on the success achieved to date through further investment
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires the Directors
in efficient operations and customer service. As a result we
anticipate delivering continued returns to our shareholders
to act in the way that they consider, in good faith, would most
through a progressive dividend policy, and remain optimistic
likely promote the success of the Company for the benefit of its
over our ability to achieve further progress.
members as a whole. Further information on our engagement
with stakeholders can be found on pages 12 to 13 of this Report
and the consideration of our dividend policy is detailed on
Roger Cornick
Chairman
page 43.
* Alternative performance measures are detailed in note 23.
COVID-19 IMPACT
The COVID-19 pandemic has impacted all businesses to varying
degrees. The Board of TAM plc is pleased to report that,
whilst the Group’s performance has been affected, the Group
The Group operates on a lean cost base, which enables our
businesses to remain competitive in their markets. However,
we are undertaking a cost reduction exercise to ensure
operates in resilient markets and the directors believe the
that all opportunities to improve efficiency are explored.
fundamentals of the business and its route to market remain
Whilst investment in future growth will continue, a moratorium
strong and relevant in these unprecedented times.
on material capital expenditure is in place and salary increases
Throughout the pandemic, the Group has supported its
customers (the IFAs) by providing valuable data and narrative
to enable them to communicate clearly with their clients,
further cementing long-term mutually beneficial relationships.
TAM plc has a low-risk, high-margin business model, based
on strong levels of recurring revenue (circa 85% over the
last 3 years). Whilst it’s still too early to estimate accurately
the full financial impact of the pandemic, the Group has
a robust financial liquidity position with £12.8 million cash at
31 March 2020 and no debt; a £1.5 million overdraft facility
and bonuses have been frozen until the COVID-19 situation
unfolds. The Group will not take advantage of Government
support schemes, which the Board believes are intended for
businesses significantly more affected than TAM plc.
The Group’s forecast has been reviewed and updated for
the expected impact of COVID-19 pandemic, various market
scenarios and management actions. This review has allowed
management to assess the potential impact on income, costs,
cash flow and capital and the ability to implement effective
management actions that may be taken to mitigate the impact.
which remains undrawn; and a highly efficient working capital
The Board will continue to support its people and take all the
cycle, ensuring strong operating cash conversion (c.100% of
precautions necessary to ensure the Company’s ongoing robust
adjusted operating profit). The Company also has indications
financial health and remains vigilant, constantly monitoring
of a good level of support from quality lending institutions,
the evolving situation. New opportunities to strengthen the
in the unlikely event that this will be required.
business through acquisition will also be evaluated if and
The Board is confident that the Group has more than adequate
when they arise.
resources to withstand the challenges the pandemic presents
Further information on the market impact is shown on page
in the short to mid-term.
15 and our principal risks shown on pages 30-31.
As noted above, the dividend policy remains unchanged.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 06
Chief Executive’s Review
INVESTMENT
EVOLVED
I am pleased to report on another year of progress for the
Group, in this our third year as a plc. Despite a complex
macro backdrop, we have continued to perform strongly
and delivered against all the challenging targets we set
ourselves at the time of our IPO.
resulting lockdowns which wiped trillions off equity values
around the world.
We have weathered all these storms and have continued to deliver
growth in line with expectations, by focusing on providing simple
but effective solution-based services to our clients, including
We floated in 2017 with a clear strategy to drive revenue and
the most competitive DFM offering available. I would like to
profitability through the development and growth of assets under
thank our shareholders for backing our team and supporting
management (AUM), and by building on existing relationships,
our ambitions and our clients for their continuing commitment
while further developing new relationships with IFAs and new
and faith in our ability to deliver an unrivalled service.
members across the Group.
Since then, we have increased our AUM from £3.9bn to over
COVID-19
As stated in our most recent Trading Update, the Group responded
£6.6bn, an increase of circa 70%. Almost all of this growth has
swiftly to the COVID-19 outbreak and efficiently implemented
been achieved organically. In the year under review, net inflows
comprehensive business continuity plans. We pivoted to remote
averaged £94.1m per month, compared to £90.0m per month
working, seamlessly replicating our processes and systems,
in the prior year, with additional support from the acquisition
whilst safeguarding the health and safety of our employees
of Sinfonia Asset Management from Tenet in September 2019,
and ensuring that the business continued to service our clients
which added a further £135m of AUM.
Today, Tatton is working with over 595 IFA firms, and manages
66,100 client accounts, representing growth of 114% and 55%
respectively since IPO. The number of Paradigm Consulting IFA
firms, for whom we provide regulatory and compliance services,
has also continued to grow in this three-year period, increasing
as normal. The Group will not be taking advantage of any
Government support scheme, which the Board believes are
intended for businesses which have been significantly more
affected than TAM plc.
THE MARKET OVERVIEW
Before the impact of COVID-19 IFA businesses were continuing
from 352 to 394, and our Mortgages Services membership
to thrive, reporting increased levels of turnover and profitability.
increased from 1,069 to 1,544.
Over the three years since IPO the key driver for the Group’s
growth in both revenue and profits has been our on platform
Discretionary Fund Management Managed Portfolio Service (“DFM
MPS”) proposition, which remains the most competitive in the
market. It has no minimum investment and delivers a standard
Over the last 12 months, the number of IFA firms across the full
IFA population has remained static and we would expect that,
post lockdown, IFAs will return to recent historic levels of activity.
We do not expect the number of supporting firms to reduce
due to COVID-19 issues, as their recurring revenue model and
low geared cost base ensures continued financial prosperity.
of service to all levels of investors and their IFA irrespective
Tatton has always believed in the benefits of independent
of portfolio size, which some other providers normally reserve
intermediated advice, and we are very encouraged by how
for wealthier clients. This, combined with risk management,
IFAs are adapting to change and delivering value to their clients,
creates a compelling proposition for IFAs.
The Group has achieved its targets, despite facing some major
headwinds: global equity markets endured steep declines in Q4
2018 amid persistent worries over trade and economic growth;
uncertainty surrounding the UK’s Brexit plans followed closely,
creating investor hesitancy throughout 2019; and, in the final
month of the year under review, the COVID-19 pandemic and
while maintaining profitable businesses. The requirement for
independent financial advisory services continues to grow with
eight out of ten advisers reporting an increase in client numbers
year on year. It is interesting to note that robo-advisory businesses,
which provide financial advice and investment management
based on mathematical rules or algorithms and with minimal
human intervention, are struggling to reach critical mass and
financial viability.
Tatton Asset Management plc Annual Report and Accounts 2020 While many financial advisers continue to manage and
run portfolios in-house, it is clear that an increasing
number are reviewing their business models in
favour of the outsourced investment management
services, which contribute to improved efficiency
in the financial planning process. The complexity
of the financial planning process and burden of
regulation, including MIFID II reporting, makes
researching and maintaining investment portfolios
in-house challenging and increasingly expensive.
When set against a backdrop of increased global
market volatility and economic uncertainty, we see
the trend for outsourcing escalating and demand
for Tatton’s services increasing.
The broader opportunity for Tatton continues to
improve, with over £500bn of assets currently sitting
on platforms of which more than £50bn are in model
portfolios. Tatton currently has £6.651bn and is the
largest provider of DFM MPS. Platforms are expected
to grow by 5-6% per annum, with some commentators forecasting
that assets will exceed £1.0 trillion by 2023.
TATTON
This year has seen another strong year of growth for Tatton.
Net inflows were £1.129bn (2019: £1.106bn) and we also experienced
a significant increase in IFA firms to 595 (2019: 445). The closing
balance of AUM was £6.651bn, a 9.6% increase on the prior year
despite being impacted by a negative market performance of
14.3% or £1.1bn towards the end of the financial year, due to
COVID-19 related market falls. Prior to this, our AUM reached
a record level of £7.758bn on 21 February 2020, an increase
of 100% since we joined AIM.
A significant milestone in the year was the strategic partnership
announced in June 2019 with Tenet Group (“Tenet”), one of the
UK’s largest financial advisory businesses, to provide a managed
portfolio service for its appointed representatives and directly
authorised firms. Of the 474 Tenet firms, 81 firms are now using
Tatton services and they have contributed £261.0m of net new
flows. The year also saw the acquisition of the Tenet’s Sinfonia
funds in September which contributed £135.0m of AUM.
Our focus this year will be to consolidate our position as the
leading DFM MPS provider of choice. We will look to leverage
our competitive advantage as being a high value low cost DFM
and further developing our AUM organically. However, it has
always been our intention to become a true asset manager,
building on the success of our MPS services and adapting to
increased IFA demand for cost reducing multi-asset multi manager
solutions. This ambition is achievable through a combination
of organic and M&A activity, enhancing the value of our AUM
and continuing to serve the demands of the IFA sector for
improved client solutions.
07
P A U L H O G A R T H Chief Executive Officer
“
We develop deep and strategic
relationships with our Financial
Adviser clients across the Group
businesses.
”
At the current time, it remains unclear what further impact the
COVID-19 pandemic will have on the business. Since the year
end, AUM has recovered in line with our 0.6 beta1 to the markets
and the start of the new financial year has seen positive net
inflows in the first two months. Clearly, events will further unfold,
but we believe our business model is robust and resilient and
the business remains well placed to manage its way through
the effects of the pandemic.
PARADIGM (IFA SUPPORT SERVICES DIVISION)
During the year, we took the decision to simplify our business
units to create a clear distinction between our investment
management and support services businesses. The Paradigm
businesses now report under a single operation and continue
to deliver both IFA Consulting and Mortgage Services.
Paradigm Consulting maintains close relationships with its financial
adviser firms, providing bespoke consultancy and support and
helping them manage the risk of an ever-changing landscape
of regulation. The number of firms has marginally increased in
the year under review, growing from 390 to 394, with a mix of
ad hoc consultancy and competitive pricing contributing to a
9.6% increase in revenue to £2.476m (2019: £2.260m).
1 Beta: The level of volatility in comparison to the market as a whole.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 08
Chief Executive’s Review continued
Paradigm Mortgages aggregates mortgage lending and life
TATTON ASSETS UNDER MANAGEMENT IN £ BILLION
insurance. Membership of Paradigm Mortgages enables advisers
and their clients to benefit from economies of scale and secure
access to the best mortgage deals and life assurance products
available. This year has been a difficult one in the mortgage market,
with the first half framed by Brexit uncertainties and finishing
with the impact of COVID-19. Despite these challenges, revenue
rose by 9.7% to £2.949m (2019: £2.689m), as membership grew
10.9% to 1,544 (FY19: 1,392) and gross lending from completions
rose by 17.5% to £9.86bn (FY19: £8.39bn).
8
7
6
5
4
3
2
1
0
The recent lockdown restrictions have made completing mortgages
difficult. This has, inevitably, impacted all parts of the mortgage
April
2013
April
2014
April
2015
April
2016
April
2017
April
2018
April
2019
April
2020
supply chain and, while the restrictions have been eased, it will
Tatton Assets under Management
take time for the market to return to normality. The likely total
impact still remains difficult to forecast. That said, the business
is lean and efficient and remains in good shape to navigate its
way through this crisis.
CURRENT TRADING AND OUTLOOK
The strong momentum built through the year has been impacted
We expect Paradigm Consulting to trade as normal through
this uncertain period, albeit remotely. Clearly, the mortgage
during lockdown, with engagement of both existing and potential
market and its behaviour are out of our control and we remain
client IFAs naturally lower than in the preceding months. Our teams
guarded against forecasting any significant recovery in the
continue to work remotely, in line with Government guidelines
short-term. One thing we know for sure is that lenders will be
which, while effective, hampers normal activity levels to a certain
more risk adverse, reducing their loan to value (LTV) lending
degree. I have no doubt that when restrictions are fully lifted
ratio. That said, it is clear that demand will return in the medium
and we can safely return to normal operation, the Group’s new
term as structural market conditions have not fundamentally
business flows will also return to normal levels. Naturally this
changed, and Government incentivisation is anticipated to assist
will be dependent on government guidelines and no further
economic recovery post COVID-19.
interruptions caused by freshly imposed restrictions in the future.
It would not be the right description to refer to COVID-19 as a
All that said, Tatton has provided considerable support and
bump in the road but we have often internally referred to the
valuable market data to its IFAs throughout this exceptionally
recent loss of momentum as leading to a potential lost year
difficult time. The positive feedback we are receiving shows
on our growth trajectory. Unfortunate as this is, we believe
how much this work has been appreciated by our IFAs. I believe
the Group is resilient and financially robust, with an enduring
the goodwill and positivity around our services will translate to
business model and exceptional people. The Board and I have
new business opportunities, as IFA businesses talk with their
no doubt that the business will rebuild momentum rapidly when
peers and come to realise that they have been left significantly
circumstances permit.
exposed with little or no support in a volatile and difficult
market environment. IFAs who have continued to in-source
their investment proposition have now been exposed on three
separate occasions: Woodford and the “star” fund manager
reliance; the suspension and lack of liquidity in property funds,
another favourite of IFAs; and latterly, the collapse of global
There will, inevitably, be opportunities in our markets as a
result of this unprecedented disruption. Tatton maintains its
clear focus on delivering sustainable organic and acquisitive
growth and is perfectly placed to act should any appropriate
opportunities arise.
markets. These events must have instilled doubt over the decision
The Board looks to the future with confidence and to reporting
to continue providing this service in-house and will lead them
on the Group’s progress as the year unfolds.
to evaluate peer-recommended outsourcing alternatives.
AUM
£6.651bn
Net inflows
£1.129bn
Paul Hogarth
Chief Executive Officer
Tatton Asset Management plc Annual Report and Accounts 2020 From initiation to implementation
2. STRATEGIC ASSET ALLOCATION
Our approach allows us to identify opportunities
and use them in appropriate portfolios
4. TACTICAL ASSET ALLOCATION
We rebalance when necessary or when
opportune, not just automatically
6. PORTFOLIO CONSTRUCTION
AND RISK MANAGEMENT
We complete portfolio construction by identifying
the representatives in each asset class
09
Stage
1
2
3
4
5
6
7
1. CORE BELIEFS
Investment excellence has three elements:
generating returns; risk management; and
competitive fees
3. BENCHMARK PORTFOLIOS
We stay within our clients’ risk parameters
and manage costs – a compelling combination
for investors
5. FUND RESEARCH
Our analytical approach ensures we make
decisions on which assets should or shouldn’t
be held
7. EXECUTION AND MONITORING
Outcomes matter: we focus on delivering
consistent and superior investment returns by
identifying the direction of travel of economic
and capital markets
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 10
Chief Investment Officer’s Report
BUSINESS GROWTH
ACCELERATES
L O T H A R M E N T E L Chief Investment Officer
Net inflows remained strong at £1.129bn over
the year, while the core proposition was expanded
to enhance future growth potential.
Capital market returns veered from headwind to
tailwind during the 2019 calendar year, while AUM
growth was driven by strong inflows and positive
market performance. Until the pandemic crisis, UK
investor sentiment was overshadowed by Brexit,
but a more positive liquidity backdrop – as central
banks reversed monetary tightening – drove global
portfolio values upwards.
After reaching a peak of £7.8 billion just before the
pandemic, negative market returns drove Tatton’s
AUM back down to £6.7 billion. Net client inflows
remained positive at £86 million for March, supported
by a continual supply of market updates and insights
during the crisis, which put investor fear into context
and prevented panic-driven redemptions.
As adviser business activity gradually returns, we are benefitting
from the support we gave them during the crisis, which has
strengthened our relationships and boosted confidence in our
portfolio stewardship. Our proactive communication approach,
together with investor returns strictly within the boundaries
of chosen risk profiles, presents a solid base for continued
business growth.
PROPOSITION DEVELOPMENTS AND BUSINESS
INVESTMENTS
Tatton has expanded its range of Blended Funds to five, adding
two risk categories, defensive and aggressive, to meet the risk
spectrum used by IFAs, ensuring a better complementary fit with
We expanded our business development capability, adding office-
based lead generation to support our field-based team. This reinforces
our investment in sales and communications marketing resource to
grow the number of firms using Tatton, in particular Tenet. We are
now deepening relationships with more adviser firms through
white label and investment support for larger firms.
We appointed a Deputy Head of Investment and created a new
role of Chief Economist, as well as recruiting a Chief Investment
Strategist. Greater strength and depth within our investment
team will help extend our investment offering across a wider
range of asset allocation requirements, allowing us to reach
an ever-increasing adviser target audience.
our Managed Portfolio Service. Lower charges and consistent
performance from the extended range should capture client
2019/2020 CAPITAL MARKETS AND RETURNS
Global growth slowed notably in 2019 and although 2020 brought
assets that cannot access our Managed Portfolio Service.
promising early signs of a recovery, we were waiting for tangible
The Tatton Bespoke Investment Service (“BPS”), created
in 2019, is gaining inflows and is now available on several
investment platforms. Its competitive, transparent charges
offer considerable opportunity to increase assets during the
coronavirus recovery. IFAs and investors will be seeking price
value and we should benefit from existing supplier disturbance
created by the lockdown.
improvement. Meanwhile, capital markets were banking on a renewed
monetary push from central banks and a steadily rebounding global
economy showing up in the economic dataflow. Easing trade
tensions between the US and China, plus the manufacturing sector
emerging from its third midcycle slowdown of the past decade,
had many investors decidedly bullish. As a result, the equity rally
building since last autumn continued until mid-February, despite
corporate results failing to meet lofty expectations.
Tatton Asset Management plc Annual Report and Accounts 2020 11
Investment portfolio returns
1 April 2019 – 31 March 2020
Tatton Fund Performance (%) – core produce set (1/4/2019–
31/03/2020 after DFM charge and fund costs)
markets responded with the broadest and steepest multi-asset
sell-off in history. Prices only stabilised after the announcement of
fiscal and monetary support measures of unprecedented dimension
and reach. Temporarily removing the risk of a devastating global
Defensive
Cautious
Balanced
Active
Aggressive
Global Equity
Tatton
Active
Tatton
Tracker
Tatton
Hybrid
Tatton
Ethical
(1.7)
(5.0)
(7.5)
(10.1)
(12.5)
(7.1)
(1.1)
(4.1)
(6.4)
(8.7)
(11.0)
(6.2)
(1.4)
(4.5)
(7.0)
(9.4)
(11.8)
(6.6)
(0.8)
(1.6)
(2.2)
(3.0)
(3.5)
(3.6)
IA
credit default cycle, together with pledges of limitless “buyer-of-
Sector*
(3.5)
(7.1)
(7.4)
(7.7)
(8.1)
(8.1)
last-resort” liquidity, has led to a V-shaped recovery in asset markets
which is looking increasingly less likely for the underlying economy.
This leaves stock market valuations in early June even more
extended than those seen in February, yet with a much more
uncertain outlook. Investment managers cannot apply historic
experience to this situation full of “unknown unknowns”, except
to observe that – similar to the aftermath of the global financial
*
IA – Investment Association managed fund peer group with comparable asset
crisis – the enormous injection of financial support is finding its way
allocation characteristics.
Since launch 1/2013
Tatton Fund Performance (%) – core produce set (1/1/2013-
31/03/2020, annualised, after DFM charge and fund costs)
Tatton
Active
Tatton
Tracker
Tatton
Hybrid
IA
Sector*
4.3
5.4
6.1
6.9
7.1
4.6
5.4
6.1
7.0
7.6
4.4
5.4
6.2
7.0
7.4
3.5
4.2
5.1
6.0
6.0
Defensive
Cautious
Balanced
Active
Aggressive
39.6% (2019: 36.7%)
Blended
38.0% (2019: 44.5%)
Active
18.1% (2019: 16.0%)
Tracker
3.0% (2019: 1.7%)
Ethical/ESG
1.3% (2019: 1.2%)
Income
Distribution of AUM across proposition matrix
— There remains little change in the breakdown of the risk
profiles in which our AUM is invested though there has
been a shift from the Active range towards our Tracker
and Hybrid Strategies.
— Ethical has continued its fast growth as a portion of AUM.
Although the coronavirus was initially brushed off as a problem
confined to the Asia-Pacific region, similar to the 2003 SARS
outbreak, the world woke up to the global pandemic threat – and
its economic implications – on 20 February. From this point, asset
into asset price inflation rather than the traditional price inflation
most would expect.
Immense monetary and fiscal support measures, together with
the need to upgrade healthcare provisions and update elements
of the global supply chain, could create the capex demand
volumes that had been lacking in the previous decade – or
create inflationary pressures while growth remains subdued.
We will use the discipline and rigour of our investment approach
to position clients’ portfolios to benefit from either outcome,
without compromising investment risk.
In the prevailing market environment, we are satisfied with
our portfolio construction and management on behalf of our
investors. While we share the disappointment of poor capital
market returns overall, this 2020 market crash has borne fewer
surprises than retail investors experienced during the 2008/2009
bear market. By holding our nerve amid the market chaos around
us, our response ensured portfolios stayed within the boundaries
of what our risk profiles suggested was possible, while fully
participating in the risk asset rebound that followed.
OUTLOOK 2020
Global crises provide catalysts for change and Tatton is well
positioned for the post-lockdown environment. We see a number
of positives for our business model as more advisers and clients
become comfortable with digital engagement, which appeals
to our low-cost operating model. Our cultural agility helps us
adapt to new relationship dynamics and we will enhance this
capability with more “distance business” throughout 2020.
The post-lockdown environment will be highly competitive. Tatton
was deliberately very visible during the crisis, offering a viable
alternative should existing supplier disturbance require advisers
to seek new arrangements for their clients. We will continue to
provide responsive information and insight, and will enhance
our digital capability to engage with the adviser community in
innovative ways.
Lothar Mentel
Chief Investment Officer
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 12
Engaging with our stakeholders
We are committed to engaging and developing strong
relationships with our key stakeholders and delivering
long-term value. We recognise that it is important that we
engage with each of our stakeholders in an open and
transparent manner, taking into account their views in
our strategic decision making. Our engagement with
stakeholders is across all areas and levels of the business,
with reporting and escalation to the Board as appropriate.
Section 172 statement: In considering how best to promote
the success of the Company for the benefit of its members as
a whole, the Directors have regard, amongst other matters, to
the likely consequences of any decisions in the long term; the
interests of the Company’s employees; the need to foster the
Company’s business relationships with suppliers, customers
and others; the impact of the Company’s operations on the
community and environment; the desirability of the Company
maintaining a reputation for high standards of business conduct;
and the need to act fairly as between members of the Company.
Our stakeholders
Firms and Clients
Shareholders
People
Society
IFAs and their clients are the central focus
of our business. The Group’s ongoing
success is built upon understanding our
customers’ needs, both those of the firm
and of their clients, and responding with
products and support. As we understand
their needs, we will continue to anticipate
future requirements to allow IFAs to
continue focusing on their clients and build
their businesses.
We rely on the support and engagement
of our shareholders to deliver our strategic
objectives and grow the business.
Our shareholder base supports the long-
term strategy we take in the management
of our business.
The Board recognises that our people are
central to the ongoing success of the firm.
The Group’s employees deliver the highest
quality of service to our customers.
We recognise the responsibility we have to
wider society and other key stakeholders.
We believe that demanding high levels of
corporate responsibility is the right thing
to do.
Their material issues
How we engage
Highlights and key decisions
Further links
— Performance of our funds and portfolios
— Transparency
— Quality of service
— Fair pricing
— The business development
— Won significant long-term investment mandate
— See our Business model on pages 16-17
teams meet regularly with
from Tenet, one of the UK’s largest Adviser
— A summary of our proposition is shown
current and potential firms to
support Groups
objectives and how these are
product range
on pages 2-3
26-27
develop a clear view of client
— Acquisition of Sinfonia funds extending our
— The Group’s KPIs are shown on pages
likely to evolve
— Expansion of our Blended fund range to five
— Read more about our Markets on pages
— Breakfast briefings
— First flows into Bespoke Investment Service (“BPS”)
14-15
— Amalgamation of Consulting and Mortgages to
— The Group’s Strategy is detailed on
— Roadshows
— Partner Forums
— Annual conference
— CPD Events
create a simplified IFA support services business
pages 18-19
to better meet the needs of IFAs through an
integrated approach
— Compelling business model and growth
— Regular meetings are held
— Delivered against our dividend policy with a total
— See our Business model on pages 16-17
prospects
— Long-term sustainable business which
delivers attractive returns through
maintaining a progressive dividend policy
— High standards of governance
— Making a difference for our customers
— Having opportunities for learning, growth
and further development
with our investors throughout
full year dividend of 9.6p, an increase of 14.3%
— Our dividend policy is detailed on page 43
the year
(FY19: 8.4p)
— The Group’s KPIs are shown on pages
— Results presentations are held
— Adjusted Operating Profit of £9.076m, an increase
26-27
at the half and full year
of 24.2% (FY19: £7.308m)
— The Group’s Strategy is detailed on
pages 18-19
— Presentations by the Board to
— During the year the Group supported a range of
— See our Business model on pages 16-17
discuss performance and the
individuals through professional qualifications
— See our Corporate Responsibility section
Company’s strategic plans
— Further extension of the EMI and Sharesave
on pages 34-35
— Being fairly rewarded for their contributions
— Regular management briefings
schemes
— Society has an interest in how we manage
our clients’ assets and ensure good
stewardship over our investments
— They have an interest in ensuring we
manage our business in a manner which
minimises our impact on the environment
and helps to benefit society
for Tatton’s ethical portfolios
prioritises funds that actively
engage with company managers
on ESG issues
— We aim for high standards of
— Growth in our ethical portfolios
— See our Business model on pages 16-17
governance across the Group.
— Continued improvement and adoption of Corporate
— See our Corporate Responsibility section
Our careful selection process
Governance guidelines
on pages 34-35
External service
providers
Our external service providers include our
distribution partners (platforms, IFAs, fund
managers) and our suppliers.
— Trusted partnerships
— Strong governance
— Clear communications
— Regular service reviews
— We maintain ongoing relations with our key
— Read more pages 34-35
— Annual due diligence reviews
suppliers and partners during the year with updates
— Collaborative engagement
at Board meetings
They are critical to ensuring the effective
distribution of our products.
Regulators
Tatton Investment Management Limited
is regulated by the Financial Conduct
Authority (“FCA”).
— Ensuring that the business understands
and adopts the principles and rules of
the FCA Handbook
— Open and transparent communication
— Demonstrating good conduct
— Acting in our customers’ best interests
— Direct communication through
— Implemented the Senior Managers & Certification
— Information on our Risk Management
our compliance senior manager
Regime (“SM&CR”), designing our framework to
framework and processes is shown on
function holder
meet the standards of an enhanced firm
pages 28-29
— We always engage in an open
— The Board and Audit and Risk Committee receive
— Our Corporate Governance statement
and co-operative manner
regular compliance reports
is shown on pages 38-39
Tatton Asset Management plc Annual Report and Accounts 2020
13
“
Stakeholder engagement –
sustainable, balanced, equitable
”
Our stakeholders
Firms and Clients
Shareholders
People
Society
Their material issues
How we engage
Highlights and key decisions
Further links
IFAs and their clients are the central focus
— Performance of our funds and portfolios
of our business. The Group’s ongoing
— Transparency
success is built upon understanding our
— Quality of service
customers’ needs, both those of the firm
— Fair pricing
and of their clients, and responding with
products and support. As we understand
their needs, we will continue to anticipate
future requirements to allow IFAs to
continue focusing on their clients and build
their businesses.
— The business development
teams meet regularly with
current and potential firms to
develop a clear view of client
objectives and how these are
likely to evolve
— Breakfast briefings
— Roadshows
— Partner Forums
— Annual conference
— CPD Events
— Won significant long-term investment mandate
from Tenet, one of the UK’s largest Adviser
support Groups
— See our Business model on pages 16-17
— A summary of our proposition is shown
on pages 2-3
— Acquisition of Sinfonia funds extending our
— The Group’s KPIs are shown on pages
product range
26-27
— Expansion of our Blended fund range to five
— First flows into Bespoke Investment Service (“BPS”)
— Amalgamation of Consulting and Mortgages to
create a simplified IFA support services business
to better meet the needs of IFAs through an
integrated approach
— Read more about our Markets on pages
14-15
— The Group’s Strategy is detailed on
pages 18-19
We rely on the support and engagement
— Compelling business model and growth
of our shareholders to deliver our strategic
prospects
objectives and grow the business.
— Long-term sustainable business which
— Regular meetings are held
with our investors throughout
the year
— Delivered against our dividend policy with a total
full year dividend of 9.6p, an increase of 14.3%
(FY19: 8.4p)
— See our Business model on pages 16-17
— Our dividend policy is detailed on page 43
— The Group’s KPIs are shown on pages
Our shareholder base supports the long-
delivers attractive returns through
— Results presentations are held
— Adjusted Operating Profit of £9.076m, an increase
26-27
term strategy we take in the management
maintaining a progressive dividend policy
at the half and full year
of 24.2% (FY19: £7.308m)
— The Group’s Strategy is detailed on
of our business.
— High standards of governance
pages 18-19
The Board recognises that our people are
— Making a difference for our customers
central to the ongoing success of the firm.
— Having opportunities for learning, growth
The Group’s employees deliver the highest
and further development
quality of service to our customers.
— Being fairly rewarded for their contributions
We recognise the responsibility we have to
— Society has an interest in how we manage
wider society and other key stakeholders.
our clients’ assets and ensure good
We believe that demanding high levels of
stewardship over our investments
corporate responsibility is the right thing
— They have an interest in ensuring we
to do.
manage our business in a manner which
minimises our impact on the environment
and helps to benefit society
— Presentations by the Board to
discuss performance and the
Company’s strategic plans
— Regular management briefings
— We aim for high standards of
governance across the Group.
Our careful selection process
for Tatton’s ethical portfolios
prioritises funds that actively
engage with company managers
on ESG issues
— During the year the Group supported a range of
individuals through professional qualifications
— Further extension of the EMI and Sharesave
— See our Business model on pages 16-17
— See our Corporate Responsibility section
on pages 34-35
schemes
— Growth in our ethical portfolios
— Continued improvement and adoption of Corporate
— See our Business model on pages 16-17
— See our Corporate Responsibility section
Governance guidelines
on pages 34-35
External service
providers
Our external service providers include our
— Trusted partnerships
distribution partners (platforms, IFAs, fund
— Strong governance
managers) and our suppliers.
— Clear communications
— Regular service reviews
— Annual due diligence reviews
— Collaborative engagement
— We maintain ongoing relations with our key
suppliers and partners during the year with updates
at Board meetings
— Read more pages 34-35
They are critical to ensuring the effective
distribution of our products.
Regulators
Tatton Investment Management Limited
— Ensuring that the business understands
is regulated by the Financial Conduct
and adopts the principles and rules of
Authority (“FCA”).
the FCA Handbook
— Open and transparent communication
— Demonstrating good conduct
— Acting in our customers’ best interests
— Direct communication through
our compliance senior manager
function holder
— Implemented the Senior Managers & Certification
Regime (“SM&CR”), designing our framework to
meet the standards of an enhanced firm
— Information on our Risk Management
framework and processes is shown on
pages 28-29
— We always engage in an open
and co-operative manner
— The Board and Audit and Risk Committee receive
— Our Corporate Governance statement
regular compliance reports
is shown on pages 38-39
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020
14
Our market share
Market trends
Tatton continues to grow as its markets
expand. We see the potential opportunity
for the UK platform market increasing
to £1trn by 2023, with the share of
assets using DFM increasing. We are
in an unrivalled position to capitalise
on this opportunity.
1. GROWING STRENGTH OF THE IFA SECTOR
The IFA sector continues to grow in strength and the requirement
for advice could well increase due to the economic effects of
COVID-19. While the number of firms remains broadly static,
the demand for independent advice continues to increase as
the mass affluent understand the need for help when making
complex decisions around retirement planning, inheritance
planning and pension consolidation. COVID-19 saw advisers
adapt their advice process and there is opportunity for those
businesses that partner with them to enhance their new ways
to advise clients.
Tatton AUM
2018
2019
2020
£4.9bn £6.1bn
£6.7bn
2023
Predicted size: £1trn
Growth:
+101.8%
2019
Size: £495.5bn
Growth:
+1.0%
2018
Size: £490.5bn
Growth:
+9.0%
Total On-
platform
Funds Under
Management
(“FUM”)
t
e
k
r
a
m
r
u
O
11.7%
On-platform
DFM FUM as
a % of Total On-
platform FUM
12.6%
2018
2019
2023
1 Source: UK Fund Distribution: Model Portfolios on Platform, Platforum July 2018.
2 Source: UK Fund Distribution: DFM Distribution Dynamics, Platforum July 2019.
Tatton Asset Management plc Annual Report and Accounts 2020
15
Our response
We can benefit IFA businesses in two ways, firstly our platform
4. GROWING STRENGTH OF PLATFORM MARKET
The platform market is fast growing and becoming an
only investment portfolio management services provide cost
increasingly attractive method for managing investments.
and operationally effective investment propositions to allow
In 2019, there were £495 billion of assets under administration
the advisers to focus on building client relationships and advice.
on investment platforms2.
Secondly, we provide expert advice and support to the IFA
and their business on compliance with FCA regulatory policy,
providing a solid foundation from which they can profitably
grow their business.
2. CLIENTS ARE DEMANDING MORE CHOICE, VALUE FOR
MONEY AND FEE TRANSPARENCY
Clients want a choice of investment options so they can choose
what best suits their circumstances. In addition, they want a
clear understanding of how much they are paying so they can
determine which option provides the best value for money
given their specific circumstances.
Our response
Tatton is an award-winning investment manager known for its
market leading, low cost, discretionary investment platform
portfolio management service for the clients of IFAs.
Following the FCA’s Investment Platforms Market Study in
March 2019, it should become easier for consumers to choose
or switch platforms through clearer information regarding
charging structures and the reduction or removal of exit fees.
Our response
Tatton’s business model is founded on a platform agnostic
discretionary portfolio management service as a centralised
investment proposition for IFAs’ clients. Tatton’s investment
portfolios are available across 14 major platforms, increasing
access to cost effective discretionary asset management.
5. IMPACT OF REGULATORY CHANGE
The market demand for financial advice is growing, however,
the ability of IFAs to meet this demand has been challenged
partly due to increased regulatory pressures, such as MiFID II
and General Data Protection Regulation (“GDPR”). The need
Clients benefit from gaining access to full discretionary investment
to comply with increasing regulation, such as SM&CR, means
management, with clear pricing and a wide range of strategy
that IFAs face significant costs and resource challenges.
options to meet different client needs, including a focus on the
growing appetite for ESG products. IFAs benefit by being able
to offer their clients fully transparent investments and pricing,
at a market leading cost, whilst retaining complete control of
client relationships and the ability to administer clients’ portfolios
through existing platform arrangements.
Our response
Within our Paradigm division, we have the expertise and capabilities
to provide support, training and other consultancy services
to our existing and new firms through adapting efficiently to
new regulation. All the Group businesses support and facilitate
a better, more efficient supply of financial advice to satisfy
Tatton’s commitment to fee transparency, highly frequent
increasing consumer demand for professional advice.
investment communications and platform independence helps
clients understand the services they are paying for and attach
value to it. Similarly, its pure investment, platform agnostic
business model as well as investment and communication
standards builds trust with advisers which leads to lasting
business relationships.
3. MARKETPLACE DISRUPTION
COVID-19 has provided the most significant level of market
6. APPETITE FOR LENDING
The prime lending market had seen increasing volumes as a level
of confidence returned to the housing market post-election.
However, the impact of COVID-19 has since been felt, and with
lenders unable to survey and value properties, combined with
severe administrative burdens from lockdown measures and
payment holidays, the house purchase market significantly
slowed. Intermediaries have turned their focus to low LTV re-
turbulence since the financial crisis of 2008. Whilst investment
mortgaging, product transfers and mortgage insurance and as
markers recover, such live disrupting episodes can significantly
lockdown measures ease and viewings, valuations and surveys
affect consumer confidence and alter both their short and long
can take place again, the market is stabilising and is set to
term attitudes towards savings and investment.
return to normality over a period of time.
Our response
The most effective measure to reassure clients during periods
Our response
As our members feel the effects of COVID-19, we continue
of market turbulence is to provide relevant and up to date
to support them through online support, webinar and video
communications. From an investment management perspective
updates, CPD content and assistance with digital strategies.
we actively manage portfolios to ensure they remain aligned
Throughout the year, we have increased our membership month
to clients’ risk and return objectives. The close integration
on month, whilst adding new lenders and providers to our
of both communication and management has the effect of
panels strengthening the quality and breadth of our proposition.
reassuring clients and advisers of our highest standards of
Through a focus on service excellence and consistent member
portfolio stewardship during times of crisis and leads to an
recruitment we have been able to outperform the market these
avoidance of irreversible client side market timing errors that
past three years and this strategy means we can maintain this
are driven by fear of the unknown and the natural urge to act.
going forward.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 16
How we create value
Client
financial goals
— Investment goals
— Length of investment
— Risk appetite
Paradigm
Mortgages
CLIENT MORTGAGES AND
INSURANCE
— 1,544 member firms
— £9.86bn gross lending
IFA
We work hard to manage
the investments of our IFAs’
clients and provide support
to help firms to grow their
clients’ wealth and focus on
building relationships.
Tatton
CLIENT INVESTMENT PRODUCTS
— 595 firms
— 66,100 client accounts
— £6.651bn AUM
— 29 risk rated portfolios across
a range of strategies across
14 platforms
Our business model
Our business model remains the same.
We succeed because we work closely
with IFAs to understand what they and
their clients need; this also helps us to
develop our market insight to support
the future development of the overall
Group offer.
Our inputs
RELATIONSHIP WITH IFAS
We provide high quality investment
management, consultancy and
mortgage-related services which
empower IFAs to support their clients.
We establish long-lasting relationships
to support IFAs in building bigger,
better businesses.
TALENTED PEOPLE
We recruit, develop and retain high
calibre people with relevant expertise
to deliver a high-quality service and
implement our Group strategy.
REGULATORY KNOWLEDGE
Our Paradigm Consulting team has vast
regulatory experience and technical
knowledge. We offer first class support
to IFAs where there is increased
demand for advice in an increasingly
regulated industry.
CAPITAL ALLOCATION
Capital is retained for both regulatory
requirements and investment needs.
The Board considers possible
acquisition opportunities which are
complementary, strategically aligned to
the existing model, earnings enhancing
and accretive to shareholder value.
TECHNOLOGY
The Group invests in technology through
both operational and capital expenditure.
Investment priorities are determined
where technology supports the Group in
delivering its long-term growth strategy.
BRAND RECOGNITION
The recognition of our brand has
continued to improve. The Group
invests in cost-effective marketing
through direct marketing and events,
whilst raising brand awareness through
a combination of PR and referrals.
Tatton Asset Management plc Annual Report and Accounts 2020 17
Our outputs
SHAREHOLDERS
The Group has a cash-generative
business model, significant levels of
recurring revenue and strong profit
AUM
£6.651bn
margins in a growth market. The value
Adjusted Operating Profit*
£9.076m
* Alternative performance measures
are detailed in note 23.
generated from the business is
issued to shareholders as dividends
or reinvested in the business to drive
future growth. We have a progressive
dividend policy – see page 33.
CLIENTS
We help clients achieve their long-
term goals through providing a
quality service and by managing their
wealth through our range of funds
and portfolios, which are flexible,
responsive and cost effective.
IFAS
We provide IFAs with support in an
increasingly regulated environment
and access to whole of market lenders
and distributors.
EMPLOYEES
Our employees support our clients and
deliver shareholder value. In return we
offer our employees challenging and
rewarding careers where they can learn
and develop.
SOCIETY
The services provided by the Group to
IFAs and their clients allow individuals
to save and invest with confidence.
The Group pays its taxes in full and on
time and we conduct our tax affairs in
a clear, fair and transparent way.
Paradigm
Consulting
COMPLIANCE ADVICE AND
SUPPORT TO IFAS
— 394 member firms
— Over 1,110 IFAs
Our business model is
underpinned by:
— Our Strategy, pages 18-19
— Our Risk Management
Framework, pages 28-29
— Our high standards of
Corporate Governance,
pages 38-39
— How we engage with Our
Stakeholders, pages 12-13
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 18
Our strategy for growth
The Group continues to deliver increasing AUM, new
customer acquisition and improving financial results
against the backdrop of a complex and challenging
market environment.
respective markets, and we continue to develop and reinforce
our business. To augment our organic growth we will look to
make acquisitions that will enhance earnings and contribute
to our broad strategic goals and the Group remains optimistic
We are focused on the provision of products and services that
an IFA requires to service its clients and continue to invest in
both people and technology that will enhance and enable our
business model. The Group is strategically well positioned in its
about its long-term prospects.
Our strategy
1
Deepen the IFA
relationships to
grow AUM
2
Organic growth –
Increase share of our
respective markets
3
M&A activity
remains part of
the Group’s
growth strategy
4
5
Migration of asset
“back books”
Strategic
Partnerships
Description
Strengthening existing IFA/client
Further penetrate our markets
We continue to look to complement
Existing clients using Tatton’s DFM
Agreements put in place to develop
relationships and building new
adding new firms in Tatton and new
our strong organic growth
service have a back book of assets
strategic partnership/alliances as
long-term relationships, delivering
members in Paradigm Consulting/
through targeted acquisitions
that we look to migrate over to
an additional distribution channel
sustainable value for both the IFA/
Mortgages
that will fit strategically and be
Tatton in the medium term
to increase assets on the Tatton
clients and shareholders
earnings enhancing
DFM service
2020 Achievements
— AUM has increased by 9.6%
— New firms and new members
— This year we made our first,
— This year we developed and
— In June 2019 we signed a
to £6.651bn from £6.068bn in
increased across all parts of
relatively modest, acquisition.
migrated back books with a total
strategic partnership with Tenet
the prior year across all firms
the business
In September we acquired 5 risk
value of £125m
and clients
— Tatton +33.7% to 595 firms
— The number of firms in the year
— Paradigm Consulting +1% to 394
increased 33.7% to 595 adding
— Paradigm Mortgages +10.9% to
150 new relationships
1,544
rated Sinfonia funds with a total
AUM value of £135m
Group one of the UKs largest
financial advisory businesses
2021 Objectives
— We continue to invest in account
— Maintain new firm growth in
— Our ambition is to grow both
— We maintain a pipeline of back
— Continue to develop existing
management both external and
Tatton while also developing
organically but also through
book opportunities. As we head
strategic alliances and develop
internal to ensure we are well
Tenet firm relationships
making strategic acquisitions
into the new year, we will look
new relationships that align
placed to service the IFA needs
— Maintain growth in Paradigm
that are earnings enhancing
to execute the migrations while
objectives and deliver the best
— Further broaden our proposition
Consulting and Mortgages
and have the potential to fit
developing further opportunities
outcomes for the client and IFA
and service portfolio
through further marketing and
our wider strategic objectives.
to add to the pipeline
— Maintain the market leading
account management
service cost proposition
We will continue to evaluate
opportunities as and when
they arise
Our vision is:
To be the partner of choice for all the needs of Independent Financial
Advisers, supplying the tools and investment management that allow them
to meet the needs of their clients whilst growing their businesses too.
Tatton Asset Management plc Annual Report and Accounts 2020 19
Our strategy
1
2
Deepen the IFA
relationships to
grow AUM
Organic growth –
Increase share of our
respective markets
3
M&A activity
remains part of
the Group’s
growth strategy
4
Migration of asset
“back books”
5
Strategic
Partnerships
Description
Strengthening existing IFA/client
Further penetrate our markets
We continue to look to complement
Existing clients using Tatton’s DFM
Agreements put in place to develop
relationships and building new
adding new firms in Tatton and new
our strong organic growth
service have a back book of assets
strategic partnership/alliances as
long-term relationships, delivering
members in Paradigm Consulting/
through targeted acquisitions
that we look to migrate over to
an additional distribution channel
sustainable value for both the IFA/
Mortgages
that will fit strategically and be
Tatton in the medium term
to increase assets on the Tatton
clients and shareholders
earnings enhancing
DFM service
2020 Achievements
— AUM has increased by 9.6%
— New firms and new members
— This year we made our first,
— This year we developed and
— In June 2019 we signed a
to £6.651bn from £6.068bn in
increased across all parts of
relatively modest, acquisition.
migrated back books with a total
strategic partnership with Tenet
the prior year across all firms
the business
In September we acquired 5 risk
value of £125m
and clients
— Tatton +33.7% to 595 firms
— The number of firms in the year
— Paradigm Consulting +1% to 394
increased 33.7% to 595 adding
— Paradigm Mortgages +10.9% to
150 new relationships
1,544
rated Sinfonia funds with a total
AUM value of £135m
Group one of the UKs largest
financial advisory businesses
2021 Objectives
— We continue to invest in account
— Maintain new firm growth in
— Our ambition is to grow both
— We maintain a pipeline of back
— Continue to develop existing
management both external and
Tatton while also developing
organically but also through
book opportunities. As we head
strategic alliances and develop
internal to ensure we are well
Tenet firm relationships
making strategic acquisitions
into the new year, we will look
new relationships that align
placed to service the IFA needs
— Maintain growth in Paradigm
that are earnings enhancing
to execute the migrations while
objectives and deliver the best
— Further broaden our proposition
Consulting and Mortgages
and have the potential to fit
developing further opportunities
outcomes for the client and IFA
and service portfolio
through further marketing and
our wider strategic objectives.
to add to the pipeline
— Maintain the market leading
account management
service cost proposition
We will continue to evaluate
opportunities as and when
they arise
Our vision is:
To be the partner of choice for all the needs of Independent Financial
Advisers, supplying the tools and investment management that allow them
to meet the needs of their clients whilst growing their businesses too.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 20
Top performing funds with the lowest fees
“Embedding Tatton in our business
has been one of the most rewarding
and successful strategies that we
have ever implemented in the history
of our company!”
Howard Lee, Managing Director
Burgess & Lee
“Tatton has certainly moved our
business forward. The regular updates
and communication during COVID-19
have helped our clients remain calm
during a difficult period and improved
our client engagement.”
David Carter, Managing Director
CMS Financial Management Limited
Tatton lead the market in Discretionary Fund Management
(DFM) IFAs can access 29 investment portfolios across
14 platforms.
The Tatton business continues to innovate and support the
needs of IFAs in a changing world.
UM grew to
£6.651bn
+9.6%
(2019: £6.068bn)
Firms utilising our
Discretionary Fund
Management services grew to
595
+33.7%
(2019: 445)
Number of
accounts increased
66,100
+13.0%
(2019: 58,500)
Tatton Asset Management plc Annual Report and Accounts 2020
21
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 22
Tatton Asset Management plc Annual Report and Accounts 2020 23
Industry leading knowledge and technical support
“ Over the last 20 years
we have used various
compliance providers
and I can honestly
say that Paradigm’s
Compliance services
are the best we
have used.” Paul Sands, Managing Director
Sands Financial Management
Paradigm has unrivalled expertise in providing compliance services
to a broad range of firms. We understand the difficulties facing
firms in an industry of increasing regulation and how it can affect
their business.
Paradigm Consulting
members increased
394
+1.0%
(2019: 390)
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 24
Powering the UK’s leading financial advisers
“Paradigm Mortgage
Services excel in
their service to us:
an extensive panel,
a friendly and
approachable team,
and comprehensive
support to our
business.” Robin Fawke, Partner,
Hawke Financial Services LLP
Paradigm provides a comprehensive mortgage offering
to directly authorised firms, including a whole of
market lending panel with market-leading procuration
fees, a highly commended helpdesk and regular
CPD events.
Paradigm Mortgages increased
Number of firms
gross lending to
increased to
£9.86bn
+17.5%
1,544
+10.9%
(2019: £8.39bn)
(2019: 1,392)
Tatton Asset Management plc Annual Report and Accounts 2020 25
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 26
Key Performance Indicators
Financial KPIs
Group revenue
(£m)
£21.4m
+22.0%
Adjusted Operating Profit*
(£m)
£9.1m
+24.2%
Fully diluted adjusted
EPS* (p)
12.0p
+19.8%
Proposed final dividend
(p)
Return on Capital
Employed (%)
6.4p
+14.3%
48.8%
+1.0%
4
.
1
2
1
.
9
.
0
2
1
.
5
7
1
.
5
5
1
3
7
.
.
5
6
.
0
0
1
1
.
9
4
6
.
6
5
.
4
4
.
1
.
8
4
.
8
7
4
.
8
8
4
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Description
Description
Description
Description
Description
Revenue generated
Adjusted Operating
Adjusted profit after tax*
Final proposed dividend
Return on Capital
by the Group for the
Profit* generated by
divided by the weighted
per share.
financial year.
the Group.
Comment
Comment
average number of fully
diluted ordinary shares.
Revenue has grown by
The high level of
Comment
Comment
Dividends represent an
important part of return
22.0% driven by the
recurring revenue
An important measure of
to shareholders.
increase in AUM and
and low level of
performance as it shows
number of firms receiving
operational gearing
profitability reflecting
the Tatton and Paradigm
has delivered increased
the effects of any future
services. In addition there
profits and maintains
potential new share
A final proposed
dividend of 6.4p gives a
full year dividend of 9.6p.
has been a change to the
strong margins.
issuance and determining
Target
Employed is calculated
by dividing the Group’s
Adjusted Operating
Profit* by its capital
employed (total assets
less current liabilities).
Comment
The Group is capital light
and makes efficient use
of the capital employed
VAT treatment of Tatton’s
services, see note 6.
Adjusted Operating
Profits* increased by
the value delivered
to shareholders.
24.2% to £9.1 million
Strong growth across
delivering Adjusted
the Group has delivered
Operating Profit* margin
strong growth in fully
Continue to grow
to generate strong
dividends per share in
returns and create value
line with the Group’s
for our shareholders.
dividend policy, detailed
on page 43.
of 42.5%.
diluted adjusted EPS*,
up 19.8% to 12.00p.
Target
Continue to grow EPS
through the scalability
of the business
model and continued
strategic execution.
* Alternative performance measures are detailed in note 23.
Tatton Asset Management plc Annual Report and Accounts 2020
27
Non-financial KPIs
AUM
(£bn)
£6.7bn
+9.6%
Asset net inflows
(£bn)
£1.1bn
+2.1%
Tatton firms
Paradigm Consulting
595
+33.7%
394
+1.0%
.
7
6
1
.
6
1
.
1
1
.
1
0
.
1
5
9
5
0
9
3
4
9
3
8
6
3
.
9
4
5
4
4
1
4
3
Paradigm Mortgages
lending (£bn)
£9.9bn
+17.5%
9
9
.
4
8
.
9
6
.
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Description
Description
Description
Description
Description
Total AUM at the end of
Strong growth in new
Number of investment
The year end
Value of gross lending by
the year.
Comment
clients has helped drive
management firms at the
number of Paradigm
Paradigm firms.
increase in net inflows.
end of the financial year.
Consulting members.
Comment
AUM has increased by
Comment
Comment
Comment
Strong growth in new
£0.6 billion or 9.6% this
Despite challenging
Strong growth in the
Steady growth in new
members has helped
year, with net inflows of
market conditions during
number of firms using the
members maintained.
drive growth throughout
£94 million per month on
the year, net inflows
Tatton DFM service.
the business.
average. AUM reached a
for the year have been
peak of £7.758 billion on
strong at £1.1 billion.
21 February 2020 before
the closing balance
of AUM was impacted
by a negative market
performance of 14.3%
towards the end of the
financial year due to
market falls related to the
COVID-19 pandemic.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020
Risk management
Effective risk management is essential for the financial
strength and resilience of the Group. The risk management
framework ensures that the business identifies existing
and emerging risks to delivering the Group strategy and
continues to develop appropriate mitigation to protect
our stakeholders.
RISK MANAGEMENT FRAMEWORK
The Board is ultimately responsible for the Group’s risk
management and internal control systems, and for determining
the Group’s risk appetite. A risk management framework has
been developed by the Board to ensure that all potential areas
of risk to the business are identified, assessed and regularly
reviewed and monitored. We continue to focus on embedding
the ownership of risks within relevant divisions and teams whilst
ensuring that the appropriate oversight and escalation process
is in place. This is delivered through moving towards a three
lines of defence model (see opposite).
We carry out a robust assessment of the principal risks facing
the Group, including those that would threaten our business
model, future performance, solvency or liquidity. We categorise
these risks into risk groups covering potential impacts to clients,
revenue, capital and reputation. The three risk groups are:
— Industry risks
— Operational risks
— Financial risks
PHILOSOPHY AND CULTURE
The Board encourages a strong risk culture throughout the
28
BOARD
EXECUTIVE MANAGEMENT
RISK MANAGEMENT
A U D I T A N D R I S K
C O M M I T T E E
S E N I O R
M A N A G E M E N T
C O M P L I A N C E
F U N C T I O N S
those risks. It also ensures that the principal risks of the Group
are considered.
The Audit and Risk Committee met four times in the year and
business. It believes an embedded risk culture enhances the
its members are:
effectiveness of risk management and decision making across
the Group. The Board is responsible for setting the right tone
and, through our senior management team, encouraging
appropriate behaviours and collaboration on managing risk
across the business.
This strong risk culture ensures that employees are able to identify,
assess, manage and report against the risks the Group faces.
The Group has a whistleblowing procedure where employees
can raise concerns anonymously either internally or externally.
GOVERNANCE
Our internal governance structure includes departmental
management reviews with dedicated risk registers, where
— Chris Poil, Chairman (and Non-Executive Board Director)
— Roger Cornick (Non-Executive Chairman of the Board)
— Other Executive Directors and senior management are invited
to attend as appropriate, including:
— Paul Hogarth (CEO)
— Paul Edwards (CFO)
— Helen O’Neill (COO of Tatton Investment Management)
RISK APPETITE
The Audit and Risk Committee regularly reviews the Group’s
risk registers and mitigating processes to ensure that these
are considered acceptable to the risk appetite and attitude
of the Board.
each department is responsible for overseeing key investment,
The Board’s strategic objectives and expectations are that the
operational and corporate functions. The Group’s Audit and
business will continue to grow; however, the Board remains
Risk Committee serves as the focal point for risk management
committed to having a balanced appetite for risk, ensuring
activities, reviewing and challenging specific risks to the Group,
that our internal controls mitigate risk to appropriate levels.
and reviewing the effectiveness of frameworks in place to manage
Tatton Asset Management plc Annual Report and Accounts 2020 29
Risk management processes
RISK REPORTING
Identified risks that have a sufficiently high likelihood of potential
material impact on the Group are reflected in the Group Risk
Three lines of defence
1 FIRST LINE OF DEFENCE
Risk management within the business
Business operations and senior management are
Management Dashboard, to ensure they receive an appropriately
responsible for identifying and managing risks by
high level of senior management and Board attention. The Board
developing and maintaining effective internal controls
takes action where these risks are deemed to be outside the
to mitigate risk.
Group’s risk tolerance.
2 SECOND LINE OF DEFENCE
The following section shows our assessment of the top risks
that we face, along with how the significance of the risk has
Risk oversight and challenge
The Audit and Risk Committee, the Board and those
changed during the year. All our significant risks fall into the
involved in compliance functions maintain a level of
industry, operational and financial categories. While the named
independence from the first line. These Committees
top risks have not changed since last year, these risks are not
and other functions provide oversight and challenge.
static; new and emerging risks are considered and assessed by
the Board throughout the year for inclusion in this list.
3 THIRD LINE OF DEFENCE
Independent assurance
The Group does not have an internal audit function,
however, there are other external bodies which provide
some independent assurance. Third party companies
are used for testing areas such as IT Security, Human
Resources, and Health and Safety. Regulators set
requirements for specific controls in our regulated entity,
Tatton Investment Management Limited.
Regular
Board
reviews
Departmental
reviews
Executive
risks
Principal
risks identified
and reported
to Board
Update
to risk
registers
Mitigating
action
agreed
4. Report
1. Identify
Risk
management
philosophy
and culture
3. Monitor and
control
2. Assess
Existing
and
emerging
risks
Operational
business
reviews
Review
by Audit
and Risk
Committee
Departmental
reviews
Risk-
scoring for
likelihood
& impact
Allocate
each risk
to a named
owner
The Board and senior management are
actively involved in a continuous risk
assessment process as part of our risk
management framework. Day to day,
our risk assessment process considers
both the impact and likelihood of
risk events which could materialise,
affecting the delivery of the strategic
goals and the annual business plans.
A top-down and bottom-up approach
ensures that our assessment of key
risks is challenged and reviewed on
a regular basis. The Board and Audit
and Risk Committee receive regular
reports and information from senior
management, operational business units
and compliance functions.
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 30
Key
Risk increase
Risk decrease
No change to risk
IMPACT
MITIGATION
— Downturns in the market and resultant
falls in AUM or other income will have a
negative impact on the Group’s revenue
and profit
— The Group has an experienced
investment management team with a
strong track record
— Investment strategies are continually
monitored by the Investment Committee
with appropriate governance
and oversight
— A prudent approach to investment
strategy means that a significant
proportion of AUM is made up of lower
risk appetite portfolios which typically
have a market fall correlation of less
than 50%
— Loss of competitive advantage such
— Broad service offering, providing
that AUM and client number targets are
adversely impacted. This would have a
negative impact on profitability
— Regulatory censure and/or fine
— Related negative publicity could reduce
customer confidence and affect ability to
generate net inflows
— Poor conduct could have a negative
impact on customer outcomes,
impacting the Group’s ability to achieve
strategic objectives
— Regulatory related complaints and claims
from third parties and clients could
have an adverse impact on the Group’s
financial condition
diversified revenue streams
— Highly competitive pricing points across
a range of services
— Deep industry experience and strong
client relationships resulting in a loyal
customer base
— Strong brand and excellent reputation
— Regulatory advice is a core business
stream for the Group, meaning that
a strong culture of compliance exists
throughout the Group
— The Group delivers regulatory and
compliance support through dedicated
compliance teams and systems
— The Group’s strong financial position
provides a safeguard should changes to
regulatory capital requirements occur
— Uncertainty in the market or adverse
— Geographical diversification of all client
impact on the UK economic performance
may reduce customer transactional
activity and/or cause the value of AUM
to reduce
investment portfolios
— Savings and investment in pensions and
other wrap products may reduce, so
reducing AUM and the Group’s revenue
— Broad service offering, providing
diversified revenue streams
Principal risks
1. Industry risks
RISK
Adverse macro-economic, political
and market factors
Economic, political and market forces,
particularly impacting the UK equity
markets, which are beyond the Group’s
control could adversely affect the value
of AUM from which the Group derives
revenues. This could be sudden in cases
such as COVID-19 which causes significant
volatility in global markets and severe
economic weakness undermines confidence.
Changing competitive environment
The market environment in which the Group
operates is highly competitive with fast
changing characteristics and trends.
Regulatory risk
Changes to legislation and regulation, or
changes to interpretation and enforcement
of existing legislation and regulation, may
adversely impact the Group’s operations and
competitive advantages.
Termination of the UK’s European
Union membership
The UK exiting the European Union could
have a material adverse impact on the fiscal
and legal framework in which the Group
operates, and impact the UK’s economic
performance in the long term.
Change to UK tax law
Changes to UK tax law could adversely
impact the performance and attractiveness
of long-term saving and investment through
pensions and other wrap products.
2. Operational risks
Failure of a third party platform provider
The Group manages its investments
through third party platform providers.
Operational failure or cessation of trade
of a major platform could have a material
adverse impact on the Group’s reputation,
operations, financial performance
and growth.
— Negative impact on customer outcomes
due to website unavailability, delays in
receiving and/or processing customer
transactions or interruptions to
settlement and reconciliation processes
— Financial impact through increased
operational losses
— Regulatory fine and/or censure
— Due diligence is performed when
selecting key suppliers
— The Group is covered by third party
indemnities for business-critical services
— Third party relationships are subjected
to a high level of ongoing oversight,
including due diligence and a risk-
based approach, from the Group’s
internal compliance function.
This gives assurance that third party
platform providers meet the Group’s
high standards
Tatton Asset Management plc Annual Report and Accounts 2020 31
Key
Risk increase
Risk decrease
No change to risk
RISK
IMPACT
MITIGATION
Failure of investment strategy
The risk that investment strategies fail to
maintain an acceptable level of performance,
particularly in times of significant market
volatility such as due to the impact of
COVID-19, resulting in a decline in revenues
and in the value of assets from which
revenues are derived.
Loss or failure of key IFA client
The Group has several major IFA clients.
A change in relationship or termination
of business with any of these, and the
Group being unable to replace them in
a timely fashion, could have a material
adverse impact.
Failure to recruit and retain
quality personnel
The Group operates in a competitive market
for talent and failure to recruit and retain
key personnel could adversely impact the
Group’s operational performance.
— Negative impact on achievement of AUM
— The Group has an experienced
and client number strategic targets
— Poor client outcomes that also prevent
the achievement of our growth targets
— Reputational damage
investment management team with
a strong track record
— Investment strategies are continually
monitored by senior management, the
Investment Committee and the Board
— Negative impact on achievement of
AUM, Operating Profit and client number
strategic targets
— Reputational damage
— Inability to service client needs
— Reputational damage
— The Group has a clearly defined business
development strategy which continues to
enhance the Group’s service offering
— Client engagements are proactively
managed through dedicated client
managers who have in-depth knowledge
of the IFA industry and expert regulatory
and compliance knowledge
— Recruitment programmes are in place to
attract suitable staff
— The success of the Group’s listing has
increased our ability to attract and retain
high calibre candidates
— Staff share schemes are now in place to
incentivise staff and encourage long-
term retention
System failure, cyber security and
data protection
The risk that operations are impacted or
that data loss or data breach occurs due
to system error, malfunction or malicious
external breach. In addition, there is the risk
of heightened market abuse and financial
fraud as individuals take advantage of the
current COVID-19 situation.
— Related negative publicity could damage
customer and market confidence in the
business, affecting our ability to retain
and attract new customers
— Information security breaches could
— Experienced in-house team of IT
professionals supported by reputable
and established third party suppliers
— IT disaster recovery procedures in place
— Data Protection Officer appointed
result in fine/censure from regulators,
the Information Commissioner’s Office
and FCA
for GDPR
— Penetration testing conducted regularly
— Increased awareness and training
of employees
3. Financial risks
Counterparty credit risk
A counterparty to a financial obligation may
default on repayments, particular if under
financial stress due to COVID-19.
— Unintended market exposure
— Customer detriment
— Increased future capital requirements
Liquidity risk
The Group may be unable to meet financial
liabilities as they become due because of
a shortfall in cash or other liquid assets or
inability to obtain sufficient funding.
— Reputational damage
— Potential customer detriment
— Financial loss
— Unable to meet obligations as they
fall due
Bank default
The risk a bank could default.
— Financial loss
— Unable to meet obligations as they
fall due
Concentration risk
Risk arising from lack of diversification in
business activity or geography.
— Over-reliance on one business activity
could lead to financial underperformance
— The Group trades only with reputable,
credit worthy third parties
— Receivable balances are reviewed
regularly for non-collection and any
doubtful balances are provided against
— Cash-generative business
— Appropriate banking facilities in place
— Active cash flow forecasting and liquidity
management to ensure availability of
liquid funds at short notice
— The Group maintains a cash surplus
above regulatory and working
capital requirements
— The Group only uses banks with strong
credit ratings
— Banking relationships are
reviewed regularly
— Broad range of business services offered,
providing diversified revenue streams
— Active recruitment is ongoing within the
Group’s sales functions in order to grow
AUM across a broader client base
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 32
Chief Financial Officer’s Report
GROWTH AND LONG-
TERM VALUE CREATION
P A U L E D W A R D S Chief Financial Officer
OVERVIEW
I am pleased to report that the Group has
continued to make good progress and has
delivered another year of double-digit growth
in both revenue and adjusted operating profits*
with strong performances from both Tatton
and Paradigm.
RECORD REVENUE AND PROFITS
Revenue – Group reported revenue increased by 22.0%
to £21.369 million (2019: £17.518 million) and includes
£1.2m relating to the change in the VAT treatment
of Tatton’s investment management services which
is explained below.
Tatton revenue increased 27.2% to £15.924 million
(2019: £12.521 million) supported by the continued
growth of AUM, which ended the year at £6.651 billion
(2019: £6.068 billion), an increase of 9.6% despite
the impact of COVID-19 related market deterioration
which occurred towards the end of the financial year.
The growth of AUM was driven by strong net inflows in the year
at £1.129 billion, an average of £94.1m per month.
Paradigm continues to make progress following the amalgamation
of Paradigm Mortgages and Paradigm Consulting which was
announced at the interim period, with revenue increasing 9.6% to
£5.426 million (2019: £4.949 million). Mortgages member firms
increased to 1,544 (2019: 1,392) driving an increase of 17.5% in gross
lending from completions to £9.86 billion (2019: £8.39 billion),
Consulting members increased to 394 (2019: 390).
Profit – The Group delivered adjusted operating profit* of
£9.076 million (2019: £7.308 million), an increase of 24.2%
and adjusted operating profit margin increased to 42.5%
(2019: 41.7%). Total Group operating profit was £10.302 million
(2019: £5.925 million) after crediting separately disclosed items
of £1.226 million.
Tatton continues to make investments which underpin our
growth, including updating IT systems and the new online portal.
In the second half of the year we have added new resource,
including both investment personnel and sales and marketing
resource to help drive and support future growth; accordingly,
adjusted operating profit* increased 20.9% to £8.910 million
(2019: £7.371 million) and its margin slightly decreased to 56.0%
(2019: 58.9%). Tatton’s continued strong growth has ensured it
is now the largest part of the Group, contributing 74.5% of the
revenue and 98.2% of the adjusted operating profit* (see note
4), a trend that is expected to continue. Paradigm’s adjusted
operating profit* contributed £2.128 million (2019: £1.818 million),
with margin of 39.2% (2019: 36.7%).
Return on capital employed is 48.8% (31 March 2019: 47.8%).
The Group remains capital light and makes efficient use of the
capital employed to generate strong returns and create value
for our shareholders.
CHANGE IN VAT TREATMENT
During the year, the Group has agreed with HMRC that Tatton’s
supplies of discretionary fund management services in respect
of model investment portfolios are exempt from VAT. As a result,
the Group has received a VAT refund relating to the period from
May 2015 to March 2019 of £1.7m. The refund has been recognised
as exceptional income in the current year results, offset by
professional fees of £0.1m. The current year impact of £1.2m has
been recognised within revenue, and also an increase in costs
of £0.2m relating to the irrecoverable element of input VAT.
* Alternative performance measures are detailed in note 23.
Tatton Asset Management plc Annual Report and Accounts 2020 33
Group revenue (£m)
AUM (£bn)
£21.4m
+22.0%
£6.7bn
+9.6%
4
.
1
2
.
5
7
1
.
5
5
1
.
7
6
1
.
6
.
9
4
Return on capital
employed (%)
48.8%
+1.0%
1
.
8
4
.
8
7
4
.
8
8
4
2018
2019
2020
2018
2019
2020
2018
2019
2020
SEPARATELY DISCLOSED ITEMS
Separately disclosed items include the cost of share-based
payments of £0.108 million, amortisation of customer relationship
intangible assets of £0.060 million, £0.097 million of acquisition-
related fees, £0.097 million of restructuring costs and a credit
relating to the treatment of VAT of £1.588 million, see note 6
to the Group financial statements. Although some of these
items may recur from one period to the next, operating profit
has been adjusted for these items to give better clarity of
the underlying performance of the Group. The Alternative
Performance Measures (“APMs”) are consistent with how the
business performance is planned and reported within the internal
management reporting to the Board. Some of these measures
are also used for the purpose of setting remuneration targets.
EARNINGS PER SHARE
Basic earnings per share increased 72.4% to 14.98p (2019: 8.69p).
Adjusted earnings per share* increased 19.5% to 13.13p
(2019: 10.99p) and adjusted fully diluted earnings per share
increased 19.8% to 12.00p (2019: 10.02p).
CASH FLOW
The Group continued to see healthy cash generation. Net cash
generated from operating activities before exceptional items
was £9.831 million (2019: £8.011 million), 108.3% of adjusted
operating profit*. Exceptional items totalled £1.394 million and
net cash generated from operating activities was £8.947 million
(2019: £6.136 million). There was an increase in the level of income
tax paid in the year as Tatton now pays its quarterly instalments
earlier in line with the requirements for “very large” companies.
Tax paid in the year was £2.278 million (2019: £1.366 million) and
dividends paid in the year totalled £4.9 million (2019: £4.0 million).
The Group made intangible and tangible asset investments of
£0.565 million and ended the year with cash on the balance
sheet of £12.757 million (2019: £12.192 million).
DIVIDENDS AND CAPITAL ALLOCATION
The Board is recommending a final dividend of 6.4p. When added
to the interim dividend of 3.2p this gives a full year dividend of
9.6p. This proposed dividend reflects both our cash performance
in the period and our underlying confidence in our business.
Dividend cover (being the ratio of earnings per share before
exceptional items and share-based payment charges) is 1.9
times. If approved at the Annual General Meeting the final
dividend will be paid on 28 August 2020 to shareholders on
the register on 17 July 2020. Our objective is to maximise long-
term shareholder returns through a disciplined deployment of
cash. To support this, we have adopted a cash allocation policy
that allows for: investment in capital projects that support
growth; regular returns to shareholders from our free cash flow;
acquisitions to supplement our existing portfolio of business;
and an efficient balance sheet appropriate to the Company’s
investment requirements.
STATEMENT OF FINANCIAL POSITION
The Group continues to strengthen its balance sheet and net
assets increased to £17.778 million (2019: £15.288 million).
Tangible and intangible assets (excluding goodwill) totalled
£2.529 million (2019: £0.602 million), increasing in the year due
to recognition of a customer relationships intangible asset of
£1.196 million on the acquisition of Sinfonia and the adoption of
IFRS 16, with further increases due to investments made in both
systems and infrastructure. Goodwill totalled £6.254 million
(2019: £4.917 million), the increase again due to the acquisition
of Sinfonia in September 2019.
NEW REPORTING STANDARDS
The Group has adopted IFRS 16 ‘Leases’ with effect from 1 April
2019 using the modified retrospective approach, under which
method prior year comparatives have not been restated, with
the right-of-use asset equal to the lease liability at transition
date. The net impact on the balance sheet is a reduction in net
assets of £0.1m at March 2020 and there is no material impact
on the Group’s KPIs. Further details and the impact are set out
in note 2.5 in the financial statements.
RISK MANAGEMENT AND THE YEAR AHEAD
Risk is managed closely and is spread across our businesses
and managed to individual materiality. Our key risks have been
referenced in this Annual Report primarily on pages 30 to 31.
We choose key performance indicators that reflect our strategic
priorities of investment, growth and profit. These KPIs are part
of our day to day management of the business and in the year
ahead we will focus on growth and value creation. In this way
we aim to deliver continued value to shareholders.
The Strategic Report found on pages 1 to 35 has been approved
and authorised for issue by the Board of Directors and signed
on their behalf on 15 June 2020 by:
Paul Edwards
Chief Financial Officer
Financial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020
34
Corporate Responsibility
POSITIVE
ACTION
The Group ensures that social, environmental and ethical
considerations are built into the Group’s strategy across
the whole of the business and we conduct our operations
with integrity, fairness and transparency. We recognise
that we have an important part to play in shaping the future
for all our stakeholders. We are committed to delivering
positive outcomes for all.
CORPORATE GOVERNANCE
The Company has applied the principles of the Quoted Companies
Alliance Corporate Governance Code (the “Code”) in so far as it
can be applied practically. The Code is constructed around ten
broad principles, accompanied by an explanation of what those
Our workforce – split by gender
Executives
Male 100%
Female 0%
Senior management
Male 60%
Female 40%
principles entail together with a set of disclosure requirements.
Other staff
These principles and how we comply with them can be found
on pages 38 to 39 of this report and on the Group’s website.
EMPLOYEES
People are our most important asset in achieving our Group
strategy, to provide excellent service, support and tools to
Male 62%
Female 38%
Independent Financial Advisers to allow them to meet the needs
We recognise that women have been less well represented
of their clients. To allow our staff to do this, we aim to ensure
at all levels in the investment management industry and our
all employees are respected, motivated and safeguarded while
commitment to diversity and inclusiveness is a continuous process.
at work.
We encourage all employees to develop and progress, whether
SUPPLIERS
The Group acknowledges its responsibilities in relation to
through internal training, apprenticeship schemes or professional
tackling modern slavery and has a zero tolerance stance on
qualifications. The Group supports its employees in meeting
slavery and human trafficking within our workforce and supply
their CPD targets set by our regulators through training and
chain. We are a largely UK-based provider of financial services,
development, ensuring that our investment managers have
meaning we do not produce, manufacture or sell any physical
the appropriate technical and supervision skills to maintain
goods. We also do not have a long or complex supply chain.
the highest levels of client service.
Our main suppliers provide support services like information
We encourage employees to take a long term view of the business
technology, market data and property services.
through the provision of EMI share option schemes to all eligible
We consider our suppliers to be at a relatively low risk of
employees SAYE share option schemes to all employees.
engaging in practices of modern slavery or human trafficking.
DIVERSITY AND INCLUSION
The Group is an equal opportunities employer and it is our policy
We nonetheless remain committed to preventing any such
practices from occurring in our business or supply chain.
to ensure that all job applicants and employees are treated fairly
and on merit, regardless of race, sex, marital/civil partnership
ESG INVESTMENTS
Tatton was one of the first firms to launch a complete range of risk
status, age, disability, religious belief, pregnancy, maternity or
rated Ethical Portfolios. We know that our private investors are
sexual orientation. We believe that an inclusive culture in which
increasingly taking an interest not only in how their investments
employees are highly engaged enables everybody to succeed.
are performing, but also how they affect the world around us.
Tatton Asset Management plc Annual Report and Accounts 2020 35
In response we developed portfolios that combine negative
and positive screening to give clients peace of mind that their
investments not only align with their principles but also help
to improve the bigger picture.
ENVIRONMENT
As a financial services business, our main environmental impacts
are largely through UK-based travel and the consumption of
resources and emissions at our business premises. We look
to manage and reduce our environmental impact and carbon
footprint through the efficient use of resources.
At the beginning of the year we moved to a more modern,
energy efficient office at St Swithin’s Lane in London and took
our carbon footprint into consideration throughout the fitout.
We have installed energy efficient lighting and equipment and
make use of enhanced video conferencing facilities where possible
to reduce employee travel.
ANTI-BRIBERY AND CORRUPTION
We value our reputation for ethical behaviour and integrity.
The Company operates anti-bribery policies which extend
across the Group and we are committed to conducting our
operations free from bribery and corruption. We also have a
whistleblowing Policy which encourages employees to report
matters of significant concern to the Chair of the Audit and
Risk Committee.
TAX STRATEGY
Tatton is committed to full compliance with all statutory obligations
and full disclosure to tax authorities. The Group’s tax affairs are
managed in line with our overall high standards of governance,
and with consideration of our corporate reputation.
Our appetite for tax risk is low and we do not participate in
aggressive tax planning or condone abusive tax practices which
would contravene our ethics and culture.
European sustainable
funds hold
£668bn
of assets
An increase of
58%
from 2018
(Morningstar,
February 2020)
Global sustainable assets
stand at over
$30tn
which is greater than the GDP
of either the US or EU
(Global Sustainable
Investment Alliance, 2019)
“
82%
of IFAs believe the number of
ESG propositions will increase
over the coming 12 months
(FE fundinfo, May 2020)
”
We pay all tax as it falls due and believe in maintaining a transparent
and professional working relationship with HM Revenue &
Customs (“HMRC”) and other tax authorities. In respect of
the year ended 31 March 2020, the Group has paid £2.3 million
of corporation tax.
Tatton Ethical Portfolios
Tatton was one of first investment managers to provide
risk-rated discretionary ethical portfolios. It became clear
from discussions with IFAs that many clients want their
principles to be applied to their entire investment portfolio,
not just a selection of funds.
Environmental – considerations for the environment,
pollution, climate change
Social – Socially responsible practices, human rights,
equality, data security
Governance – Positive employment practices, business
ethics, diversity
Tatton Ethical Portfolios www.tattoninvestments.com1Tatton Ethical Portfolios For investment with integrityFinancial StatementsCorporate GovernanceStrategic ReportTatton Asset Management plc Annual Report and Accounts 2020 Board of Directors
36
Roger CornickChairmanPaul HogarthChief Executive Officer Paul EdwardsChief Financial Officer Roger is TAM plc’s Non-Executive Chairman. From January 2009 to September 2016, Roger was Chairman of Aberdeen Asset Management having joined the Board in January 2004. Prior to joining Aberdeen, Roger was with Perpetual plc for over twenty years.Paul is the Chief Executive Officer of TAM plc, as well as Senior Partner at Paradigm Consulting.Paul has over 30 years’ experience in financial services, the majority of which were at the centre of IFA distribution. Paul was the Co-Founder of Bankhall in 1987, and built Bankhall Investment Associates from scratch to sale in May 2001 at which point 25% of the IFA sector utilised at least part of the Bankhall service proposition. After leaving Bankhall he went on to establish Paradigm Partners Ltd which launched in April 2007 and has since grown to become one of the UK’s top five distribution businesses. Subsequently he was also the Founder of Perspective Financial Group Limited in December 2007 and of Tatton Capital Limited in July 2012.Paul has a BA in Economics from Heriot-Watt University in Edinburgh.Paul is the Chief Financial Officer of TAM plc. He is also Finance Director of Paradigm Partners Limited and Tatton Investment Management Limited.Prior to joining TAM plc Paul was the Group Finance Director of Scapa Group Plc for six years and NCC Group Plc for ten years. He has also held several other senior roles in a broad range of listed and private companies. Until recently Paul was also the Chair of the Hallé Pension Trustees, having spent five years in the role.Tatton Asset Management plc Annual Report and Accounts 2020
Committee memberships
Nominations Committee
Remuneration Committee
Audit and Risk Committee
Board Director
Board Composition
Length of tenure of Directors
Executive 3
Non-Executive 2
Directors
Less than a year
One to three years
Three to six years
More than six years
37
–
5
–
–
Chris PoilNon-Executive & Head of Audit and RiskRobert HuntChief Executive Officer of MortgagesLothar Mentel Director & Chief Investment OfficerLothar is the Chief Investment Officer of TAM plc. He is also Chief Executive Officer for Tatton Investment Management.Prior to setting up Tatton Investment Management in 2012, Lothar was the Chief Investment Officer of Octopus Investments from 2008, where he built a multi-manager fund business that he grew to £1.6 billion. He has also held senior positions with N M Rothschild, Threadneedle, Barclays Wealth and Commerzbank Asset Management. Lothar began his career in Germany as a performance and risk analyst and later designing and launching the Barclays Multi-Manager funds.Lothar was educated in Germany and holds a postgraduate degree in Business and Economics (Diplom Ökonom) from Ruhr-Universität Bochum.Chris is TAM plc’s Senior Independent Non-Executive Director. Previously he served as Head of UK Equities at ING Baring Asset Management. Prior to joining ING he was a Director of Mercury Asset Management. Chris has previously been a Non-Executive Director of Ignite Group Ltd, Novus Leisure Ltd and Byron Ltd.Robert is the Chief Executive of Paradigm Mortgage Services LLP and a Board member of the Society of Mortgage Professionals (“SMP”) acting as a respected figurehead and representative of mortgage clubs. He also manages the operations of Paradigm Consulting and has over 30 years’ experience of working with financial intermediaries.Prior to setting up Paradigm Mortgages in 2007, Robert was the key accounts director at Santander (formerly Abbey National) for 13 years. Before joining Santander, he had various management roles at Hill Samuel Asset Management Group in which he worked for 11 years. Robert has now led Paradigm Mortgages to win the Mortgage Strategy’s Best Mortgage Club Award for two consecutive years.In 1978 Robert joined the Royal Air Force where he studied electronic engineering for five years.Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report
38
Corporate Governance Statement
INTRODUCTION
The Board is committed to achieving
Responsibilities of each Board member
BOARD EFFECTIVENESS,
have been clearly established and there is
COMPOSITION AND INDEPENDENCE
high standards of corporate governance,
a clearly defined division of responsibility
integrity and business ethics. This year the
between the Chairman and the Chief
OF THE BOARD
During the year, and up until the date of
Group has taken into consideration the
Executive. The Chairman is responsible
signing this report, the Board comprised a
guidance for smaller quoted companies
for leading the Board, ensuring that
Non-Executive Chairman, a Non-Executive
on the Code produced by the Quoted
shareholders are adequately informed
Director and three Executive Directors.
Companies Alliance (the “Code”) and
with respect to the Group’s affairs and
The Board has determined that all the
taken steps to apply the principles of
that there are efficient communication
Non-Executive Directors are independent
the Code in so far as it can be applied
channels between management, the Board
in character and judgement and neither
practically, given the current size of the
and shareholders. The Chief Executive is
represent a major shareholder group
Group and the nature of its operations.
responsible for innovation, managing the
nor have any involvement in the day to
Under the AIM Rules, the Group is not
strategy of the Group and leading the
day management of the Company or its
required to comply with the provisions
senior management team in developing
subsidiaries. The Non-Executive Directors
of the UK Corporate Governance Code
and implementing the strategy to maximise
continue to complement the Executive
While the UK Corporate Governance Code
shareholder value.
has not been applied in full, the Board has
continued working towards full compliance
over the coming years.
BOARD COMMITTEES
Nominations Committee
The Nominations Committee is responsible
Directors’ experience and skills, bringing
independent judgement and objectivity
to enhance shareholder value.
The skills and experience of the Non-
LEADERSHIP AND ROLE OF
for Board recruitment and succession
Executive Directors are wide and varied
THE BOARD
The Board is responsible for the long-term
success of the Group and is ultimately
accountable for the Group’s strategy,
risk management and performance.
The Board’s primary roles are to provide
entrepreneurial leadership to the Group
within a framework of prudent and effective
control which enables risk to be assessed
planning, to ensure that the right skill
and they provide constructive challenge
sets are present in the Boardroom.
in the Boardroom. The composition of
Remuneration Committee
The Remuneration Committee is responsible
for determining all elements of remuneration
for the Executive Directors and for reviewing
the appropriateness and relevance of the
Group’s remuneration policy.
the Board is intended to ensure that
its membership represents a mix of
backgrounds and experience that will
optimise the quality of deliberations and
decision making. We consider diversity
in the composition to be an important
factor in the effectiveness of the Board
and managed, and to set the Group’s
strategic objectives and ensure that the
Audit and Risk Committee
The Audit and Risk Committee’s
and, in searching for prospective Directors,
we consider the existing skill set of the
necessary resources are made available
main responsibilities are to challenge
Board and areas we have identified for
so that those objectives can be met.
management, monitor the integrity of the
development to meet future needs and
The Board also sets the Group’s values and
Group’s financial statements, review internal
address succession planning.
standards and is responsible for ensuring
and external audit activity and monitor
that its obligations to its shareholders and
the effectiveness of risk management and
other stakeholders, including employees,
internal controls.
suppliers, customers and the community,
are understood and met.
During the year, the Audit Committee ran
a tender process for the external audit.
The Board comprises three Executive
Following a comprehensive exercise the
Directors, a Non-Executive Chairman
Audit Committee was pleased to reappoint
and a Non-Executive Director. The names,
Deloitte LLP.
biographical details and Committee
memberships of the Board are set out
on pages 36 and 37 of this report.
The Board composition of Non-Executive
and Executive Directors has remained the
same during the financial year.
Although not members of the Committees,
the Executive Directors attend meetings of
the Audit and Risk Committee, Remuneration
Committee and Nominations Committee
as invited attendees, when appropriate.
Tatton Asset Management plc Annual Report and Accounts 2020 39
Meetings and attendance
The following table sets out attendance of each Director at Board meetings held
during the 12 months to the year ended 31 March 2020:
This process has been in place throughout
the year under review and includes key
risks (financial and operational) facing the
Remuneration
Nominations
Audit
Group. The process has also included the
review and circulation of the Group Open
Door Policy and procedure (previously
known as the Whistleblowing Policy) to
enable anonymous reporting of complaints.
In addition, the Board has also received
external reports in relation to cyber
security and uses a range of measures
to manage this risk, including the use of
cyber security policies and procedures,
security protection tools and ongoing
detection and monitoring of threats.
The Board
routinely
reviews
the
effectiveness of the systems of internal
control and
risk management
to
ensure controls react to changes in the
Group’s operations.
Approved and authorised for issue by
the Board of Directors and signed on its
Board
Committee
Committee
Committee
Number of meetings held
Roger Cornick
Chris Poil
Paul Hogarth
Lothar Mentel
Paul Edwards
8
8
8
8
8
8
2
2
2
2*
–
2*
–
–
–
–
–
–
4
4
4
3*
–
4*
PERFORMANCE
The Board conducts a formal annual review
making and consideration of stakeholder
interests is consistent. Further information
of the performance of individual Directors,
on the Company’s key stakeholders is
to monitor and improve effectiveness.
shown on pages 12-13.
The review of the Chief Executive is
undertaken by the Non-Executive Chairman.
In addition to individual reviews, the
Board considers its overall performance
as a body and the performance of its
Committees. The review has confirmed
that the performance of the Board and its
Committees is effective and appropriate.
DEVELOPMENT AND TRAINING
The Chairman is responsible for ensuring
Directors’
continuing professional
development and every Director is entitled
to receive training and development
relevant to their responsibilities and
duties. The Directors take advantage
of relevant seminars and conferences
and receive training and advice on new
regulatory requirements and relevant
current developments from the Company
and professional advisers.
STAKEHOLDER INTERESTS
AND ENGAGEMENT
As Directors, we are obliged to fulfil our
section 172 duties, having regard to the
factors set out in the Chairman’s Statement
on page 5 and also on page 12 and, in
taking decisions, ensure that we promote
the success of the Company as a whole.
We believe that effective stakeholder
engagement is critical to running a
COMMUNICATION WITH
SHAREHOLDERS
The Board is committed to maintaining
an ongoing dialogue with the Company’s
shareholders. The principal methods of
communication with private investors
remain the Annual Report and financial
behalf by:
Paul Edwards
Chief Financial Officer
15 June 2020
statements, the Interim Report, the Annual
General Meeting and the Group’s website
(www.tattonassetmanagement.com).
At the Company’s Annual General Meeting,
all Directors will be available to respond
to questions from shareholders present.
The Annual General Meeting provides a
forum for constructive communication
between the Board and shareholders.
In addition, throughout the year, the
Executive Directors, and separately the
Chairman, meet with investors to discuss
matters relevant to the Company.
INTERNAL CONTROL AND RISK
MANAGEMENT
The Board is ultimately responsible for
the Group’s system of internal control
and for reviewing its effectiveness.
Such systems are designed to manage
rather than eliminate risks and can only
provide reasonable, not absolute, assurance
against material misstatement or loss.
long-term sustainable business and by
An ongoing process has been established to
considering the Company’s strategic
promote and communicate an appropriate
priorities and having a process in place
risk culture within the Group and to
for decision making, the Board aims to
identify, evaluate and manage significant
make sure that its approach to decision
risks faced by each part of the Group.
* Attendance by invitation at Audit Committee and Remuneration Committee meetings.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 40
Directors’ Remuneration Report
REMUNERATION POLICY
Remuneration policy for
External appointments
It is the policy of the Group, which is
The Non-Executive Director fees policy is
to pay a basic fee for membership of the
Executive Directors
The policy of the Remuneration Committee
reflected in the contract of employment,
Board, with additional fees for the Senior
that no Executive Director may accept
Independent Director and Chairmanship
is to set basic salaries at a level which
any Non-Executive Directorships or other
of a Committee to take into account
is competitive with that of comparable
appointments without the prior approval of
the additional responsibilities and time
businesses. The same principles are
the Board. Any outside appointments are
commitments of these roles. The Non-
applied to Directors’ fixed remuneration,
considered by the Nominations Committee
Executive Directors’ fee is currently set
pension contributions and benefits as are
or the Board to ensure that they would not
at £70,000 per annum.
applied to those of employees throughout
give rise to a conflict of interest. It is the
the organisation.
The main principles of the senior executive
remuneration policy are set out below:
— Attract and retain high calibre executives
in a competitive market, and remunerate
executives fairly and responsibly.
— Motivate delivery of our key business
strategies and encourage a strong and
sustainable performance orientated
culture.
Group’s policy that remuneration earned
from any such appointment may be retained
by the individual Executive Director.
Service contracts
It is the Group’s policy for all Executive
Directors to have contracts of employment
that contain a termination notice period of
Remuneration policy for the Chairman
not less than twelve months. All Executive
and Non-Executive Directors
The Chairman and other Non-Executive
Director appointments continue until
terminated by either party on giving not less
Directors are appointed under a letter of
than 12 months’ notice to the other party.
appointment. The letters of appointment
cover such matters as duties, time
commitment and other business interests.
Non-Executive Directors do not have
service contracts. A letter of appointment
provides for an initial period of 12 months
— Align the business strategy and
The Remuneration Committee determines
and continues until terminated by either
achievement of planned business
the remuneration for the Chairman and
party giving three months’ prior written
objectives.
Non-Executive Directors within the limits
notice to expire at any time on or after
— Take into consideration the views of
set in the Company’s Articles of Association.
the initial 12 month period.
shareholders and best practice guidelines.
The fee for the Chairman’s role takes into
The Committee believes that the level of
account the time commitment required
remuneration for Executive Directors is
for the role, the skills and experience of
commensurate with the corporate and
the individual and market practice in
personal performance of the Executive
comparable companies. The Chairman’s
Directors for the financial year ended
fee is currently set at £90,000 per annum.
31 March 2020.
Single total figure of remuneration for each Director (audited)
Directors’ remuneration payable in respect of the year ended 31 March 2020 was as follows:
31/03/2020
31/03/2019
Basic salary
Pension
related and
other taxable
Basic salary
Pension
related and
other taxable
Executive Directors
and fees
Bonus
benefits
Total
and fees
Bonus
benefits
Total
Paul Hogarth
Lothar Mentel
Paul Edwards
Sub-total
Non-Executives
Roger Cornick
Chris Poil
Notes
342,000
300,381
262,500
–
35,000
–
1,622
11,573
935
343,622
346,954
263,435
342,000
295,950
245,667
–
–
–
1,560
15,459
836
343,560
311,409
246,503
904,881
35,000
14,130
954,011
883,617
–
17,855
901,472
90,000
70,000
–
–
–
–
90,000
70,000
90,000
70,000
–
–
–
–
90,000
70,000
1,064,881
35,000
14,130
1,114,011
1,043,617
–
17,855
1,061,472
1 Paul Hogarth and Paul Edwards have received additional basic salary in lieu of pension contributions.
2 Paul Hogarth and Lothar Mentel have received additional basic salary in lieu of provision of a company car.
3 All Executive Directors have received additional basic salary in lieu of pension contributions.
Tatton Asset Management plc Annual Report and Accounts 2020 41
COMPONENTS OF REMUNERATION
Salaries and fees
Salaries for Executive Directors are
Sharesave Plan
The Sharesave plan is an “all-employee”
the EMI plan in 2018 and 1 April 2019 for
the options granted in the extension of the
save as you earn (“SAYE”) share option plan
EMI plan in 2019. If the EPS growth falls
determined by
the Remuneration
which gives eligible participating employees
between the thresholds for EPS growth, the
Committee. The level of salary broadly
the opportunity to acquire ordinary shares
proportion of the option subject to the EPS
reflects the value of the individual, their
in the Company using savings of up to
measure that vests will be determined on a
role, skills and experience. Salaries are
£500 per month or such other amount
straight-line basis. The options granted in
reviewed annually in April taking account
permitted under the relevant legislation
2017 will vest in respect of growth in TSR
of market levels, corporate performance
governing “tax-approved” savings-related
from the date of IPO to 31 March 2020.
and individual performance.
share option plans.
Fees to Non-Executive Directors are
TAM PLC LONG-TERM INCENTIVE
determined by the Board, having regard
to fees paid to other Non-Executive
PLAN
The Directors have adopted the TAM
Directors in other UK quoted companies,
plc EMI plan which became effective on
the responsibilities of the individual Non-
admission and which was extended in both
Executive Director and the time committed
August 2018 and August 2019. The EMI
to the Company.
Pension provision
Where an Executive Director has not
reached their maximum lifetime allowance,
the Group will pay minimum contributions
into a personal pension plan nominated by
each Executive Director at a rate between
5% and 10% of their basic salary. If the
plan is a share option plan under which all
eligible employees (including Executive
Directors) may be granted options over
shares on a tax-advantaged basis, under
the provisions of Schedule 5 of the Income
(“Schedule 5”). Non-qualifying options
may also be granted under the EMI plan.
maximum lifetime allowance has been
reached, the Director will receive the
Performance conditions
Options granted under the EMI plan are
The options granted in the extension of
the EMI plan in 2018 will vest in respect
of growth in TSR over the three-year
performance period commencing 1 April
2018. If the Compound Annual Growth
Rate (“CAGR”) of TSR falls between the
thresholds for CAGR, the proportion of the
option subject to the TSR measure that
vests will be determined on a straight-
line basis.
Clawback
Vested and unvested EMI plan awards are
Grant of equity share options under
the EMI plan
At 31 March 2020, the Company had
granted options to certain of its Executive
Tax (Earnings and Pensions) Act 2003
subject to a formal clawback mechanism.
equivalent in basic salary.
only exercisable subject to the satisfaction
Directors and senior managers to acquire
of performance conditions which will
(in aggregate) up to 5.4% of its share
determine the proportion of the option
capital. The maximum entitlement of any
that will vest at the end of the three-year
individual was 2.6%.
Other benefits
Executive Directors are entitled to
benefits commensurate with their position,
including consideration for a discretionary
performance-related annual bonus scheme,
private medical cover, life assurance and
car allowances.
performance period. The performance
conditions used in determining the number
of options that will vest are split between
adjusted earnings per share (“EPS”) growth
and total shareholder return (“TSR”).
Short-term incentives
Performance-based bonuses are assessed
The Committee currently believes these
are fair and appropriate conditions for
on a discretionary basis.
rewarding participants as they align their
LONG-TERM INCENTIVES
The long-term incentive plan for Executives
is designed to reward execution of
strategy and growth in shareholder value
over a multiple-year period. Long-term
interests with those of shareholders and,
being measured over a three-year period,
align the reward with the Group’s strategy
for growth by encouraging longer-term
profitable growth.
performance measurement discourages
When determining the adjusted EPS
excessive risk taking and inappropriate
growth, the shares will be fully diluted
short-term behaviours and encourages
and the impact of adjusted items as
Executive Directors to take a long-term
determined by the Board, see note 23, will
view by aligning their interests with those
be disregarded to ensure that they do not
of shareholders. Where possible, and to
artificially impact the EPS measurement.
the limits applied by the legislation, the
The option will vest in respect of growth
long-term incentive plan benefits from
in EPS over the three-year performance
the tax advantages under an Enterprise
periods, commencing 1 April 2017 for the
Management Incentive (“EMI”) scheme.
options granted in 2017, 1 April 2018 for
the options granted in the extension of
Terms of awards
Options may be granted over newly issued
shares, treasury shares or shares purchased
in the market. To satisfy exercised options,
shares may be purchased in the market or
new shares subscribed from the Company.
At 31 March 2020 the Company held no
shares in treasury, other than those held
by the Employee Benefit Trust to satisfy
options awarded under share incentive
schemes (2019: nil).
Unapproved share scheme
Options issued under the long-term
incentives are intended to be qualifying
options for EMI purposes. If they are not
qualifying options (for example, because
they exceed the statutory limit at the
date of grant) then they will take effect
as unapproved options which cannot
benefit from the preferential tax treatments
afforded to options granted pursuant to
an EMI scheme.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 42
Directors’ Remuneration Report continued
Directors’ interests in share options
Outstanding share options granted to Executive Directors are as follows:
Paul Hogarth
Lothar Mentel
Paul Edwards
Total
Date of grant
7 July 2017
7 August 2018
7 July 2017
7 August 2018
7 August 2018
Exercise
price
£1.89
£0.00
£1.89
£0.00
£0.00
At 31 March
2019
Number
503,168
330,000
1,118,150
330,000
765,000
3,046,318
Granted
during
the year
Exercised
Forfeited
At 31 March
during
the year
during
the year
2020
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
503,168
330,000
1,118,150
330,000
765,000
3,046,318
Employee Benefit Trust (“EBT”)
On 18 November 2019, the Company
Directors’ interests
The beneficial interests of the Directors and their connected persons in the ordinary
established the EBT, with an independent
share capital of the Company at 31 March 2020 were as follows:
Jersey-based trustee. The EBT was
established for the benefit of the employees,
former employees and their dependants
Paul Hogarth
No. of ordinary
Percentage
shares
shareholding (%)
10,575,358
991,785
94,864
173,205
32,051
18.91
1.77
0.17
0.31
0.06
Lothar Mentel
Paul Edwards
Christopher Poil
Roger Cornick
On behalf of the Board:
Chris Poil
Chairman of the Remuneration Committee
15 June 2020
Total Shareholder returns
%
n
r
u
t
e
R
140
130
120
110
100
90
80
70
60
1/4/19 1/5/19 1/6/19 1/7/19 1/8/19 1/9/19 1/10/19 1/11/19 1/12/19 1/1/20 1/2/20 1/3/20
Tatton
FTSE AIM All-Share Total Return
Source: Morningstar Direct.
of the Group. The EBT may be used in
conjunction with the EMI plan where the
Remuneration Committee decides in its
discretion that it is appropriate to do so.
The Company may provide funds to the
trustee by way of loan or gift to enable the
trustee to subscribe or purchase existing
shares in the market in order to satisfy
awards made under the EMI plan or the
SAYE share option plan. During the year,
the Company has made a gift of £1 million
to the EBT.
As at 31 March 2020, the EBT held a total of
413,411 ordinary shares (2019: nil) equating
to 0.74% of the issued ordinary share capital
of the Company (2019: nil).
Total shareholder returns from
admission on AIM to 31 March 2020
The Company’s share price in the period
from admission on AIM on 7 July 2017
to 31 March 2020 increased from £1.56
to £1.96 and market capitalisation grew
from £87,215,720 to £109,578,725, with
£10.18 million returned to shareholders
by way of dividend.
The graph below shows the Company’s total
shareholder returns (“TSR”) compared to
the FTSE AIM All-Share Index in the twelve
months to 31 March 2020. TSR is defined
as share price growth plus reinvested
dividends. The Directors consider the
FTSE AIM All-Share Index to be the most
appropriate index against which the TSR
of the Company should be measured.
Tatton Asset Management plc Annual Report and Accounts 2020
43
Directors’ Report
The Directors are pleased to present their report together with the audited consolidated
ALTERNATIVE PERFORMANCE
financial statements for the year ended 31 March 2020.
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS
A review of the business and future developments can be found in the Chairman’s
Statement and the Chief Executive’s Statement on pages 4 to 5 and 6 to 8 respectively.
MEASURES
We use a number of performance measures
to assist in presenting information in this
statement in a way which can be easily
analysed and understood. We use such
PRINCIPAL ACTIVITIES
TAM plc is a holding company whose shares are listed on the AIM market of the
measures consistently and reconcile
them as appropriate and they are used by
London Stock Exchange and is domiciled and incorporated in the UK. It has three
management in evaluating performance.
core operating subsidiaries within two core operating divisions as follows:
See note 2.24.
Subsidiary name
the Company Principal activities of subsidiary
Operating division
% owned by
Tatton Investment
100% Provides discretionary fund
Tatton
Management Limited
overlay services to IFAs
(“Tatton”)
Paradigm Partners
100% Provides compliance
Paradigm
Limited (“Paradigm
Consulting” or “PPL”)
consultancy and technical
support services to IFAs
Paradigm Mortgage
100% Provides mortgage and
Paradigm
Services LLP (“PMS”)
insurance product distribution
services
RESULTS AND DIVIDENDS
Group profit before tax was £10.296 million
(2019: £6.112 million), up 68.5% on the prior
year due to strong revenue growth and a
change in the VAT treatment of Tatton’s
investment management services, see note 6.
Adjusted Operating Profit* was £9.076 million
(2019: £7.308 million) giving an Adjusted
Operating margin* of 42.5% (2019: 41.7%).
Operating Profit after the effect of
share-based payments, amortisation on
customer relationship intangible assets
and exceptional items is £10.302 million
(2019: £5.925 million).
An interim dividend in respect of the period
ended 30 September 2019 of 3.2p per share
was paid to shareholders on 13 December
2019. The Directors recommend a final
The policy is intended to ensure that
shareholders benefit from the growth of
the Group, and it aligns with the strategic
objective of growing our dividend.
The Board recognises the importance of
dividends to shareholders and the benefit
of providing sustainable shareholder
returns. The target payout ratio has been
adopted to provide sufficient flexibility for
the Board to remunerate shareholders for
their investment whilst recognising that
there may at times be a requirement to
retain capital within the Group.
In determining the level of dividend in any
year, the Directors follow the dividend
policy and also consider a number of
other factors that influence the proposed
dividend, including:
dividend of 6.4p per share. This has not been
— the level of retained distributable
included within the Group financial statements
as no obligation existed at 31 March 2020.
If approved, the final dividend will be paid
on 28 August 2020 to ordinary shareholders
whose names are on the register at the close
reserves in the Company;
— availability of cash resources;
— future cash commitments and investment
plans, in line with the Company’s strategic
plan; and
of business on 17 July 2020.
The Company operates a progressive
dividend policy to grow dividends in
line with the Group’s adjusted earnings,
with a target payout ratio in the region of
70% of annual adjusted diluted earnings
per share.
— the
impact of the decision on
the Company’s key stakeholders.
The Company’s key stakeholders are
shown on pages 12-13 and we have
detailed how we engage with them
and understand their issues and the
impact of the decisions of management
on our stakeholders.
SHARE CAPITAL
As at 31 March 2020 there were 55,907,513
fully paid ordinary shares of 20p amounting
to £11,181,503.
Details of the issued share capital shown
are in note 18 to the consolidated financial
statements. The Company has one class
of ordinary shares which carry no right to
fixed income. Each ordinary share carries
the right to one vote at general meetings
of the Company.
There are no specific restrictions on the size
of a holding or on the transfer of shares,
which are both governed by the general
provisions of the Articles of Association
and prevailing legislation other than: certain
restrictions may be imposed from time to
time by laws and regulations pursuant to
the Listing Rules of the Financial Conduct
Authority (“FCA”), whereby certain
Directors, officers and employees of the
Group require the approval of the Group
to deal in ordinary shares of the Company.
The Directors are not aware of any
other agreements between holders of
the Company’s shares that may result in
restrictions on the transfer of securities
or on voting rights.
No person has any special rights of control
over the Company’s share capital and all
issued shares are fully paid.
SHARE OPTIONS
Details of the Company’s share capital
and options over the Company’s shares
under the Company’s employee share
plans are given in note 20 to the Group
financial statements.
* Alternative performance measures are detailed in
note 23.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 44
Directors’ Report continued
SIGNIFICANT SHAREHOLDERS
At 29 May 2020, the Company had been notified of the following interests representing 3% or more of its issued share capital:
Shareholder
Paul Hogarth and connected parties
Funds and accounts under management by direct and indirect investment management
subsidiaries of BlackRock, Inc.
Liontrust Investment Partners LLP
Chelverton Asset Management Limited
Gresham House Asset Management Limited
Kames Capital plc
Legal & General Investment Management Limited
Canaccord Genuity Wealth Limited
Standard Life Aberdeen plc
Shares
Percentage
held
10,575,358
8,490,747
7,097,519
3,102,914
2,939,084
2,764,449
2,613,866
2,406,000
1,829,564
holding
18.91%
15.18%
12.69%
5.55%
5.26%
4.94%
4.67%
4.30%
3.27%
PURCHASE OF OWN SHARES
At the 2019 AGM, shareholders authorised
TAKE OVER DIRECTIVE
The Company has only one class of
DIRECTORS’ INTERESTS
Directors’ emoluments, interests in the
the Company to buy back up to 10% of its
ordinary share and these shares have
shares of the Company and options to
own ordinary shares by market purchase
equal voting rights. The nature of individual
acquire shares are disclosed in the Directors’
at any time prior to the conclusion of the
Directors’ holdings is disclosed on page
Remuneration Report on pages 40 to 42.
AGM to be held in 2020. The Company did
42. There are no other significant holdings
Paul Hogarth is also the beneficial owner
not purchase any of its own shares during
of any individual.
the financial year, other than through the
Employee Benefit Trust (note 19). The cost
of shares purchased and held by the EBT
is deducted from equity.
BOARD OF DIRECTORS
The names of the present Directors and
their biographical details are shown on
of Paradigm House, the Group’s registered
address and the trading premises of PPL.
CONFLICTS OF INTEREST
There are procedures in place to deal
pages 36 and 37. At the AGM, to be held
with any Directors’ conflicts of interest
At the forthcoming AGM, the Directors will
on 18 August 2020, all Executive and Non-
arising under section 175 of the Companies
seek to extend shareholders’ approval for
Executive Directors will offer themselves
Act 2006.
a further period to the conclusion of the
for re-election.
AGM to be held in 2021, by way of special
resolution, for the grant of an authority for
the Company to make market purchases of
up to 10% of its own shares. The Directors
consider that the grant of the power for
the Company to make market purchases of
the Company’s shares would be beneficial
for the Company and accordingly they
recommend this special resolution to
shareholders. The Directors would only
exercise the authority sought if they
believed such a purchase in the interests of
shareholders generally. The minimum price
to be paid will be the shares’ nominal value
of 20p and the maximum price will be no
more than 5% above the average middle
market quotations for the shares on the
five days before the shares are purchased.
APPOINTMENT AND REPLACEMENT
OF DIRECTORS
With regard to the appointment and
DIRECTORS’ INDEMNITY
All Directors and Officers of the Company
have the benefit of the indemnity provision
contained in the Company’s Articles.
replacement of Directors, the Company is
The provision, which is a qualifying third
governed by its Articles of Association (the
party indemnity provision, was in force
“Articles”), the UK Corporate Governance
throughout the last financial year and is
Code, the Companies Act 2006 and related
currently still in force. The Group also
legislation. The Articles themselves may
purchased and maintained throughout
be amended by special resolution of the
the financial period Directors’ and Officers’
shareholders. The powers of Directors
liability insurance in respect of itself and its
are described in the Articles which
Directors and Officers, although no cover
can be found on the Group’s website
exists in the event Directors or Officers
(www.tattonassetmanagement.com).
are found to have acted fraudulently
or dishonestly.
PRINCIPAL RISKS
A report on principal risks, risk management
and internal controls is included on pages
28 to 31.
Tatton Asset Management plc Annual Report and Accounts 2020 45
EMPLOYEES
The Group is committed to the principle
POST BALANCE SHEET DATE EVENTS
There have been no material post balance
RELATED PARTIES
Details of related party transactions are given
of equal opportunities in employment and
sheet events.
in note 22 to the Group financial statements.
POLITICAL DONATIONS
The Group made no political donations or
GOING CONCERN
The Board has reviewed detailed papers
contributions during the year (2019: £nil).
prepared by management that consider
to ensuring that no applicant or employee
receives less favourable treatment on the
grounds of gender, marital status, age, race,
colour, nationality, ethnic or national origin,
religion, disability, sexuality, or unrelated
criminal convictions.
The Group applies employment policies
which are believed to be fair and equitable
and which ensure that entry into, and
ANNUAL GENERAL MEETING (“AGM”)
The AGM of the Company will be held on
18 August 2020. A notice convening the
meeting will be sent to shareholders on
23 July 2020.
progression within, the Group is determined
solely by application of job criteria and
AUDITOR
Deloitte LLP was the Group’s independent
personal ability and competency.
auditor during the year and has confirmed
The Group aims to give full and fair
consideration to the possibility of employing
disabled persons wherever suitable
opportunities exist. Employees who become
disabled are given every opportunity to
their willingness to continue in office.
A resolution to reappoint Deloitte LLP
as auditor to the Group and to authorise
the Directors to set its remuneration will
be proposed at the 2020 AGM.
the Group’s expected future profitability,
dividend policy, capital position and
liquidity, both as they are expected
to be and also under more stressed
conditions. The Board has also reviewed
the management actions that could be
taken in these scenarios.
Management have also prepared reports
in relation to the operational resilience of
the business reflecting the switch to home
working in compliance with Government
advice and effectively implementing its
business continuity planning procedures.
The Group also maintains its high level of
continue their positions or be trained for
Each of the persons who is a Director at
ongoing oversight and monitoring of third
other suitable positions.
the date of approval of this Annual Report
party platforms. The Board is satisfied that
The Group provides a Group Personal
Pension plan which is open to all employees.
The Group operates an Enterprise
Management Incentive scheme and a Group
Sharesave scheme, details of which are
provided in the Directors’ Remuneration
Report and the financial statements.
FINANCIAL INSTRUMENTS
The Group’s financial instruments at
31 March 2020 comprise cash and cash
equivalents and receivable and payable
balances that arise directly from its
daily operations.
Cash flow is managed to ensure that
sufficient cash is available to meet
liabilities. The Group is not reliant on
income generated from cash deposits.
The Group has one operating subsidiary
(Tatton) which is supervised in the UK by
the FCA. The Group must comply with the
regulatory capital requirements set by the
FCA and manages its regulatory capital
through continuous review of Tatton’s
capital positions and requirements, which
are reported to the Board monthly.
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 business can operate successfully in
these conditions. The Board is satisfied
that the Group has adequate resources
to continue in operational existence for
— the Director has taken all the steps
the foreseeable future:
that he/she ought to have taken as a
Director in order to make himself/herself
aware of any relevant audit information
and to establish that the Company’s
auditor is aware of that information.
CORPORATE GOVERNANCE
A full review of corporate governance
appears on pages 38 to 39.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES/DISCLOSURES
TO THE AUDITOR
As far as the Directors are aware, there
is no relevant information of which the
Group’s independent auditors are unaware.
The Directors have taken all the steps that
they ought to have taken as Directors to
make themselves aware of any relevant
audit information and to establish that
the Company’s independent auditor is
aware of that information.
Liquidity – The Group has a robust financial
liquidity position with £12.8m cash at
31 March 2020 and no debt, a £1.5 million
overdraft facility which remains undrawn
and a highly efficient working capital cycle,
ensuring strong operating cash conversion
(c.100% of Adjusted Operating Profit).
Regulatory position – Management has
assessed the impact of COVID-19 and
has confirmed that the Group continues
to have significant headroom over its
regulatory requirements.
Having given due consideration to the
risks, uncertainties and contingencies
disclosed in the financial statements and
accompanying reports, the Directors believe
the business is well placed to manage its
business risk successfully. Accordingly the
financial statements have been prepared
on a going concern basis. Details of the
Group’s business activities, results, cash
flows and resources, together with the
risk it faces and other factors likely to
affect its future development, performance
and position are set out in the Strategic
Report, see page 5.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 46
Directors’ Report continued
BASIS OF PREPARATION OF THE
In preparing the Group financial statements,
DIRECTORS’ RESPONSIBILITIES
FINANCIAL STATEMENTS
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare such financial statements for each
financial year. Under that law the Directors
are required to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (“IFRSs”)
as adopted by the European Union and
Article 4 of the International Accounting
Standards (“IAS”) Regulation and have
elected to prepare the Parent Company
financial statements in accordance with
Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’. Under company law
the Directors must not approve the financial
statements unless they are satisfied that
they give a true and fair view of the state
of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing the Parent Company financial
statements, the Directors are required to:
— select suitable accounting policies and
then apply them consistently;
— make judgements and accounting
estimates that are reasonable and
IAS 1 requires that Directors:
STATEMENT
— properly select and apply accounting
We confirm that to the best of our
policies;
knowledge:
— present information, including accounting
— the financial statements, prepared in
policies, in a manner that provides
accordance with the relevant financial
relevant, reliable, comparable and
reporting framework, give a true and
understandable information;
fair view of the assets, liabilities,
— provide additional disclosures when
financial position and profit or loss of
compliance with the specific requirements
the Company and the undertakings
in IFRSs are insufficient to enable users
included in the consolidation taken
to understand the impact of particular
as a whole;
transactions, other events and conditions
— the Strategic Report includes a fair review
on the entity’s financial position and
of the development and performance
financial performance; and
of the business and the position of
— make an assessment of the Company’s
the Company and the undertakings
ability to continue as a going concern.
included in the consolidation taken as
The Directors are responsible for keeping
adequate accounting
records
that
are sufficient to show and explain the
Company’s transactions and 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. They are also responsible for
safeguarding the assets of the Company
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, are fair,
balanced and understandable and
provide the information necessary
for shareholders to assess the
Company’s performance, business
model and strategy.
and hence for taking reasonable steps for
The Directors’ Report has been approved
the prevention and detection of fraud and
and authorised for issue by the Board
other irregularities.
of Directors and signed on its behalf by:
prudent;
The Directors are responsible for the
— state whether applicable Financial
maintenance and integrity of the corporate
Reporting Standard 101 ‘Reduced
and financial information included on the
Disclosure Framework’ has been
Company’s website. Legislation in the United
followed, subject to any material
Kingdom governing the preparation and
departures disclosed and explained
dissemination of financial statements may
Paul Hogarth
Chief Executive Officer
in the financial statements; and
differ from legislation in other jurisdictions.
15 June 2020
— prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
Paul Edwards
Chief Financial Officer
15 June 2020
Tatton Asset Management plc Annual Report and Accounts 2020 47
Independent Auditor’s Report to the Members of Tatton Asset Management plc
Report on the audit of the
financial statements
1. OPINION
In our opinion:
— the financial statements of Tatton
Asset Management plc (the ‘Parent
We have audited the financial statements
which comprise:
— the consolidated statement of total
comprehensive income;
— the consolidated and parent company
balance sheets;
Company’) and its subsidiaries (the
— the consolidated and parent company
‘Group’) give a true and fair view of
statements of changes in equity;
the state of the Group’s and of the
— the consolidated statement of cash flows;
Parent Company’s affairs as at 31 March
— the related notes 1 to 26.
The financial reporting framework that
has been applied in the preparation of the
Group financial statements is applicable
law and IFRSs as adopted by the European
Union. The financial reporting framework
that has been applied in the preparation of
the Parent Company financial statements
is applicable law and United Kingdom
Accounting Standards, including FRS
101 “Reduced Disclosure Framework”
(United Kingdom Generally Accepted
Accounting Practice).
2020 and of the Group’s profit for the
year then ended;
— the Group financial statements have
been properly prepared in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union and IFRSs as issued by
the International Accounting Standards
Board (IASB);
— the Parent Company financial statements
have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting Practice,
including Financial Reporting Standard
101 “Reduced Disclosure Framework”;
and
— the financial statements have been
in accordance with the
prepared
requirements of the Companies Act 2006.
2. 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 Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed 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.
3. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
— share based payments; and
— valuation and completeness of intangible assets
Within this report, key audit matters are identified as follows:
! Newly identified
> Increased level of risk
<> Similar level of risk
< Decreased level of risk
Materiality
The materiality that we used for the Group financial statements was £439,000, which was determined
on the basis of 5% of adjusted income before tax.
Scoping
Our audit covered 100% of the Group’s profit before tax, revenue, and net assets.
Significant changes
in our approach
We have identified a new key audit matter relating to the valuation and completeness of intangible
assets, in relation to the acquisition in the year of Sinfonia Asset Management Limited, due to the inherent
management judgement involved in determining the fair value of the assets acquired.
We have not considered related parties as a key audit matter in the current period, in response to the risk
assessment performed in the current period.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 48
Independent Auditor’s Report to the Members Of Tatton Asset Management PLC continued
4. CONCLUSIONS RELATING TO GOING CONCERN
We are required by ISAs (UK) to report in respect of the following matters where:
— the directors’ use of the going concern basis of accounting in preparation of the financial statements
is not appropriate; or
— the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the Group’s or the Parent Company’s ability to continue to adopt
the going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
We have nothing to
report in respect of
these matters.
5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, 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. These matters included 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.
5.1 Share-based payments <>
Key audit matter
The Group floated on the AIM market of the London Stock Exchange through 2017. Subsequent to listing,
description
certain employees within the Group have been offered an Enterprise Management Incentive (EMI) scheme,
and a Sharesave scheme each period. As such, six incentive schemes, relating to 2017, 2018, and 2019,
remain active at 31 March 2020.
Our key audit matter has been focuss ed on the 2018 EMI scheme, given the materiality of the scheme.
The 2018 EMI scheme has two performance conditions; total shareholder return (TSR) and earnings per
share (EPS) growth over the three year vesting period.
TSR growth is a market condition, which means that the number of options expected to vest is embedded
in the fair value of the option, using a Monte Carlo model. EPS growth is a non-market condition, which
means that the number of options expected to vest should be adjusted to the extent that the relevant
measure of performance is expected to be met, using a Black Scholes model.
To determine its IFRS 2 - Share-based payments (IFRS 2) accounting, the Group is required to estimate
the exercise price, risk free rate, yield %, volatility and leavers, with the most sensitive estimate being
the accuracy of the number of options expected to vest under the EPS performance conditions of the
scheme. Further, the estimate of vesting options is reliant upon the accuracy of EPS forecasts, which
involve significant management assumptions.
Due to the potential for management to introduce inappropriate bias to estimates, we have determined
that there is a risk of misstatement due to fraud.
The accounting policies adopted by the Group have been disclosed within note 2.21 to the financial
statements. In light of COVID-19, the estimate of future performance of the Group, and thus the estimated
EPS growth, have been impacted.
How the scope
To address our share-based payment key audit matter, we have:
of our audit
responded to the
key audit matter
— Gained an understanding of the relevant controls put in place by management to manage the risks
associated with accounting for share-based payments;
— Challenged the EPS growth assumptions that determine the number of options vesting, through
a recalculation and extrapolation of historic growth rates, and by reviewing and challenging growth
forecasts, including the impact of COVID-19 on these forecasts;
— Challenged management’s assumptions around exercise price, risk free rate, yield %, volatility and
leavers using internal and external data as appropriate;
— Involved our internal specialists on share-based payment valuations to review the scheme documentation,
and recalculate the valuation of the schemes at the reporting date under IFRS 2; and
— Assessed the fair value output from the fair value model to determine whether it is generating
a reasonable fair value based on the assumptions.
Tatton Asset Management plc Annual Report and Accounts 2020 49
Key observations
As a result of the above procedures, we concur that Management’s accounting treatment of the share-
based payment schemes is consistent with IFRS 2.
5.2. Valuation and completeness of intangible assets !
Key audit
On 30 September 2019, the Group acquired 100% of the shares in Sinfonia Asset Management for a
matter description
purchase price of £2.7m. The total consideration consisted of an initial payment of £2.0m, and deferred
consideration of a maximum of £0.7m, payable two instalments on the first and second anniversary of
the transaction.
In accordance with IFRS 3 - Business combinations (IFRS 3), management have completed the assessment
of the acquisition recognising a client relationship intangible of £1.2m, goodwill of £1.3m, deferred tax of
£0.2m and deferred consideration of £0.3m within the financial statements. The identification of intangible
assets requires judgement and estimates, including the recognition criteria, future net cash flows, discount
rate, and expected fund life. We have identified a key audit matter in relation to the completeness of the
identifiable assets and the valuation of the client relationship intangible, specifically in relation to the
estimation of future cash flows.
In addition to the acquisition accounting and in light of COVID-19 we have also identified a risk in relation to
the appropriateness of the valuation of the deferred consideration and the assumptions used in determining
the cash flow forecasts to support the impairment assessment at the year end date.
Due to the potential for management to introduce inappropriate bias to judgements and estimates, we
have determined that there is a risk of misstatement due to fraud.
Management have detailed the accounting policies relating to goodwill, and client relationship intangibles
through note 2 to the financial statements. Further details of the cash flow assumptions are provided
through notes 11 and 12 to the financial statements.
How the scope
To address our intangible assets key audit matter, we have:
of our audit
responded to the
key audit matter
— Gained an understanding of the relevant controls put in place by management to manage the risks
associated with the completeness of intangible assets identified and the estimates made in the valuation
prepared by management;
— Challenged the completeness of identified acquired assets in line with the criteria in IFRS 3;
— Challenged key assumptions, (including the criteria for recognition, discount factor, expected life, and net
inflows) by performing sensitivity analysis, and seeking external contradictory and supporting evidence;
— Tested management’s forecasting accuracy by reference to actual cash flows observed since the
acquisition date;
— Assessed the valuation of the deferred consideration as of the acquisition date, and subsequently at the
year end date with reference to external market predictions considering the impact of COVID-19; and
— Challenged Management’s impairment test as of the year end date to test the intangible asset for
impairment which also included consideration of the impact of COVID-19.
Key observations
As a result of the above procedures, we have concluded that Management’s judgements and estimates
are reasonable, with both reference to the completeness and valuation of the intangible assets that
were acquired.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 50
Independent Auditor’s Report to the Members Of Tatton Asset Management PLC continued
6. OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
Basis for
determining
materiality
Group financial statements
Parent Company financial statements
£439,000 (2019: £308,000)
£351,000 (2019: £242,000)
We have determined materiality based on 5% of
Parent Company materiality equates to 2% of total
adjusted income before tax. We have normalised
assets, which is capped at 80% of Group materiality.
the benchmark by adjusting for the impact of the
This is consistent with the prior period.
prior period VAT refund, within exceptional income.
As management could not have reasonably known
the outcome of the VAT refund in the prior period,
the impact has been to increase current year income
before tax. We do not deem this to be “business as
usual”, as such have adjusted the benchmark used
for our determination of materiality.
In the prior period, we did not include adjustments to
income before tax in the determination of materiality.
Rationale for the
We have determined materiality based on adjusted
The main operation of the Parent Company is to hold
benchmark applied
income before tax as it is a profit driven business,
investments in the subsidiaries. We have therefore
therefore is considered the most relevant benchmark
selected total assets as the benchmark for determining
for users of the financial statements.
materiality. We have however capped materiality based
on the Group materiality.
Adjusted income
before tax
£8,799k
Group materiality
£439k
Component materiality range
£417k to £83k
Audit Committee reporting
threshold £22.0k
Adjusted income before tax
Group materiality
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was
set at 70% of Group materiality for the 2020 audit (2019: 70%). In determining performance materiality, we considered the
following factors:
— our risk assessment, including our assessment of the Group’s overall control environment; and
— our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified
in prior periods.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £22,000
(2019: £15,400), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation
of the financial statements.
Tatton Asset Management plc Annual Report and Accounts 2020
51
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1 Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls,
and assessing the risks of material misstatement at the Group level. At a Group level, the audit team has also tested the
consolidation process and adjustments.
Our Group audit focused on the three material trading entities within the Group’s three reportable segments and the three
material holding companies including the parent Company. The Group audit team performed full scope audits on all entities
directly, which account for 100% of the Group’s profit before tax, revenue and net assets. We have used appropriate levels of
materiality for the three material trading entities and three material holding companies that ranged from £83,000–£417,000
(2019: £14,000–£272,000).
8. OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information
We have nothing
included in the annual report, Chairman’s letter, the Chief Executive Officer’s Review, the Strategic
to report in respect
Report, the Chief Investment Officer’s Report, Principal Risks and Uncertainties, the Directors’ Report,
of these matters.
the Corporate Governance Report and the Directors’ Remuneration 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 this other information, we are required to report that fact.
9. RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement, 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.
10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an 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 FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 52
Independent Auditor’s Report to the Members Of Tatton Asset Management PLC continued
Report on other legal and regulatory requirements
11. OPINIONS ON OTHER MATTERS PRESCRIBED BY 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.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
12. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
12.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
— we have not received all the information and explanations we require for our audit; or
— adequate accounting records have not been kept by the Parent Company, or returns adequate for
our audit have not been received from branches not visited by us; or
— the Parent Company financial statements are not in agreement with the accounting records and returns.
12.2 Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of directors’ remuneration have not been made.
We have nothing
to report in respect
of these matters.
We have nothing
to report in respect
of this matter.
13. USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
David Heaton (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
15 June 2020
Tatton Asset Management plc Annual Report and Accounts 2020 Consolidated Statement of Total Comprehensive Income
For the year ended 31 March 2020
Revenue
Other exceptional income
Administrative expenses
Operating Profit
– Share-based payment costs
– Amortisation of intangibles – customer relationships
– Exceptional items
Adjusted Operating Profit (before separately disclosed items)1
Finance (costs)/income
Profit before tax
Taxation charge
Profit attributable to shareholders
Earnings per share – Basic
Earnings per share – Diluted
Adjusted earnings per share – Basic2
Adjusted earnings per share – Diluted2
53
31-Mar
2019
(£’000)
17,518
–
(11,593)
5,925
874
–
509
7,308
187
6,112
(1,255)
4,857
8.69p
7.92p
10.99p
10.02p
31-Mar
2020
(£’000)
21,369
1,588
(12,655)
10,302
108
60
(1,394)
9,076
(6)
10,296
(1,933)
8,363
14.98p
14.54p
13.13p
12.00p
Note
6
6
6
7
8
9
9
9
9
1 Adjusted for exceptional items, amortisation on client relationship intangibles and share-based payments. See note 23.
2 Adjusted for exceptional items, amortisation on client relationship intangibles and share-based payments and the tax thereon. See note 23.
All revenue, profit and earnings are in respect of continuing operations.
There were no other recognised gains or losses other than those recorded above in the current or prior year and
therefore a Statement of Other Comprehensive Income has not been presented.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report Consolidated Statement of Financial Position
As at 31 March 2020
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax
Total current liabilities
Non-current liabilities
Other payables
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the Company
Share capital
Share premium account
Own shares
Other reserve
Merger reserve
Retained earnings
Total equity
54
31-Mar
2019
(£’000)
4,917
223
349
104
5,593
2,508
12,192
14,700
20,293
(4,521)
(484)
(5,005)
–
–
–
(5,005)
15,288
11,182
8,718
–
2,041
(28,968)
22,315
Note
11
12
13
16
14
15
15
16
18
19
31-Mar
2020
(£’000)
6,254
1,495
1,034
–
8,783
3,431
12,757
16,188
24,971
(6,186)
(199)
(6,385)
(702)
(106)
(808)
(7,193)
17,778
11,182
8,718
(996)
2,041
(28,968)
25,801
17,778
15,288
The financial statements on were approved by the Board of Directors on 15 June 2020 and were signed on its behalf by:
Paul Edwards
Director
Company registration number: 10634323
Tatton Asset Management plc Annual Report and Accounts 2020
Consolidated Statement of Changes in Equity
55
For the year ended 31 March 2020
Share
capital
(£’000)
Share
premium
(£’000)
Own
shares
(£’000)
Other
reserve
(£’000)
Merger
reserve
(£’000)
Retained
earnings
(£’000)
Total
equity
(£’000)
Note
At 1 April 2018
11,182
8,718
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on share-based
payments
At 31 March 2019
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on
share-based payments
Own shares acquired in the year
9
20
9
20
19
–
–
–
–
–
–
–
–
11,182
8,718
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(996)
2,041
(28,968)
20,588
13,561
–
–
–
–
–
–
–
–
4,857
(4,025)
765
4,857
(4,025)
765
130
130
2,041
(28,968)
22,315
15,288
–
–
–
–
–
–
–
–
–
–
8,363
(4,920)
86
8,363
(4,920)
86
(43)
–
(43)
(996)
At 31 March 2020
11,182
8,718
(996)
2,041
(28,968)
25,801
17,778
The other reserve and merger reserve were created on 19 June 2017 when the Group was formed, where the difference
between the Company’s capital and the acquired Group’s capital has been recognised as a component of equity being the
merger reserve. Both the other reserve and the merger reserve are non-distributable.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report Consolidated Statement of Cash Flows
For the year ended 31 March 2020
Operating activities
Profit for the year
Adjustments:
Income tax expense
Finance costs/(income)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share-based payment expense
Changes in:
Trade and other receivables
Trade and other payables
Exceptional items
Cash generated from operations before exceptional items
Cash generated from operations
Income tax paid
Net cash from operating activities
Investing activities
Payment for the acquisition of subsidiary, net of cash acquired
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Interest received
Dividends paid
Purchase of own shares
Repayment of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Net cash and cash equivalents at end of period
56
31-Mar
2020
(£’000)
31-Mar
2019
(£’000)
Note
8,363
4,857
7
13
12
6
6
21
9
19
1,933
6
298
195
108
(1,016)
1,338
(1,394)
9,831
11,225
(2,278)
8,947
(2,002)
(271)
(294)
(2,567)
162
(4,920)
(996)
(61)
(5,815)
565
12,192
12,757
1,255
(187)
91
43
874
78
491
509
8,011
7,502
(1,366)
6,136
–
(266)
(336)
(602)
53
(4,025)
–
–
(3,972)
1,562
10,630
12,192
Tatton Asset Management plc Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements
57
1 GENERAL INFORMATION
Tatton Asset Management plc (“the Company”) is a public company limited by shares. The address of the registered office is
Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND. The registered number is 10634323.
The Group comprises the Company and its subsidiaries. The Group’s principal activities are discretionary fund management,
the provision of compliance and support services to independent financial advisers (“IFAs”), the provision of mortgage
adviser support services and the marketing and promotion of Tatton Oak funds.
News updates, regulatory news and financial statements can be viewed and downloaded from the Group’s website,
www.tattonassetmanagement.com. Copies can also be requested from: The Company Secretary, Tatton Asset Management
plc, Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own
income statement.
2 ACCOUNTING POLICIES
The principal accounting policies applied in the presentation of the annual financial statements are set out below.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted for use in the European Union and International Financial Reporting
Interpretations Committee (“IFRIC”) interpretations issued by the International Accounting Standards Board (“IASB”) and
the Companies Act 2006. The financial statements of the Company have been prepared in accordance with UK Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (“FRS 101”).
The consolidated financial statements have been prepared on a going concern basis and prepared on the historical cost basis.
The consolidated financial statements are presented in sterling and have been rounded to the nearest thousand (£’000).
The functional currency of the Company is sterling as this is the currency of the jurisdiction where all of the Group’s sales
are made.
The preparation of financial information in conformity with IFRSs requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge
of the amount, event or actions, actual events may ultimately differ from those estimates.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
the consolidated financial statements.
2.2 Going concern
These financial statements have been prepared on a going concern basis. The Directors have prepared cash flow projections
and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future.
To form the view that the consolidated financial statements should continue to be prepared on an ongoing basis in light
of the current COVID-19 pandemic and the resulting economic uncertainty, the Directors have assessed the outlook of the
Group by considering various market scenarios and management actions. This review has allowed management to assess
the potential impact on income, costs, cash flow and capital and the ability to implement effective management actions
that may be taken to mitigate the impact. The Directors have also considered the risks associated with Brexit, including
considering the effect on clients’ wealth, attitude towards savings and investment and changes in government policy.
The Directors do not consider that the impact of Brexit will affect the Group continuing as a going concern. Accordingly,
the Directors continue to adopt the going concern basis in preparing these financial statements.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report Notes to the Consolidated Financial Statements continued
58
2 ACCOUNTING POLICIES CONTINUED
2.3 Basis of consolidation
On 23 February 2017, the Company was incorporated under the name Nadal Listco Limited, which changed to Tatton Asset
Management Limited on 31 May 2017. On 19 June 2017, the Company acquired the entire share capital of Nadal Newco
Limited via a share for share exchange with the shareholders of Nadal Newco Limited. On 19 June 2017, Tatton Asset
Management Limited was re-registered as a public company with the name Tatton Asset Management plc.
2.4 Subsidiaries
The Group’s financial statements consolidate those of the Parent Company and all of its subsidiaries as at 31 March 2020.
The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and
has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 31 March.
All transactions between Group companies are eliminated on consolidation, including unrealised gains and losses on
transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation,
the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements
of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by
the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from
the effective date of acquisition, up to the effective date of disposal, as applicable.
2.5 Adoption of new and revised standards
New and amended IFRS Standards that are effective for the current year
In the current period, the Group, for the first time, has applied IFRS 16 ‘Leases’ (as issued by the IASB in January 2016)
which became effective for accounting periods beginning on or after 1 January 2019. The date of initial application of IFRS
16 for the Group was 1 April 2019.
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the
lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-
of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets.
In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of
the adoption of IFRS 16 on the Group’s consolidated financial statements is described below.
The Group has applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is
not restated and the cumulative effect of internally applying IFRS 16 is recognised in retained earnings at the date of initial
application, however there is no impact on the net assets and retained earnings of the Group at 1 April 2019.
Tatton Asset Management plc Annual Report and Accounts 2020 59
2 ACCOUNTING POLICIES CONTINUED
2.5 Adoption of new and revised standards continued
Impact on the new definition of a lease
The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is
or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied
to those leases entered or modified before 1 April 2019. The change in definition of a lease mainly relates to the concept
of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to
control the use of an identified asset for a period of time in exchange for consideration.
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or
modified on or after 1 April 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time
application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition
in IFRS 16 will not change significantly the scope of contracts that meet the definition of a lease for the Group.
Impact on lessee accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were
off-balance sheet.
Applying IFRS 16, for all leases (except as noted below), the Group:
(a) recognises right-of-use assets and lease liabilities in the Consolidated Statement of Financial Position, initially measured
at the present value of the future lease payments;
(b) recognises depreciation of right-of-use assets and interest on lease liabilities in the Consolidated Statement of Total
Comprehensive Income; and
(c) separates the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the Consolidated Statement of Cash Flows.
Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease
liabilities whereas under IAS 17 they resulted in the recognition of a lease liability incentive, amortised as a reduction of
rental expenses on a straight-line basis.
Under IFRS 16, right-of-use assets will be tested for impairment in accordance with IAS 36 ‘Impairment of Assets’.
This replaces the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and
office furniture), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16.
This expense is presented within Other operating expenses in the Consolidated Statement of Total Comprehensive Income.
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2.5 Adoption of new and revised standards continued
Financial impact of initial application of IFRS 16
The tables below show the amount of adjustment for each financial statement line item affected by the application of IFRS
16 for the current period.
Impact on profit or loss in the period
Increase in depreciation1
Increase in finance costs1
Decrease in other operating expenses1
Decrease in profit for the period
Impact on earnings per share
Increase in earnings per share from continuing operations
Basic
Diluted
Impact on assets, liabilities and equity as at 31 March 2020
Right-of-use asset1
Net impact on total assets
Trade and other payables
Lease liabilities1
Net impact on total liabilities
Impact on net assets
Retained earnings
£’000
(138)
(22)
150
(10)
p
0.02p
0.02p
As if IAS 17 still
IFRS 16
applied
£’000
adjustments
As presented
£’000
£’000
–
–
(103)
–
(103)
(103)
(103)
551
551
103
(650)
(547)
4
4
551
551
–
(650)
(650)
(99)
(99)
1 The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of right-of-use assets and lease liabilities.
It resulted in a decrease in Other operating expenses and an increase in depreciation and interest expense.
Operating lease commitments disclosed as at 31 March 2019
(Less): short-term leases recognised on a straight-line basis as expense
Lease liability recognised as at 1 April 2019 discounted using the lessee’s incremental borrowing rate at the
date of initial application
Of which are:
Current lease liabilities
Non-current lease liabilities
£’000
778
(28)
750
689
40
649
689
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 61
2 ACCOUNTING POLICIES CONTINUED
2.5 Adoption of new and revised standards continued
The application of IFRS 16 has an impact on the consolidated cash flows of the Group. Under IFRS 16, lessees must present:
— short-term lease payments and payments for leases of low-value assets as part of operating activities (the Group has
included these payments as part of payments to suppliers and employees);
— cash paid for the interest portion of lease liability as either operating activities or financing activities, as permitted by
IAS 7 (the Group has opted to include interest paid as part of operating activities); and
— cash payments for the principal portion for lease liability, as part of financing activities.
Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities. At the
reporting date there is no impact on net cash generated by operating activities as no payments have been made against the
relevant lease in the period. The adoption of IFRS 16 did not have an impact on net cash flows.
The Group as lessee
The Group assesses whether a contract is or contains a lease at inception of the contract.
The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which
it is the lessee, 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 expense on a straight-line basis over the
term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its
incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
— fixed lease payments (including in substance fixed payments), less any lease incentives;
— the amount expected to be payable by the lessee under residual value guarantees;
— the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
— payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented within Trade and other payables in the Consolidated Statement of Financial Position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
— the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 62
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2.5 Adoption of new and revised standards continued
— the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial
discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised
discount rate is used); and
— a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it
is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision
is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are
incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise
a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are within property, plant and equipment in the Consolidated Statement of Financial Position.
The Group applies IAS 36 ‘Impairment of Assets’ to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the property, plant and equipment policy.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
Standards in issue not yet effective
The following IFRS and IFRIC interpretations have been issued but have not been applied by the Group in preparing
the historical financial information, as they are not as yet effective. The Group intends to adopt these Standards and
Interpretations when they become effective, rather than adopt them early.
Effective date 1 January 2020
Amendments to the Conceptual Framework in IFRS Standards
Amendments to IAS 1 ‘Presentation of Financial Statements’
Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’
Amendments to IFRS 3 ‘Business Combinations’
Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and Measurement’ and IFRS 7
‘Financial Instruments: Disclosure’
Effective date 1 January 2021
IFRS 17 ‘Insurance Contracts’
A number of IFRS and IFRIC interpretations are also currently in issue which are not relevant for the Group’s activities and
which have not therefore been adopted in preparing the annual financial statements.
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial
statements of the Group in future periods.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 63
2 ACCOUNTING POLICIES CONTINUED
2.6 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for
services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Revenue is reduced
for estimated rebates and other similar allowances. Revenue is recognised when control is transferred and the performance
obligations are considered to be met.
The Group’s revenue is made up of the following principal revenue streams:
— Fees charged to IFAs for compliance consultancy services, which is recognised when performance obligations are met.
— Fees for providing investment platform services. Revenue is recognised on a daily basis, in line with the satisfaction of
performance obligations, on the Assets Under Administration held on the relevant investment platform.
— Fees for discretionary fund management services in relation to on-platform investment Assets Under Management
(“AUM”). Revenue is recognised daily based on the AUM.
— Fees for mortgage-related services including commissions from mortgage and other product providers and referral fees
from strategic partners. Commission is recognised when performance obligations are met.
— Fees for marketing services provided to providers of mortgage and investment products, which is recognised when
performance obligations are met.
2.7 Exceptional items
Exceptional items are disclosed and described separately in the Financial statements where it is necessary to do so to
provide further understanding of the underlying financial performance of the Group. These include material items of income
or expense that are shown separately due to the significance of their nature and amount.
2.8 Interest income and interest expense
Finance income is recognised as interest accrued (using the effective interest method) on funds invested outside the Group.
Finance expense includes the cost of borrowing from third parties and is recognised on an effective interest rate basis,
resulting from the financial liability being recognised on an amortised cost basis.
2.9 Impairment
Assets which have an indefinite useful life are not subject to amortisation and are tested for impairment at each Statement
of Financial Position date. Assets subject to depreciation and amortisation are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be recoverable. Impairment losses on previously revalued assets
are recognised against the revaluation reserve as far as this reserve relates to previous revaluations of the same assets.
Other impairment losses are recognised in the Statement of Total Comprehensive Income based on the amount by which
the carrying value exceeds the recoverable amount. The recoverable amount is the higher of the fair value less the costs to
sell, and the value in use.
Impairment losses recognised in respect of cash-generating units (“CGUs”) are allocated first to reduce the carrying amount
of any goodwill allocated to CGUs and then to reduce the carrying amount of other assets in the unit on a pro rata basis.
The impairment review has also considered the COVID-19 pandemic as a potential indicator of impairment and as a result of
this review, none of the assets held by the Group were impaired. See note 11 for further details.
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2.10 Goodwill and Intangible assets
Goodwill is initially recognised and measured as set out in note 2.12.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill
is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) expected to benefit from
the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
Following initial recognition, intangible assets are held at cost less any accumulated amortisation and any provision
for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (CGUs).
Intangible assets acquired separately are measured on initial recognition at cost.
Computer software licences acquired are capitalised at the cost incurred to bring the software into use and are amortised
on a straight-line basis over their estimated useful lives, which are estimated as being five years. Costs associated with
developing or maintaining computer software programs that do not meet the capitalisation criteria under IAS 38 are
recognised as an expense as incurred.
Intangible assets acquired in a business combination and recognised separately from goodwill are recognised initially at
their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, the customer
relationship intangible assets have a finite useful life and are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is calculated using the straight-line method over their useful lives, estimated at ten years.
Gains and losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying value of the asset. The difference is then recognised in the income statement.
An assessment is made at each reporting date as to whether there is any indication that an asset in use may be impaired. If any
such indication exists and the carrying values exceed the estimated recoverable amount at that time, the assets are written down
to their recoverable amount. The recoverable amount is measured as the greater of fair value less costs to sell and value in use.
Non-financial assets that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
The Directors have reviewed the intangible assets as at 31 March 2020 and have considered the COVID-19 pandemic
as a potential indicator of impairment. As a result of the review, it was determined that none of the assets are impaired
(2019: none).
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 65
2 ACCOUNTING POLICIES CONTINUED
2.11 Property, plant and equipment
Property, plant and equipment assets are stated at cost net of accumulated depreciation and accumulated provision for
impairment. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment. Principal annual rates are as follows:
Computer, office equipment and motor vehicles – 20-33% straight-line.
Fixtures and fittings – 20% straight-line.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. The gain or loss arising on disposal or scrappage of an asset is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.
2.12 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in
a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets
transferred to the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at
the acquisition date, except that: deferred tax assets or liabilities and assets or liabilities related to employee benefit
arrangements are recognised and measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefits’
respectively; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held
interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Group in a business combination includes a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the
consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify
as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement
period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified
as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Other contingent consideration is remeasured to fair value at subsequent reporting dates with changes in fair value
recognised in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognised as of that date.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 66
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2.13 Leases
Policy applicable from 1 April 2019
The Group has applied the practical expedient to grandfather the definition of a lease at the date of transition. Therefore,
this policy applies to all contracts entered into on or after 1 April 2019.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
The Group recognises a right-of-use (“ROU”) asset and a lease liability at the inception date of the lease. The ROU asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The ROU assets are subsequently depreciated on a straight-line basis over the shorter of the expected life of the asset and
the lease term, adjusted for any remeasurements of the lease liability. At the end of each reporting period, the ROU assets
are assessed for indicators of impairment in accordance with IAS 36.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. The Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
— fixed payments, including in-substance fixed payments;
— variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
— amounts expected to be payable under a residual value guarantee; and
— the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a
lease unless the Group is reasonably certain not to terminate early.
The lease liability is subsequently measured by adjusting the carrying amount to reflect the interest charge, the lease
payments made and any reassessment or lease modifications. The lease liability is remeasured if the Group changes its
assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-
of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Where the Group is an intermediate lessor in a sub-lease, it accounts for its interests in the head lease and the sub-lease
separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset.
Policy applicable before 1 April 2019
Lease agreements which do not transfer substantially all of the risks and rewards of ownership of the leased assets to
the Group are classified as operating leases. Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease. The impact of any lease incentives is spread over the term of the lease.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 67
2 ACCOUNTING POLICIES CONTINUED
2.14 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and call deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are included as a component of cash and bank balances for the
purpose only of the Consolidated Statement of Cash Flows.
2.15 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to
the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under
a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned,
and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value
through profit or loss. Transaction costs directly attributable to the acquisition of financial assets classified as at fair value
through profit or loss are recognised immediately in profit or loss.
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash
and bank balances, loans and borrowings, and trade and other payables.
Trade receivables
Trade receivables do not carry interest and are stated at amortised cost as reduced by appropriate allowances for estimated
irrecoverable amounts. They are recognised when the Group’s right to consideration is only conditional on the passage of
time. Allowances incorporate an expectation of lifetime credit losses from initial recognition and are determined using an
expected credit loss approach.
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, where applicable or required. These amounts represent liabilities for goods and services provided
to the Group prior to the end of the financial period, which are unpaid.
Financial liabilities at fair value through profit or loss (“FVTPL”)
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a
business combination, (ii) held for trading or (iii) designated as at FVTPL. Financial liabilities at FVTPL are measured at fair
value, with any gains or losses arising on changes in fair value recognised in profit or loss.
Interest-bearing borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in
profit or loss over the period of the borrowings using the effective interest method.
The Group does not hold or issue derivative financial instruments for trading purposes.
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2.16 Taxation
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated
with such investments and interests are only recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary difference and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or substantively enacted at the Statement of Financial Position
date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in
other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off the current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the accounting for the business combination.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 69
2 ACCOUNTING POLICIES CONTINUED
2.17 Retirement benefit costs
The Group pays into personal pension plans for which the amount charged to income in respect of pension costs and other
post-retirement benefits is the amount of the contributions payable in the year. Payments to defined contribution retirement
benefit scheme are recognised as an expense when employees have rendered service entitling them to the contributions.
Differences between contributions payable and paid are accrued or prepaid. The assets of the plans are invested and
managed independently of the finances of the Group.
2.18 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the Statement of Financial Position date, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows (when the effect of the time value of money is material). When some or all of the economic
benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset
if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
2.19 Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued. Retained earnings include all current and prior
period retained profits or losses.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been
approved in a general meeting prior to the reporting date.
2.20 Employee Benefit Trust
The Company provides finance to the EBT to purchase the Company’s shares on the open market in order to meet its
obligation to provide shares when an employee exercises awards made under the Group’s share-based payment schemes.
Administration costs connected with the EBT are charged to the Consolidated Statement of Comprehensive Income.
The cost of shares purchased and held by the EBT is deducted from equity. The assets held by the EBT are consolidated into
the Group’s financial statements.
2.21 Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest. Fair value is measured by use of the Black-Scholes model or Monte Carlo model as appropriate.
* Alternative performance measures are detailed in note 23.
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2.22 Operating segments
The Group comprises the following two operating segments which are defined by trading activity:
— Tatton – investment management services
— Paradigm – the provision of compliance and support services to IFAs and mortgage advisers
The Board is considered to be the chief operating decision maker.
Following changes to the structure of the Group’s internal organisation, and subsequent changes to the way in which
financial and management information is presented to both the Board and the Executive Committee, the composition of the
Group’s reportable segments changed in the financial year ended 31 March 2020.
The change to the Group’s organisation structure was the establishment of the Paradigm division in order to bring together
the activities of Paradigm Consulting and Paradigm Mortgages under single leadership. The change allows the needs of
independent financial advisers and mortgages advisers to be better met through an integrated approach. The services
being provided to these customers include compliance and support services. In addition, the Tatton division now
includes wrap-related revenue which was previously included in the Paradigm Consulting division. This change brings the
management and responsibility for all asset-related management and services into one division.
As a result of these changes, activities previously reported under Paradigm Consulting have been split between Tatton and
Paradigm, with Paradigm Mortgages being reported under Paradigm.
The Revenue, Operating Profit and Adjusted Operating Profit* by segment disclosure note for the year ended March 2019
has been amended as follows:
(i) Revenue by segment
Tatton
Paradigm
Paradigm Consulting
Paradigm Mortgages
Central
Total
(ii) Operating Profit by segment
Tatton
Paradigm
Paradigm Consulting
Paradigm Mortgages
Central
Total
* Alternative performance measures are detailed in note 23.
Year ended 31 March 2019
As reported
Adjustment
£’000
8,732
–
6,049
2,689
48
17,518
£’000
3,789
4,949
(6,049)
(2,689)
–
–
Year ended 31 March 2019
As reported
Adjustment
£’000
4,098
–
2,983
1,565
(2,721)
5,925
£’000
2,743
1,805
(2,983)
(1,565)
–
–
Restated
£’000
12,521
4,949
–
–
48
17,518
Restated
£’000
6,841
1,805
–
–
(2,721)
5,925
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 71
Year ended 31 March 2019
As reported
Adjustment
£’000
4,628
–
2,996
1,565
(1,881)
7,308
£’000
2,743
1,818
(2,996)
(1,565)
–
–
Restated
£’000
7,371
1,818
–
–
(1,881)
7,308
2 ACCOUNTING POLICIES CONTINUED
2.22 Operating segments continued
(iii) Adjusted Operating Profit* by segment
Tatton
Paradigm
Paradigm Consulting
Paradigm Mortgages
Central
Total
2.23 Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group’s accounting policies, which are described above, management have made judgements
and estimations about the future that have an effect on the amounts recognised in the financial statements. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods. Changes for accounting estimates would be accounted for
prospectively under IAS 8.
Goodwill and client relationship intangibles
Critical judgement
Impairment of goodwill and client relationship intangibles
The impact of COVID-19 has been considered as a potential indicator of impairment of goodwill and intangible assets.
Impairment exists when the carrying value of an asset or cash-generating unit (‘CGU’) exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
impairment testing, the recoverable amount of goodwill is determined using a discounted cash flow model, as detailed in
note 11. The results of the calculation indicate that goodwill and client relationship intangibles are not impaired.
Client relationship intangibles
Critical judgements
Client relationship intangibles purchased through corporate transactions
When the Group purchases client relationships through transactions with other corporate entities, a judgement is made
as to whether the transaction should be accounted for as a business combination or as a separate purchase of intangible
assets. In making this judgement, the Group assesses the assets, liabilities, operations and processes that were the subject
of the transaction against the definition of a business combination in IFRS 3. In particular, consideration is given to the
scale of the operations subject to the transaction and whether ownership of a corporate entity has been acquired, among
other factors.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 72
2 ACCOUNTING POLICIES CONTINUED
2.23 Critical accounting judgements and key sources of estimation uncertainty continued
Business combinations
Critical judgement
Treatment and fair value of consideration transferred
On 30 September 2019, the group acquired the entire share capital of Sinfonia Asset Management Limited (“Sinfonia“).
The group accounted for the transaction as a business combination. Business combinations and acquisitions require a
fair value exercise to be undertaken to allocate the purchase price to the fair value of the identifiable assets acquired and
the liabilities assumed. The determination of the fair value of the asset and liabilities is based, to a considerable extent, on
management’s judgement. The amount of goodwill initially recognised as a result of a business combination is dependent
on the allocation of this purchase price to the identifiable assets and liabilities with any unallocated portion being recorded
as goodwill.
As described in note 21 to the financial statements, the purchase price payable for the acquisition is split into a number
of different parts. The payment of certain elements has been deferred. At 31 March 2020, two elements of deferred
consideration remained unvested and subject to ongoing vesting conditions.
Vesting of the earn-out consideration is conditional on achieving certain operational targets.
Estimation uncertainty
Valuation of the earn-out consideration
The value of earn-out consideration is variable, dependent on performance by the acquired business against certain
operational targets by 30 September 2020 and 30 September 2021. The estimated value of earn-out consideration that
will be payable at these dates is £344,000, based on projections of growth in funds under management over that period.
If qualifying funds under management do not exceed £98 million then no earn-out consideration is payable.
If qualifying funds under management at 30 September 2020 are £10 million higher or lower than management’s estimate
then the earn-out consideration would be £200,000 higher or lower and the charge to profit or loss in the year to 31 March
2020 would be £200,000 higher or lower.
Under the terms of the agreements, the maximum possible payment under the earn-out and incentivisation awards
is capped at £689,000; which represents qualifying funds under management of approximately £132.5 million at
30 September 2021.
Share-based payments
Estimation uncertainty
Given the significance of share-based payments as a form of employee remuneration for the Group, share-based payments
have been included as a significant accounting estimate. The principal estimations relate to:
— forfeitures (where awardees leave the Group as “bad” leavers and therefore forfeit unvested awards); and
— the satisfaction of performance obligations attached to certain awards.
These estimates are reviewed regularly and the charge to the Statement of Total Comprehensive Income is adjusted
appropriately (at the end of the relevant scheme as a minimum). The sensitivity analysis carried out shows that if it was
considered that 100% of the options would vest, the charge for the year would increase by £1,420,000; an increase of
10% in the vesting assumptions would increase the charge in the year by £185,000. In considering the level of satisfaction
of performance obligations, the Group’s forecast has been reviewed and updated for the expected impact of COVID-19
pandemic, various market scenarios and management actions. This forecast has been used to estimate the relevant vesting
assumptions for the EMI schemes in place.
There are no other judgements or assumptions made about the future, or any other major sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts
of assets and liabilities within the next financial year.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 73
2 ACCOUNTING POLICIES CONTINUED
2.24 Alternative performance measures
In reporting financial information, the Group presents alternative performance measures (“APMs”) which are not defined
or specified under the requirements of IFRSs. The Group believes that these APMs provide users with additional helpful
information on the performance of the business. The APMs are consistent with how the business performance is planned
and reported within the internal management reporting to the Board. Some of these measures are also used for the purpose
of setting remuneration targets. The APMs used by the Group are set out in note 23 including explanations of how they
are calculated and how they can be reconciled to a statutory measure where relevant. There is also further information on
separately disclosed items in note 6.
3 CAPITAL MANAGEMENT
The Group’s objectives when managing capital are i) to safeguard the Group’s ability to continue as a going concern so
that it can continue to provide returns for shareholders and benefits for other stakeholders; ii) to maintain a strong capital
base and utilise it efficiently to support the development of its business; and iii) to comply with the regulatory capital
requirements set by the FCA. Capital adequacy and the use of regulatory capital are monitored by the Group’s management
and Board. There is one active regulated entity in the Group: Tatton Investment Management Limited, regulated by the FCA.
Regulatory capital is determined in accordance with the requirements of the Capital Requirements Directive IV prescribed
in the UK by the FCA. The Directive requires continual assessment of the Group’s risks in order to ensure that the higher of
Pillar 1 (Minimum Capital Requirements) and Pillar 2 (Supervisory Review) requirements is met.
Pillar 1 imposes a minimum capital requirement on investment firms which is calculated as the higher of the sum of the credit
and market risk capital requirements and the fixed overheads requirement (“FOR”). The FOR equates to 25% of the fixed
overheads reported in the most recent audited financial statements.
Pillar 2 requires investment firms to assess firm-specific risks not covered by the formulaic requirements of Pillar 1, the
objective of this being to ensure that investment firms have adequate capital to enable them to manage their risks.
The Group completes its assessment of regulatory capital requirements using its Internal Capital Adequacy Assessment
Process (“ICAAP”) under Pillar 2, which is a forward looking exercise that includes stress testing on major risks, such as
a significant market downturn, and identifying mitigating action.
As required by the FCA, Tatton Investment Management Limited holds capital based on a multiple of Pillar 1 and maintains
a significant surplus over this requirement at all times.
The Group manages its total equity which totalled £17.8 million as at 31 March 2020 (2019: £15.3 million). Surplus regulatory
capital was maintained throughout the year at both a consolidated Group level and individual regulated entity level.
There were no changes in the Group’s approach to capital management during the year.
4 SEGMENT REPORTING
Information reported to the Board of Directors as the chief operating decision maker for the purposes of resource
allocation and assessment of segmental performance is focused on the type of revenue. The principal types of revenue are
discretionary fund management and the marketing and promotion of the funds run by the companies under Tatton Capital
Limited (“Tatton”) and the provision of compliance and support services to IFAs and mortgage advisers (“Paradigm”).
The Group’s reportable segments under IFRS 8 are therefore Tatton, Paradigm, and “Central” which contains the Operating
Group’s central overhead costs. The operating segments disclosed have changed during the reporting period, see note 2.22.
The principal activity of Tatton is that of Discretionary Fund Management (“DFM”) of investments on-platform and the
provision of investment wrap services.
The principal activity of Paradigm is that of provision of support services to IFAs and mortgage advisers.
For management purposes, the Group uses the same measurement policies used in its financial statements.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 74
4 SEGMENT REPORTING CONTINUED
The following is an analysis of the Group’s revenue and results by reportable segment:
Year ended 31 March 2020
Revenue
Other exceptional income
Administrative expenses
Operating Profit/(Loss)
Share-based payments
Exceptional items
Amortisation of client relationship intangible assets
Adjusted Operating Profit/(Loss) (before separately
disclosed items)*
Finance (costs)/income
Profit/(loss) before tax
Year ended 31 March 2019 (restated, see note 2.22)
Revenue
Administrative expenses
Operating Profit/(Loss)
Share-based payments
Exceptional charges
Adjusted Operating Profit/(Loss) (before separately
disclosed items)*
Finance income
Profit/(loss) before tax
All turnover arose in the United Kingdom.
* Alternative performance measures are detailed in note 23.
Tatton
(£’000)
15,924
1,588
(7,204)
Paradigm
(£’000)
5,426
–
(3,362)
Central
(£’000)
19
–
(2,089)
Group
(£’000)
21,369
1,588
(12,655)
10,308
2,064
(2,070)
10,302
–
(1,458)
60
8,910
(20)
–
64
–
2,128
13
108
–
–
108
(1,394)
60
(1,962)
9,076
1
(6)
10,288
2,077
(2,069)
10,296
Tatton
(£’000)
12,521
(5,680)
6,841
34
496
7,371
–
6,841
Paradigm
(£’000)
4,949
(3,144)
1,805
–
13
1,818
185
1,990
Central
(£’000)
48
(2,769)
(2,721)
840
–
Group
(£’000)
17,518
(11,593)
5,925
874
509
(1,881)
7,308
2
(2,719)
187
6,112
5 OPERATING PROFIT
The operating profit and the profit before taxation are stated after charging/(crediting):
Amortisation of software
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Separately disclosed items (note 6)
Services provided by the Group’s auditor:
Audit of the statutory consolidated and Company financial statements of TAM plc
Audit of subsidiaries
Other fees payable to auditor:
Other taxation advisory services
Non-audit services
31-Mar
2020
(£’000)
135
160
138
(1,226)
34
58
–
86
31-Mar
2019
(£’000)
43
91
–
1,383
33
40
38
10
Total audit fees were £92,000 (2019: £73,000). Total non-audit fees payable to the auditor were £86,000 (2019: £48,000).
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 75
31-Mar
2020
(£’000)
–
–
–
97
97
(1,588)
(1,394)
108
60
31-Mar
2019
(£’000)
13
293
203
–
–
–
509
874
–
(1,226)
1,383
6 SEPARATELY DISCLOSED ITEMS
IPO costs
Project set-up costs related to transferring Authorised Corporate Director
New fund set-up costs
Restructuring costs
Acquisition-related expenses
VAT reclaim
Total exceptional items
Share-based payments
Amortisation of client relationship intangible assets
Total separately disclosed items
Separately disclosed items shown separately on the face of the Consolidated Statement of Total Comprehensive Income
or included within administrative expenses reflect costs and income that do not relate to the Group’s normal business
operations and that are considered material (individually (or in aggregate if of a similar type) due to their size or frequency.
Exceptional items
On 30 September 2019 the Group acquired the share capital of Sinfonia Asset Management Limited (see note 21) and
incurred acquisition-related costs of £97,000. These costs are part of separately disclosed items within administrative
expenses in the Consolidated Statement of Total Comprehensive Income.
The restructuring charge relates to the rationalisation and restructuring of various departments and functions.
The headcount reduction resulted in redundancy costs, payment in lieu of notice, settlement and other restructuring-related
costs. These have been excluded from underlying earnings in view of their one-off nature.
During the year, the Group has agreed with HMRC that Tatton’s supplies of discretionary fund management services in
respect of model investment portfolios are exempt from VAT. As a result, the Group has recognised income of £1,756,000
relating to the 4 year period ending 31 March 2019, £1,675,000 of which has been received from HMRC as a VAT refund.
This is offset by £168,000 of professional fees. The Group has reflected this change in treatment of revenue and the level of
irrecoverable input VAT in revenue and administrative expenses from 1 April 2019.
During the financial year ended 31 March 2019, the Group incurred exceptional one-off costs of £496,000 which related to
the funds in Tatton. Tatton transferred its Authorised Corporate Director, who acts on behalf of the Company to administer
the funds, and this transfer incurred significant project management charges. In addition, Tatton launched new funds in the
year and incurred material set-up costs as part of the process; both are included within exceptional items and separately
disclosed items within administrative expenses in the Consolidated Statement of Total Comprehensive Income.
Various legal and professional costs incurred in relation to the IPO of the Group in July 2017 are shown as part of separately
disclosed items within administrative expenses in the Consolidated Statement of Total Comprehensive Income in the
prior year.
Share-based payments
Share-based payments is a recurring item, though the value will change depending on the estimation of the satisfaction of
performance obligations attached to certain awards. It has been excluded from the core business operating profit since it is
a significant non-cash item. Underlying profit, being adjusted operating profit, represents largely cash-based earnings and
more directly relates to the financial reporting period.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 76
6 SEPARATELY DISCLOSED ITEMS CONTINUED
Amortisation of client relationship intangible assets
Payments made for the introduction of customer relationships that are deemed to be intangible assets are capitalised and
amortised over their useful life, which has been assessed to be ten years. This amortisation charge is recurring over the life
of the intangible asset, though has been excluded from the core business operating profit since it is a significant non-cash
item. Underlying profit, being adjusted operating profit, represents largely cash-based earnings and more directly relates to
the financial reporting period.
7 FINANCE (COSTS)/INCOME
Bank interest income
Other interest income
Interest expense on lease liabilities
Bank charges
8 TAXATION
Current tax expense
Current tax on profits for the period
Adjustment in respect of previous years
Deferred tax expense
Share-based payments
Origination and reversal of temporary differences
Adjustment in respect of previous years
Effect of rate changes
Total tax expense
31-Mar
2020
(£’000)
31-Mar
2019
(£’000)
3
13
(22)
–
(6)
31-Mar
2020
(£’000)
1,986
7
1,993
(12)
57
(95)
(10)
2
214
–
(29)
187
31-Mar
2019
(£’000)
1,318
(74)
1,244
(19)
30
–
–
1,933
1,255
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK
applied to profit for the year are as follows:
Profit before taxation
Tax at UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Adjustments in respect of previous years
Differences in tax rates
Share-based payments
Total tax expense
31-Mar
2020
(£’000)
10,296
1,956
87
(88)
(10)
(12)
1,933
31-Mar
2019
(£’000)
6,112
1,161
25
(74)
(2)
145
1,255
A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was substantively enacted on
6 September 2016. In the 11 March 2020 Budget, it was announced that the UK corporation tax rate will remain at the current
level of 19% and not reduce to 17% from 1 April 2020. Deferred tax is calculated using the rate expected to apply when the
relevant timing differences are forecast to unwind.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 77
9 EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares during the year.
Number of shares
Basic
Weighted average number of shares in issue
Effect of own shares held by an EBT
Diluted
Weighted average number of shares (diluted)1
Adjusted diluted
Adjusted diluted weighted average number of options and shares for the year2
2020
2019
55,907,513
(72,355)
55,907,513
–
55,835,158
55,907,513
57,529,989
61,313,712
61,075,935
61,313,712
1. The weighted average number of shares is diluted due to the effect of potentially dilutive contingent issuable shares from share option schemes.
2. The dilutive shares used for this measure differ from that used for statutory dilutive earnings per share; the future value of service costs attributable to employee
share options is ignored and contingently issuable shares for Long-Term Incentive Plan (“LTIP”) options are assumed to fully vest. The Directors have selected
this measure as it represents the underlying effective dilution by offsetting the impact to the calculation of basic shares of the purchase of shares by the EBT to
satisfy options.
Own shares held by an EBT represents the Company’s own shares purchased and held by the Employee Benefit Trust (EBT),
shown at cost. In the year ending 31 March 2020 the EBT purchased 413,411 (2019: none) of the Company’s own shares.
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period
Share-based payments – IFRS 2 option charges
Amortisation of intangible assets – customer relationships
Exceptional (income)/costs – see note 6
Tax impact of adjustments
Adjusted basic and diluted profits for the period and attributable earnings
Earnings per share (pence) – Basic
Earnings per share (pence) – Diluted
Adjusted earnings per share (pence) – Basic
Adjusted earnings per share (pence) – Diluted
31-Mar
2020
(£’000)
8,363
108
60
(1,394)
194
7,331
14.98
14.54
13 .13
12.00
31-Mar
2019
(£’000)
4,857
874
–
509
(97)
6,143
8.69
7.92
10.99
10.02
Dividends
The Directors consider the Group’s capital structure and dividend policy at least twice a year ahead of announcing results
and do so in the context of its ability to continue as a going concern, to execute the strategy and to invest in opportunities
to grow the business and enhance shareholder value.
During the year, TAM plc paid the final dividend related to the year ended 31 March 2019 of £3,131,000, representing a
payment of 5.6p per share. In addition, the Company paid an interim dividend of £1,789,000 (2019: £1,565,000) to its equity
shareholders. This represents a payment of 3.2p per share (2019: 2.8p per share).
The Company’s dividend policy is described in the Directors’ Report on page 43. At 31 March 2020, the Company’s
distributable reserves were £25.8 million (2019: £22.3 million).
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 78
31-Mar
2019
(£’000)
4,389
648
110
–
874
6,021
31-Mar
2019
74
3
77
10 STAFF COSTS
The staff costs shown below exclude key management compensation which is shown separately below.
Wages, salaries and bonuses
Social security costs
Pension costs
Termination benefits
Share-based payments
The average monthly number of employees during the year was as follows:
Administration
Key management
31-Mar
2020
(£’000)
5,995
594
160
88
123
6,960
31-Mar
2020
79
3
82
Key management compensation
The remuneration of the statutory Directors who are the key management of the Group is set out below in aggregate for
each of the key categories specified in IAS 24 ‘Related Party Disclosures’.
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
31-Mar
2020
(£’000)
940
11
3
(15)
939
31-Mar
2019
(£’000)
884
14
3
587
1,488
In addition to the remuneration above, the Non-Executive Chairman and Non-Executive Directors have submitted invoices
for their fees as follows:
Total fees
The remuneration of the highest paid Director was:
Total
31-Mar
2020
(£’000)
160
31-Mar
2020
(£’000)
347
31-Mar
2019
(£’000)
160
31-Mar
2019
(£’000)
343
The highest paid Director did not exercise any share options in the period. There were no share options granted to the
highest paid Director in the year.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 79
Goodwill
(£’000)
4,917
1,337
6,254
11 GOODWILL
Cost and carrying value at 31 March 2019
Recognised on acquisition of subsidiary
Cost and carrying value at 31 March 2020
The carrying value of goodwill includes £5.9 million allocated to the Tatton operating segment and CGU. This is made up
of £2.5 million arising from the acquisition in 2014 of an interest in Tatton Oak Limited by Tatton Capital Limited consisting
of the future synergies and forecast profits of the Tatton Oak business, £2.0 million arising from the acquisition in 2017 of
an interest in Tatton Capital Group Limited and £1.3 million of goodwill generated in the year on the acquisition of Sinfonia,
see note 21. The carrying value of goodwill also includes £0.4 million allocated to the Paradigm operating segment and CGU
relating to the acquisition of Paradigm Mortgage Services LLP.
None of the goodwill is expected to be deductible for income tax purposes.
Impairment loss and subsequent reversal
Goodwill is subject to an annual impairment review based on an assessment of the recoverable amount from future trading.
Where, in the opinion of the Directors, the recoverable amount from future trading does not support the carrying value
of the goodwill relating to a subsidiary company then an impairment charge is made. Such impairment is charged to the
Statement of Total Comprehensive Income.
Impairment testing
For the purpose of impairment testing, goodwill is allocated to the Group’s operating companies which represents the
lowest level within the Group at which the goodwill is monitored for internal management accounts purposes.
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (“CGUs”) or group of
units that are expected to benefit from that business combination. The Directors test goodwill annually for impairment, or
more frequently if there are indicators that goodwill might be impaired. The impairment review considered the COVID-19
pandemic as a potential indicator of impairment, consequently, the Group carried out an exercise The Directors have
reviewed the carrying value of goodwill at 31 March 2020 and do not consider it to be impaired.
Growth rates
The value in use is calculated from cash flow projections based on the Group’s forecasts for the year ended 31 March 2021
which are extrapolated for a further four years. The Group’s latest financial forecasts, which cover a three-year period, are
reviewed by the Board.
Discount rates
The pre-tax discount rate used to calculate value is 7.7% (2019: 8.3%). The discount rate is derived from a benchmark
calculated from a number of comparable businesses.
Cash flow assumptions
The key assumptions used for the value in use calculations are those regarding discount rate, growth rates and expected
changes in margins. Changes in prices and direct costs are based on past experience and expectations of future changes
in the market. The growth rate used in the calculation reflects the average growth rate experienced by the Group for
the industry.
The headroom compared to the carrying value of goodwill as at 31 March 2020 is £414 million (2019: £223 million). From the
assessment performed, there are no reasonable sensitivities that result in the recoverable amount being equal to the
carrying value of the goodwill attributed to the CGU.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 80
Total
(£’000)
–
266
266
271
1,196
1,733
–
(43)
(43)
(195)
(238)
–
223
Computer
Customer
software
(£’000)
relationships
(£’000)
–
266
266
271
–
537
–
(43)
(43)
(135)
(178)
–
223
359
–
–
–
–
1,196
1,196
–
–
–
(60)
(60)
–
–
12 INTANGIBLE ASSETS
Cost
Balance at 31 March 2018
Additions
Balance at 31 March 2019
Additions
Acquired on acquisition of a subsidiary
Balance at 31 March 2020
Accumulated amortisation and impairment
Balance at 31 March 2018
Charge for the period
Balance at 31 March 2019
Charge for the period
Balance at 31 March 2020
Net book value
As at 31 March 2018
As at 31 March 2019
As at 31 March 2020
All amortisation charges are included within administrative expenses in the Consolidated Statement of Total
Comprehensive Income.
1,136
1,495
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 81
13 PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at 1 April 2018
Additions
Balance at 31 March 2019
Adoption of IFRS 16
Additions
Balance at 31 March 2020
Accumulated depreciation and impairment
Balance at 1 April 2018
Charge for the period
Balance at 31 March 2019
Charge for the period
Balance at 31 March 2020
Net book value
As at 1 April 2018
As at 31 March 2019
As at 31 March 2020
Computer,
office
Right-of-use
equipment and
Fixtures and
assets
motor vehicles
(£’000)
fittings
(£’000)
– buildings
(£’000)
Total
(£’000)
435
72
507
–
81
588
(331)
(66)
(397)
(73)
(470)
104
110
118
214
264
478
–
213
691
(214)
(25)
(239)
(87)
(326)
–
239
365
–
–
–
689
–
689
–
–
–
(138)
(138)
–
–
649
336
985
689
294
1,968
(545)
(91)
(636)
(298)
(934)
104
349
551
1,034
All depreciation charges are included within administrative expenses in the Consolidated Statement of Total
Comprehensive Income.
The Group leases buildings and IT equipment. The Group has applied the practical expedient for low value assets and so has
not recognised IT equipment within ROU assets. The average lease term is five years. No leases have expired in the current
financial period.
All depreciation charges are included within administrative expenses in the Consolidated Statement of Total
Comprehensive Income.
Right-of-use assets
Amounts recognised in profit and loss
Depreciation on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to low value assets
At 31 March 2020, the Group is committed to £nil for short-term leases.
The total cash outflow for leases amounts to £156,000.
31-Mar
2020
(£’000)
(138)
(22)
(94)
(1)
(255)
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 82
31-Mar
2020
(£’000)
116
108
1,948
1,259
–
3,431
31-Mar
2019
(£’000)
313
107
1,763
191
134
2,508
14 TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts due from related parties
Prepayments and accrued income
Other receivables
Loan notes
All trade receivable amounts are short term. The carrying value is considered a fair approximation of their fair value.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECLs) for trade receivables at
an amount equal to lifetime ECLs. In line with the Group’s historical experience, and after consideration of current credit
exposures, the Group does not expect to incur any credit losses and has not recognised any ECLs in the current year
(2019: £nil).
The amounts due from related parties are net of provisions. At 31 March 2017, Paradigm Mortgage Services LLP made full
provision of £1,251,000 against the recoverability of amounts due from Jargon Free Benefits LLP. Also, as at 31 March 2017,
Paradigm Partners Limited made full provision of £350,000 against the recoverability of amounts due from Amber Financial
Investments Limited, an entity controlled by Paul Hogarth.
The carrying value of the provisions as at 31 March 2020 was £1,601,000 (2019: £1,601,000). There has been no movement
in the carrying value during the year.
Trade receivable amounts are all held in sterling.
15 TRADE AND OTHER PAYABLES
Trade payables
Amounts due to related parties
Accruals
Deferred income
Contingent consideration
Other payables
Less non-current portion:
Contingent consideration
Other payables
Total non-current trade and other payables
Total current trade and other payables
31-Mar
2020
(£’000)
275
222
2,476
131
344
3,440
6,888
(172)
(530)
(702)
6,186
31-Mar
2019
(£’000)
414
386
1,382
165
–
2,174
4,521
–
–
–
4,521
The carrying values of trade payables, amounts due to related parties, accruals and deferred income are considered
reasonable approximation of fair value.
Trade payable amounts are all held in sterling.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 83
Total
£’000
(15)
(11)
130
104
(227)
60
(43)
(106)
16 DEFERRED TAXATION
Liability at 1 April 2018
Income statement (charge)/credit
Equity credit
Asset/(liability) at 31 March 2019
Acquisition of subsidiary
Income statement (charge)/credit
Equity charge
(Liability)/asset at 31 March 2020
Deferred capital
Share-based
Acquisition
allowances
payments
intangibles
£’000
£’000
£’000
(15)
(30)
–
(45)
–
(81)
–
(126)
–
19
130
149
–
130
(43)
236
–
–
–
–
(227)
11
–
(216)
17 FINANCIAL INSTRUMENTS
The Group’s treasury activities are designed to provide suitable, flexible funding arrangements to satisfy the Group’s
requirements. The Group uses financial instruments comprising borrowings, cash and items such as trade receivables
and payables that arise directly from its operations. The main risks arising from the Group’s financial instruments are
interest rate risks, credit risks and liquidity risks. The Board reviews policies for managing each of these risks and they
are summarised below.
The Group finances its operations through a combination of cash resource and other borrowings. Short-term flexibility is
satisfied by overdraft facilities in Paradigm Partners Limited which are repayable on demand.
Fair value estimation
IFRS 7 requires disclosure of fair value measurements of financial instruments by level of the following fair value
measurement hierarchy:
— Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
— Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices) (level 2).
— Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
All financial assets are categorised as Loans and receivables and are classified as level 1. All financial liabilities except for
contingent consideration are categorised as Financial liabilities measured at amortised cost and are also classified as level 1.
The only financial liabilities measured subsequently at fair value on level 3 fair value measurement represent contingent
consideration relating to a business combination. No gain or loss for the year relating to this contingent consideration has
been recognised in profit or loss.
Interest rate risk
The Group finances its operations through a combination of retained profits and bank overdrafts. The Group has an
exposure to interest rate risk, as the overdraft facility is at an interest rate of 3.2% above the base rate. At 31 March 2020,
total borrowings were £nil (2019: £nil).
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 84
17 FINANCIAL INSTRUMENTS CONTINUED
Credit risk
Credit risk is the risk that a counterparty will cause a financial loss to the Group by failing to discharge its obligation to
the Group. The financial instruments are considered to have a low credit risk due to the mitigating procedures in place.
The Group manages its exposure to this risk by applying Board approved limits to the amount of credit exposure to any
one counterparty, and employs strict minimum credit worthiness criteria as to the choice of counterparty thereby ensuring
that there are no significant concentrations. The Group does not have any significant credit risk exposure to any single
counterparty or any group of counterparties having similar characteristics. The maximum exposure to credit risk for
receivables and other financial assets is represented by their carrying amount.
The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at 31 March,
as summarised below:
Classes of financial assets – carrying amounts:
Cash and cash equivalents
Trade and other receivables
31-Mar
2020
(£’000)
12,757
3,110
15,867
31-Mar
2019
(£’000)
12,192
2,208
14,400
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by
the Group, and incorporates this information into its credit risk controls. The Group’s policy is to deal only with credit
worthy counterparties.
The Group’s management consider that all of the above financial assets that are not impaired or past due for each of the
31 March reporting dates under review are of good credit quality.
At 31 March the Group had certain trade receivables that had not been settled by the contractual date but were not
considered to be impaired. The amounts at 31 March, analysed by the length of time past due, are:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than 1 year
Total
31-Mar
2020
(£’000)
75
19
17
5
116
31-Mar
2019
(£’000)
241
72
–
–
313
Trade receivables consist of a large number of customers within the UK. Based on historical information about customer
default rates, management consider the credit quality of trade receivables that are not past due or impaired to be
good. The Group has rebutted the presumption in paragraph 5.5.11 of IFRS 9 that credit risk increases significantly when
contractual payments are more than 30 days past due.
The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 85
17 FINANCIAL INSTRUMENTS CONTINUED
Liquidity risk
Liquidity risk is the risk that companies within the Group will encounter difficulty in meeting obligations associated with
financial liabilities. To counter this risk, the Group operates with a high level of interest cover relative to its net asset value
and no debt. In addition, it benefits from strong cash flow from its normal trading activities. The Group manages its liquidity
needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows
and outflows due in day to day business. The data used for analysing these cash flows is consistent with that used in the
contractual maturity analysis below.
The totals for each category of financial instruments, measured in accordance with IFRS 9 and IFRS 7 as detailed in the
accounting policies to this historical financial information, are as follows:
At 31 March 2020, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments
where applicable) as summarised below:
At 31 March 2020
Trade and other payables
Lease liabilities
Contingent consideration
Total
Current
Non-current
Within 6
months
6 to 12
months
1 to 5
years
Later than 5
years
5,761
37
–
5,798
–
84
172
256
–
530
172
702
–
–
–
–
This compares with the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows:
At 31 March 2019
Trade and other payables
Total
Current
Non-current
Within 6
months
4,356
4,356
6 to 12
months
1 to 5
years
Later than 5
years
–
–
–
–
–
–
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities
at the reporting date.
18 EQUITY
Authorised, called up and fully paid
£0.20 ordinary shares
Each share in TAM plc carries one vote and the right to a dividend.
31-Mar
2020
31-Mar
2019
(number)
(number)
55,907,513
55,907,513
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 86
19 OWN SHARES
The following movements in own shares occurred during the year:
At 1 April 2019
Acquired in the year
At 31 March 2020
Number of
shares
–
413,411
413,411
£’000
–
996
996
Own shares represent the cost of the Company’s own shares, either purchased in the market or issued by the Company, that
are held by an employee benefit trust to satisfy future awards under the Group’s share-based payment schemes (note 20).
413,411 shares were held in the Employee Benefit Trust at 31 March 2020 (2019: nil).
20 SHARE-BASED PAYMENTS
During the year, a number of share-based payment schemes and share options schemes have been utilised by the Company,
described under 20.1 Current schemes, below.
20.1 Current schemes
(i) TAM plc EMI Scheme (“TAM EMI Scheme”)
On 7 July 2017 the Group launched an EMI share option scheme relating to shares in TAM plc to enable senior management
to participate in the equity of the Company. A total of 3,022,733 options with a weighted average exercise price of £1.89
were granted during the prior period, each exercisable in July 2020.
The scheme was extended on 8 August 2018 and a total of 1,720,138 zero cost options were granted during the year ended
31 March 2019, each exercisable in August 2021. The scheme was further extended on 1 August 2019 and a total of 193,000
zero cost options were granted, each exercisable in August 2022. A total of 4,755,737 options remain outstanding at
31 March 2020, none of which are currently exercisable.
No options were exercised during the period. A total of 68,319 options were forfeited in the period (111,815 options were
forfeited in the prior year).
The options vest in July 2020, August 2021 or August 2022 provided certain performance conditions and targets, set prior
to grant, have been met. If the performance conditions are not met, the options lapse.
Within the accounts of the Company, the fair value at grant date is estimated using the appropriate models including both
Black-Scholes methodology and Monte Carlo modelling methodologies.
Outstanding at 1 April 2018
Granted during the period
Forfeited during the period
Outstanding at 31 March 2019
Exercisable at 31 March 2019
Outstanding at 1 April 2019
Granted during the period
Forfeited during the period
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Number of
share options
granted
(number)
3,022,733
1,720,138
(111,815)
4,631,056
–
4,631,056
193,000
(68,319)
4,755,737
–
Weighted
average
price
(£)
1.89
–
1.89
1.19
–
1.19
–
0.52
1.15
–
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 87
20 SHARE-BASED PAYMENTS CONTINUED
(ii) TAM plc Sharesave Scheme (“TAM Sharesave Scheme”)
On 7 July 2017, 5 July 2018 and 3 July 2019 the Group launched all employee Sharesave schemes for options over shares in
TAM plc, administered by Yorkshire Building Society. Employees are able to save between £10 and £500 per month over a
three-year life of each scheme, at which point they each have the option to either acquire shares in the Company, or receive
the cash saved.
Over the life of the 2017 Sharesave scheme it is estimated that, based on current saving rates, 197,481 share options will be
exercisable at an exercise price of £1.70. Over the life of the 2018 Sharesave scheme it is estimated that, based on current
saving rates, 48,688 share options will be exercisable at an exercise price of £1.90. Over the life of the 2019 Sharesave
scheme it is estimated that, based on current savings rates, 75,610 share options will be exercisable at an exercise price
of £1.79. No options have been exercised or expired in the period and 10,741 options have been forfeited in the period.
Within the accounts of the Company, the fair value at grant date is estimated using the Black-Scholes methodology for
100% of the options. Share price volatility has been estimated using the historical share price volatility of the Company,
the expected volatility of the Company’s share price over the life of the options and the average volatility applying to a
comparable group of listed companies. Key valuation assumptions and the costs recognised in the accounts during the
period are noted in 20.2 and 20.3 overleaf respectively.
Outstanding at 1 April 2018
Granted during the period
Forfeited during the period
Outstanding at 31 March 2019
Exercisable at 31 March 2019
Outstanding at 1 April 2019
Granted during the period
Forfeited during the period
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Number of
share options
Weighted
average
granted
(number)
63,344
82,322
(13,690)
131,976
–
131,976
102,493
(10,741)
223,728
26,176
price
(£)
1.70
1.74
1.71
1.70
–
1.70
1.75
1.85
1.73
1.70
20.2 Valuation assumptions
Assumptions used in the option valuation models to determine the fair value of options at the date of grant were as follows:
Share price at grant (£)
Exercise price (£)
Expected volatility (%)
Expected life (years)
Risk free rate (%)
Expected dividend yield (%)
EMI Scheme
Sharesave Scheme
2019
2.12
0.00
30.44
3.00
0.35
3.96
2018
2.40
0.00
28.48
3.00
0.81
2.75
2017
1.89
1.70
26.00
3.00
0.66
4.50
2019
2.14
1.79
30.44
3.00
0.35
3.96
2018
2.34
1.90
28.48
3.00
0.81
2.75
2017
1.89
1.70
26.00
3.00
0.66
4.50
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 88
31-Mar
2020
(£’000)
84
24
108
31-Mar
2019
(£’000)
839
35
874
20 SHARE-BASED PAYMENTS CONTINUED
20.3 IFRS 2 Share-based option costs
TAM EMI Scheme
TAM Sharesave Scheme
21 BUSINESS COMBINATION
On 30 September 2019, the Group acquired 100% of the issued share capital of Sinfonia Asset Management Limited
(“Sinfonia”), obtaining control of Sinfonia. Sinfonia is an administration services company which facilitates the sale of
investment products. Sinfonia holds funds within the IFSL Sinfonia Open-Ended Investment Companies. Sinfonia was
acquired in order to complement Tatton’s existing fund range and give IFAs’ clients further access to a range of investments
balanced to reflect a particular risk profile.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed upon acquisition of Sinfonia
are set out in the table below:
Identifiable intangible assets
Financial assets
Financial liabilities
Deferred tax liability
Total identifiable assets
Goodwill
Total consideration
Satisfied by:
Cash
Contingent consideration arrangement
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balance acquired
Net cash outflow
£’000
1,196
54
(13)
(227)
1,010
1,337
2,347
2,003
344
2,347
2,003
(1)
2,002
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 89
21 BUSINESS COMBINATION CONTINUED
The fair value of the financial assets includes accrued income and prepayments with a fair value of £54,000. The best
estimate at acquisition date of the contractual cash flows not to be collected is £nil.
The fair value of Sinfonia’s client relationship intangible assets has been measured using a multi-period excess earnings
method. The model uses estimates of client longevity and the level of activity driving commission income to derive a
forecast series of cash flows, which are discounted to a present value to determine the fair value of the client relationships
acquired. The useful economic life of the client relationships has been determined to be ten years.
The goodwill of £1,337,000 arising from the acquisition consists of future synergies and future income expected to be
generated from the funds. None of the goodwill is expected to be deductible for income tax purposes.
The contingent consideration arrangement requires the value of assets held in the funds to meet specific criteria agreed
between the parties. The potential undiscounted amount of all future payments that the Group could be required to make
under the contingent consideration arrangement is between £nil and £690,000.
The fair value of the contingent consideration arrangement of £344,000 was estimated by calculating the expected
future value of assets held in the Sinfonia funds. The liability of £344,000 has been recognised in other payables in the
Consolidated Statement of Financial Position.
Acquisition-related costs (included in administrative expenses and separately disclosed in the Consolidated Statement of
Total Comprehensive Income) amount to £97,000.
Sinfonia contributed £151,000 to revenue and £81,000 to the Group’s profit for the period between the date of acquisition
and the reporting date.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 90
22 RELATED PARTY TRANSACTIONS
Ultimate controlling party
The Directors consider there to be no ultimate controlling party.
Relationships
The Group has trading relationships with the following entities in which Paul Hogarth, a Director, has a beneficial interest:
Entity
Nature of transactions
Amber Financial Investments Limited
The Group provides discretionary fund management services, as well as
accounting and administration services.
Jargon Free Benefits LLP
The Group provides accounting and administration services.
Paradigm Investment Management LLP
The Group incurs finance charges.
Perspective Financial Group Limited
The Group provides discretionary fund management services and compliance
advisory services.
Suffolk Life Pensions Limited
The Group pays lease rental payments on an office building held in a pension fund
by Paul Hogarth.
From 20 December 2019 Perspective Financial Group Limited is no longer a related party. The transactions shown below
are those which took place in the financial period during which the company was a related party. The balance receivable/
payable is the year end balance.
Related party balances
Terms and conditions
Amber Financial Investments Limited
Jargon Free Benefits LLP
Paradigm Management Partners LLP
Paradigm Investment Management LLP
Perspective Financial Group Limited
Suffolk Life Pensions Limited
Hermitage Holdings (Wilmslow) Limited Repayment on demand
Payable within 30 days
Repayment on demand
Repayment on demand
Repayment on demand
Payable within 30 days
Payable in advance
Balances with related parties are non-interest bearing.
2020
2019
Value of
income/
(cost)
(£’000)
Balance
receivable/
(payable)
(£’000)
Value of
income/
(cost)
(£’000)
Balance
receivable/
(payable)
(£’000)
297
15
1
(5)
243
(57)
4
25
66
5
(234)
11
9
4
239
24
–
(11)
369
(56)
–
(42)
43
4
(13)
72
9
–
Key management personnel remuneration
Key management includes Executive and Non-Executive Directors. The compensation paid or payable to key management
personnel is as disclosed in note 10.
Notes to the Consolidated Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 91
23 ALTERNATIVE PERFORMANCE MEASURES (“APMS”)
Income statement measures
Closest
Reconciling items to
APM
equivalent measure
their statutory measure
Definition and purpose
Adjusted Operating
Profit before separately
disclosed items
Operating profit
Exceptional items, share-based
payments and amortisation of client
relationship intangibles. See note 6.
Adjusted Profit before
tax; before separately
disclosed items
Profit before tax
Exceptional items, share-based
payments and amortisation of client
relationship intangibles. See note 6.
An important measure where exceptional items distort
the understanding of the operating performance of
the business. Allows comparability between periods.
See also note 2.24.
An important measure where exceptional items distort
the understanding of the operating performance of
the business. Allows comparability between periods.
See also note 2.24
Adjusted earnings per
share – Basic
Earnings per
share – Basic
Exceptional items, share-based
payments and amortisation of client
relationship intangibles and the tax
thereon. See note 9.
An important measure where exceptional items distort
the understanding of the operating performance of
the business. Allows comparability between periods.
See also note 2.24.
Adjusted earnings per
share – Diluted
Earnings per
share – Diluted
Exceptional items, share-based
payments and amortisation of client
relationship intangibles and the tax
thereon. The dilutive shares for this
measure assume that all contingently
issuable shares will fully vest. See
note 9.
An important measure where exceptional items distort
the understanding of the operating performance of
the business. Allows comparability between periods.
See also note 2.24.
Net cash generated
from operations before
separately disclosed items
Net cash
generated from
operations
Exceptional items, share-based
payments and amortisation of client
relationship intangibles. See note 6.
Net cash generated from operations before
exceptional costs. To show underlying cash
performance. See also note 2.24.
Other measures
APM
equivalent measure
their statutory measure Definition and purpose
Closest
Reconciling items to
Tatton – Assets Under
Management (“AUM”)
None
Not applicable
AUM is representative of the customer assets and is a measure of the
value of the customer base. Movements in this base are an indication of
performance in the year and growth of the business to generate revenues
going forward.
Paradigm Consulting
members and growth
Paradigm Mortgages
lending, member firms
and growth
None
None
Not applicable
Alternative growth measure to revenue, giving an operational view of
growth.
Not applicable
Alternative growth measure to revenue, giving an operational view of
growth.
Dividend cover
None
Not applicable
Dividend cover (being the ratio of diluted earnings per share before
exceptional items and share-based charges) is 1.9 times, demonstrating
ability to pay.
24 POST BALANCE SHEET EVENT
There were no material post balance sheet events.
25 CAPITAL COMMITMENTS
At 31 March 2020, the Directors confirmed there were no capital commitments (2019: £112,000) for capital improvements.
26 CONTINGENT LIABILITIES
At 31 March 2020, the Directors confirmed there were no contingent liabilities (2019: none).
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report Company Statement of Financial Position
As at 31 March 2020
Non-current assets
Investments in subsidiaries
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the Company
Share capital
Share premium account
Own shares
Other reserve
Merger reserve
Retained earnings
Total equity
92
31-Mar
2019
(£’000)
77,216
2
143
77,361
10,127
5,508
15,635
31-Mar
2020
(£’000)
77,216
5
235
77,456
9,264
7,657
16,921
94,377
92,996
(1,932)
(1,932)
(1,932)
(383)
(383)
(383)
92,445
92,613
11,182
8,718
(996)
1,121
67,316
5,104
92,445
11,182
8,718
–
1,036
67,316
4,361
92,613
Note
5
17
13
14
15
16
12
The Company generated a profit of £5,706,000 during the financial year (2019: profit of £3,788,000).
The financial statements were approved by the Board of Directors on 15 June 2020 and were signed on its behalf by:
Paul Edwards
Director
Company registration number 10634323
Tatton Asset Management plc Annual Report and Accounts 2020
Company Statement of Changes in Equity
93
For the year ended 31 March 2020
At 31 March 2018
Profit for the period
Dividends
Share-based payments
Deferred tax on share-
based payments
Share
capital
(£’000)
11,182
Share
premium
(£’000)
8,718
–
–
–
–
–
–
–
–
At 31 March 2019
11,182
8,718
Profit for the period
Dividends
Share-based payments
Deferred tax on share-
based payments
Own shares acquired in
the year
–
–
–
–
–
–
–
–
–
–
At 31 March 2020
11,182
8,718
Own
shares
(£’000)
–
–
–
–
–
–
–
–
–
–
(996)
(996)
Other
reserve
(£’000)
140
–
–
766
130
1,036
–
–
85
–
–
Merger
reserve
(£’000)
67,316
Retained
earnings
(£’000)
Total
equity
(£’000)
4,672
92,028
–
–
–
–
67,316
–
–
–
–
–
3,788
(4,025)
(74)
–
4,361
5,706
(4,920)
–
3,788
(4,025)
692
130
92,613
5,706
(4,920)
85
(43)
(43)
–
(996)
1,121
67,316
5,104
92,445
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report Notes to the Company Financial Statements
94
1 AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH FRS 101
The financial statements of Tatton Asset Management plc for the year ended 31 March 2020 were authorised for issue by the
Board of Directors on 15 June 2020. Tatton Asset Management plc is incorporated and domiciled in England and Wales.
These financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’ (“FRS 101”) and in accordance with applicable accounting standards. The Company’s financial statements are
presented in sterling.
These financial statements have been prepared on a going concern basis and on the historical cost basis.
The principal accounting policies adopted by the Company are set out in note 2.
2 ACCOUNTING POLICIES
2.1 Accounting policies
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year
ended 31 March 2020.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
a) the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information
in respect of:
1) Paragraph 79(a)(IV) of IAS 1;
2) Paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment’;
b) the requirements of paragraphs 10(d), and 134–136 of IAS 1 ‘Presentation of Financial Statements’ and the requirements
of IAS 7 ‘Statement of Cash Flows’;
c) the requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’;
d) the requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’;
e) the requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two
or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a
member; and
f) the disclosure requirements of IFRS 7 ‘Financial Instruments: Disclosures’.
2.2 Investments
All investments are initially recorded at cost, being the fair value of consideration given including the acquisition costs
associated with the investment. Subsequently, they are reviewed for impairment on an individual basis if events or changes
in circumstances indicate the carrying value may not be fully recoverable.
2.3 Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, and trade and
other payables.
2.4 Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method.
2.5 Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, where applicable or required. These amounts represent liabilities for goods and services provided
to the Group prior to the end of the financial period, which are unpaid.
2.6 Cash and cash equivalents
Cash and cash equivalents comprise long and short-term deposits held with banks by the Company, and are subject to
insignificant risk of changes in value.
Tatton Asset Management plc Annual Report and Accounts 2020 95
2 ACCOUNTING POLICIES CONTINUED
2.7 Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest. Fair value is measured by use of the Black-Scholes model or Monte Carlo model as appropriate.
2.8 Interest income and interest expense
Finance income is recognised as interest accrued (using the effective interest method) on funds invested outside the Group.
Finance expense includes the cost of borrowing from third parties and is recognised on an effective interest rate basis,
resulting from the financial liability being recognised on an amortised cost basis.
2.9 Taxation
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
Statement of Total Comprehensive Income because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated
with such investments and interests are only recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary difference and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
is realised based on tax laws and rates that have been enacted or substantively enacted at the Statement of Financial
Position date. Deferred tax is charged or credited in the Statement of Total Comprehensive Income, except when it relates
to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other
comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off the current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 96
2 ACCOUNTING POLICIES CONTINUED
2.9 Taxation continued
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the accounting for the business combination.
2.10 Dividends
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been
approved in a Board meeting prior to the reporting date.
2.11 Retirement benefit costs
The Company pays into a personal pension plan for which the amount charged to income in respect of pension costs and
other post-retirement benefits is the amount of the contributions payable in the year. Payments to the defined contribution
retirement benefit scheme are recognised as an expense when employees have rendered service entitling them to the
contributions. Differences between contributions payable and paid are accrued or prepaid. The assets of the plans are
invested and managed independently of the finances of the Company.
3 OPERATING LOSS
The following items have been included in arriving at the operating loss for continuing operations:
Share-based payment charges (note 11)
31-Mar
2020
(£’000)
108
31-Mar
2019
(£’000)
840
Share-based payment charges relate to the provision made in accordance with IFRS 2 ‘Share-based Payment’ following the
issue of share options to employees.
4 SERVICES PROVIDED BY THE COMPANY’S AUDITOR
During the period the Company obtained the following services provided by the Company’s auditor at the costs
detailed below:
Audit of the statutory financial statements of TAM plc
Services provided by the Group’s auditor:
Other taxation advisory services
Non-audit services
5 INVESTMENTS
Cost and net book value at 1 April 2018, 31 March 2019 and 31 March 2020
31-Mar
2020
(£’000)
31-Mar
2019
(£’000)
34
–
22
33
8
10
£’000
77,216
Notes to the Company Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 97
5 INVESTMENTS CONTINUED
The principal investment comprises shares at cost in the following companies:
Country of incorporation
Holding
Direct/indirect
Name of subsidiary
Nadal Newco Limited
Paradigm Partners Limited
Paradigm Mortgage Services LLP
Tatton Capital Group Limited
Tatton Capital Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Tatton Investment Management Limited
United Kingdom
Tatton Oak Limited
Tatton Crown Investments Limited
Sinfonia Asset Management Limited
United Kingdom
United Kingdom
United Kingdom
100%
100%
100%
100%
100%
100%
100%
100%
100%
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
All entities above are included within the consolidated financial statements for TAM plc and all have the same registered
address as the Company.
6 DIRECTORS AND EMPLOYEES
The average number of persons employed by the Company (including Directors) during each year was as follows:
Administration
Wages, salaries and bonuses
Social security costs
Benefits in kind
Pension costs
Share-based payment charges
The remuneration of the highest paid Director was:
Total
7 ULTIMATE CONTROLLING PARTY
The Directors consider that there is no ultimate controlling party.
8 FINANCE INCOME
Bank interest income
31-Mar
2020
12
31-Mar
2020
(£’000)
1,130
142
–
12
108
1,392
31-Mar
2020
(£’000)
347
31-Mar
2019
11
31-Mar
2019
(£’000)
1,095
132
–
12
312
1,551
31-Mar
2019
(£’000)
343
31-Mar
2020
(£’000)
–
31-Mar
2019
(£’000)
2
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 98
31-Mar
2020
(£’000)
31-Mar
2019
(£’000)
–
4
(123)
(16)
(135)
–
(12)
–
–
(12)
9 INCOME TAX
Current tax expense
Current tax on profits for the period
Deferred tax income
Share-based payments
Adjustments in respect of prior years
Difference in tax rates
Total tax income
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the
United Kingdom applied to profit for the year are as follows:
Profit before taxation
Tax at UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Income not taxable
Difference in tax rates
Share-based payments
Adjustments in respect of prior years
Group relief
Total tax income
31-Mar
2020
(£’000)
5,571
1,059
25
(1,496)
(16)
4
(123)
412
(135)
31-Mar
2019
(£’000)
3,776
717
7
(1,218)
1
145
–
336
(12)
The deferred tax asset as at 31 March 2020 has been calculated based on a rate of 19% based on when the Company expects
the deferred tax asset to reverse.
10 DIVIDEND PAID AND PROPOSED
During the year, TAM plc paid the final dividend related to the year ended 31 March 2019 of £3,131,000, representing a
payment of 5.8p per share. In addition, the Company paid an interim dividend of £1,789,000 (2019: £1,565,000) to its equity
shareholders. This represents a payment of 3.2p per share (2019: 2.8p per share).
In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 March 2020 of 6.4p
(2019: 5.8p) per share which will absorb an estimated £3.6 million (2019: £3.1 million) of shareholders’ funds. It will be
paid on 28 August 2020 to shareholders who are on the register of members on 17 July 2020.
11 SHARE-BASED PAYMENTS
Details of share-based payments are shown in note 20 to the consolidated financial statements.
12 OWN SHARES
Details of own shares are shown in note 19 to the consolidated financial statements.
Notes to the Company Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 99
31-Mar
2020
(£’000)
9,184
50
30
9,264
31-Mar
2019
(£’000)
10,089
38
–
10,127
13 TRADE AND OTHER RECEIVABLES
Amounts due from related parties
Prepayments and accrued income
Other debtors
All receivable amounts are short term. All of the Company’s trade and other receivables have been reviewed for indicators
of impairment and, where necessary, a provision for impairment provided. The carrying value is considered a fair
approximation of their fair value. The value of the impairment charged to the Statement of Total Comprehensive Income
is £nil (2019: £nil).
Trade receivable amounts are all held in sterling.
14 CASH AND CASH EQUIVALENTS
Cash at bank
15 TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to related parties
Accruals
Other creditors
31-Mar
2020
(£’000)
7,657
31-Mar
2020
(£’000)
44
1,309
534
45
1,932
31-Mar
2019
(£’000)
5,508
31-Mar
2019
(£’000)
51
110
222
–
383
The carrying values of trade payables, amounts due to related parties and accruals are considered reasonable
approximation of fair value.
Trade payable amounts are all held in sterling.
16 EQUITY
Authorised, called up and fully paid
£0.20 ordinary shares
Each share in TAM plc carries one vote and the right to a dividend.
31-Mar
2020
31-Mar
2019
(number)
(number)
55,907,513
55,907,513
Tatton Asset Management plc Annual Report and Accounts 2020Financial StatementsCorporate GovernanceStrategic Report 100
Share-based
payments
(£’000)
Total
(£’000)
–
13
130
143
135
(43)
235
–
13
130
143
135
(43)
235
17 DEFERRED TAXATION
Asset/(liability) at 1 April 2018
Income statement credit
Equity credit
Asset at 31 March 2019
Income statement credit
Equity charge
Asset at 31 March 2020
18 CONTINGENT LIABILITIES
The Directors confirmed that at 31 March 2020, no contingent liabilities existed (2019: none).
19 CAPITAL COMMITMENTS
The Directors confirmed that at 31 March 2020, no capital commitments existed (2019: none).
20 RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption under paragraph 8(K) of FRS 101 not to disclose transactions with
entities that are wholly owned subsidiaries of TAM plc. There are no other related party transactions other than those that
have been disclosed in note 22 to the consolidated financial statements.
20.1 Transactions with key management personnel
Other than the Directors and Officers of the Group (see note 22), no other key management personnel have been identified.
21 EVENTS AFTER THE REPORTING PERIOD
There were no events after the reporting period.
Notes to the Company Financial Statements continuedTatton Asset Management plc Annual Report and Accounts 2020 Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
Image credits:
p20-21 photographed by Jeremy Yap
p22-23 photographed by Grianghraf
p24-25 photographed by Taylor Nicole
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