CREATING THE
ENVIRONMENT
FOR GROWTH
Annual Report
and Accounts 2021
Strategic Report
Introduction
CREATING THE
ENVIRONMENT
FOR GROWTH
Tatton Asset Management plc has
delivered strong growth in what has
been a challenging year, demonstrating
the resilience of Tatton’s business model.
Since the business floated four years
ago, it has more than doubled the level
of assets under management (“AUM”),
reaching a milestone of £9bn at the end
of this financial year.
www
Find out more about
Tatton Asset Management at
tattonassetmanagement.com
Financials
Adjusted operating profit*
£11.402m
+25.6%
(2020: £9.076m)
Profit before tax
£7.303m
Adjusted EPS*
14.74p
Proposed final dividend
-29.1%
(2020: £10.296m)
Read more on page 35
+22.8%
(2020: 12.00p)
Basic EPS on opposite page
7.5p
+17.2%
(2020: 6.4p)
* Alternative performance measures are detailed in note 22
Contents
STRATEGIC REPORT
1
Highlights
2 At a glance and investment case
4 Chairman’s Statement
6 Chief Executive’s Review
10 Chief Investment Officer’s Report
12 Engaging with our stakeholders
16 Our market share and trends
18 Our business model
20 Our strategy for growth
28 Key performance indicators
30 Risk management
32 Principal risks
34 Chief Financial Officer’s Report
36 Environmental, Social and Governance (“ESG”)
CORPORATE GOVERNANCE
40 Board of Directors
42 Corporate Governance Statement
44 QCA Code Principles
45 Directors’ Remuneration Report
49 Directors’ Report
53
Independent Auditor’s Report
FINANCIAL STATEMENTS
60 Consolidated Statement of Total Comprehensive Income
61 Consolidated Statement of Financial Position
62 Consolidated Statement of Changes in Equity
63 Consolidated Statement of Cash Flows
64 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
Corporate Governance
Financial Statements
Group revenue
AUM
£23.353m +9.3%
£9.0bn +35.2%
(2020: £6.7bn)
(2020: £21.369m)
Highlights
Share price trading
450
400
350
300
250
200
150
190
2018
JUL
2017
203
2019
267
2020
425.5
270
2021
TATTON’S SHARE PRICE
Total Shareholder Return for TAM over the same period is 112%
Total Shareholder Return for TAM over the same period is 112%
Financial
— Group revenue increased 9.3% to £23.353m (2020: £21.369m)
Operational
— Tatton’s discretionary assets under management (“AUM”)
— Adjusted operating profit* up 25.6% to £11.402m
increased 35.2% to £8.990bn (2020: £6.651bn)
(2020: £9.076m)
— Tatton's ethical portfolios increased 141% to £441m
— Adjusted operating profit* margin increased to 48.8%
(2020: £183m)
(2020: 42.5%)
— Organic net inflows of £0.755bn (2020: £1.129bn) or 11.4%
— Profit before tax £7.303m (2020: £10.296m) due to the
of opening AUM, an average of £62.9m per month
catch‑up in share‑based payment charges
— The Group responded swiftly to the COVID‑19 outbreak
— Final dividend increased by 17.2% to 7.5p (2020: 6.4p), giving
and efficiently implemented comprehensive business
a full year dividend of 11.0p (2020: 9.6p)
continuity plans
— Fully diluted adjusted earnings per share (“EPS”)*
— Tatton increased its IFA firms by 12.3% to 668 (2020: 595)
increased by 22.8% to 14.74p (2020: 12.00p) and basic EPS
10.86p (2020: 14.98p) due to the catch‑up in share‑based
and number of client accounts to 72,450 (2020: 66,100)
— Paradigm Mortgages increased its number of member firms
payment charges
to 1,612 (2020: 1,544) and gross lending to £11.34bn and
— Healthy financial position, strong balance sheet and £16.934m
Consulting member firms increased to 407 (2020: 394)
of net cash (2020: £12.757m)
Read more on page 34
Read more on page 6
Tatton Asset Management plc Annual Report and Accounts 2021
1
Strategic Report
At a glance and Investment case
A BROADER
PROPOSITION
Our vision is to be the provider of choice for
financial advisers and their end clients who
seek third party investment and operational
support in order to elevate outcomes for
both advisers and their clients.
We are transparent, honest, open and
without pretence. Across our Group we strive
to be appropriately knowledgeable, to be
conscious of risk and to continually improve.
We support our
Financial Advisers
so they can spend
time helping their
clients and grow
their businesses.
P A U L H O G A R T H Chief Executive Officer
Investment case
Tatton Asset Management plc continues to deliver strong growth
across revenue, adjusted operating profit* and AUM. AUM has
grown by 35.2% in the year to £9.0bn and has grown by over £5bn
in under 4 years, an average annual growth of 23.4% since 2017.
The majority of this growth has been achieved organically, with
average annual net inflows since listing in 2017 of £1.0bn per annum.
The Group continues to grow and circa 85% of its revenue is
recurring. The Group continues to deliver increasing profit margins,
now at 48.8% and a 22.8% increase in fully diluted adjusted EPS* in
the current financial year.
We have a progressive dividend policy with circa 70% of adjusted
earnings being paid out as dividends to shareholders giving
a dividend yield of 3.1%.
Average annual growth
in AUM since 2017*
Average annual net
inflows since 2017*
23.4%
Increase in
Adjusted EPS*
22.8%
Current year
dividend growth
14.6%
£1.0bn
Cash on the
balance sheet
£16.9m
Current year
dividend yield
3.1%
Earnings support a stable and sustainable dividend
16.0
14.0
12.0
10.0
8.0
e
c
n
e
p
6.0
6.526
7.308
4.0
2.0
11.402
9.076
m
£
t
fi
o
r
p
g
n
i
t
a
r
e
p
o
d
e
t
s
u
d
A
j
0.0 2018
2019
/ Full year dividend
2020
2021
/
Adj EPS*
Adjusted operating profit
Read more on page 6
* Alternative performance measures are detailed in note 22.
2
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Group’s proposition
— 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 to the clients of IFAs
— Clients benefit from gaining access to full discretionary
management of their investments
— Platform agnostic – now available on 15 platforms
— Comprehensive mortgage offering to directly authorised
firms, including a whole of market lender panel
— Financial compliance support to directly authorised wealth
managers, IFAs and mortgage advisers
Group revenue breakdown
Paradigm
Tatton
22.4%
77.6%
The Group is a highly cash-generative business and it
has a resilient balance sheet with £16.9m of net cash
and £24.4m of net assets. In addition, we have access to
a committed £10m revolving credit facility with a £20m
accordion, providing liquidity and a good foundation
for any future acquisitive growth.
TAM recruits and retains high quality people that have
a diverse range of skills and experience.
Number of
Tatton firms
668
Average annual growth
in firm numbers*
29.6%
Number of employees
Employee retention rate
86
90%
Our operating segments
TATTON INVESTMENT MANAGEMENT DIVISION
Tatton is a discretionary investment manager providing a range
of investment services, predominately through an on‑platform
only model portfolio service to the clients of IFAs. It manages
£8.990 billion of assets for the private clients from 668 UK IFA firms.
IFAs benefit by being able to offer their clients full discretionary
asset management whilst retaining complete control of those
relationships, together with the ability to manage their clients’
portfolios through existing platform arrangements.
Paul Hogarth
Chief Executive Officer
PARADIGM – IFA SUPPORT SERVICES DIVISION
Paradigm Mortgage Services is one of the UK’s leading mortgage
distribution businesses, with membership of over 1,600 directly
authorised firms, representing c.4,200 regulated IFAs.
Paradigm Mortgage Services provides access to a whole of
market lender panel as well as a wide range of mortgage and
related support services, such as specialist lending distributors,
conveyancing partners and general insurance via Paradigm Protect.
Paradigm Consulting is a leading provider of support services,
including compliance and other related products/services to
directly authorised IFAs in the UK.
Tatton Asset Management plc Annual Report and Accounts 2021
3
Chairman’s Statement
During the year, the Group has continued to deliver on
its strategic objectives and maintained strong growth
in revenue, adjusted profits* and assets under
management (“AUM”).
The impact of the COVID‑19 pandemic over the reporting period
ended 31 March 2021 has been widely reported and is now broadly
understood. Notwithstanding the challenges that have arisen in this
connection the Group has delivered on expectations for growth
in revenue, adjusted operating profit* and AUM as well as on its
strategic objectives. For this we have, in particular, our remarkable
staff and a wide range of discriminating Independent Financial
Advisers ("IFAs"), and their clients to thank. Their adaptability,
commitment and resilience are at the heart of what Tatton has been
able to achieve over the last 12 months.
Strategic Report
Chairman’s Statement
CONTINUED
PROGRESS
AGAINST OUR
STRATEGY
R O G E R C O R N I C K Chairman
The Group has
continued to deliver on
its strategic objectives
and maintained strong
growth in revenue,
profits and AUM.
4
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
FINANCIAL PERFORMANCE
Despite the challenges of the pandemic over the whole of the
review period the Group has performed well. At the start of the
year, we reacted swiftly to changing circumstances by transitioning
to a new working and trading environment, redeploying resources
to direct online engagement, running multiple online events and
employing a communication strategy which included frequent
online investment updates to support the IFA community and
their clients. Operating along these lines the Group’s business
model has proved very resilient. Group revenues increased by
9.3% to £23.4 million (2020: £21.4 million). Adjusted operating
profit* increased by 25.6% to £11.4 million (2020: £9.1 million) and
profit before tax, after incurring exceptional costs and share‑
based payment charges, was £7.3 million (2020: £10.3 million).
The resulting impact on fully diluted adjusted earnings per share*
was an increase of 22.8% to 14.74p (2020: 12.00p). Basic earnings
per share were 10.86p (2020: 14.98p).
STRATEGY
In the early part of this year when the outlook was very uncertain, we
implemented a capital investment, pay and recruitment freeze as we
sought clarity on the impact of the pandemic on both our business
and the wider industry. This was quickly lifted, and in the second
half of this year we resumed investment in people and technology to
PRO
FIT
Our
financial
focus
E
P
S
E
U
EV E N
R
A
U
M
DIV I D E N D S
develop the business. While this has been a challenging period, we
have deployed our agility and resilience not only to engage with the
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires the Directors to
immediate issues, but also to advance our capabilities for the future.
act in the way that they consider, in good faith, would most likely
We remain committed to the growth of AUM by providing products
and services that are designed to support IFAs in advising their
clients, and we will continue to invest in both people and technology
that will grow the business by enhancing our relationships with the
IFA community. While we aim to at least sustain our rate of organic
growth, we also intend to supplement this growth through targeted
M&A activity.
promote the success of the Company for the benefit of its members
as a whole. In doing this s.172 requires a Director to 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;
This year has seen an increase in corporate activity in our industry
and the need to act fairly as between members of the Company.
driven by the continued trend for consolidation and supported by
Further information can be found on pages 12 to 15 of this Report.
the low cost of capital. In considering the opportunities, and threats,
implicit in these developments our focus remains on assets that are
strategically relevant and aligned, and those that will enhance our
products and services, and support the maintenance of our position
as an innovative and forward thinking business. By paying close
attention to fundamentals, we aim to continue to create long‑term
value for all our stakeholders.
DIVIDENDS
The Group has continued its growth trajectory and delivered
against its financial performance targets maintaining both a strong
balance sheet and cash generation which remain a key focus for
the Board. The Board is proposing a final dividend of 7.5p per
share, bringing the total ordinary dividend for the year to 11.0p per
share, an increase of 14.6%, which is 2.0 times covered by adjusted
BOARD AND CORPORATE GOVERNANCE
Tatton Asset Management remains committed to the highest
earnings per share. The Board continues to operate a progressive
dividend policy and targets a payout ratio in the region of 70% of
standards of corporate governance. The Board and its Committees
annual adjusted earnings per share over the medium term.
guide the Company and lead its strategic outlook, and we are
determined to ensure that we have the right mix of skill sets to steer
the Group forward. In support of this aim I would like to welcome
Lesley Watt who joins the Board as an independent Non‑Executive
Director. Lesley will serve on the Audit and Risk, Remuneration and
Nominations Committees, and brings with her a significant amount
of Board and M&A experience. Following this appointment Chris
Poil will become the Senior Non‑Executive Director. In a business
evolving in the current challenging environment, we will maintain
a governance structure that underpins and facilitates growth, while
ensuring effective controls and safeguards are in place.
OUTLOOK
While the ever‑changing market in which we operate can be quick
to take advantage of any reliance on historical achievement, we
believe that the momentum built up over this reporting period,
combined with the potential of a number of opportunities currently
under review, supports a sense of confidence, and optimism, as we
view both the year ahead and the longer‑term future of the Group.
Roger Cornick
Chairman
* Alternative performance measures are detailed in note 22.
Tatton Asset Management plc Annual Report and Accounts 2021
5
Chief Executive’s Review
This has been a significant year for the Group, a year that has seen
unprecedented change and one in which I am pleased to report we
have continued to grow and prosper. We are proud to have played a
very positive role in supporting all our clients in what has been a very
tough environment, but one which we have navigated successfully.
We maintained our focus and continued to adopt our clear and
sustainable business strategy, which is to drive revenue and
profitability through broadening our appeal, widening our client
base and further developing and growing our AUM. We continue
to achieve this through engagement with our existing client base
while at the same time attracting new firms that value our services
and propositions, which in turn drives our growth. I am pleased
to report the Group has now reached a milestone of £9.0bn of
AUM, an increase of over £5bn in under four years from the point
the business listed in July 2017. Impressively, the vast majority of
this £5bn growth has been achieved organically except for a small
acquisition of £135m relating to the Sinfonia funds in 2019.
Strategic Report
Chief Executive’s Review
Adjusted operating profit*
£11.4m
+25.6%
(2020: £9.1m)
Revenue
£23.4m
+9.3%
(2020: £21.4m)
INVESTMENT
EVOLVED
P A U L H O G A R T H Chief Executive Officer
We have responded
swiftly and effectively
to the challenges of
the pandemic, always
keeping the needs
and interests of the
IFA community front
of mind.
* Alternative Performance Measures are
detailed in note 22
6
Strategic Report
Corporate Governance
Financial Statements
Tatton Assets under Management in £ billion
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21
This reported financial year has run in parallel with the COVID‑19
pandemic and whilst our business has continued to prosper
it is certainly not lost on me that it has been a difficult time for
REVIEW OF THE FINANCIAL YEAR AND
MARKET OVERVIEW
I am pleased to report we delivered another record year for revenue
many other corporates and indeed, more importantly, for many
and profit driven by solid organic growth. Revenue increased by
individuals who have been affected in what has been a distressing
9.3% to £23.4m (2020: £21.4m) and adjusted operating profit*
and challenging year in lots of different ways. Tatton has a long
increased by 25.6% to £11.4m (2020: £9.1m) with adjusted operating
track record of putting the client first and our success has been built
profit* margin increasing to 48.8% (2020: 42.5%). Pre‑tax profit
on the core values of putting the IFA at the heart of our business.
after exceptional items, amortisation of customer relationship
This year this philosophy has been critical and our ability to adapt
intangibles, finance costs and share‑based payment charges
to their changing needs has paid dividends. We have done this
decreased to £7.303m (2020: £10.296m) due to the increase in
through an ongoing process of IFA engagement, listening to what
share‑based payment charges in the period, following a release of
they want and need and then delivering this to enable our IFAs to
the provision at the March 2020 year end. This release was solely
concentrate on running their business, meeting clients and ensuring
related to the increased level of uncertainty in the market due to
their client needs are satisfied.
the COVID‑19 pandemic.
The business model has been tested and proved to be very resilient
As reported in the interim accounts, there is little doubt that the
both financially but also operationally as we have adapted to change.
pandemic impacted our business in the first half of this financial
I am proud of the way in which everyone in the Group addressed
year. There remained a significant amount of uncertainty as we
the challenges they have faced, both personally and professionally,
entered the second half of the year and we prudently anticipated
while protecting the health and safety of their colleagues and
delivering a similar financial performance across the business.
communities. This mindset enabled us to adapt quickly and
While we could not predict the length of the downturn, the work
seamlessly to a new trading environment and implement a broad
we did very early in this pandemic gave us a strong platform from
range of changes, which included the redeploying of resources to
which to push on and continue to grow. As such, the second half
direct online engagement and running multiple interactive virtual
performance was a significant gain on the first and we improved our
events and frequent video investment updates. While this year has
performance across all our metrics. We continued to benefit from
seen a material change in the way we operate and interact with our
a reduction in costs as we continued to work and engage with our
clients, it has also been a period where we have learned a lot about
firms and client base remotely, but the improved second half was
ourselves and our business and in many ways, we have become
fundamentally underpinned by improving markets, net inflows in
a stronger and better business for it. Following the end of the
Tatton which increased 30% in the second half of the year compared
transition period on 31 December 2020 with the United Kingdom
to the first half of the year, and an increase in gross lending (£6.3bn
finally leaving the European Union on the 31 January 2020, there
vs £5.0bn) in Paradigm.
have been no direct material financial or operational impacts to the
Group as a consequence.
Tatton Asset Management plc Annual Report and Accounts 2021
7
Strategic Report
Chief Executive’s Review continued
IMPACT OF COVID-19 ON PARADIGM MORTGAGES
Mortgage procuration income
Protection & General Insurance ("GI") income
Valuations income
Provider marketing
Other income
1.7%
14.7%
6.1%
24.1%
2021
53.4%
1.6%
17.4%
10.3%
21.7%
2020
49.0%
TATTON
Tatton has continued to grow from strength to strength over the last
12 months in what has been a difficult year for all IFAs. We continue
to grow organically, attracting new firms to our propositions,
and continue to see positive net inflows. We now work with 668
(2020: 595) adviser firms and support over 72,450 (2020: 66,000)
clients and we have continued to experience new net inflows
through the year totalling £755m (2020: £1.129bn).
As reported in the interims the first few months of this year were
difficult times as we all adjusted to the new circumstances that the
pandemic placed on us; however, we adjusted quickly and built up
momentum throughout the year and delivered a much stronger
second half with flows in H2 being £427m, a 30% increase on the
£328m in H1. Overall, the business saw its AUM increase 35% or
£2.3bn year on year to a new milestone of £9.0bn (2020: £6.7bn).
In addition to the £755m of new net inflows, markets contributed
£1.6bn or 24%.
This year has seen us continue to broaden our propositions,
expanding the number of platforms we operate on to 15 with
plans to add more in the near future, and we have implemented
a suite of new global models to complement our growing blended
models. The Tatton environmental, social and governance ("ESG")
proposition continues to grow strongly and now accounts for over
5% of the overall AUM or £0.4bn and is anticipated to make further
strides given its strong performance and the ongoing trends in the
market for ESG propositions.
The strategic partnership agreement with Tenet has completed
its first full year and we now have £0.5bn of AUM from 104 firms.
We will continue to focus on the development of our AUM both
organically but also through acquisitions of targeted funds, further
strategic alliances and joint ventures where these fit with our
strategy and direction.
PARADIGM (IFA SUPPORT SERVICES DIVISION)
The Paradigm division has shown considerable strength over
the last 12 months. In what was a particularly difficult start to the
financial year it has ultimately delivered a very resilient performance.
Revenue for the year was £5.2m (2020: £5.4m), and costs were tightly
controlled ensuring its adjusted operating profit* contribution was not
impacted, delivering £2.0m (2020: £1.8m). Importantly, the second
half performance was significantly stronger as the business took
advantage of the increasing demand in the housing market. To put
— Strong customer growth and an increase in lending from
this in context, following the lifting of the lockdown restriction in the
£5.0bn in the first half of the year, to £6.3bn in the second.
first half of the year, which halted all physical in‑situ valuations, it soon
— Despite this, Mortgages revenue fell slightly year on year due
became clear the UK public had not lost their desire to move and
to the impact of COVID‑19 on the different income streams.
improve. In fact, in many ways the pandemic has stimulated many
— Income from gross lending (procuration fees) increased
homeowners to re‑evaluate their living arrangements, reconsider
due to the increase in gross lending, albeit there has been
lifestyle, and look for homes with more room and the ability to
a change in product mix with a greater level of re‑mortgages
accommodate working from home either fully or part of the time.
and product transfers rather than new purchases.
This in turn fed through to the mortgage market and was further aided
— Protection and GI income has seen a small increase.
by government stimulus and the July 2020 reduction in stamp duty
— Valuations income was significantly affected with no
valuations income in Q1 during the first lockdown.
that was extended to end June 2021 from its original 31 March 2021
deadline. While initially access to lending was harder, as lenders limited
— Provider marketing was also significantly affected as this
products, restricted criteria and critically withdrew high loans to value
relates to marketing income from strategic partners with
a large proportion relating to face‑to‑face events which
(“LTVs”), as the year progressed more funds became available and
lending restrictions were relaxed more towards pre‑pandemic terms.
have not been able to continue in the same format.
The increase in activity improved gross lending from £5.0bn in the first
half to £6.3bn in the second half. Overall revenue increased by 21%,
8
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
AUM reached a new milestone
Paradigm Mortgages gross lending
£9.0bn +35.2% (2020: £6.7bn) from 668 firms, an increase
£11.3bn +15.0% (2020: £9.9bn), a record year, with procuration
of 12.3% in the year
income now making up more than half of Mortgages’ income
£0.5m, compared to the first half of the year, and with continued cost
is no doubt we will continue to utilise the alternative solutions of
control positively impacted the contribution in year.
online interaction and home working and essentially adopt a hybrid
Although some way off pre‑pandemic levels, lenders have now
returned to 95% LTV lending, helped partly by the government
mortgage guarantee scheme and also with many lenders choosing
to lend at this level through their own means. As the market continues
to stabilise, we believe the specialist lending sector will play a more
model to best leverage the use of time and resources. At the time
of writing, activity and IFA engagement have been stable and this
has been reflected in the new net inflows in the final quarter of
the financial year under review. This momentum has also carried
forward into the start of the new financial year.
prominent role, particularly with regard to self‑employed clients and
While the past 12 months have been challenging, our ambition
those with new earnings complexities, for example those borrowers
remains focused on continuing to deliver the organic growth in
who were furloughed. While in many ways there remains a degree
AUM and with £10bn in touching distance we set our sights well
of uncertainty and it is therefore difficult to predict, on balance, we
beyond this milestone. To support this ambition, corporate activity
believe the next 12 months for the mortgage market remain positive.
remains part of our strategy. This year has seen us participate in
While we do not anticipate a significant increase in the volume of
a number of corporate processes commencing early in the year
gross mortgage lending, retention business is strong and growing
with the proposed acquisition in the first half of this financial year
and we believe we are well placed to continue to take advantage of
of £5.5bn of funds and, while we were ultimately unsuccessful,
the opportunities to grow our lending and cross‑sales activities across
we followed a disciplined process and with a developing pipeline
the Paradigm business, for example Protection and General Insurance
our ambition for acquisitive growth remains undimmed, either
and Compliance services.
Paradigm Consulting has continued to maintain close links to its firms
and advisers and supply best‑in‑class solutions and support to ensure
IFA firms can effectively navigate the constantly changing regulatory
landscape. This year was a difficult year for advisers and Paradigm
as a partner needed to be adaptable in the way it provided its
regulatory and compliance services. Paradigm successfully adopted
virtual support processes at the same time as remaining focused
on delivering bespoke consultancy to satisfy the varying needs and
through funds, entities or joint ventures that are value creating and
fit with the strategic direction of the Group. To supplement this, we
will also pursue other strategic partnerships and we are delighted
to bring on board new IFA partners following a due diligence
process with Threesixty Services, a provider of compliance and
business support services to over 900 directly authorised client
firms and 9,000 advisers. This further extends our reach, which will
support our organic growth plans alongside other exciting strategic
partnerships and acquisition opportunities.
wants of the IFAs. Over the period the business has increased the
As we enter the new financial year, we remain confident the Group
number of firms we work with to 407 (2020: 394) and demonstrates
will continue to make progress and we look forward to reporting
the importance of flexibility and service.
on this progress as the year unfolds.
CURRENT TRADING AND OUTLOOK
As we enter the new financial year we do so with a degree of
optimism. The industry is tuned into the new environment and
while we look to return to more face‑to‑face interaction, there
Paul Hogarth
Chief Executive Officer
Tatton Asset Management plc Annual Report and Accounts 2021
9
Strategic Report
Chief Investment Officer’s Report
Distribution of AUM across proposition matrix
Chief Investment Officer’s Report
2020, from an investment perspective a year that at times
seemed the ultimate annus horribilis, ended well, despite
the global economy suffering the worst recessionary
decline on record.
The key for us was to look through the noise and mayhem of March
2020 and rapidly develop our understanding of how capital markets
would react to the duress caused by the short‑term evaporation of
earnings, vs the counterbalancing efforts by governments and central
banks and their determination to prevent major damage to the output
potential of their economies and the wellbeing of society.
At Tatton we stood closely by our investors and, knowing that
fear is the worst imaginable adviser, we provided relentless client
communication insights into the drivers of market dynamics that once
again were welcomed as valuable reassurance. Once global policy
support commitment materialised, we adeptly positioned portfolios
for the recovery.
PROPOSITION AND BUSINESS DEVELOPMENTS
As previously reported, we managed the change to remote working
seamlessly and were able to support adviser businesses and their
clients during this time in exactly the same way as if we had been office
based. After an initial adjustment period, advisers took advantage of
the changed landscape and discovered operational efficiencies arising
from remote business practices that enabled them to extend their own
regional footprint to mutual benefit.
Blended 41.2% (2020: 39.6%)
Managed 29.8% (2020: 38.0%)
Tracker 18.3% (2020: 18.1%)
Ethical/ESG 5.3% (2020: 3.0%)
Income 1.0% (2020: 1.3%)
Global 4.4% (2020: 0%)
— Launch of Global portfolios during the year offering
investors the widest choice of portfolio styles and
risk profiles.
— Continued growth in Ethical portfolios.
A YEAR OF
OPPORTUNITY AND
OPTIMISM THROUGH
THE PANDEMIC
L O T H A R M E N T E L Chief Investment Officer
“
We proved our
commitment to
our IFAs through
decisive action in the
depth of the crisis
and by adapting and
enhancing the way
we do business.
10
Strategic Report
Corporate Governance
Financial Statements
The widespread acceptance of online meetings successfully
of the pandemic recession was its deliberate creation by governments to
transformed the modus operandi of our lead generation team and
mitigate the public health impact of the COVID‑19 virus, not market forces.
the increased use of technology within day to day operations acted
Nevertheless, the early rapid market recovery was initially interpreted as
as a catalyst for the introduction of segmentation, targeting and
a temporary reversal (known as a bear market bounce). This recovery
positioning business practices with advisers. Our continued investment
diverted from historical precedent and became sustained when it became
in new digital infrastructure has delivered significant improvements in
evident that the global economy was unlikely to suffer long‑lasting
processing new business mandates and meaningful enhancements to
scarring damage and that demand was likely to rebound very strongly.
online IFA client management through the Tatton Portal, which were
well received by all adviser firms.
The rebound was led by China and Eastern Asia, where we had an
overweight position to benefit, as it emerged first from the pandemic.
The fallout from Brexit and the shifts in the world economy from the
Likewise beneficial was the reiteration of an overall equity overweight
COVID‑19 pandemic acted as a catalyst to bring forward changes
in early April while distinctly underweighting UK equities. The US
in our investment offering. In July we launched the Tatton Global
followed China in the recovery of its stock market, as the home to the
Portfolios, giving investor the choice to invest in portfolios weighted
bulk of digital global enterprises such as Amazon, Microsoft, Netflix
towards a global market capitalisation or in our Tatton Classic
and other big tech benefited from consumers being homebound.
Portfolios with their more traditional UK home biased asset allocation.
The second pandemic wave in the autumn created an inevitable
The pandemic has also stimulated a surge in interest towards ethical and
market setback but markets then reversed dramatically in light of rapid
ESG investing. Tatton has one of the longest‑running Ethical Managed
progress of vaccine developments. This also marked the beginning of
Portfolio Services ("MPS") (launched in 2014) in the UK and we have
the "great rotation" with value and income investment assets staging
seen interest grow significantly in our portfolios. This led to a noticeable
a massive recovery – the flip side being underperformance of growth
change in the distribution of inflows with a much larger proportion now
and momentum‑style investments that had been the leaders of the
going towards our Ethical portfolios as investors reprioritised their
initial market recovery.
balance of investment aims. The exceptionally strong outperformance
of growth and momentum assets during 2020 also led to increased
flows into our Tatton Tracker Portfolio range as market capitalisation
weighted investment exposures appeared superior.
2020/2021 CAPITAL MARKETS AND RETURNS
1 APRIL 2020–31 MARCH 2021
Tatton investment returns (%) – core MPS product set (after
The new US administration instigated a faster vaccination campaign
and a greater post‑pandemic stimulus programme than anticipated,
which extended positive market sentiment – despite the ever‑rising
death toll and subsequent return of tightened restrictions. As society
learned to live with the pandemic, but also started to see it coming
to an end, a level of orthodoxy returned to capital markets. In this
environment active stock picking made a strong comeback with
discretionary fund management ("DFM") charge and fund costs)
sectoral and market understanding becoming a premium once again
Defensive
Cautious
Balanced
Active
Aggressive
Global Equity
Tatton
Tatton
Tatton
Managed
Tracker
Blended
Tatton
Ethical
13.2
20.9
26.2
32.7
39.0
41.1
10.6
17.4
22.5
28.1
33.7
37.9
11.9
19.1
24.3
30.4
36.3
39.5
16.2
22.2
25.9
30.2
35.0
39.4
ARC
PCI1
11.5
18.5
18.5/
24.82
24.8
31.7
31.7
5 YEARS, 1 APRIL 2016–31 MARCH 2021
Tatton investment returns (%) – core MPS product set (annualised,
after DFM charge and fund costs)
Defensive
Cautious
Balanced
Active
Aggressive
Global Equity
Tatton
Tatton
Tatton
Managed
Tracker
Blended
Tatton
Ethical3
4.6
6.3
7.3
8.7
10.1
13.5
4.5
6.2
7.5
8.9
10.2
13.2
4.5
6.3
7.4
8.8
10.1
13.4
–
–
9.1
–
–
–
ARC
PCI1
3.6
5.3
5.3/
7.22
7.2
8.9
8.9
1 ARC PCI – Asset Risk Consultants Private Client Indices ("PCI").
2 Balanced Portfolios are measured against both ARC Balanced Asset PCI and ARC
Steady Growth PCI as in risk terms the Balanced Portfolios lie in the middle of
these Indices.
3 Only Tatton Ethical Balanced has existed for five years.
Adapting to living and operating under constraints that Western societies
last experienced during WWII and the resultant worst recession on record
dominated all aspects of life and business. However, the key difference
and rapidly closing the return gap to index trackers and momentum
investing that had opened up in the first half of 2020.
We were very pleased that our diversified investment approach,
actively tilting towards trends in investments rather than following them
exclusively, delivered strong and consistent returns. I am very satisfied
that our stewardship approach, with a determined focus on sustainable
and repeatable returns, has been well received by our investors.
OUTLOOK FOR 2021
The outlook for the remainder of 2021 is brightened by the anticipation
of a widespread economic recovery boom. Beyond that it remains
unclear if global GDP growth rates can be maintained at higher than pre‑
pandemic levels, or will return to the post‑Global Financial Crisis ("GFC")
decade of subdued demand and growth. Nevertheless, the necessity
to reinvigorate the economy decisively in order to mitigate the negative
impact of the vastly increased public sector debt provides policy makers
with a strong incentive not to repeat their demand suppressing post‑
GFC mistakes.
Tatton’s investment and business model has emerged successfully from
the 2020/2021 years and we have been able to prove our commitment
to the IFA sector through decisive action in the depth of the crisis and
now by adapting and enhancing the way we do business. As advisers
and their clients reflect on what worked well for them during the stresses
of the pandemic, we are confident that we remain well positioned with
a cost‑effective and broad investment offering.
Lothar Mentel
Chief Investment Officer
Tatton Asset Management plc Annual Report and Accounts 2021
11
Strategic Report
Engaging with our Stakeholders
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 stakeholder in an open and
transparent manner, taking into account their views
in our strategic decision making. We engage with our
stakeholders across all areas and levels of the business,
with reporting and escalation to the Board
as appropriate.
Throughout the year we have
continued to listen to our
stakeholders and understand
their needs. We have invested
more time and resources in
investor and wider market
communication and provided
support and reassurance to
our IFAs and their clients.
P A U L E D W A R D S Chief Financial Officer
Our stakeholders
Firms and clients
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
IFAs 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.
Shareholders
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.
People
The Board recognises that our people are central to the
ongoing success of the Group. The Group’s employees
deliver the highest quality of service to our customers.
Society
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.
External service providers
Our external service providers include our distribution
partners (platforms, IFAs, fund managers) and
our suppliers.
They are critical to ensuring the effective distribution
of our products.
Regulators
Tatton Investment Management Limited is regulated
by the Financial Conduct Authority (“FCA”).
Their material issues
How we engage
Highlights and key decisions
Further links
— Performance of our funds
— The business development
— In July 2020 we launched the Tatton
— See our business model
teams meet regularly
Global Portfolios
on pages 18 and 19
with current and potential
— As a result of the COVID-19 restrictions,
— A summary of our
and portfolios
— Transparency
— Quality of service
— Fair pricing
firms to develop a clear
view of client objectives
and how these are likely
to evolve
— Virtual events,
including partner
forums, roadshows and
continuing professional
development ("CPD")
events
Tatton and Paradigm ran multiple
interactive virtual events and
frequent video investment updates.
Paradigm held 79 events during the
proposition is shown on
pages 2 and 3
— The Group’s KPIs are shown
on pages 28 and 29
year attracting 5,359 attendees in total
— Read more about our markets
on pages 16 and 17
— The Group’s strategy is
detailed on pages 20 and 21
— Compelling business
— Regular meetings are
— Delivered against our dividend policy
— See our business model
model and growth
prospects
held with our investors
throughout the year
with a total full year dividend of 11.0p,
on pages 18 and 19
an increase of 14.6% (FY20: 9.6p)
— Our dividend policy is
— Long‑term sustainable
— Results presentations
— Adjusted operating profit* of £11.402m,
detailed on page 49
business which delivers
have been held virtually
an increase of 25.6% (FY20: £9.076m)
— The Group’s KPIs are shown
attractive returns through
at the half and full year
— The decision was made to hold the half
on pages 28 and 29
year and full year results presentations
— The Group’s strategy is
with shareholders virtually due to
detailed on pages 20 and 21
COVID-19 restrictions
maintaining a progressive
dividend policy
— High standards
of governance
— Making a difference
— Presentations by
— During the year the Group supported
— See our business model
for our customers
— Having opportunities
the Board to discuss
performance and
a range of individuals through
professional qualifications
on pages 18 and 19
— See our ESG section on
for learning, growth and
further development
the Company’s
strategic plans
— Further extension of the Enterprise
pages 36 and 39
Management Incentive ("EMI") and
— Being fairly rewarded for
— Regular management
Sharesave schemes
their contributions
briefings
— Staff transitioned seamlessly to
working from home
— Society has an interest
— We aim for high
— Growth in our Ethical portfolios
— See our business model
in how we manage our
standards of governance
— Continued improvement and adoption
on pages 18 and 19
of corporate governance guidelines
— See our ESG section on
— Group-wide review of our approach to
pages 36 and 39
clients’ assets and ensure
across the Group.
good stewardship over
our investments
Our careful selection
process for Tatton’s
— They have an interest in
Ethical portfolios
ensuring we manage our
prioritises funds that
business in a manner which
actively engage with
minimises our impact on
company managers on
the environment and helps
ESG issues
to benefit society
ESG and establishment of a working
group led by Chris Poil, Senior Non-
Executive Director and the Head of the
Audit and Risk Committee
— Trusted partnerships
— Regular service reviews
— We maintained ongoing relations
— Read more on pages 36 to 39
— Strong governance
— Annual due diligence
— Clear communications
reviews
with our key suppliers and partners
during the year with updates at
— Collaborative engagement
Board meetings
— Ensuring that the business
— Direct communication
— The Board and Audit and Risk
— Information on our risk
understands and adopts
through our compliance
Committee received and reviewed
the principles and rules
of the FCA Handbook
senior manager
function holder
regular compliance reports
— Completion of FCA COVID-19
— Open and
— We always engage
questionnaires throughout the year
— Our Corporate Governance
transparent communication
in an open and
co‑operative manner
— Surplus regulatory capital was
maintained throughout the year
management framework and
processes is shown on pages
30 and 31
42 to 44
Statement is shown on pages
— Demonstrating
good conduct
— Acting in our customers’
best interests
12
Tatton Asset Management plc Annual Report and Accounts 2021
Our stakeholders
Firms and clients
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
IFAs 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.
Shareholders
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 Group. The Group’s employees
deliver the highest quality of service to our customers.
People
Society
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.
External service providers
Our external service providers include our distribution
partners (platforms, IFAs, fund managers) and
They are critical to ensuring the effective distribution
our suppliers.
of our products.
Regulators
Tatton Investment Management Limited is regulated
by the Financial Conduct Authority (“FCA”).
Strategic Report
Corporate Governance
Financial Statements
Their material issues
How we engage
Highlights and key decisions
Further links
— 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
— Virtual events,
including partner
forums, roadshows and
continuing professional
development ("CPD")
events
— Regular meetings are
held with our investors
throughout the year
— Results presentations
have been held virtually
at the half and full year
— In July 2020 we launched the Tatton
— See our business model
Global Portfolios
— As a result of the COVID-19 restrictions,
Tatton and Paradigm ran multiple
interactive virtual events and
frequent video investment updates.
Paradigm held 79 events during the
year attracting 5,359 attendees in total
on pages 18 and 19
— A summary of our
proposition is shown on
pages 2 and 3
— The Group’s KPIs are shown
on pages 28 and 29
— Read more about our markets
on pages 16 and 17
— The Group’s strategy is
detailed on pages 20 and 21
— Delivered against our dividend policy
with a total full year dividend of 11.0p,
an increase of 14.6% (FY20: 9.6p)
— Adjusted operating profit* of £11.402m,
an increase of 25.6% (FY20: £9.076m)
— The decision was made to hold the half
year and full year results presentations
with shareholders virtually due to
COVID-19 restrictions
— See our business model
on pages 18 and 19
— Our dividend policy is
detailed on page 49
— The Group’s KPIs are shown
on pages 28 and 29
— The Group’s strategy is
detailed on pages 20 and 21
— Presentations by
— During the year the Group supported
— See our business model
— Performance of our funds
and portfolios
— Transparency
— Quality of service
— Fair pricing
— Compelling business
model and growth
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
— Being fairly rewarded for
the Board to discuss
performance and
the Company’s
strategic plans
— Regular management
their contributions
briefings
— 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
— 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
— Trusted partnerships
— Strong governance
— Clear communications
— Regular service reviews
— Annual due diligence
reviews
— Collaborative engagement
a range of individuals through
professional qualifications
— Further extension of the Enterprise
Management Incentive ("EMI") and
Sharesave schemes
— Staff transitioned seamlessly to
working from home
— Growth in our Ethical portfolios
— Continued improvement and adoption
of corporate governance guidelines
— Group-wide review of our approach to
ESG and establishment of a working
group led by Chris Poil, Senior Non-
Executive Director and the Head of the
Audit and Risk Committee
on pages 18 and 19
— See our ESG section on
pages 36 and 39
— See our business model
on pages 18 and 19
— See our ESG section on
pages 36 and 39
— We maintained ongoing relations
— Read more on pages 36 to 39
with our key suppliers and partners
during the year with updates at
Board meetings
— 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 our compliance
senior manager
function holder
— We always engage
in an open and
co‑operative manner
— The Board and Audit and Risk
Committee received and reviewed
regular compliance reports
— Completion of FCA COVID-19
— Information on our risk
management framework and
processes is shown on pages
30 and 31
questionnaires throughout the year
— Our Corporate Governance
— Surplus regulatory capital was
maintained throughout the year
Statement is shown on pages
42 to 44
Tatton Asset Management plc Annual Report and Accounts 2021
13
Strategic Report
Engaging with our Stakeholders continued
Section 172 statement
Section 172 of the Companies Act 2006 requires the Directors to
The Directors fulfil their duties partly through a governance
consider how best to promote the success of the Company for the
framework that delegates day‑to‑day decision making to the
benefit of its members as a whole. In doing so, the Directors must
employees of the Company. The Board recognises that such
have regard, amongst other matters, to:
delegation needs to be part of a robust governance structure, which
a) the likely consequences of any decisions in the long term;
b) the interests of the Company’s employees;
c) the need to foster the Company’s business relationships with
covers our values, how we engage with our stakeholders, and how
the Board assures itself that the governance structure and systems
of controls continue to be robust.
suppliers, customers and others;
Our Chairman, with the assistance of the Company Secretary, sets
d) the impact of the Company’s operations on the community
the agenda for each Board meeting to ensure that the requirements
and environment;
of section 172 are always met and considered in line with our
e) the desirability of the Company maintaining a reputation for
approach to section 172 detailed below.
high standards of business conduct; and
f) the need to act fairly as between members of the Company.
The opposite page shows some of the key decisions made by the
Board having regard to the Group's stakeholders over the course
Our Board ensures that all decisions are taken for the long term
of the financial year due to the impact of the COVID‑19 pandemic.
and collectively and individually aims to always uphold the highest
standards of conduct. Similarly, our Board acknowledges that
the business can only grow and prosper over the long‑term if it
understands and respects the views and needs of the Company's
investors, customers, employees, suppliers and other stakeholders
to whom we are accountable, as well as the environment we
operate within.
Our approach to Section 172
Leadership and
management receive
training on Directors’
duties to ensure
awareness of the
Board’s responsibilities
Our Board continually
engages with
stakeholders.
Read more on pages
12 and 13
The Group has
a flat structure and
a culture of openness
and transparency
ensuring proper
consideration of the
potential impacts
of decisions
The Board are
continually reviewing
and ensuring that
the governance in
place is relevant for
the size and nature
of the business and
the Board recognises
the value it brings to
the Group
The Board determines
the action to be taken
following discussions
INFORMED
BOARD
DISCUSSIONS HELD BY THE BOARD
TO DETERMINE STRATEGY
BOARD
DECISION
Board papers cover
a broad range of
topics to capture
s.172 factors that
are relevant to the
strategic direction
of the Group
The Board considers
and adapts its
strategic direction
with a view to
ensuring it meets
its long‑term
strategic objectives
The Board regularly
receives and
reviews financial
and operational
information that
supports decision
making and
drives long‑term
value creation
We evaluate the
outcomes of our
decisions, take
action and amend
the strategy and
implement change
where necessary
14
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
The impact of the COVID-19
pandemic has run in parallel with
our financial year, inevitably
impacting our business and each
of our stakeholders.
Throughout the year, we have looked
after the welfare and safety of
our employees.
We have communicated with our IFAs
and their clients, providing critical
reassurance at a time of uncertainty
and volatility.
We responded quickly and adapted
our processes to a new working
environment, continuing to deliver
uninterrupted business operations,
creating value for our shareholders
and maintaining a strong
capital position.
Our response to the pandemic throughout the year
Throughout the
year, the Board has
looked to make
decisions to support
its workforce and
customers, review
the resilience of its
supply chain and
consider the interest
of its shareholders
and regulators.
P A U L H O G A R T H
Chief Executive Officer
Throughout 2020/2021
At each Board meeting, the Board
reviewed the impact of the pandemic on
our workforce and the resilience of the
business and its supply chain.
February 2020
onwards
Tatton provided reassurance to our IFAs
and their clients through consistent
client communication insights into the
Tatton and Paradigm redeployed
drivers of market dynamics and Paradigm
resources to direct online engagement,
supported its intermediaries with
running multiple interactive virtual events
ongoing updates.
which were very successful.
March 2020
May 2020
Our staff transitioned seamlessly
The Board considered the interest of its
to working from home. The Board
shareholders and the Group’s financial
continued to support its people and take
position when proposing the payment
all precautions necessary, constantly
of the FY20 final dividend of 6.4p.
monitoring the evolving situation.
During FY21 the Board has proposed total
June and November
2020
The Board continued to engage with our
investors, holding the Group’s full year
and half year presentations virtually.
dividends of 11.0p.
July 2020
The Group’s Annual General Meeting
("AGM") was held with two members
in attendance and the Board attending
by phone. All shareholders were able to
raise issues or concerns in advance of the
meeting and vote by proxy.
Tatton Asset Management plc Annual Report and Accounts 2021
15
Strategic Report
Our market share and trends
Our markets are evolving and so are we
Tatton continues to grow as its markets expand. We see
the potential for the UK platform market to continue to
increase in size, while regulatory and pricing pressures
drive IFAs to outsource the management of model
portfolios to a discretionary fund manager.
1 CLIENTS ARE DEMANDING
MORE CHOICE, VALUE
FOR MONEY AND FEE
TRANSPARENCY
Due to the ageing population, the cost
of funding retirement has increased.
Individuals have become more self‑reliant in
planning for their long‑term needs and 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.
0.15%
Tatton DFM MPS fee is 55% lower than the
average MPS fee of 0.33%1
2 INCREASING DEMAND FOR
ESG SOLUTIONS
3 DISRUPTION IN THE
INVESTMENT MARKETS
4 GROWING STRENGTH OF THE
IFA SECTOR
An increased focus on climate change and
COVID‑19 has provided the most significant
The requirement for advice from IFAs
environmental issues has driven consumer
level of market turbulence since the 2008
continues to increase as the mass affluent
demand for a choice of investment options
financial crisis, with the global economy
make complex decisions around financial
that focus on corporate environmental,
suffering the worst recorded recessionary
planning, particularly during a time of market
social and governance factors. COVID‑19
decline. Such market disruption can
turbulence. The pandemic saw IFAs adapt
has reinforced this trend, making investors
significantly affect consumer confidence
their advice process and shift successfully
more aware of and likely to act in relation to
and alter both their short‑ and long‑term
to remote working; however regulatory and
social and environmental issues.
attitudes towards savings and investment.
technological change continues to drive
€120bn
of net inflows into European sustainable
-30%
FTSE 100 fell by 30% to 6,100 in February/
funds in Q1 2021, making up 51% of overall
new flows into European funds2
March 2020, recovering to over 7,000 by
June 2021
consolidation across the industry.
5,512 +0.1%
Number of Directly Authorised IFA Firms3
5 GROWING STRENGTH
OF PLATFORM MARKET
6 APPETITE FOR
LENDING
7 IMPACT OF
REGULATORY CHANGE
The platform market is fast growing and
After an effective closure of the mortgage
The market demand for financial advice is
becoming an increasingly attractive method
market in April 2020, the pandemic stimulated
growing; however, the ability of IFAs to meet
for managing investments. Following the
many homeowners to re‑evaluate their living
this demand has been challenged partly due
FCA’s Investment Platforms Market Study in
arrangements. This in turn fed through to the
to increased regulatory pressures, such as
2019, it should become easier for consumers
mortgage market and as the year progressed
MiFID II, General Data Protection Regulation
to choose or switch platforms through clearer
more funds became available and criteria
(“GDPR”) and Senior Managers & Certification
pricing information and the reduction or
restrictions relaxed.
removal of exit fees.
£541bn
+9.3%
On‑platform AUM4, forecast to be >£1trn
by 2025
1. Platforum, October 2020
2. Morningstar, February 2021
3. PIMFA, November 2020
16
£258bn
-5.0%
Gross lending in the UK market in 2020
4. Platforum, November 2020
5. Schroders, November 2020
Regime ("SM&CR"), meaning that IFAs face
significant costs and resource challenges.
#1 concern
Regulation is the biggest concern for IFAs
in 20215
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Growth Opportunities
As these market trends evolve,
we see the opportunity for
Tatton to take advantage of the
growth opportunities that these
present to our business and to
our stakeholders.
Advisers continue the trend
of outsourcing
Demand increases for sustainable
investing and business practices
We have a growing IFA customer base, winning new firms
Tatton offers a complete range of risk profiles in our Ethical
through demonstrating the benefits and value of outsourcing the
Portfolios enabling investors to choose from a range of
discretionary fund management of the IFAs' clients' investment
investment products that best suit their circumstances.
portfolios. We offer a broad range of model portfolios and
During the year the Group has launched a Group‑wide review
funds at a transparent and highly competitive cost, focusing on
of the adequacy and effectiveness of our ESG policies, to
delivering an investment performance that matches the clients'
increase the level of transparency in our reporting and to drive
risk appetite.
better outcomes for our stakeholders. See pages 36 to 39 for
more information.
668 firms +12.3%
Number of firms using the Tatton DFM service
£441m
AUM in Tatton’s Ethical Portfolios
+183%
Growing demand for
investment platforms
Strength of the
UK mortgage market
The UK platform market continues to grow. Consumers benefit
95% loan to value lending is now more freely available, helped
from the platform model by being able to engage more closely
partly by the government backed scheme though many lenders
with their financial planning and monitor their investments to
chose to lend at this level through their own means. As the
aid decision making. IFAs can offer their clients a broad range
market continues to stabilise, the specialist lending sector will
of investment propositions while also benefiting from the
play a more prominent role as it returns to pre‑pandemic levels
platform's operational efficiencies.
of lending which were curtailed due to funding issues. All in all,
while there remains a level of uncertainty, the UK mortgage
market remains resilient supported by ongoing demand for
mortgage products.
£1.0trn
On‑platform AUM forecast to be greater than £1.0trn by 2025
£11.34bn +15.0%
Paradigm Mortgages gross lending
Tatton Asset Management plc Annual Report and Accounts 2021
17
Strategic Report
Our business model
How we do business
We succeed because we work closely with
IFAs to understand what they and their clients
need; this also helps us to gain insights into
our market and supports the development
of the Group's overall offer.
Our inputs
How we create long-term value
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.
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
Client
financial
goals
operational and capital expenditure. Investment priorities
— Investment goals
are determined where technology supports the
— Length of investment
Group in delivering its long‑term growth strategy.
— Risk appetite
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.
TALENTED PEOPLE
We recruit, develop and retain high calibre people
with relevant expertise to deliver a high quality
service and implement our Group strategy.
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.
OUR BUSINESS MODEL IS UNDERPINNED BY:
— Our strategy, pages 20 and 21
— Our risk management framework, pages 30 and 31
— Our high standards of corporate governance, pages 42 to 44
— How we engage with our stakeholders, pages 12 to 15
18
Tatton Asset Management plc Annual Report and Accounts 2021
How we create long-term value
Strategic Report
Corporate Governance
Financial Statements
Our outputs
SHAREHOLDERS
The Group has a cash‑generative business model,
access to a committed £10m revolving credit facility
and a further £20m accordion, significant levels
of recurring revenue and strong profit margins in
a growth market. The value 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 49.
CLIENTS
We help clients achieve their long‑term goals through
providing a quality service and by managing their
wealth through our range of portfolios and funds,
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. See pages 36 to 39.
Tatton
INVESTMENT PORTFOLIOS
AND FUNDS
— 668 firms
— 72,450 client accounts
— £8.990bn AUM
— 44 risk‑rated portfolios
across a range of strategies
across 15 platforms
Paradigm
MORTGAGES AND
INSURANCE
— 1,612 member firms
— £11.34bn gross lending
AUM
COMPLIANCE ADVICE AND
SUPPORT TO IFAS
— 407 Consulting
£8.990bn (2020: £6.651bn)
member firms
— Over 1,150 IFAs
Adjusted operating profit*
£11.402m (2020: £9.076m)
* Alternative performance measures are detailed in note 22.
Tatton Asset Management plc Annual Report and Accounts 2021
19
Strategic Report
Our strategy for growth
We remain focused on a growth strategy
The Group continues to deliver increasing AUM, new
customer acquisition and improving financial results
against the backdrop of a complex and challenging
market environment.
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
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 about its long-
Our strategy
Description
term prospects.
1 DEEPEN OUR 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 MIGRATION OF ASSET
“BACK BOOKS”
5 STRATEGIC
PARTNERSHIPS AND
JOINT VENTURES
Strengthening existing IFA/client
Further penetrate our markets adding
We continue to look to complement our
Existing clients using Tatton’s DFM
Agreements put in place to develop
relationships and building new long-term
new firms in Tatton and new members
strong organic growth through targeted
service have a back book of assets that
strategic partnership/alliances and joint
relationships, delivering sustainable value
in Paradigm
for both the IFA/clients and shareholders
acquisitions that fit strategically and will
we look to migrate over to Tatton in the
ventures as an additional distribution
be earnings enhancing
medium term
channel to increase assets on the Tatton
2021 achievements
— AUM has increased by 35.2% to
— New firms and new members
— This year we have participated in
— This financial year we developed and
— This is the first full year of the
£8.990bn from £6.651bn in the prior
increased across all parts of
a number of corporate processes,
migrated back books with a total
strategic partnership with Tenet
year across all firms and clients
the business
in each of which we have followed
value of £71m
— The number of firms in the year
increased by 12.3% to 668
— We launched Global portfolios in the year,
increasing our proposition to our clients
— Tatton +12.3% to 668 firms
— Paradigm Mortgages +4.4% to 1,612
— Paradigm Consulting +3.3% to 407
a disciplined process
— We have developed a strong pipeline
of potential targets to support future
M&A activity
DFM service
Group. At March 2021, 104 firms have
contributed £0.5bn to Tatton’s overall
AUM of £9.0bn
— We have brought on board new IFA
partners following a due diligence
with Threesixty Services
2022 objectives
— We continue to invest in account
— Maintain new firm growth in Tatton
— Our ambition is to grow both
— We maintain a pipeline of back
— Continue to develop existing
management, both external and
and Paradigm through further
organically and also through making
book opportunities. As we head
strategic alliances and develop new
internal, to ensure we are well placed
marketing and account management
strategic acquisitions that are
into the new financial year, we will
relationships that align objectives
KPIs
Risks
to service the IFAs’ needs
— Further broaden our proposition and
service portfolio
— Maintain the market leading product
and service proposition
Net
inflows
Net inflows as %
of opening AUM
Tatton firm
numbers
11.4%
£0.8bn
Increase in
AUM in the year
35.2%
668
Mortgages
members
1,612
Growth in
Tatton firms
12.3%
Consulting
members
407
earnings enhancing and have the
look to execute the migrations while
and deliver the best outcomes for
potential to fit our wider strategic
developing further opportunities to
the client and IFA
objectives. We will continue to
add to the pipeline
evaluate opportunities as and when
they arise
Cash
at bank
Undrawn debt
AUM
facility
£16.9m
£10.0m
£9.0bn
Back book
migrations
£71m
Attributable
Attributable
firms
104
AUM
£0.5bn
INTERNAL
— Failure of investment strategy
INTERNAL
— Failure of investment strategy
— Due diligence and post acquisition
— Failure of investment strategy
— Key personnel risk
INTERNAL
INTERNAL
— Key personnel risk (the loss of, or inability
— Loss or failure of key IFA client
integration risk
— Key personnel risk
(relationship management)
to recruit and retain key personnel)
EXTERNAL
— Adverse macro-economic,
EXTERNAL
— Increasing level of competition and
new entrants into the MPS market
— Liquidity risk where the Group is
(relationship management)
— Failure of investment strategy
unable to obtain sufficient funding
— Loss or failure of key IFA client
EXTERNAL
EXTERNAL
EXTERNAL
— Changing competitive environment
political and market factors which
— IFA consolidation reduces the
— Adverse macro-economic, political
— Changing competitive environment
— Regulatory changes affecting
affect performance
number of targets with the potential
and market factors which affect
— Failure of a third party
the Group’s ability to reach new
— Changing regulatory and competitive
to impact existing firms
the valuation of target companies/
platform provider
distribution channels
environment which could adversely
impact AUM and client number targets
— System failure, cyber security and
data protection breaches causing
reputational damage
20
Tatton Asset Management plc Annual Report and Accounts 2021
Access to
accordion
£20.0m
INTERNAL
fund ranges
— Bank default
— Interest rate risk on borrowings
Strategic Report
Corporate Governance
Financial Statements
Our strategy
Description
1 DEEPEN OUR IFA
RELATIONSHIPS TO GROW AUM
INCREASE SHARE OF OUR
2 ORGANIC GROWTH –
RESPECTIVE MARKETS
3 M&A ACTIVITY REMAINS
PART OF THE GROUP’S
GROWTH STRATEGY
4 MIGRATION OF ASSET
“BACK BOOKS”
5 STRATEGIC
PARTNERSHIPS AND
JOINT VENTURES
Strengthening existing IFA/client
Further penetrate our markets adding
We continue to look to complement our
Existing clients using Tatton’s DFM
Agreements put in place to develop
relationships and building new long-term
new firms in Tatton and new members
strong organic growth through targeted
service have a back book of assets that
strategic partnership/alliances and joint
relationships, delivering sustainable value
in Paradigm
for both the IFA/clients and shareholders
acquisitions that fit strategically and will
we look to migrate over to Tatton in the
ventures as an additional distribution
be earnings enhancing
medium term
channel to increase assets on the Tatton
DFM service
2021 achievements
— AUM has increased by 35.2% to
— New firms and new members
— This year we have participated in
— This financial year we developed and
— This is the first full year of the
£8.990bn from £6.651bn in the prior
increased across all parts of
a number of corporate processes,
migrated back books with a total
strategic partnership with Tenet
year across all firms and clients
the business
in each of which we have followed
value of £71m
— The number of firms in the year
— Tatton +12.3% to 668 firms
a disciplined process
increased by 12.3% to 668
— Paradigm Mortgages +4.4% to 1,612
— We launched Global portfolios in the year,
— Paradigm Consulting +3.3% to 407
increasing our proposition to our clients
— We have developed a strong pipeline
of potential targets to support future
M&A activity
Group. At March 2021, 104 firms have
contributed £0.5bn to Tatton’s overall
AUM of £9.0bn
— We have brought on board new IFA
partners following a due diligence
with Threesixty Services
2022 objectives
— We continue to invest in account
— Maintain new firm growth in Tatton
— Our ambition is to grow both
— We maintain a pipeline of back
— Continue to develop existing
management, both external and
and Paradigm through further
organically and also through making
book opportunities. As we head
strategic alliances and develop new
internal, to ensure we are well placed
marketing and account management
strategic acquisitions that are
into the new financial year, we will
relationships that align objectives
KPIs
Risks
to service the IFAs’ needs
— Further broaden our proposition and
service portfolio
— Maintain the market leading product
and service proposition
Net
inflows
Net inflows as %
Tatton firm
of opening AUM
numbers
11.4%
£0.8bn
Increase in
AUM in the year
35.2%
INTERNAL
668
Mortgages
members
1,612
INTERNAL
Growth in
Tatton firms
12.3%
Consulting
members
407
— Failure of investment strategy
— Failure of investment strategy
earnings enhancing and have the
look to execute the migrations while
and deliver the best outcomes for
potential to fit our wider strategic
developing further opportunities to
the client and IFA
objectives. We will continue to
add to the pipeline
evaluate opportunities as and when
they arise
Cash
at bank
Undrawn debt
facility
AUM
£16.9m
£10.0m
£9.0bn
Back book
migrations
£71m
Attributable
firms
104
Attributable
AUM
£0.5bn
Access to
accordion
£20.0m
— Key personnel risk (the loss of, or inability
— Loss or failure of key IFA client
integration risk
— Key personnel risk
(relationship management)
to recruit and retain key personnel)
EXTERNAL
— Liquidity risk where the Group is
(relationship management)
— Failure of investment strategy
EXTERNAL
— Increasing level of competition and
unable to obtain sufficient funding
— Loss or failure of key IFA client
— Adverse macro-economic,
new entrants into the MPS market
political and market factors which
— IFA consolidation reduces the
EXTERNAL
— Adverse macro-economic, political
EXTERNAL
— Changing competitive environment
EXTERNAL
— Changing competitive environment
— Regulatory changes affecting
affect performance
number of targets with the potential
and market factors which affect
— Failure of a third party
the Group’s ability to reach new
— Changing regulatory and competitive
to impact existing firms
the valuation of target companies/
platform provider
distribution channels
INTERNAL
— Due diligence and post acquisition
INTERNAL
— Failure of investment strategy
INTERNAL
— Key personnel risk
environment which could adversely
impact AUM and client number targets
— System failure, cyber security and
data protection breaches causing
reputational damage
fund ranges
— Interest rate risk on borrowings
— Bank default
Read more on page 6
Tatton Asset Management plc Annual Report and Accounts 2021
21
Strategic Report
Our strategy for growth
Delivering value
through strategic
partnerships
22
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Our working relationship
with Tatton has been easy
from the beginning. The
investment proposition
provides a range of
competitively priced
managed portfolios
including an ethical
option. Introducing Tatton
to our clients has been
straightforward and now
forms part of our overall
offering, improving our
processes and allowing us
to focus on the planning
needs of our clients.
C R A I G B O N S O R Jalapeno Financial Planning
www
Find out more about
Tatton Asset Management at
tattonassetmanagement.com
J U S T I N E R A N D A L L Sales Director
After completing the first full year of working
with the Tenet Group, our partnership has
brought 104 new IFA firms and in excess of
£0.5bn of client assets into the Tatton family.
We have been delighted to extend our distribution
footprint by demonstrating to the Tenet firms the value
of working with an investment manager with a strong
track record.
This has enabled the team and I to work with firms of
all shapes and sizes to deliver a consistent approach
to managing investments and service excellence.
Most importantly, this allows the advisers to focus on
what they do best – helping clients achieve their financial
and lifestyle goals.
18
months
104
firms
£0.5bn
AUM
Justine Randall
Sales Director
Tatton Asset Management plc Annual Report and Accounts 2021
23
Strategic Report
Our strategy for growth
Making a difference
through ethical
investments
24
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
We invest in best-in-
breed ethical funds that
have standards similar
to those we aspire to for
our portfolios and that
can also deliver attractive
performance to investors.
L O T H A R M E N T E L Chief Investment Officer
www
Find out more about
Tatton Asset Management at
tattonassetmanagement.com
Tatton’s Ethical Portfolios hold £441 million
of AUM, 5% of our overall AUM and an
increase of 141% in the year.
Over the years many investors have become
frustrated that their investments do not take into
consideration the environmental impact or corporate
behaviour of the underlying companies in the funds.
Environmental and socially responsible policies
are more central to our everyday lives and so
investing according to these principles is becoming
more mainstream.
Tatton Investment Management’s Ethical Portfolios
are designed to suit the needs of investors who want
their investments to align with their own responsible
investing concerns. We offer a complete range of risk
profiles in our Ethical Portfolios allowing us to meet
the needs of the majority of investors. To do this,
we combined our sophisticated investment process
with a set of negative and positive ethical screens,
selecting managers with strategies and investment
outlooks that complement each other to create
harmonious investment portfolios.
Read more on page 39
AUM (£m)
£441m
£274m
£183m
£138m
£38m £45m
£95m
£72m
Sep
2017
Mar
2018
Sep
2018
Mar
2019
Sep
2019
Mar
2020
Sep
2020
Mar
2021
AUM
£441m
Net flows
£204m
Number of accounts
4,472
% of overall AUM
4.9%
+141% (2020: £183m)
+89% (2020: £108m)
+98% (2020: 2,263)
+2.1% (2020: 2.8%)
Tatton Asset Management plc Annual Report and Accounts 2021
25
Strategic Report
Our strategy for growth
Supporting
IFAs in a
rollercoaster
mortgage market
26
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Despite a challenging year
in the mortgage market,
Paradigm has excelled in
recruiting new firms and
has reached record levels
of mortgage completions
and applications.
R O B E R T H U N T
Chief Executive Officer of Paradigm Mortgages
R O B E R T H U N T
Chief Executive Officer of Paradigm Mortgages
In April 2020, due to the first lockdown, the
housing market was in effect closed to new
business with the subsequent impact on
mortgage lending. Roll on 12 months and
Paradigm has had a record year in mortgage
applications and completions.
This is not solely down to the reduction in stamp duty
– by the time the Chancellor introduced this in July the
market was already running apace and Paradigm was
able to build on this due to the support we offered
to our members and the wider market during the
difficult months of lockdown. Paradigm continued
to recruit new firms despite not being able to make
in-person visits.
These factors, and a dedicated, hard working team,
enabled Paradigm to provide high quality service
and support to our members through the most
difficult of times, with the result that we increased
our completions by 15% to £11.34bn in a market that
declined by 5%.
Mortgage completions trend over lockdown
i
g
n
d
n
e
l
s
s
o
r
G
DEC
19
JAN
20
FEB
20
MAR
20
APR
20
MAY
20
JUN
20
JUL
20
AUG
20
SEP
20
OCT
20
NOV
20
DEC
20
JAN
21
FEB
21
MAR
21
www
Find out more about
Tatton Asset Management at
tattonassetmanagement.com
Tatton Asset Management plc Annual Report and Accounts 2021
27
Strategic Report
Key performance indicators
Group performance
Strategic objectives
The Group uses these financial and strategic Key
performance indicators (“KPIs”) to measure its
progress and the achievement against its strategy.
1 DEEPEN OUR IFA
RELATIONSHIPS
TO GROW AUM
Tatton firm numbers
668
2 ORGANIC GROWTH –
INCREASE SHARE
OF OUR RESPECTIVE
MARKETS
Net inflows
£0.8bn
3 M&A ACTIVITY
REMAINS PART OF
THE GROUP’S
GROWTH STRATEGY
Opportunities
being considered
while maintaining
discipline around
fundamentals
4 MIGRATION OF ASSET
“BACK BOOKS”
5 STRATEGIC
PARTNERSHIPS AND
JOINT VENTURES
Migration of back
books contributed
to AUM of
£9.0bn
Attributable AUM
£0.5bn
Read more on page 20
Financial KPIs
GROUP REVENUE (£M)
Revenue generated by the
Group for the financial year.
ADJUSTED OPERATING
PROFIT* (£M)
Adjusted operating profit*
generated by the Group.
FULLY DILUTED
ADJUSTED EPS* (P)
Adjusted profit after tax* divided
by the weighted average number
of fully diluted ordinary shares.
PROPOSED FINAL
DIVIDEND (P)
Final proposed dividend per share.
Non-financial KPIs
AUM (£BN)
Total AUM at the end of the year.
ASSET NET
INFLOWS (£BN)
Growth in new clients has helped
drive positive net inflows.
TATTON INVESTMENT
MANAGEMENT FIRMS
Number of Tatton firms at the
end of the financial year.
PARADIGM CONSULTING
MEMBERS
The year end number of
Paradigm Consulting members.
PARADIGM MORTGAGES
MEMBERS
Number of Paradigm Mortgages
members at the end of the year.
MORTGAGES GROSS
LENDING (£BN)
Value of gross lending by
Paradigm firms.
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
15.5
17.5
21.4
23.4
6.5
7.3
9.1
11.4
9.12
10.02
12.00
14.74
4.4
5.6
6.4
7.5
see page 49.
FY2021 progress and FY2022 outlook
a dividend.
Key risks
4.879
6.068
6.651
8.990
0.960
1.106
1.129
0.755
341
445
595
668
368
390
394
407
1,220
1,392
1,544
1,612
6.87
8.39
9.86
11.34
FY2021 progress and FY2022 outlook
Key risks
Revenue has grown by 9.3% in the year, driven by the
A reduction in AUM through adverse macro-economic,
increase in AUM and number of firms receiving the
political or market factors or through a changing
Tatton and Paradigm services. The Group’s strategy is
competitive environment reduces revenue.
to continue its growth both organically and through
M&A activity.
A loss or failure of a key IFA client or reputational damage
reducing AUM will also affect the Group’s revenue.
Link to strategic objectives
1,2,3,4,5
TAM has a high level of recurring revenue and high level
Adjusted operating profit* would be affected by
of operational gearing, delivering increased profits
a reduction in revenue or increased operating costs,
and margins. Adjusted operating profit* has increased
for example through the revenue risks listed above or
by 25.6% to £11.402m, delivering adjusted operating
through increased costs from changes to legislation
profit* margin of 48.8% (2020: 42.5%). Profit before tax,
and regulation or a system failure, cyber security or
1,2,3,4,5
however, has reduced to £7.303m (2020: £10.296m) due
data breach.
to the catch-up in share-based payment charges.
Strong growth across the Group has driven an increase of
Fully diluted adjusted EPS* would be affected by
1,2,3,4,5
22.8% in fully diluted adjusted EPS* to 14.74p, reflecting
a reduction in profits.
the increased value delivered to shareholders.
The Group expects to continue to grow EPS through
the scalability of the business model and continued
strategic execution.
A final proposed dividend of 7.5p gives a full year
A reduction in profits would reduce the level of profits
1,2,3,4,5
dividend of 11.0p.
The Group targets continued growth in dividends
per share in line with the Group’s dividend policy;
available for distribution to shareholders. If the Group
had a shortfall in cash or other liquid assets, changed
its strategy on the allocation of capital or an inability
to obtain sufficient funding it may be unable to pay
Link to strategic objectives
1,2,3,4,5
AUM has increased by £2.3 billion, or 35.2% this year
There may be falls in AUM through adverse macro-
to a new milestone of £9.0 billion. Net inflows were
economic, political or market factors. The Group may
£0.8 billion in the year with positive market movements
suffer outflows as a result of a changing competitive
of £1.5 billion following the COVID-19 pandemic-related
environment, a failure in its investment strategy, a loss or
market downturn at the end of the 2020 financial year.
failure of a key IFA client or a failure to recruit and retain
quality personnel to meet its clients’ needs.
Strong growth in new clients has helped drive positive
Net inflows may reduce due to adverse market
net inflows of £755 million despite the challenging
conditions, a loss or failure of a key IFA client, a changing
market conditions of the last financial year. We built up
competitive environment or a failure of the Group’s
1,2,3,4,5
momentum through the year, delivering £427 million
investment strategy.
in H2 compared with £328 million in H1 and carry this
momentum into the new financial year.
Strong growth in the number of firms using the Tatton
An increasingly competitive environment may affect the
DFM service, an increase of 12.3% to 668 firms. The Group
Group’s ability to add new firms. The Group may lose
continues to focus on increasing our share of the market
firms due to a failure of the Group’s investment strategy
2,3,5
and adding new firms.
or its recruitment and retention of quality personnel.
Paradigm Consulting members maintained steady
The Group may not be able to increase the number
growth in new members, increasing by 3.3% to 407
of member firms due to an increasingly competitive
and the Group will continue to support its firms and
environment and market consolidation.
gain new members.
Paradigm Mortgages has excelled in recruiting new firms,
The Group may not be able to increase the
increasing its members by 4.4% to 1,612.
number of member firms due to an increasingly
competitive environment.
Paradigm Mortgages increased its gross lending by 15.0%
Paradigm gross lending would be affected by the number
to £11.34bn in a market that declined by 5%. As Paradigm
of member firms.
continues to recruit new firms, it will increase its share of
the mortgage market.
2,5
2,5
2
28
Tatton Asset Management plc Annual Report and Accounts 2021
* Alternative performance measures are detailed in note 22.
Financial KPIs
GROUP REVENUE (£M)
Revenue generated by the
Group for the financial year.
ADJUSTED OPERATING
PROFIT* (£M)
Adjusted operating profit*
generated by the Group.
FULLY DILUTED
ADJUSTED EPS* (P)
Adjusted profit after tax* divided
by the weighted average number
of fully diluted ordinary shares.
PROPOSED FINAL
DIVIDEND (P)
Final proposed dividend per share.
Non-financial KPIs
AUM (£BN)
Total AUM at the end of the year.
ASSET NET
INFLOWS (£BN)
Growth in new clients has helped
drive positive net inflows.
TATTON INVESTMENT
MANAGEMENT FIRMS
Number of Tatton firms at the
end of the financial year.
PARADIGM CONSULTING
MEMBERS
The year end number of
Paradigm Consulting members.
PARADIGM MORTGAGES
MEMBERS
Number of Paradigm Mortgages
members at the end of the year.
MORTGAGES GROSS
LENDING (£BN)
Value of gross lending by
Paradigm firms.
Strategic Report
Corporate Governance
Financial Statements
FY2021 progress and FY2022 outlook
Key risks
Revenue has grown by 9.3% in the year, driven by the
increase in AUM and number of firms receiving the
Tatton and Paradigm services. The Group’s strategy is
to continue its growth both organically and through
M&A activity.
A reduction in AUM through adverse macro-economic,
political or market factors or through a changing
competitive environment reduces revenue.
A loss or failure of a key IFA client or reputational damage
reducing AUM will also affect the Group’s revenue.
Link to strategic objectives
1,2,3,4,5
TAM has a high level of recurring revenue and high level
of operational gearing, delivering increased profits
and margins. Adjusted operating profit* has increased
by 25.6% to £11.402m, delivering adjusted operating
profit* margin of 48.8% (2020: 42.5%). Profit before tax,
however, has reduced to £7.303m (2020: £10.296m) due
to the catch-up in share-based payment charges.
Strong growth across the Group has driven an increase of
22.8% in fully diluted adjusted EPS* to 14.74p, reflecting
the increased value delivered to shareholders.
The Group expects to continue to grow EPS through
the scalability of the business model and continued
strategic execution.
Adjusted operating profit* would be affected by
a reduction in revenue or increased operating costs,
for example through the revenue risks listed above or
through increased costs from changes to legislation
and regulation or a system failure, cyber security or
data breach.
1,2,3,4,5
Fully diluted adjusted EPS* would be affected by
a reduction in profits.
1,2,3,4,5
A final proposed dividend of 7.5p gives a full year
dividend of 11.0p.
The Group targets continued growth in dividends
per share in line with the Group’s dividend policy;
see page 49.
A reduction in profits would reduce the level of profits
available for distribution to shareholders. If the Group
had a shortfall in cash or other liquid assets, changed
its strategy on the allocation of capital or an inability
to obtain sufficient funding it may be unable to pay
a dividend.
1,2,3,4,5
FY2021 progress and FY2022 outlook
Key risks
AUM has increased by £2.3 billion, or 35.2% this year
to a new milestone of £9.0 billion. Net inflows were
£0.8 billion in the year with positive market movements
of £1.5 billion following the COVID-19 pandemic-related
market downturn at the end of the 2020 financial year.
There may be falls in AUM through adverse macro-
economic, political or market factors. The Group may
suffer outflows as a result of a changing competitive
environment, a failure in its investment strategy, a loss or
failure of a key IFA client or a failure to recruit and retain
quality personnel to meet its clients’ needs.
Link to strategic objectives
1,2,3,4,5
Strong growth in new clients has helped drive positive
net inflows of £755 million despite the challenging
market conditions of the last financial year. We built up
momentum through the year, delivering £427 million
in H2 compared with £328 million in H1 and carry this
momentum into the new financial year.
Net inflows may reduce due to adverse market
conditions, a loss or failure of a key IFA client, a changing
competitive environment or a failure of the Group’s
investment strategy.
1,2,3,4,5
Strong growth in the number of firms using the Tatton
DFM service, an increase of 12.3% to 668 firms. The Group
continues to focus on increasing our share of the market
and adding new firms.
An increasingly competitive environment may affect the
Group’s ability to add new firms. The Group may lose
firms due to a failure of the Group’s investment strategy
or its recruitment and retention of quality personnel.
2,3,5
Paradigm Consulting members maintained steady
growth in new members, increasing by 3.3% to 407
and the Group will continue to support its firms and
gain new members.
The Group may not be able to increase the number
of member firms due to an increasingly competitive
environment and market consolidation.
Paradigm Mortgages has excelled in recruiting new firms,
increasing its members by 4.4% to 1,612.
The Group may not be able to increase the
number of member firms due to an increasingly
competitive environment.
2,5
2,5
Paradigm Mortgages increased its gross lending by 15.0%
to £11.34bn in a market that declined by 5%. As Paradigm
continues to recruit new firms, it will increase its share of
the mortgage market.
Paradigm gross lending would be affected by the number
of member firms.
2
* Alternative performance measures are detailed in note 22.
Tatton Asset Management plc Annual Report and Accounts 2021
29
Strategic Report
Risk management
Our approach to risk
Effective risk management is essential for the
financial strength and resilience of the Group.
Our 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 all our stakeholders.
BOARD
EXECUTIVE MANAGEMENT
RISK MANAGEMENT
AUDIT
AND RISK
COMMITTEE
SENIOR
MANAGEMENT/
SUBSIDIARY
BOARDS
COMPLIANCE
FUNCTIONS
Risk management
RISK MANAGEMENT FRAMEWORK
The Board is ultimately responsible for the Group’s risk management
GOVERNANCE
Our internal governance structure includes departmental
and internal control systems, and for determining the Group’s risk
management reviews with dedicated risk registers, where
appetite. A risk management framework has been developed by the
each department is responsible for overseeing key investment,
Board to ensure that all potential areas of risk to the business are
operational and corporate functions. The Group’s Audit and Risk
identified, assessed, regularly reviewed, monitored and reported.
Committee serves as the focal point for risk management activities,
The Board seeks to ensure that the risks taken by the Group are
reviewing and challenging specific risks to the Group, and reviewing
managed in order to achieve a balance between appropriate levels
the effectiveness of frameworks in place to manage those risks.
of risk and return. Ownership of risks rests within the relevant
It also ensures that the principal risks of the Group are considered.
divisions and teams, with oversight and escalation to the Group
Board where required. 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 business.
The Audit and Risk Committee met three times in the year
and, following the appointment of Lesley Watt in April 2021, its
members are:
— Chris Poil, Chairman (and Non-Executive Board Director)
— Roger Cornick (Non-Executive Chairman of the Board)
— Lesley Watt (Non-Executive Board Director)
— Other 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
Limited (“TIML”))
— Grant Dempster (Non-Executive Board Director of TIML)
It believes an embedded risk culture enhances the effectiveness of
We look forward to the additional oversight and challenge that
risk management and decision making across the Group. The Board
Lesley will be able to bring from her previous experience.
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 all 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.
TIML RISK REVIEW
During the year, the Group’s regulated entity, TIML, completed an
independent review of its current risk management practices to
support its growth strategy and ensure ongoing alignment with
good practice. Although this review did not identify any material
deficiencies, the TIML Board agreed the following enhancements:
— clarifying the risk governance arrangements between the
Group and TIML, via a revised schedule of Matters Reserved;
30
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Risk assessment process
The Board and senior management are actively involved
in a continuous risk assessment process as part of our risk
management framework. Our risk assessment process
considers both the impact and likelihood of risk events which
could materialise, affecting the delivery of the strategic goals
and our 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.
— implementing a more structured risk appetite framework,
comprising both financial and franchise risk areas; and
— enhancing the current risk reporting of the top risks facing the
THREE LINES OF DEFENCE
1 FIRST LINE OF DEFENCE
OWNERSHIP AND MANAGEMENT OF RISK WITHIN
business, which is ongoing.
THE BUSINESS
The progress in delivering these changes is overseen by the TIML
Each division’s senior management are accountable for identifying
Board and reported to the TAM Audit and Risk Committee on a
and managing their risks in line with the risk assessment process.
quarterly basis.
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.
They are responsible for developing and maintaining effective
internal controls to mitigate risk to an acceptable level.
2 SECOND LINE OF DEFENCE
RISK OVERSIGHT AND CHALLENGE
The TAM Board, Audit and Risk Committee, the TIML Board
The Board’s strategic objectives and expectations are that the
and those involved in compliance functions maintain a level of
business will continue to grow; however, the Board remains
independence from the first line and provide oversight and
committed to having a balanced appetite for risk, ensuring that our
challenge of the first line risk management and provide guidance
internal controls mitigate risk to appropriate levels.
and direction on the Group’s policies and procedures relating to
risk management.
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, perspective and challenge. Third party companies are
used for reviewing and testing in areas such as IT Security, Human
Resources, and Health and Safety.
RISK REPORTING
Our assessment system provides a grading of risks by multiplying
a value based on the impact of the risk by a value based on the
likelihood of its occurrence. Identified risks that have a sufficiently
high likelihood of potential material impact on the Group are reflected
in the Group Risk Management Dashboard, to ensure they receive an
appropriately high level of senior management and Board attention.
The Board ensures that management takes action where these risks
are deemed to be outside the Group’s risk tolerance.
The following section shows our assessment of the top risks that we
face, along with how the significance of the risk has changed during
the year. As the UK has now left the European Union without any
material impact to the Group’s business, this specific risk has been
removed and the Group will continue to monitor the related risks of
Adverse macro-economic, political and market factors and Changes
to UK tax law. New and emerging risks are considered and assessed
by the Board throughout the year for inclusion in this list.
Read more on page 42
Tatton Asset Management plc Annual Report and Accounts 2021
31
Strategic Report
Principal risks
Industry risks
Risk
Impact
Mitigation
Key
Risk increased Risk decreased Risk unchanged
Adverse macro-economic, political
— Downturns in the market and resultant
— The Group has an experienced
and market factors
falls in AUM or other income would have
investment management team with
Economic, political and market forces,
a negative impact on the Group’s revenue
a strong track record
particularly impacting the UK equity
and profit
— Investment strategies are
markets, which are beyond the Group’s
— Market uncertainty can lead to clients
continually monitored by the
control could adversely affect the value
being reluctant to invest in the market,
Investment Committee
of AUM from which the Group derives
so reducing net inflows
— A prudent approach to investment
revenues. This could be sudden in cases
such as the COVID-19 pandemic, and could
cause significant volatility in global markets
and severe economic weakness which
undermines confidence.
strategy means that a significant
proportion of AUM is made up of lower
risk appetite portfolios which typically
have a market fall correlation of
approximately 60%
Changing competitive environment
— Loss of competitive advantage such
— Broad service offering providing
The market environment in which the Group
that AUM and client number targets
diversified revenue streams across
operates is highly competitive with fast
are adversely impacted. This would
an increased number of platforms
changing characteristics and trends.
have a negative impact on revenue
— Highly competitive pricing points
and profitability
— Deep industry experience and strong
client relationships resulting in a loyal
customer base
— Strong brand and excellent reputation
Regulatory risk
— Regulatory fine and/or censure
— Regulatory advice is a core business
Changes to or new legislation and/or
— Related negative publicity could reduce
stream for the Group meaning that
regulation, or changes to interpretation
customer confidence and affect ability to
a strong risk culture exists throughout
and/or failure to comply with existing
generate net inflows
the Group
legislation and/or regulation, may adversely
— Poor conduct could have a negative
— The Group delivers strong regulatory
impact the Group’s operations and
impact on client outcomes, impacting
and compliance support to clients
competitive position.
the Group’s ability to achieve
through dedicated compliance teams
strategic objectives
and systems
— Complaints and claims from third parties
— The Group’s strong financial position
and clients in connection with the
provides a safeguard should changes to
Group’s regulatory responsibilities could
regulatory capital requirements occur
have an adverse impact on the Group’s
financial condition
Change to UK tax law
— Increase in taxes leaves investors with less
— Broad service offering, providing
A change to UK tax law, particularly as
free cash to invest, resulting in a reduction
diversified revenue streams
a result of a change in UK law post Brexit
savings and investment in pensions and
and as the economy recovers from the
other wrap products, so reducing AUM
COVID-19 pandemic, could adversely
and the Group’s revenue
impact the performance and attractiveness
of long-term saving and investment through
pensions and other wrap products.
Operational risks
Risk
Impact
Mitigation
Failure of a third party service provider
— Negative impact on customer outcomes
— Due diligence is performed when
The Group manages its investments through
due to service unavailability, delays in
selecting key suppliers
the use of third party service providers,
receiving and/or processing customer
— The Group is covered by third party
e.g. platform/authorised corporate director
transactions or interruptions to settlement
indemnities for business-critical services
providers. Operational failure or cessation
and reconciliation processes
— Third party relationships are subjected
of trade of a significant third party could
— Financial impact through increased
to a high level of ongoing oversight,
have a material adverse impact on the
operational losses
including due diligence and a risk-
Group’s reputation, operations, financial
— Regulatory fine and/or censure
based approach, from the Group’s
performance and growth.
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.
internal compliance function.
This gives assurance that third party
platform providers meet the Group’s
high standards.
— Inability to service client needs
— Recruitment programmes are in place
— Reputational damage
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 in place to
incentivise staff and encourage long-
term retention
32
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Operational risks continued
Risk
Impact
Mitigation
Key
Risk increased Risk decreased Risk unchanged
Failure of investment strategy
— Negative impact on achievement of
— The Group has an experienced
The risk that the investment strategy fails to
AUM, net inflows and client number
investment management team with
maintain an acceptable level of performance,
strategic targets
a strong track record
particularly in times of significant market
— Poor client outcomes that also prevent the
— Investment strategies are continually
volatility such as due to the impact of the
achievement of our growth targets
monitored by senior management, the
COVID-19 pandemic, resulting in a decline
— Reputational damage
Investment Committee and the Board
in revenues and in the value of assets from
which revenues are derived.
— Due to the nature of the Group’s
investment strategy, its portfolios
typically have a market fall correlation
of approximately 60%
Loss or failure of key IFA client
— Negative impact on achievement of
— The Group has a clearly defined
The Group has several major IFA clients.
AUM, operating profit and client number
business development strategy and
A change in relationship or termination of
strategic targets
a broad service offering
business with any of these, and the Group
— Reputational damage
— The Group continues to add member
being unable to replace them in a timely
fashion, could have an adverse impact.
firms, so diversifying its client base
— Client engagement is proactively
managed by dedicated client managers
who have in-depth knowledge of the
IFA industry and expert regulatory and
compliance knowledge
System failure, cyber security and
— Related negative publicity could damage
— Experienced in-house team of IT
data protection
customer and market confidence in the
professionals supported by reputable
The risk that operations are impacted or
business, affecting our ability to retain and
and established third party suppliers
that data loss or data breach occurs due
attract new customers
— IT disaster recovery procedures in place
to system error, malfunction or malicious
— Information security breaches could
— Data Protection Officers appointed
external breach. There is a heightened
result in fine/censure from regulators, the
— Penetration testing conducted regularly
risk for financial fraud as individuals
Information Commissioner’s Office and
— Increased awareness and training
take advantage of the current COVID-19
the FCA
of employees
pandemic situation.
Financial risks
Risk
Counterparty credit risk
Impact
Mitigation
— Unintended market exposure
— The Group trades only with reputable,
A counterparty to a financial obligation
— Customer detriment
credit worthy third parties
may default on repayments, particularly
if under financial stress due to the
COVID-19 pandemic
— Receivable balances are reviewed
regularly for non-collection and any
doubtful balances are provided against
— All receivables are paid monthly
Liquidity risk
— Reputational damage
— Profitable and cash-generative business
The Group may be unable to meet financial
— Potential customer detriment
— New £10m revolving credit facility put in
liabilities as they become due because
— Financial loss
place in the year, with a £20m accordion
of a shortfall in cash or other liquid
— Unable to meet obligations as they fall due
— Active cash flow forecasting and
assets or an inability to obtain sufficient
additional funding.
liquidity management ensures
availability of funds at short notice
— The Group maintains a cash surplus
above regulatory and working
capital requirements
Bank default
— Financial loss
— The Group only uses banks with strong
The risk that one of the Group’s relationship
— Unable to meet obligations as they fall due
credit ratings
banks could default.
— Banking relationships are
reviewed regularly
Concentration risk
— Over-reliance on one business activity
— Broad range of business services
Risk arising from lack of diversification in
could lead to financial underperformance
offered, providing diversified revenue
business activity or geography.
streams and a diverse and growing
client base
— Recruitment into the Group’s sales
functions in the year in order to grow
AUM across a broader client base
Tatton Asset Management plc Annual Report and Accounts 2021
33
Strategic Report
Chief Financial Officer’s Report
Group revenue (£m)
£23.4m +9.3%
2019
2020
2021
AUM (£bn)
£9.0bn +32.5%
2019
2020
2021
Adjusted EPS* (p)
14.74p +22.8%
2019
2020
2021
£17.5m
£21.4m
£23.4m
Chief Financial Officer’s Report
OVERVIEW
In a year which has seen significant uncertainty and market
volatility, the Group has shown a considerable level of resilience
across all areas of the business. The Group’s business model has
been resoundly tested and proved to be robust as the Group
delivered strong growth across revenue, adjusted operating
profit* and earnings while maintaining a strong balance sheet and
liquidity position.
RECORD REVENUE AND PROFITS
Revenue – Group reported revenue increased by 9.3% to
£23.353 million (2020: £21.369 million).
£6.1bn
£6.7bn
Tatton revenue increased 13 .6% to £ 1 8 .097 million
£9.0bn
(2020: £15.924 million). AUM increased 35.2% to reach £8.990 billion
(2020: £6.651 billion). This increase in AUM includes net inflows of
£755 million despite the challenging market conditions and was
supported by investment returns of 23.8% as markets recovered
following the deterioration of asset values in February 2020 due to
the COVID-19 pandemic. The mix of the investment income continues
10.02p
to evolve with income from MPS continuing to show strong growth.
12.00p
Tatton funds continue to make an increase in contribution as we
14.74p
further expand our proposition beyond purely MPS. Funds, or non-
MPS, AUM now accounts for £0.5 billion of AUM (2020: £0.3 billion).
RESILIENCE
AND LONG-
TERM VALUE
CREATION
P A U L E D W A R D S Chief Financial Officer
The Group has
delivered a strong
financial performance
in a difficult year,
highlighting the
resilience of its
business model.
34
Strategic Report
Corporate Governance
Financial Statements
Paradigm’s revenue reduced by 3.4% to £5.240 million
performance effectively requiring two years’ charge to be taken in the
(2020: £5.426 million) as the initial lockdown and subsequent
current financial year. Although some of these items may recur from
restrictions impacted valuations and marketing income, predominately
one period to the next, operating profit has been adjusted for these
in H1. However, despite the restrictions in place, Paradigm Mortgages
items to give better clarity of the underlying performance of the Group.
adapted quickly to the new environment and increased its member
The alternative performance measures (“APMs”) are consistent with
firms to 1,612 (2020: 1,544) driving an increase of 15.0% in gross
how the business performance is planned and reported within the
lending from completions to £11.34 billion (2020: £9.86 billion).
internal management reporting to the Board. Some of these measures
Paradigm Consulting member firms increased to 407 (2020: 394).
are also used for the purpose of setting remuneration targets.
Profit – The Group delivered adjusted operating profit* of £11.402 million
(2020: £9.076 million), an increase of 25.6%. Adjusted operating profit*
EARNINGS PER SHARE
Basic earnings per share reduced to 10.86p (2020: 14.98p) due to the
margin increased to 48.8% (2020: 42.5%), supported by our business
impact of the share-based payments charge in the year and the benefit
model and the low level of operational gearing but also uniquely
in 2020 of the credit relating to the VAT refund. Adjusted earnings per
this year has seen a reduction in costs of circa £0.6 million related to
share* increased by 22.9% to 16.14p (2020: 13.13p) and adjusted fully
travel and marketing. Total Group operating profit was £7.508 million
diluted earnings per share increased by 22.8% to 14.74p (2020: 12.00p).
(2020: £10.302 million) which includes the impact of the cost of separately
disclosed items of £3.894 million with the prior year benefiting from
a credit from separately disclosed items of £1.227 million, largely relating
to the VAT refund received in 2020.
STATEMENT OF FINANCIAL POSITION AND CASH
The Group continues to strengthen its balance sheet and net assets
increased to £24.446 million (2020: £17.778 million). The Group
continued to see healthy cash generation and ended the year with
In order to better understand the profitability of the divisions, each
cash on the balance sheet of £16.934 million (2020: £12.757 million).
division has been allocated an element of central overhead costs.
Net cash generated from operating activities before exceptional
The allocation is based on the amount of time spent by central
items was £10.906 million (2020: £9.831 million), 95.6% of adjusted
functions and the central services used by the divisions. The operating
operating profit*. The Group received £3.212 million on the issue of
profit figures for the current and prior year reflect the allocation of
new shares following the exercise of employee share options and,
these central costs so that the prior year figures are comparable.
following demand from institutional investors, Zeus Capital, the
Tatton continues to make investments which underpin our growth,
increasing our sales team at the start of the financial year by an
additional three people to help drive and support future growth.
Adjusted operating profit* increased by 26.4% to £10.901 million
(2020: £8.622 million1) and its adjusted margin* increased to 60.2%
(2020: 54.1%1). Tatton’s continued strong growth has ensured it
remains the largest part of the Group, contributing 77.5% of the
Company’s Broker, elected to exercise their warrant over 1,118,151
ordinary shares. The warrant was granted at the point of listing in
July 2017 and there are no other warrants outstanding.
DEBT FACILITY
Earlier this year the Group has put in place a new debt facility giving
access to up to £30 million of funds. The new facility is split between
a £10 million three-year committed revolving credit facility which
revenue and 95.6% of the adjusted operating profit* (see note 4), a
remains undrawn, with an accordion option of £20 million. The accordion
trend that is expected to continue. Paradigm’s adjusted operating
profit* contributed £2.028 million (2020: £1.891 million1), with margin
of 38.7% (2020: 34.9%1).
CHANGE IN VAT TREATMENT
At the end of March 2020, the Group agreed with HM Revenue
feature remains uncommitted at this stage but accessible on short
notice and provides financial flexibility for future corporate transactions.
DIVIDENDS
The Board is recommending a final dividend of 7.5p. When added
to the interim dividend of 3.5p this gives a full year dividend of 11.0p.
& Customs (“HMRC”) that Tatton’s supplies of DFM services in
This proposed dividend reflects both our cash performance in the
respect of model portfolios would be exempt from VAT. As a result,
period and our underlying confidence in our business. If approved at
the Group received a VAT refund of £1.7 million in the prior year
the Annual General Meeting the final dividend will be paid on 28 July
relating to the years 2015 to 2019. During this financial year, HMRC
2021 to shareholders on the register on 25 June 2021.
has continued correspondence with the Group to seek further
understanding and clarification around the Group’s MPS service,
with a further claim relating to 2020 remaining outstanding.
RISK MANAGEMENT
Risk is managed closely and is spread across our businesses
and managed to individual materiality. Our key risks have been
SEPARATELY DISCLOSED ITEMS
Separately disclosed items include the cost of share-based payments
referenced in this Annual Report primarily on pages 32 and 33.
We choose key performance indicators that reflect our strategic
of £3.740 million, amortisation of customer relationship intangible
priorities of investment, growth and profit and these are detailed
assets of £0.120 million, £0.218 million of acquisition-related fees and
on pages 28 and 29.
a credit relating to the change in fair value of contingent consideration
of £0.184 million; see note 6. There has been a significant increase in
share-based payments this year as a consequence of the release of
the majority of the provision in the prior year due to the uncertainty
around the impact that the COVID-19 pandemic would have on the
financial performance of the Group. Due to the Group’s response and
management of the business, the Group has delivered a strong financial
The Strategic Report found on pages 1 to 39 has been approved
and authorised for issue by the Board of Directors and signed on
their behalf on 14 June 2021 by:
Paul Edwards
Chief Financial Officer
1. Restated for the allocation of central overhead costs in the year ending March 2020
*
Alternative performance measures are detailed in note 22.
Tatton Asset Management plc Annual Report and Accounts 2021
35
Strategic Report
Environmental, Social and Governance (“ESG”)
Positive action
The Board understands and is committed to its
Environmental, Social and Governance (“ESG”)
responsibilities and ensures that ESG considerations
are built into the Group’s strategy across the whole of
the business. We conduct our operations with integrity,
fairness and transparency and 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.
OUR ESG PRIORITIES
The Board initiated an ESG review during this year to address how
ENVIRONMENT
As a financial services business, our main environmental impacts are
the business responds to ESG-related matters at the corporate
largely through UK-based travel and the consumption of resources
level. A sub-committee has been established with Chris Poil (Senior
and emissions at our business premises. We look to manage and
Non-Executive Director and Head of the Audit and Risk Committee)
reduce our environmental impact and carbon footprint through the
leading this team with the aim of creating a roadmap to develop
efficient use of resources.
the initiatives in this area. The ESG sub-committee feed information
into the Board where it identifies any gaps in its application of
ESG principles including opportunities where we can make further
progress in the future. The Board has commenced holding ESG as
a standing item on its agenda and uses the information provided
by the sub-committee in its decision making process as detailed on
page 14 and takes appropriate action. Our key priorities for further
improvement over the short term are:
ENVIRONMENT
— Monitoring and reporting on climate change impact, energy
consumption and energy efficiency
— Waste management, considering Green IT and IT recycling
We have a relatively small number of employees with three UK
offices. Our employees rarely travel internationally, and particularly
in the current year, our UK travel has significantly reduced with
employees making use of video conferencing facilities. This is
a trend which we expect to continue to some extent, even once
all the restrictions relating to the COVID-19 pandemic have
been removed.
OUR PEOPLE AND CULTURE
People are our most important asset in achieving our Group
strategy and provide excellent service and support to IFAs which
enables them to meet the needs of their clients. In support of
this, we aim to ensure all employees have the skill set to deliver
SOCIAL
— Extending employee communication around wellbeing
this and in addition that they feel they are respected, motivated
and safeguarded while at work. The business remains small with
and engagement
currently fewer than 90 employees which allows the Directors to
— Reporting on equal opportunity and equal pay
communicate with employees informally throughout the year but
— Other means of supporting employee learning
also through annual conferences and general meetings. In addition,
and development
there are appropriate procedures in place to ensure employees are
— Consideration of other ways of supporting charitable giving
able to raise issues through our grievance and harassment policies
GOVERNANCE
— ESG reporting including a Corporate Responsibility Policy
and Whistleblowing Policy which encourages employees to report
matters of significant concern to their line manager, Compliance
Manager, the Board or the Chair of the Audit and Risk Committee.
Other ESG areas are regularly monitored and reviewed by the Board
The Board is also currently considering additional ways of extending
and the Audit and Risk Committee.
communication and engagement with employees.
36
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
We encourage all employees to develop and make progress in
Age breakdown within Tatton
their careers at TAM plc, whether through internal training,
apprenticeship schemes or professional qualifications. The Group
supports its employees with training and development, assisting
financially and with time where appropriate to help them meet their
goals; this includes CPD targets set by our regulators, ensuring
that our investment managers have the appropriate technical and
supervision skills to maintain the highest levels of client service.
18—30
31—45
46—60
60+
We encourage employees to take a long-term view of the business
through the provision of share-based incentives through both an
EMI share option scheme, open to eligible employees, and a SAYE
share option scheme which is open to all employees.
Total employee turnover during the year was 10%, of which 6% was
voluntary employee turnover.
8%
24%
40%
28%
MENTAL HEALTH AND WELLBEING
We focus on the wellbeing of our people and we are acutely
GENDER PAY GAP REPORTING
Gender Breakdown within Tatton
aware this year in particular of the challenges that everyone has
faced since lockdown commenced. We have introduced access
for all employees to a range of health support services, including
remote GP access, mental health support and life, money and
Other
Management/
Supervisory
wellbeing support. We hope that this will be a valuable addition
Board
to staff benefits.
COVID-19
As the impact of the COVID-19 pandemic evolved over the past
year, we have paid particular attention to supporting our employees
as well as our clients. We adapted seamlessly to working from
home and supported employees whose circumstances were
more challenging. We invested in new equipment for employees
and ensured all employees had laptops to enable them to work
from home. Online communication tools which were already
in place across the business became the day to day means of
communicating across the workforce and externally. During the
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
% Men
% Women
Tatton Gender pay gap by hourly pay quarter
Upper hourly
pay quarter
Upper middle
hourly pay quarter
Lower middle
hourly pay quarter
Lower hourly
pay quarter
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
year, all Board and Committee meetings have been held virtually
% Men
% Women
due to the impact of the pandemic. Our business continuity plans
were proved to be effective as our customer support and business
processes continued unaffected. The Group has not received any
funding from government for any purpose, including the pandemic,
as the Board believes that these government schemes are intended
for businesses significantly more affected than TAM plc. In addition,
no staff were made redundant directly because of the pandemic.
DIVERSITY AND INCLUSION
The Group is an equal opportunities employer and it is our policy to
ensure that all job applicants and employees are treated fairly and
on merit, regardless of race, sex, marital/civil partnership status,
age, disability, religious belief, pregnancy, maternity or sexual
Despite there being no requirement for the Group to publish
its gender pay gap report due to the number of employees in
the Group, analysis over the Group’s gender pay gap has been
performed and reviewed by the Board and Remuneration
Committee. Some of the key figures have been disclosed in this
Annual Report to give transparency.
The Group seeks to create an inclusive Company culture with
a diverse workforce. Part of how we formally monitor our
progress is now through gender pay gap reporting and we use
this information to highlight any areas that need to be addressed
to narrow the gap.
orientation. We believe that an inclusive culture in which employees
We have analysed where there are men and women who perform
are highly engaged enables everybody to succeed.
the same role and in all cases they are paid equally. The mean
We recognise that women have been less well represented at all
levels in the investment management industry and the financial
services sector has the largest pay gap. The Group’s figures
correlate with this but show a slight improvement on the previous
year where in March 2021, the Group employed 88 permanent staff,
with a total of 33 women, 38% of our workforce (2020: 36%).
hourly pay gap in 2021 is 45% and the median hourly pay gap
is 48%. These differences reflect the profile of the workforce at
different job levels where there is a higher number of men in senior
roles than women, however this is a trend which is changing in
our organisation as women have made up 75% of the most recent
appointments into senior positions.
Tatton Asset Management plc Annual Report and Accounts 2021
37
Strategic Report
Environmental, Social and Governance (“ESG”) continued
Our people and culture
European sustainable fund assets1
Flows into European funds1
£1,332bn +199%
51% of all new flows into European funds
are now going into Sustainable funds
from 2020
SUPPLIERS
The Group acknowledges its responsibilities in relation to tackling
Our Compliance team and other Committees have policies in place
to prevent and detect financial crime, such as money laundering
modern slavery and has a zero tolerance stance on slavery and
and bribery and corruption, and to meet any obligations arising
human trafficking within our workforce and supply chain. We are
from regulatory change.
a UK-based provider of financial services, meaning we do not
produce, manufacture or sell any physical goods. We also do not
have a long or complex supply chain.
GOVERNANCE
The Company has applied the principles of the Quoted Companies
Alliance Corporate Governance Code (the “Code”) in so far as it
Our main suppliers provide support services such as information
can be applied practically. The Code is constructed around ten
technology, market data and property services. We consider our
broad principles, accompanied by an explanation of what those
suppliers to be at a relatively low risk of engaging in practices
principles entail together with a set of disclosure requirements.
of modern slavery or human trafficking. We nonetheless remain
These principles and how we comply with them can be found
committed to preventing any such practices from occurring in our
on pages 42 to 44 of this report and on the Group’s website.
business or supply chain.
CHARITABLE GIVING
In 2020, the Group, its employees, customer and strategic
TAX STRATEGY
Tatton is committed to full compliance with all statutory
obligations and full disclosure to tax authorities. The Group’s
partners participated for a third year in the Trussell Trust’s Reverse
tax affairs are managed in line with our overall high standards of
Advent Calendar, with the Group matching all donations by 150%.
governance, and with consideration of our corporate reputation.
The Trussell Trust and its network of UK food banks supports
people across the UK experiencing food poverty of some kind
and due to the COVID-19 pandemic many of the usual fundraising
activities have not been possible.
REGULATION AND FINANCIAL CRIME
The Group ensures that it complies with all relevant legal and
regulatory requirements. 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.
1. Morningstar, 2021
38
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. We pay all tax as it falls due and believe in
maintaining a transparent and professional working relationship with
HMRC and other tax authorities. In respect of the year ended 31 March
2021, the Group has paid £2.1 million of corporation tax.
CYBER AND DATA SECURITY
TAM plc places great importance on information security, including
cybersecurity, to protect against external threats and malicious
insiders. The Group’s cybersecurity strategy prioritises identification,
protection, detection, analysis and response to known, anticipated
or unexpected cyber threats, effective management of cyber
risks, and resilience against cyber incidents. The Group maintains
a cybersecurity program structured around the National Institute
of Standards and Technology (“NIST”) Cybersecurity Framework.
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
European sustainable fund assets1
European assets
12% of total
81% of millennials are demanding ‘climate aware’
responsible investment products2
The Group maintains a cybersecurity training program, which
We examine the managers’ use of data, the culture of the firm and
is designed to help employees recognise information and
the fund management team themselves. It is not good enough
cybersecurity concerns and respond accordingly. In particular, this
simply to buy from an ‘ethical’ fund universe applying performance
program is designed to provide all employees with the knowledge
analysis criteria. We always meet the managers and, since we are
and skills to prevent, identify, and escalate cybersecurity risks.
aiming to be as objective and rigorous as possible in our fund
TATTON’S APPROACH TO ESG INVESTING
Tatton is a pioneer of discretionary ESG investing launching the
first Tatton Ethical Portfolio in 2014. This experience is vital for
advisers as more investment managers launch ESG funds and
selection, ask the difficult questions our investors need answering.
DO TATTON ETHICAL PORTFOLIOS MAKE
A DIFFERENCE?
From an investor perspective investing ethically can collectively
more discretionary managers launch their own ESG portfolios.
make a difference to how companies behave since it affects their
There is no industry standard or set in stone rulebook as to how asset
ability to raise capital from institutions that are avoiding poor
managers or investors should apply ethical criteria. Our experience
ESG practice at the behest of their investors. It is clear we are
of interpreting what our advisers’ clients actually want and building
in a period of change and Tatton’s seven years of research and
portfolios on that basis is vital to ensure we meet clients’ ethical
management experience in this field matters.
expectations. Advisers need confidence in their discretionary
managers since the risk of ‘greenwashing’ applies at a portfolio as
well as fund level.
We believe ESG principles have the potential to provide
widespread benefits to us all, including improving the value of
the funds and companies that investors own. Tatton is well placed
The largely welcomed shift to mainstream for ESG investing
to identify and take advantage of this expanding and societally
does present some challenges, such as the definitions of what
important market.
is ‘ethical’ and whether investing responsibly ultimately detracts
from performance. Primarily, we select fund managers for all of
our portfolios on their process and performance through our
proprietary due diligence process. We apply the same process for
our Ethical Portfolios with the additional focus on how managers
integrate ethical investing into their investment process.
Fund managers can differ greatly in their respective approach
to any type of investing and this is no different for ethical funds.
We research each fund manager on a firm by firm and fund by fund
basis – individual funds within the same firm can also be managed
very differently so we have to get down into the detail before we
are satisfied with selecting a fund.
2. KPMG
Tatton Asset Management plc Annual Report and Accounts 2021
39
Corporate Governance
Board of Directors
The Board
ROGER CORNICK
Chairman
PAUL HOGARTH
Chief Executive Officer
PAUL EDWARDS
Chief Financial Officer
Committee memberships
Commenced: 2017
Commenced: 2007
Commenced: 2018
Nominations Committee
Skills, competence and experience:
Skills, competence and experience:
Skills, competence and experience:
Remuneration Committee
Roger is Tatton Asset Management’s
Paul is the Chief Executive Officer
Paul is the Chief Financial Officer
Audit and Risk Committee
Non-Executive Chairman. From January
of Tatton Asset Management,
of Tatton Asset Management. He is
Board Director
2009 to September 2016, Roger
as well as Senior Partner at
also Finance Director of Paradigm
was Chairman of Aberdeen Asset
Paradigm Consulting.
Partners Limited and Tatton
Management having joined the
Board in January 2004. Prior to
joining Aberdeen, Roger was with
Perpetual plc for over 20 years.
Paul has over 30 years’ experience
Investment Management Limited.
in financial services, the majority
Prior to joining Tatton Asset
of which were at the centre of IFA
Management Paul was the Group
distribution. Paul was the Co-
Finance Director of Scapa Group plc
Founder of Bankhall in 1987, and
for six years and NCC Group plc for
built Bankhall Investment Associates
ten years. He has also held several
from scratch to sale in May 2001 at
other senior roles in a broad range
which point 25% of the IFA sector
of listed and private companies.
utilised at least part of the Bankhall
Until recently Paul was also the Chair
service proposition. After leaving
of the Hallé Pension Trustees, having
Bankhall he went on to establish
spent five years in the role.
Paul is a Chartered Management
Accountant and also holds an MBA
from Manchester Business School.
Paradigm Partners Limited, which
launched in 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 later in 2007 and
of Tatton Capital Limited in 2012.
Paul has a BA in Economics from
Heriot-Watt University in Edinburgh.
40
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
LOTHAR MENTEL
Director & Chief
Investment Officer
CHRIS POIL
Non-Executive
Director & Head
of Audit and Risk
LESLEY WATT
Non-Executive Director
ROBERT HUNT
Chief Executive
Officer of Mortgages
Commenced: 2012
Commenced: 2017
Commenced: 2021
Commenced: 2007
Skills, competence and experience:
Skills, competence and experience:
Skills, competence and experience:
Skills, competence and experience:
Lothar is the Chief Investment Officer
Chris is Tatton Asset Management’s
Lesley Watt is Tatton Asset
Robert is the Chief Executive of
of Tatton Asset Management. He is
Senior Independent Non-Executive
Management ’s independent
Paradigm Mortgage Services
also Chief Executive Officer for
Director. Previously he served as
Non-Executive Director. Lesley is
LLP and a Board member of the
Tatton Investment Management.
Head of UK Equities at ING Baring
a senior executive with over 20
Society of Mortgage Professionals
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, 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.
Asset Management. Prior to joining
years’ experience at board and
(“SMP”) acting as a respected
ING he was a Director of Mercury
senior finance positions including
figurehead and representative of
Asset Management. Chris has
Scottish and Newcastle plc
mortgage clubs. He has over 30
previously been a Non-Executive
and latterly as CFO of Miller
years’ experience of working within
Director of Ignite Group Ltd, Novus
Developments. Lesley currently
financial intermediaries.
Leisure Ltd and Byron Ltd.
holds a Non-Executive Directorship
at Scottish Baroque Ensemble
Limited, where she chairs the Audit
and Risk Committee.
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 5 years.
Tatton Asset Management plc Annual Report and Accounts 2021
41
Corporate Governance
Corporate Governance Statement
Corporate Governance Statement
INTRODUCTION
The Board is committed to achieving high standards
of corporate governance, integrity and business ethics.
The Group has taken into consideration the guidance for
smaller quoted companies on the Code produced by the
Quoted Companies Alliance Corporate Governance Code
(the “Code”) and taken steps to apply the principles of
the Code in so far as it can be applied practically, given
the current size of the Group and the nature of its
operations; see page 44.
BOARD COMMITTEES
NOMINATIONS COMMITTEE
The Nominations Committee is responsible for Board recruitment
and succession planning, to ensure that the right skill sets are
present in the Boardroom.
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.
Under the AIM Rules, the Group is not required
to comply with the provisions of the UK Corporate
Governance Code. While the UK Corporate Governance
Code has not been applied in full, the Board has
continued working towards full compliance over
the coming years.
LEADERSHIP AND ROLE OF THE BOARD
The Board is responsible for the long-term success of the Group and
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee’s main responsibilities are to
challenge management, monitor the integrity of the Group’s
financial statements, review internal and external audit activity and
monitor the effectiveness of risk management and internal controls.
BOARD EFFECTIVENESS, COMPOSITION AND
INDEPENDENCE OF THE BOARD
During the year, and up until the date of signing this report, the
is ultimately accountable for the Group’s strategy, risk management
Board comprised a Non-Executive Chairman, two Non-Executive
and performance. The Board’s primary roles are to provide
Directors and three Executive Directors. The Board has determined
entrepreneurial leadership to the Group within a framework of
that all the Non-Executive Directors are independent in character
prudent and effective control which enables risk to be assessed and
and judgement and neither represent a major shareholder group
managed, and to set the Group’s strategic objectives and ensure
nor have any involvement in the day to day management of the
that the necessary resources are made available so that those
Company or its subsidiaries. The Non-Executive Directors continue
objectives can be met.
The Board also sets the Group’s values and standards and promotes
these values throughout the organisation. The Board is responsible
to complement the Executive Directors’ experience and skills,
bringing independent judgement and objectivity to enhance
shareholder value.
for ensuring that its obligations to its shareholders and other
The skills and experience of the Non-Executive Directors are
stakeholders, including employees, suppliers, customers and the
wide and varied and they provide constructive challenge in the
community, are understood and met.
Boardroom. The composition of the Board is intended to ensure that
The Board comprises three Executive Directors, a Non-Executive
Chairman and two Non-Executive Directors. The Group appointed
a new Non-Executive Director, Lesley Watt, effective from
April 2021. The names, biographical details and Committee
memberships of the Board are set out on pages 40 and 41 of this
report. Responsibilities of each Board member have been clearly
established and there is a clearly defined division of responsibility
between the Chairman and the Chief Executive. The Chairman is
responsible for leading the Board, ensuring that shareholders are
adequately informed with respect to the Group’s affairs and that
there are efficient communication channels between management,
the Board and shareholders. The Chief Executive is responsible for
innovation, managing the strategy of the Group and leading the
senior management team in developing and implementing the
strategy to maximise shareholder value.
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, in searching for prospective
Directors, we consider the existing skill sets of the Board and
areas we have identified for development to meet future needs
and address succession planning. The Board composition of
Non-Executive and Executive Directors has remained the same
during the financial year, with Lesley Watt joining the Board as a
Non-Executive Director in April 2021. The Board members seek
continuous improvement, ensuring they have the necessary up-
to-date experience, skills and capabilities with development
and training where required, see further information opposite.
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.
42
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
MEETINGS AND ATTENDANCE
The following table sets out attendance of each Director at Board
COMMUNICATION WITH SHAREHOLDERS
The Board is committed to maintaining an ongoing dialogue
meetings held during the 12 months to the year ended 31 March 2021:
with the Company’s shareholders. The principal methods of
Audit
communication with private investors remain the Annual Report
Remuneration
Nominations
and Risk
Board
Committee
Committee
Committee
Number of meetings
held
Roger Cornick
Chris Poil
Paul Hogarth
Lothar Mentel
Paul Edwards
5
5
5
5
5
5
4
4
4
4
–
4
1
1
1
1
–
–
3
3
3
2
–
3
and financial statements, the Interim Report, half and full year
investor presentations, the Annual General Meeting and the Group’s
website (www.tattonassetmanagement.com).
The Annual General Meeting (“AGM”) provides a forum for
constructive communication between the Board and shareholders.
All shareholders are invited to raise any issues or concerns arising
from the business proposed to be conducted at the AGM meeting
by email in advance. Responses will be published on the Company’s
website on the morning of the AGM. In addition, throughout the
Lesley Watt was appointed to the Board as a Non-Executive
year, the Executive Directors, and separately the Chairman, meet
Director in April 2021 and therefore is not shown in the table above.
with investors to discuss matters relevant to the Company.
PERFORMANCE
The Board conducts a review of the performance of individual
INTERNAL CONTROL AND RISK MANAGEMENT
The Board is ultimately responsible for the Group’s system of
Directors, to monitor and improve effectiveness. The review of the
internal control and for reviewing its effectiveness. Such systems
Chief Executive is undertaken by the Non-Executive Chairman.
are designed to manage rather than eliminate risks and can only
In addition to individual reviews, the Board considers its overall
provide reasonable, not absolute, assurance against material
performance as a body and the performance of its Committees.
misstatement or loss. An ongoing process has been established
The review has confirmed that the performance of the Board and
to promote and communicate an appropriate risk culture within
its Committees is effective and appropriate.
the Group and to identify, evaluate and manage significant risks
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
faced by each part of the Group. This process has been in place
throughout the year under review and includes key risks (industry,
financial and operational) facing the Group. The process has also
included the review and circulation of 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
regard to the factors set out in the Chairman’s Statement on page
Group’s operations.
5 and also on pages 12 and 13 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
long-term sustainable business and by considering the Company’s
strategic priorities and having a process in place for decision
making, the Board aims to make sure that its approach to decision
making and consideration of stakeholder interests is consistent.
Further information on the Company’s key stakeholders is shown
on pages 12 and 13.
Approved and authorised for issue by the Board of Directors and
signed on its behalf by:
Paul Edwards
Chief Financial Officer
Tatton Asset Management plc Annual Report and Accounts 2021
43
Corporate Governance
QCA Code Principles
The Group has adopted the Quoted Companies Alliance
Corporate Governance Code (the “QCA Code”). The QCA
Code is built on the three fundamentals of delivering
growth; maintaining a dynamic management framework;
and building trust, each of which the Board is committed
to, as it believes these will support the Group’s medium
to long-term success.
QCA Code
Principle
Required disclosure
Reference
1
2
3
4
5
6
7
8
9
Establish a strategy and business model which promote long-term value
Our business model is shown on pages
for shareholders
18 and 19 of the 2021 Annual Report
Seek to understand and meet shareholder needs and expectations
How we engage with our Stakeholders
is shown on pages 12 to 15 of the 2021
Annual Report
Take into account wider stakeholder and social responsibilities and their
How we engage with our Stakeholders
implications for long-term success
is shown on pages 12 to 15 of the 2021
Annual Report
Embed effective risk management, considering both opportunities and threats,
Our risk management processes and
throughout the organisation
principal risks are shown on pages 30
to 33 the 2021 Annual Report
Maintain the board as a well-functioning, balanced team led by the chair
Details of our Board members are
shown on pages 40 and 41 of the 2021
Annual Report
Ensure that between them the directors have the necessary up-to-date experience,
Details of our Board members are
skills and capabilities
shown on pages 40 and 41 of the 2021
Annual Report
Evaluate board performance based on clear and relevant objectives, seeking
The Corporate Governance Report and
continuous improvement
Remuneration Report are detailed on
pages 42 and 43 and 45 to 48 of the
2021 Annual Report
Promote a corporate culture that is based on ethical values and behaviours
Our ESG report is shown on pages 36
to 39 of the 2021 Annual Report
Maintain governance structures and processes that are fit for purpose and support
good decision making by the board
The Corporate Governance Report is
detailed on pages 42 and 43 of the 2021
10 Communicate how the company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders
Annual Report
How we engage with our Stakeholders
is shown on pages 12 to 15 and our
Corporate Governance Report and
Remuneration Report are detailed on
pages 42 and 43 and 45 to 48 of the
2021 Annual Report
44
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Directors’ Remuneration Report
REMUNERATION POLICY
REMUNERATION POLICY FOR EXECUTIVE DIRECTORS
The policy of the Remuneration Committee is to set basic salaries
REMUNERATION POLICY FOR THE CHAIRMAN AND
NON-EXECUTIVE DIRECTORS
The Chairman and other Non-Executive Directors are appointed
at a level which is competitive with that of comparable businesses.
under a letter of appointment. The letters of appointment cover such
The same principles are applied to Directors’ fixed remuneration,
matters as duties, time commitment and other business interests.
pension contributions and benefits as are applied to those of
The Remuneration Committee determines the remuneration for
employees throughout the organisation.
the Chairman and Non-Executive Directors within the limits set in
The main principles of the senior executive remuneration policy
are set out below:
the Company’s Articles of Association. The fee for the Chairman’s
role takes into account the time commitment required for the role,
the skills and experience of the individual and market practice
— Attract and retain high calibre executives in a competitive
in comparable companies. The Chairman’s fee is currently set at
market, and remunerate executives fairly and responsibly.
£90,000 per annum. The Non-Executive Director fees policy is
— Motivate delivery of our key business strategies and
to pay a basic fee for membership of the Board, with additional
encourage a strong and sustainable performance
fees for the Senior Independent Director and Chairmanship of a
orientated culture.
Committee to take into account the additional responsibilities and
— Align the business strategy and achievement of planned
time commitments of these roles. The Non-Executive Director’s fee
business objectives.
is currently set at £70,000 per annum.
— Take into consideration the views of shareholders and best-
practice guidelines.
SERVICE CONTRACTS
It is the Group’s policy for all Executive Directors to have contracts
The Committee believes that the level of remuneration for Executive
of employment that contain a termination notice period of not less
Directors is commensurate with the corporate and personal
than 12 months. All Executive Director appointments continue until
performance of the Executive Directors for the financial year ended
terminated by either party on giving not less than 12 months’ notice
31 March 2021.
EXTERNAL APPOINTMENTS
It is the policy of the Group, which is reflected in the contract of
employment, that no Executive Director may accept any Non-
Executive Directorships or other appointments without the prior
approval of the Board. Any outside appointments are considered
by the Nominations Committee or the Board to ensure that they
would not give rise to a conflict of interest. It is the Group’s policy
that remuneration earned from any such appointment may be
retained by the individual Executive Director.
to the other party. Non-Executive Directors do not have service
contracts. A letter of appointment provides for an initial period of
12 months and continues until terminated by either party giving
three months’ prior written notice to expire at any time on or after
the initial 12 month period.
SINGLE TOTAL FIGURE OF REMUNERATION FOR EACH DIRECTOR (AUDITED)
Directors’ remuneration payable in respect of the year ended 31 March 2021 was as follows:
Basic salary
2020/2021
and fees
£
Bonus
£
31/03/2021
Pension-
2019/2020
related and
Deferred
Bonus3
£
other taxable
benefits
£
Total
£
31/03/2020
Pension-
related and
other taxable
Basic salary
and fees
Bonus
benefits
£
£
–
342,000
150,000 300,000
1,887
793,887
342,000
305,176
85,000
100,000
6,046
496,222
300,381
35,000
262,500
85,000
100,000
951
448,451
262,500
–
909,676
320,000 500,000
8,884 1,738,560
904,881
35,000
90,000
70,000
–
–
–
–
–
–
90,000
70,000
90,000
70,000
–
–
1,069,676
320,000 500,000
8,884 1,898,560
1,064,881
35,000
14,130
£
1,622
11,573
935
14,130
–
–
Total
£
343,622
346,954
263,435
954,011
90,000
70,000
1,114,011
Executive Directors
Paul Hogarth
Lothar Mentel
Paul Edwards
Sub-total
Non-Executives
Roger Cornick
Chris Poil
Total
Notes
1
Paul Hogarth and Lothar Mentel have received additional basic salary in lieu of provision of a company car.
2 All Executive Directors have received additional basic salary in lieu of pension contributions.
3 In the financial year ended 31 March 2021, bonuses of £500,000 relate to the performance in the financial year ended 31 March 2020, however the decision for the award was
deferred until October 2020 due to the uncertainty around the impact on the business of the COVID-19 pandemic, see further information overleaf.
Tatton Asset Management plc Annual Report and Accounts 2021
45
Corporate Governance
Directors’ Remuneration Report continued
COMPONENTS OF REMUNERATION
SALARIES AND FEES
Salaries for Executive Directors are determined by the
LONG-TERM INCENTIVES
The long-term incentive plan for Executives is designed to reward
execution of strategy and growth in shareholder value over a
Remuneration Committee. The level of salary broadly reflects the
multiple-year period. Long-term performance measurement
value of the individual, their role, skills and experience. Salaries are
discourages excessive risk taking and inappropriate short-term
reviewed annually in March with any changes typically taking effect
behaviours and encourages Executive Directors to take a long-
in April taking account of market levels, corporate performance and
term view by aligning their interests with those of shareholders.
individual performance.
Fees to Non-Executive Directors are determined by the Board,
having regard to fees paid to other Non-Executive Directors in
other UK quoted companies, the responsibilities of the individual
Non-Executive Director and the time committed 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 maximum
lifetime allowance has been reached, the Director will receive the
equivalent in basic salary.
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.
Where possible, and to the limits applied by the legislation, the
long-term incentive plan benefits from the tax advantages under
an Enterprise Management Incentive (“EMI”) scheme.
SHARESAVE PLAN
The Sharesave plan is an “all-employee” save as you earn (“SAYE”)
share option plan which gives eligible participating employees
the opportunity to acquire ordinary shares in the Company using
savings of up to £500 per month or such other amount permitted
under the relevant legislation governing “tax-approved” savings-
related share option plans.
TAM PLC LONG-TERM INCENTIVE PLAN
The Directors have adopted the TAM plc EMI plan which became
effective on admission and which was extended in each subsequent
year up to 2020. The EMI 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 Tax (Earnings and Pensions) Act 2003
(“Schedule 5”). Non-qualifying options may also be granted under
SHORT-TERM INCENTIVES – 2021 PERFORMANCE AND
the EMI plan.
REMUNERATION OUTCOMES
Our remuneration framework for our Executive Directors is closely
aligned with the financial performance of the Group. The Group’s
assets under management grew by 35.2% to reach £8.990 billion
at 31 March 2021, revenue grew by 9.3% to £23.353 million and
adjusted operating profit* grew by 25.6% to £11.402 million, which
VESTING OF 2017 EMI SCHEME
The EMI options granted in 2017 were based on a combination of
targets for adjusted earnings per share (“EPS”) growth of 40% and
total shareholder return (“TSR”) of 30% compound annual growth
over a three-year period.
represents an underlying operating margin of 48.8%. Any bonuses
The 2017 EMI scheme vested in July 2020 and the vesting outcome
paid as a short-term incentive are based on predetermined
was 76% of the total options granted. This resulted in 2,196,185
financial targets set at the start of the financial year and personal
options vesting. During the year 673,568 shares were issued by
performance. For further details on the financial performance of
the Company to satisfy options which were exercised with the
the firm, please see pages 34 and 35.
remaining 1,522,617 options being unexercised as at 31 March 2021.
In the financial year ended 31 March 2021, bonuses of £820,000
were paid to Executive Directors, of which £500,000 relates to the
PERFORMANCE CONDITIONS FOR CURRENT EMI SCHEMES
Options granted under the EMI plan are only exercisable subject
performance in the financial year ended 31 March 2020 where the
to the satisfaction of performance conditions which will determine
predetermined financial targets had been met. However, due to the
the proportion of the option that will vest at the end of the three-
extraordinary circumstances relating to the impact of the COVID-19
year performance period. The performance conditions used in
pandemic which unfolded at the time of the prior year end March
determining the number of options that will vest are split, with 75%
2020, it was agreed by the Board that the Group would implement
of the shares vesting by reference to growth in adjusted EPS and
a salary increase and bonus freeze at the start of this financial year.
25% of the shares vesting based on growth in TSR over the three-
The allocation and decision of this award was therefore deferred
year performance period.
until October 2020 when there was greater clarity around the short-
and medium-term implications of the pandemic on the financial
performance of the Group.
*Alternative performance measures are detailed in note 22.
46
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Performance condition
Weighting
Vesting criteria
EPS
75%
TSR
25%
13% straight-line growth results in 33% of the option subject to the EPS measure
vesting
40% straight-line growth results in 100% of the option subject to the EPS measure
vesting
If the growth rate falls between the thresholds above, the proportion of options
subject to the EPS measure that vest will be determined on a straight-line basis
8.25% compound annual growth rate results in 33% of the option subject to the TSR
measure vesting
25% compound annual growth rate results in 100% of the option subject to the TSR
measure vesting
If the compound annual growth rate falls between the thresholds above, the
proportion of options subject to the TSR measure that vest will be determined on
a straight-line basis
The Committee currently believes these are fair and appropriate conditions for rewarding participants as they align their 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. When determining the adjusted EPS growth, the shares will be fully diluted and the impact of adjusted
items as determined by the Board, see note 6, will be disregarded to ensure that they do not artificially impact the EPS measurement.
The option will vest in respect of growth in EPS and compound annual growth in TSR over the three-year performance periods,
commencing 1 April in the year that the options have been granted.
DIRECTORS’ INTERESTS IN SHARE OPTIONS
Outstanding share options granted to Executive Directors are as follows:
Executive Directors
Paul Hogarth
Lothar Mentel
Paul Edwards
Date of grant
Exercise price
Number
the year
the year
the year
Number
At 31 March 2020
Granted during
Exercised during
Lapsed during
At 31 March 2021
7 July 2017
7 August 2018
28 July 2020
7 July 2017
7 August 2018
28 July 2020
7 August 2018
28 July 2020
£1.89
£0.00
£0.00
£1.89
£0.00
£0.00
£0.00
£0.00
503,168
330,000
–
–
–
174,758
1,118,150
330,000
–
–
–
162,274
765,000
–
3,046,318
–
141,624
478,656
–
–
–
–
–
–
–
–
–
(121,098)
–
–
(269,106)
–
–
–
–
382,070
330,000
174,758
849,044
330,000
162,274
765,000
141,624
(390,204)
3,134,770
MALUS AND CLAWBACK
Vested and unvested EMI plan awards are subject to a formal malus
UNAPPROVED SHARE SCHEME
Options issued under the long-term incentives are intended to
and clawback mechanism.
GRANT OF EQUITY SHARE OPTIONS UNDER THE EMI PLAN
At 31 March 2021, the Company had granted options to certain of its
Executive Directors and senior managers to acquire (in aggregate)
up to 8.2% of its share capital. The maximum entitlement of any
individual was 2.4%.
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 2021 the Company held no shares
in treasury, other than those held by the Employee Benefit Trust to
satisfy options awarded under share incentive schemes (2020: nil).
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.
EMPLOYEE BENEFIT TRUST (“EBT”)
The Company’s EBT was established for the benefit of the
employees, former employees and their dependants 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 £0.975 million to the EBT
(2020: £1.0 million).
As at 31 March 2021, the EBT held a total of 775,157 ordinary shares
(2020: 413,411) equating to 1.34% of the issued ordinary share
capital of the Company (2020: 0.74%).
Tatton Asset Management plc Annual Report and Accounts 2021
47
Corporate Governance
Directors’ Remuneration Report continued
TOTAL SHAREHOLDER RETURN FROM ADMISSION ON AIM TO
31 MARCH 2021
The Company’s share price in the period from admission on AIM
DIRECTORS’ INTERESTS
The beneficial interests of the Directors and their connected
persons in the ordinary share capital of the Company at 31 March
on 7 July 2017 to 31 March 2021 increased from £1.56 to £3.51 and
2021 were as follows:
market capitalisation grew from £87,215,720 to £203,192,191 with
£15.78 million returned to shareholders by way of dividend.
The graph below shows the Company’s TSR compared to the FTSE
AIM All-Share Index in the 12 months to 31 March 2021. 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.
Paul Hogarth
Lothar Mentel
Paul Edwards
Christopher Poil
Roger Cornick
No. of
Percentage
ordinary shares
shareholding (%)
10,575,358
1,022,373
94,864
173,205
32,051
18.27%
1.73%
0.16%
0.30%
0.06%
200
180
160
140
120
100
80
31/03/2020 30/04/2020 31/05/2020 30/06/2020 31/07/2020
31/08/2020
30/09/2020
31/10/2020
30/11/2020
31/12/2020
31/01/2021
28/02/2021
31/03/2021
Tatton Asset Management plc
FTSE AIM All-Share Total Return GBP
Source: Morningstar Direct
48
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Directors’ Report
The Directors are pleased to present their report together with the audited consolidated financial statements for the
year ended 31 March 2021.
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 Review on pages
4 and 5, and 6 to 9 respectively.
PRINCIPAL ACTIVITIES
TAM plc is a holding company whose shares are listed on the AIM market of the London Stock Exchange and is domiciled and incorporated
in the UK. It has three core operating subsidiaries within two core operating divisions as follows:
Subsidiary name
% owned by the Company
Principal activities of the subsidiary
Operating division
Tatton Investment Management
Limited (“Tatton”)
Paradigm Partners Limited
(“Paradigm Consulting” or “PPL”)
100%
100%
Provides discretionary fund overlay services to IFAs Tatton
Provides compliance consultancy and technical
support services to IFAs
Paradigm
Paradigm Mortgage Services LLP
(“PMS”)
100%
Provides mortgage and insurance product
distribution services
Paradigm
RESULTS AND DIVIDENDS
Group profit before tax was £7.303 million (2020: £10.296 million),
The Company’s key stakeholders are shown on pages 12 and13
and we have detailed how we engage with them and understand
down 29.1% on the prior year due to the catch-up in share-based
their issues and the impact of the decisions of management on
payment charges and the credit relating to the change in the VAT
our stakeholders.
treatment of Tatton’s investment management services, see note 6.
Adjusted operating profit* was £11.402 million (2020: £9.076 million)
giving an Adjusted operating profit* margin of 48.8% (2020: 42.5%).
ALTERNATIVE PERFORMANCE MEASURES
We use a number of performance measures to assist in presenting
information in this statement in a way which can be easily analysed
Operating profit after the effect of share-based payments,
and understood. We use such measures consistently and reconcile
amortisation on customer relationship intangible assets and
them as appropriate and they are used by management in evaluating
exceptional items is £7.508 million (2020: £10.302 million).
performance. See notes 2.23 and 22.
An interim dividend in respect of the period ended 30 September
2020 of 3.5p per share was paid to shareholders on 18 December
SHARE CAPITAL
As at 31 March 2021 there were 57,889,065 fully paid ordinary
2020. The Directors recommend a final dividend of 7.5p per share.
shares of 20p amounting to £11,577,813, an increase of £396,310 on
This has not been included within the Group financial statements
the prior year due to the issue of shares upon exercise of employee
as no obligation existed at 31 March 2021. If approved, the final
share options and the exercise of a warrant over new shares in
dividend will be paid on 28 July 2021 to ordinary shareholders
the Company by Zeus Capital Investments Limited (the holding
whose names are on the register at the close of business on
company of Tatton’s nominated adviser and joint broker).
25 June 2021.
Details of the issued share capital shown are in note 18 to the
The Company operates a progressive dividend policy to grow
consolidated financial statements. The Company has one class of
dividends in line with the Group’s adjusted earnings, with a target
ordinary shares which carry no right to fixed income. Each ordinary
payout ratio in the region of 70% of annual adjusted diluted earnings
share carries the right to one vote at general meetings of the
per share. The policy is intended to ensure that shareholders
Company. There are no specific restrictions on the size of a holding
benefit from the growth of the Group, and it aligns with the
or on the transfer of shares, which are both governed by the general
strategic objective of growing our dividend. The Board recognises
provisions of the Articles of Association and prevailing legislation
the importance of dividends to shareholders and the benefit of
other than: certain restrictions may be imposed from time to time by
providing sustainable shareholder returns. The target payout ratio
laws and regulations pursuant to the Listing Rules of the Financial
has been adopted to provide sufficient flexibility for the Board to
Conduct Authority (“FCA”), whereby certain Directors, Officers
remunerate shareholders for their investment whilst recognising
and employees of the Group require the approval of the Group to
that there may at times be a requirement to retain capital within
deal in ordinary shares of the Company.
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:
— the level of retained distributable reserves in the Company;
— availability of cash resources;
— future cash commitments and investment plans, in line with
the Company’s strategic plan; and
— the impact of the decision on the Company’s key stakeholders.
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 consolidated financial statements.
Tatton Asset Management plc Annual Report and Accounts 2021
49
Corporate Governance
Directors’ Report continued
SIGNIFICANT SHAREHOLDERS
At 14 May 2021, the Company had been notified of the following
DIRECTORS’ INTERESTS
Directors’ emoluments, interests in the shares of the Company
interests representing 3% or more of its issued share capital:
and options to acquire shares are disclosed in the Directors’
Shareholder
held
holding
Paul Hogarth and connected parties
10,575,358
18.26%
beneficial owner of Paradigm House, the Group’s registered address
and the trading premises of PPL.
Shares
Percentage
Remuneration Report on pages 45 to 48. Paul Hogarth is also the
14.32%
12.26%
4.77%
5.16%
4.77%
Funds and accounts under management
by direct and indirect investment
management subsidiaries of
BlackRock, Inc.
Liontrust Investment Partners LLP
8,292,340
7,097,519
Chelverton Asset Management Limited 2,760,914
Canaccord Genuity Wealth Limited
Kames Capital plc
Legal & General Investment
Management Limited
Gresham House Asset Management
Limited
Standard Life Aberdeen plc
2,985,443
2,764,449
2,613,866
4.51%
2,133,394
1,829,564
3.68%
3.16%
PURCHASE OF OWN SHARES
At the 2020 AGM, shareholders authorised the Company to buy
back up to 10% of its own ordinary shares by market purchase at
any time prior to the conclusion of the AGM to be held in 2021.
The Company did not purchase any of its own shares during the
financial year, other than through the EBT (note 19). The cost of
shares purchased and held by the EBT is deducted from equity.
At the forthcoming AGM, the Directors will seek to extend shareholders’
approval for a further period to the conclusion of the AGM to be held
in 2022, 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
CONFLICTS OF INTEREST
There are procedures in place to deal with any Directors’ conflicts
of interest arising under section 175 of the Companies Act 2006.
DIRECTORS’ INDEMNITY
All Directors and Officers of the Company have the benefit of
the indemnity provision contained in the Company’s Articles.
The provision, which is a qualifying third party indemnity provision,
was in force throughout the last financial year and is currently still
in force. The Group also purchased and maintained throughout
the financial period Directors’ and Officers’ liability insurance in
respect of itself and its Directors and Officers, although no cover
exists in the event Directors or Officers are found to have acted
fraudulently or dishonestly.
PRINCIPAL RISKS
A report on principal risks, risk management and internal controls
is included on pages 30 to 33.
EMPLOYEES
The Group is committed to the principle of equal opportunities in
employment and 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 progression within,
the Group is determined solely by application of job criteria and
personal ability and competency.
the authority sought if they believed such a purchase in the interests
The Group aims to give full and fair consideration to the possibility
of shareholders generally. The minimum price to be paid will be the
of employing disabled persons wherever suitable opportunities
shares’ nominal value of 20p and the maximum price will be no more
exist. Employees who become disabled are given every opportunity
than 5% above the average middle market quotations for the shares
to continue their positions or be trained for other suitable positions.
on the five days before the shares are purchased.
The Group provides a Group personal pension plan which is open
TAKE OVER DIRECTIVE
The Company has only one class of ordinary share and these shares
have equal voting rights. The nature of individual Directors’ holdings
is disclosed on page 48. There are no other significant holdings of
any individual.
BOARD OF DIRECTORS
The names of the present Directors and their biographical details are
shown on pages 40 and 41. At the AGM, to be held on 21 July 2021,
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.
There is further information on the Group’s employee engagement
and how it fosters relationships with stakeholders on pages 12 to 15.
FINANCIAL INSTRUMENTS
The Group’s financial instruments at 31 March 2021 comprise cash
all Executive and Non-Executive Directors will offer themselves
and cash equivalents, receivable and payable balances that arise
for re-election.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
With regard to the appointment and replacement of Directors, the
Company is governed by its Articles of Association (the “Articles”),
the UK Corporate Governance Code, the Companies Act 2006 and
related legislation. The Articles themselves may be amended by
special resolution of the shareholders. The powers of Directors are
described in the Articles which can be found on the Group’s website
(www.tattonassetmanagement.com).
directly from its daily operations and £0.2 million of financial assets
at fair value through profit or loss. 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.
50
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
POST BALANCE SHEET DATE EVENTS
There have been no material post balance sheet events.
POLITICAL DONATIONS
The Group made no political donations or contributions during the
year (2020: £nil).
ANNUAL GENERAL MEETING (“AGM”)
The AGM of the Company will be held on 21 July 2021. A notice
convening the meeting will be sent to shareholders on 24 June 2021.
AUDITOR
Deloitte LLP was the Group’s independent auditor during the year
and has confirmed its 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 2021
AGM. Each of the persons who is a Director at the date of approval
The Group also maintains its high level of ongoing oversight and
monitoring of third party platforms. The Board is satisfied that 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 foreseeable future:
Liquidity – The Group has a robust financial liquidity position
with £16.9 million cash at 31 March 2021 and no debt, a £10 million
committed revolving credit facility which remains undrawn with
access to an accordion of £20 million and a highly efficient working
capital cycle, ensuring strong operating cash conversion (95.6% of
adjusted operating profit).
Regulatory position – Management have assessed the impact of the
COVID-19 pandemic and have confirmed that the Group continues
to have significant headroom over its regulatory requirements.
of this Annual Report confirms that:
Having given due consideration to the risks, uncertainties
— so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
— the Director has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware
of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
CORPORATE GOVERNANCE
A full review of corporate governance appears on pages 42 to 44.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES/
DISCLOSURES TO THE AUDITOR
As far as the Directors are aware, there is no relevant information of
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 4 onwards.
BASIS OF PREPARATION OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
which the Group’s independent auditor is unaware. The Directors
regulations. Company law requires the Directors to prepare such
have taken all the steps that they ought to have taken as Directors
financial statements for each financial year. Under that law the
to make themselves aware of any relevant audit information and
Directors are required to prepare the Group financial statements
to establish that the Company’s independent auditor is aware of
in accordance with International Financial Reporting Standards
that information.
RELATED PARTIES
Details of related party transactions are given in note 21 to the
consolidated financial statements.
GOING CONCERN
The Board has reviewed detailed papers prepared by management
that consider 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.
(“IFRSs”) as adopted by the United Kingdom 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.
Tatton Asset Management plc Annual Report and Accounts 2021
51
Corporate Governance
Directors’ Report continued
In preparing the Parent Company financial statements, the Directors
are required to:
DIRECTORS’ RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
— select suitable accounting policies and then apply
— the financial statements, prepared in accordance with the
them consistently;
relevant financial reporting framework, give a true and fair
— make judgements and accounting estimates that are
view of the assets, liabilities, financial position and profit or
reasonable and prudent;
loss of the Company and the undertakings included in the
— state whether applicable Financial Reporting Standard 101
consolidation taken as a whole;
‘Reduced Disclosure Framework’ has been followed, subject
— the Strategic Report includes a fair review of the development
to any material departures disclosed and explained in the
and performance of the business and the position of the
financial statements; and
Company and the undertakings included in the consolidation
— prepare the financial statements on the going concern basis
taken as a whole, together with a description of the principal
unless it is inappropriate to presume that the Company will
risks and uncertainties that they face; and
continue in business.
— 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.
The Directors’ Report has been approved and authorised for issue
by the Board of Directors and signed on its behalf by:
Paul Hogarth
Chief Executive Officer
Paul Edwards
Chief Financial Officer
In preparing the Group financial statements, IAS 1 requires
that Directors:
— properly select and apply accounting policies;
— present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
— provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
— make an assessment of the Company’s ability to continue as a
going concern.
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 and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
52
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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 company’) and its subsidiaries (the ‘group’)
give a true and fair view of the state of the group’s and of
the parent company’s affairs as at 31 March 2021 and of the
group’s profit for the year then ended;
— the group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of
the Companies Act 2006 and International Financial
Reporting Standards (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 prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
— the consolidated statement of total comprehensive income;
— the consolidated and parent company balance sheets;
— the consolidated and parent company statements of changes
in equity;
— the consolidated cash flow statement; and
— the related notes 1 to 25.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law
and international accounting standards in conformity with the
3.
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified
in the current year were:
Materiality
Scoping
Significant changes in
our approach
— Share based payments; and
— Impairment 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
The materiality that we used for
the group financial statements was
£365,000 which was determined on
the basis of 5% of profit before tax.
Our audit covered 100% of the group’s
profit before tax, revenue, and net assets.
In the prior year we identified a key
audit matter in respect of valuation and
completeness over the intangible asset
recognised following the acquisition of
Sinfonia Asset Management Limited.
However, for the current period the
impairment of such intangible has been
retained as a key audit matter with the
completeness assertion not deemed
relevant as this related to the fair value
of the assets acquired.
CONCLUSIONS RELATING TO GOING CONCERN
4.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
requirements of the Companies Act 2006 and IFRSs as issued by
Our evaluation of the directors’ assessment of the group’s and
the IASB. The financial reporting framework that has been applied
parent company’s ability to continue to adopt the going concern
in the preparation of the parent company financial statements
basis of accounting included:
is applicable law and United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting Practice).
— Evaluating management’s assessment, identifying the
assumptions and testing the mechanical accuracy of the
underlying forecast;
BASIS FOR OPINION
2.
We conducted our audit in accordance with International
— Understanding the entity’s process for the preparation of its
assessment and any related controls;
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
— Performing sensitivity analysis on the key assumptions
Our responsibilities under those standards are further described in
applied to understand those that could give rise to a material
the auditor’s responsibilities for the audit of the financial statements
uncertainty on the use of the going concern basis; and
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
— Checking consistency with the forecast assumptions applied
in the going concern assessment across other forecasts within
the Group.
audit of the financial statements in the UK, including the Financial
Based on the work we have performed, we have not identified
Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
any material uncertainties relating to events or conditions that,
listed entities, and we have fulfilled our other ethical responsibilities
individually or collectively, may cast significant doubt on the
in accordance with these requirements.
group’s and parent company’s ability to continue as a going concern
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report.
Tatton Asset Management plc Annual Report and Accounts 2021
53
Corporate Governance
Independent Auditor’s Report continued
KEY AUDIT MATTERS
5.
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
description
There are three Enterprise Management Incentive (EMI) schemes in place, beginning August 2018, 2019, and
2020, in addition to the three Sharesave schemes. The August 2018 scheme has different vesting conditions
for directors (B options) and non-directors (A options). The 2017 EMI and Sharesave schemes vested in
July 2020. During the year, the Remuneration Committee reviewed and modified the vesting criteria for the
2017 and 2018 EMI schemes, to account for the unexpected impact arising from market movements due to
COVID-19, albeit this did not impact the valuation of the scheme significantly.
Our key audit matter has been pinpointed to the 2018 EMI scheme, given the size of the income statement
charge. The 2018 EMI scheme has two performance conditions; being total shareholder return (TSR)
accounting for 25% of the pay-out, and earnings per share (EPS) growth accounting for 75% of the pay-
out, 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.
The accuracy of share based payments is considered to be the focus of our key audit matter, due to the
judgements inherent in the assumptions used in the models. Specifically the accuracy of the number of
options expected to vest under the EPS performance condition of the EMI scheme.
The accounting policies adopted by the Group and the sources of estimation uncertainty have been disclosed
within note 2.20 and 2.22 respectively within the financial statements. Note 20 details the reconciliation of
the share based payment balance.
To address our share based payment key audit matter, we have performed the following procedures over
the significant risk:
— Obtained 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 determines the number of options that will vest, through
recalculation and extrapolation of historical growth rates and by reviewing analyst growth forecasts;
— Worked with 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,
including the impact of modifications to the scheme;
— Assessed the fair value output from the fair value model to determine whether it is generating a
reasonable fair value based on the assumptions.
How the scope of our
audit responded to the
key audit matter
Key observations
As a result of the above procedures, we consider that the share based payment charge is materially in line
with the requirements of IFRS 2.
54
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
5.2.
IMPAIRMENT OF INTANGIBLE ASSETS
Key audit matter
description
On 30 September 2019, the Group acquired the share capital of Sinfonia Asset Management Limited (“SAML”)
gaining control over the entity. At acquisition, the Group identified any other identifiable intangible assets
acquired in the business combination. The Group recognised a client relationship intangible asset relating to
the non-contractual customer relationships, with the customer being the IFA.
The initial cost of the intangible assessment was valued at £1.2m and is being amortised over a ten-year
period since this is considered the estimated useful life of the customer relationship. As at 31 March 2021
the carrying amount of the intangible is £1.02m, with £0.18m relating of accumulated amortisation and no
historic impairment losses.
We have identified a key audit matter and fraud risk in relation to the valuation of the customer contract
intangible, specifically in relation to the determination of future cash flows and growth rates used in the
value in use (VIU) calculation as part of the impairment assessment which requires significant judgement
and therefore potential for management to introduce bias in estimates.
The accounting policies adopted by the Group have been disclosed within notes 2.8 and 2.9 to the financial
statements. Impairment of client relationships has been identified as a critical accounting judgement in note
2.22. Note 12 details the reconciliation of the client relationship intangible balance.
To address our intangible asset impairment key audit matter, we have:
— Obtained an understanding of relevant controls in relation to the impairment review process for client
relationship intangibles;
— Challenged the key assumptions used within management’s future cash flows through seeking
corroboratory and contradictory evidence; and
— Tested management’s forecasting accuracy by reference to cash flows/customer lapses observed since
the acquisition date.
How the scope of our
audit responded to the
key audit matter
Key observations
As a result of the above procedures, management’s judgement and estimates are reasonable and concur no
impairment of the intangible asset is required.
Tatton Asset Management plc Annual Report and Accounts 2021
55
Corporate Governance
Independent Auditor’s Report continued
6. OUR APPLICATION OF MATERIALITY
6.1. 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
£365,000 (2020: £439,000)
Parent Company financial statements
£310,250 (2020: £351,000)
5% of profit before tax (2020: 5% of adjusted
Parent company materiality equates to 2% of
income before tax)
For our basis of materiality we have used profit
before tax which has changed from the prior
year where adjusted profit before tax was used.
The benchmark was normalised in the prior year
as a result of a prior period VAT refund within
exceptional income. There were no adjustments
to profit before tax in the current year.
total assets (2020: 2% of total assets), which is
capped at 85% (2020: 80%) of Group materiality.
The percentage of Group materiality has been
determined based on the contribution to the total
Group net assets.
Rationale for the
benchmark applied
We have determined materiality based on profit
The main operation of the parent company is to
before tax as it is a profit driven business, therefore
hold investments in the subsidiaries. We have
is considered the most relevant benchmark for
therefore selected total assets as the benchmark
users of the financial statements.
for determining materiality. We have however
capped materiality based on the Group materiality.
PBT
£7,303k
PBT
Group materiality
Group materiality
£365k
Component materiality range
£15k to £347k
Audit and Risk Committee
reporting threshold
£15k
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.
Performance materiality
70% (2020: 70%) of group materiality
70% (2020: 70%) of parent company materiality
Group financial statements
Parent Company financial statements
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
— Our risk assessment, including our assessment of the group’s overall control environment and that
we consider it appropriate to rely on controls over investment wrap service income;
— Our understanding of the entity and its environment, in particular the resilience of the group against
the impact of Covid 19; 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 and Risk Committee that we would report to the Committee all audit differences in excess of £15,000
(2020: £22,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to
the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
56
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
7.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
IDENTIFICATION AND SCOPING OF COMPONENTS
7.1.
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 (2020: three) material trading entities within the Group’s three (2020: three) reportable segments
and the three (2020: three) material holding companies including the parent Company. The Group audit team performed full scope
audits on all entities directly, which account for 100% (2020: 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
£15,000–£347,000 (2020: £83,000–£417,000).
7.2. OUR CONSIDERATION OF THE CONTROL ENVIRONMENT
The key IT system relevant to the audit was the financial accounting system as this is integral to the accounting records maintained by the
Group. We have not relied upon any controls associated with this system as its operation involves a high degree of manual intervention.
We tested the manual controls in place for investment wrap service related revenue and relied on the controls in place for our testing
of this balance.
8. OTHER INFORMATION
The other information comprises the information included in the annual report, other than the financial
We have nothing to
statements and our auditor’s report thereon. The directors are responsible for the other information contained
report in this regard.
within the annual report.
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.
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 course of our audit, or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. 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.
RESPONSIBILITIES OF DIRECTORS
9.
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.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
10.
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 2021
57
Corporate Governance
Independent Auditor’s Report continued
EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
11.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
IDENTIFYING AND ASSESSING POTENTIAL RISKS RELATED TO IRREGULARITIES
11.1.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
— the nature of the industry and sector, control environment and business performance including the design of the group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
— results of our enquiries of management and the Audit and Risk Committee about their own identification and assessment of the
risks of irregularities;
— any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:
•
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-
compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
— the matters discussed among the audit engagement team and relevant internal specialists, including tax, IT and industry specialists
regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: accuracy of share based payments and impairment of intangible
assets. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory framework that the group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key
laws and regulations we considered in this context included the UK Companies Act and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included FCA regulations.
11.2. AUDIT RESPONSE TO RISKS IDENTIFIED
As a result of performing the above, we identified share based payments and the impairment of intangible assets as key audit matters
related to the potential risk of fraud. The key audit matters section of our report explains the matters in more detail and also describes
the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
— reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
— enquiring of management, the audit committee and external legal counsel concerning actual and potential litigation and claims;
— performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
— reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with HMRC and the Financial Conduct Authority; and
— in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
58
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. 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.
13. OPINION ON OTHER MATTER PRESCRIBED BY OUR ENGAGEMENT LETTER
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
provisions of the Companies Act 2006 that would have applied were the company a quoted company.
14. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
14.1. 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.
14.2. 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.
15. 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
14 June 2021
Tatton Asset Management plc Annual Report and Accounts 2021
59
Financial Statements
Consolidated Statement of Total Comprehensive Income
FOR THE YEAR ENDED 31 MARCH 2021
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
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
31-Mar
2021
(£’000)
23,353
–
(15,845)
7,508
3,740
120
34
11,402
(205)
7,303
(1,192)
6,111
10.86p
10.31p
16.14p
14.74p
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
6
7
8
9
9
9
9
1 Adjusted for exceptional items, amortisation on client relationship intangibles and share-based payments. See note 22.
2 Adjusted for exceptional items, amortisation on client relationship intangibles and share-based payments and the tax thereon. See note 22.
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.
60
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Consolidated Statement of Financial Position
AS AT 31 MARCH 2021
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Financial assets at fair value through profit or loss
Corporation tax
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
Note
11
12
13
16
14
17
15
15
16
18
19
31-Mar
2021
(£’000)
6,254
1,436
992
1,420
10,102
4,302
163
48
16,934
21,447
31,549
(6,587)
–
(6,587)
(516)
–
(516)
(7,103)
24,446
11,578
11,534
(1,969)
2,041
(28,968)
30,230
24,446
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
The financial statements on were approved by the Board of Directors on 14 June 2021 and were signed on its behalf by:
PAUL EDWARDS
Director
Company registration number: 10634323
Tatton Asset Management plc Annual Report and Accounts 2021
61
Financial Statements
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 MARCH 2021
At 1 April 2019
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on share-based
payments
Own shares acquired in the
year
At 31 March 2020
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on
share-based payments
Issue of share capital
on exercise of employee
share options
Own shares acquired in
the year
At 31 March 2021
Note
9
20
19
9
20
Share
capital
(£’000)
11,182
Share
premium
(£’000)
8,718
–
–
–
–
–
–
–
–
–
–
11,182
8,718
–
–
–
–
–
–
–
–
396
2,816
Own
shares
(£’000)
Other
reserve
(£’000)
Merger
reserve
(£’000)
–
–
–
–
–
(996)
(996)
–
–
–
–
–
2,041
(28,968)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
(£’000)
22,315
Total
equity
(£’000)
15,288
8,363
8,363
(4,920)
(4,920)
86
86
(43)
(43)
–
6,111
(5,551)
2,954
(996)
17,778
6,111
(5,551)
2,954
915
915
–
–
3,212
(973)
2,041
(28,968)
25,801
19
–
–
11,578
11,534
(973)
(1,969)
2,041
(28,968)
30,230
24,446
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.
62
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 MARCH 2021
Operating activities
Profit for the year
Adjustments:
Income tax expense
Finance costs
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 (paid)/received
Transaction costs related to borrowings
Dividends paid
Proceeds from the issue of shares
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
Note
31-Mar
2021
(£’000)
31-Mar
2020
(£’000)
6,111
8,363
7
13
12
6
6
9
19
1,192
205
351
341
3,740
(537)
(531)
34
10,906
10,872
(2,051)
8,821
(160)
(282)
(67)
(509)
(36)
(613)
(5,551)
3,212
(973)
(174)
(4,135)
4,177
12,757
16,934
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
Tatton Asset Management plc Annual Report and Accounts 2021
63
Financial Statements
Notes to the Consolidated Financial Statements
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 by the United Kingdom 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.
64
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
2 Accounting Policies continued
2.3 BASIS OF CONSOLIDATION
The Group’s financial statements consolidate those of the Parent Company and all of its subsidiaries as at 31 March 2021. 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.
2.4 ADOPTION OF NEW AND REVISED STANDARDS
NEW AND AMENDED IFRS STANDARDS THAT ARE EFFECTIVE FOR THE CURRENT YEAR
The following revised standards and interpretations have been adopted in the current year, being amendments to the Conceptual
Framework in IFRS Standards, IAS 1 ‘Presentation of Financial Statements’, IAS 8 ‘Accounting Policies, Changes in Accounting Estimates
and Errors’, IFRS 16 ‘Leases’, IFRS 3 ‘Business Combinations’, IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition
and Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’. These amendments have not had a material impact on the financial
statements of the Group.
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 yet effective. The Group intends to adopt these Standards and Interpretations when they become effective,
rather than adopt them early.
EFFECTIVE DATE 1 JANUARY 2023
IFRS 17 ‘Insurance Contracts’
In addition the following standards each have amendments will be effective for accounting periods beginning on or after 1 January 2021:
IFRS 10 ‘Consolidated Financial Statements’ IAS 28 ‘Investments in Associates and Joint Ventures’, IAS 1 ‘Presentation of Financial Statements’,
IFRS 3 ‘Business Combinations’, IAS 16 ‘Property, Plant and Equipment’, IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.
The Directors do not expect that the adoption of the new or revised Standards listed above will have a material impact on the financial
statements of the Group in future periods.
2.5 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 for discretionary fund management services in relation to on-platform investment assets under management (“AUM”).
Revenue is recognised daily based on the AUM.
— Fees charged to IFAs for compliance consultancy services, which are 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 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.
Tatton Asset Management plc Annual Report and Accounts 2021
65
Financial Statements
Notes to the Consolidated Financial Statements continued
2 Accounting Policies continued
2.6 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.
2.7 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.
2.8 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.
2.9 GOODWILL AND INTANGIBLE ASSETS
Goodwill is initially recognised and measured as set out in note 2.11.
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 CGUs (or groups of CGUs) expected to benefit from the synergies of the combination. CGUs 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 CGU 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 CGU, 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.
66
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
2 Accounting Policies continued
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 2021 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 (2020: none).
2.10 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.
2.11 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.
Tatton Asset Management plc Annual Report and Accounts 2021
67
Financial Statements
Notes to the Consolidated Financial Statements continued
2 Accounting Policies continued
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 at the acquisition date that, if known, would have affected the amounts recognised as of that date.
2.12 LEASES
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.
68
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
2 Accounting Policies continued
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 ROU asset, or is
recorded in profit or loss if the carrying amount of the ROU 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 ROU asset arising from the head lease, not with reference to the
underlying asset.
2.13 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.
2.14 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the 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.
FINANCIAL INVESTMENTS
Financial investments are classified as fair value through profit or loss if they are either held for trading or specifically designated in this
category on initial recognition. Assets in this category are initially recognised at fair value and subsequently remeasured, with gains or
losses arising from changes in fair value being recognised in the Statement of Comprehensive Income.
Financial assets at fair value through profit or loss include investments in a regulated open-ended investment company and an investment
portfolio, which are managed and evaluated on a fair value basis in line with the market value.
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.
Tatton Asset Management plc Annual Report and Accounts 2021
69
Financial Statements
Notes to the Consolidated Financial Statements continued
2 Accounting Policies continued
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.
2.15 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 where 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.
70
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
2 Accounting Policies 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.
2.16 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.
2.17 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.
2.18 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.
2.19 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 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.
2.20 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.
2.21 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.
Tatton Asset Management plc Annual Report and Accounts 2021
71
Financial Statements
Notes to the Consolidated Financial Statements continued
2 Accounting Policies continued
2.22 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
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.
BUSINESS COMBINATIONS
ESTIMATION UNCERTAINTY
Valuation of the earn-out consideration
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. The purchase price payable for the acquisition was split into a number of different
parts. The payment of certain elements has been deferred. At 31 March 2021, there remained one element of deferred consideration
unvested and subject to ongoing vesting conditions. The value of earn-out consideration is variable, dependent on performance by the
acquired business against certain operational targets by 30 September 2021. The estimated value of earn-out consideration that will be
payable at these dates is £nil, based on projections of growth in funds under management over that period.
Under the terms of the agreements, the maximum possible payment under the remaining earn-out and incentivisation award is capped
at £345,000, 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 accordingly (at the
end of the relevant scheme as a minimum). Based on the current forecasts of the Group, the charge for the year is based on 100% of the
options vesting for the element relating to non-market-based performance conditions. A decrease of 10% in the vesting assumptions
would reduce the charge in the year by £341,000. In considering the level of satisfaction of performance obligations, the Group’s forecast
has been reviewed and updated for the expected impact of the COVID-19 pandemic, various market scenarios and management actions.
This forecast has been used to estimate the relevant vesting assumptions for the Enterprise Management Incentive (“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.
72
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
2 Accounting Policies continued
2.23 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 22 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 £24.4 million as at 31 March 2021 (2020: £17.8 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 (“CODM”) 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. During the financial year, it was decided that centrally incurred overhead costs should be allocated to the Tatton and
Paradigm divisions on an appropriate pro rata basis and this is how financial information is presented to the Group’s CODM. The March
2020 comparative figures have been presented on a like for like basis showing the relevant allocation of central costs on the prior year.
Tatton Asset Management plc Annual Report and Accounts 2021
73
Financial Statements
Notes to the Consolidated Financial Statements continued
4 Segment Reporting continued
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.
The following is an analysis of the Group’s revenue and results by reportable segment:
Year ended 31 March 2021
Revenue
Administrative expenses
Operating profit/(loss)
Share-based payments
Exceptional items
Amortisation of client relationship intangible assets
Adjusted Operating profit/(loss) (before separately disclosed items)1
Finance costs
Profit/(loss) before tax
Year ended 31 March 2020 restated2
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)1
Finance (costs)/income
Profit/(loss) before tax
All turnover arose in the United Kingdom.
Tatton
(£’000)
18,097
(7,132)
10,965
–
(184)
120
10,901
(21)
10,944
Tatton
(£’000)
15,924
1,588
(7,492)
10,020
–
(1,458)
60
8,622
(20)
10,000
Paradigm
(£’000)
5,240
(3,212)
2,028
–
–
–
2,028
(4)
2,024
Paradigm
(£’000)
5,426
–
(3,599)
1,827
–
64
–
1,891
13
1,840
Central
(£’000)
16
(5,501)
(5,485)
3,740
218
–
(1,527)
(180)
(5,665)
Central
(£’000)
19
–
(1,545)
(1,545)
108
–
–
(1,437)
1
Group
(£’000)
23,353
(15,845)
7,508
3,740
34
120
11,402
(205)
7,303
Group
(£’000)
21,369
1,588
(12,655)
10,302
108
(1,394)
60
9,076
(6)
(1,544)
10,296
1 Alternative performance measures are detailed in note 22.
2 Administrative expenses in March 2020 have been restated to include an allocation of central overhead costs to aid comparability with the current year.
74
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
Gain arising on financial assets designated as FVTPL
Separately disclosed items (note 6)
Services provided by the Group’s auditor:
Audit of the statutory consolidated and Company financial statements of
Tatton Asset Management plc
Audit of subsidiaries
Other fees payable to auditor:
Non-audit services
31-Mar
2021
(£’000)
221
175
176
(35)
31-Mar
2020
(£’000)
135
160
138
–
3,894
(1,226)
69
66
25
34
58
86
31-Mar
2020
(£’000)
97
97
–
(1,588)
(1,394)
108
60
(1,226)
Total audit fees were £135,000 (2020: £92,000). Total non-audit fees payable to the auditor were £25,000 (2020: £86,000).
6 Separately Disclosed Items
Restructuring costs
Acquisition-related expenses
Gain arising on changes in fair value of contingent consideration
VAT reclaim income
Total exceptional costs/(income)
Share-based payment charges
Amortisation of client relationship intangible assets
Total separately disclosed items
31-Mar
2021
(£’000)
–
218
(184)
–
34
3,740
120
3,894
Separately disclosed items shown separately on the face of the 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
During the period, the Group pursued a potential acquisition of a business which fitted the strategic direction of the Group and would
have been both material and complementary to the Tatton portfolio of products. The Group incurred professional fees of £218,000
during the process which have been treated as exceptional items.
Acquisition-related expenses during the financial year ended 31 March 2020 related to the acquisition of the share capital of Sinfonia
Asset Management Limited (“Sinfonia”), incurring acquisition-related costs of £97,000.
Tatton Asset Management plc Annual Report and Accounts 2021
75
Financial Statements
Notes to the Consolidated Financial Statements continued
6 Separately Disclosed Items continued
During the current financial year, the Group revalued its financial liability at FVTPL relating to the deferred consideration on the acquisition
of Sinfonia. This has resulted in a credit from the change in fair value of £184,000 being recognised in the year.
During the financial year ended 31 March 2020, the Group incurred a restructuring charge relating 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.
In addition, during the financial year ended 31 March 2020, the Group 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 recognised income of
£1,756,000 relating to the four-year period ended 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 reflected this change in treatment of revenue and the level of irrecoverable
input VAT in revenue and administrative expenses from 1 April 2019.
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. The current year charge of £3,740,000 has seen a material increase on the prior year charge of £108,000, as in the prior
year a significant amount of the provision for share-based payments was released due to the uncertainty around the impact that the
COVID-19 pandemic would have on the financial performance of the business. In the current year, there is an increased expectation of the
amount of options that will vest for the schemes currently in place, so increasing the charge in the Statement of Comprehensive Income.
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
Bank interest income
Other interest income
Interest expense on lease liabilities
Interest payable in servicing of banking facilities
31-Mar
2021
(£’000)
1
–
(25)
(181)
(205)
31-Mar
2020
(£’000)
3
13
(22)
–
(6)
76
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
8 Taxation
Current tax expense
Current tax on profits for the period
Adjustment for under-provision in prior periods
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
2021
(£’000)
1,790
13
1,803
(563)
7
(55)
–
1,192
31-Mar
2020
(£’000)
1,986
7
1,993
(12)
57
(95)
(10)
1,933
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% (2020: 19%)
Expenses not deductible for tax purposes
Income not taxable
Adjustments in respect of previous years
Differences in tax rates
Fixed asset differences
Share-based payments
Total tax expense
31-Mar
2021
(£’000)
7,303
1,388
63
(34)
(42)
–
6
(189)
1,192
31-Mar
2020
(£’000)
10,296
1,956
87
–
(88)
(10)
–
(12)
1,933
In the 3 March 2021 Budget, it was announced that the UK corporation tax rate will change to 25% from 1 April 2023 but this has not
yet been substantively enacted. Deferred tax is calculated using the rate expected to apply when the relevant timing differences are
forecast to unwind.
Tatton Asset Management plc Annual Report and Accounts 2021
77
Financial Statements
Notes to the Consolidated Financial Statements continued
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
Effect of weighted average number of options outstanding for the year
Weighted average number of shares (diluted)1
Adjusted diluted
Effect of full dilution of employee share options which are contingently issuable or
have future attributable service costs
Adjusted diluted weighted average number of options and shares for the year2
31-Mar
2021
31-Mar
2020
56,835,807
55,907,513
(551,954)
(72,355)
56,283,853
55,835,158
2,966,507
59,250,360
1,694,831
57,529,989
2,370,976
61,621,336
3,545,946
61,075,935
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 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 ended 31 March 2021 the EBT purchased 361,746 (2020: 413,411) 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 costs/(income) – 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
2021
(£’000)
6,111
3,740
120
34
(923)
9,082
10.86
10.31
16.14
14.74
31-Mar
2020
(£’000)
8,363
108
60
(1,394)
194
7,331
14.98
14.54
13.13
12.00
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 its strategy and to invest in opportunities to grow the business and
enhance shareholder value.
During the year, Tatton Asset Management plc paid the final dividend related to the year ended 31 March 2020 of £3,552,000, representing
a payment of 6.4p per share. In addition, the Company paid an interim dividend of £1,999,000 (2020: £1,789,000) to its equity
shareholders. This represents a payment of 3.5p per share (2020: 3.2p per share).
The Company’s dividend policy is described in the Directors’ Report on page 49. At 31 March 2021, the Company’s distributable reserves
were £28.6 million (2020: £25.8 million).
78
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
2021
(£’000)
4,971
619
200
54
1,257
7,101
31-Mar
2021
82
3
85
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
2021
(£’000)
1,730
5
4
2,483
4,222
31-Mar
2020
(£’000)
940
11
3
(15)
939
In addition to the remuneration above, the Non-Executive Chairman and Non-Executive Directors have submitted invoices for their fees
as follows:
Total fees
31-Mar
2021
(£’000)
160
31-Mar
2020
(£’000)
160
The Group incurred Social security costs of £235,000 (2020: £126,000) on the remuneration of the Directors and Non-Executive Directors.
The remuneration of the highest paid Director was:
Total
31-Mar
2021
(£’000)
794
31-Mar
2020
(£’000)
347
The highest paid Director did not exercise any share options in the period. There were 174,758 share options granted to the highest paid
Director in the year.
Tatton Asset Management plc Annual Report and Accounts 2021
79
Financial Statements
Notes to the Consolidated Financial Statements continued
11 Goodwill
Cost and carrying value at 31 March 2020 and 31 March 2021
Goodwill
(£’000)
6,254
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 £1.4 million of goodwill generated on the acquisition of Sinfonia. 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 represent 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 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 Directors have reviewed the carrying value of goodwill at 31 March 2021 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 ending 31 March 2022 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 10.8% (2020: 7.7%). 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 2021 is £245 million (2020: £414 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.
80
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
12 Intangible Assets
Cost
Balance at 31 March 2019
Additions
Acquired on acquisition of a subsidiary
Balance at 31 March 2020
Additions
Balance at 31 March 2021
Accumulated amortisation and impairment
Balance at 31 March 2019
Charge for the period
Balance at 31 March 2020
Charge for the period
Balance at 31 March 2021
Net book value
As at 31 March 2019
As at 31 March 2020
As at 31 March 2021
Computer
software
(£’000)
Customer
relationships
(£’000)
266
271
–
537
282
819
(43)
(135)
(178)
(221)
(399)
223
359
420
–
–
1,196
1,196
–
1,196
–
(60)
(60)
(120)
(180)
–
1,136
1,016
All amortisation charges are included within administrative expenses in the Statement of Total Comprehensive Income.
13 Property, Plant and Equipment
Cost
Balance at 31 March 2019
Increase attributable to change in accounting standards
Additions
Balance at 31 March 2020
Additions
Disposals
Balance at 31 March 2021
Accumulated depreciation and impairment
Balance at 31 March 2019
Charge for the period
Balance at 31 March 2020
Charge for the period
Disposals
Balance at 31 March 2021
Net book value
As at 1 April 2019
As at 31 March 2020
As at 31 March 2021
Computer,
office
equipment and
Fixtures and
motor vehicles
(£’000)
fittings
(£’000)
Right-of-use
assets –
buildings
(£’000)
507
–
81
588
67
(223)
432
(397)
(73)
(470)
(80)
223
(327)
110
118
105
478
–
213
691
–
(214)
477
(239)
(87)
(326)
(95)
214
(207)
239
365
270
–
689
–
689
242
–
931
–
(138)
(138)
(176)
–
(314)
–
551
617
All depreciation charges are included within administrative expenses in the Statement of Total Comprehensive Income.
Tatton Asset Management plc Annual Report and Accounts 2021
Total
(£’000)
266
271
1,196
1,733
282
2,015
(43)
(195)
(238)
(341)
(579)
223
1,495
1,436
Total
(£’000)
985
689
294
1,968
309
(437)
1,840
(636)
(298)
(934)
(351)
437
(848)
349
1,034
992
81
Financial Statements
Notes to the Consolidated Financial Statements continued
13 Property, Plant and Equipment continued
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 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 2021, the Group is committed to £nil for short-term leases (2020: £nil).
The total cash outflow for leases amounts to £220,000 (2020: £156,000).
14 Trade and Other Receivables
Trade receivables
Amounts due from related parties
Prepayments and accrued income
Other receivables
31-Mar
2021
(£’000)
(176)
(25)
(44)
(1)
(246)
31-Mar
2021
(£’000)
172
29
3,060
1,041
4,302
31-Mar
2020
(£’000)
(138)
(22)
(94)
(1)
(255)
31-Mar
2020
(£’000)
116
108
1,948
1,259
3,431
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 (2020: £nil).
The amounts due from related parties are net of provisions. At 31 March 2021 Tatton Asset Management plc made full provision of £60,000
against the recoverability of amounts due from Jargonfree Benefits LLP in addition to the full provision of £1,251,000 made at 31 March
2017 by Paradigm Mortgage Services LLP. During the year, Paradigm Partners Limited wrote off a debt with Amber Financial Investments
Limited (“Amber”) of £350,000 which had been fully provided for. Amber was previously a related party as an entity controlled by Paul
Hogarth until its sale in November 2020.
The carrying value of the provisions as at 31 March 2021 was £1,311,000 (2020: £1,601,000).
Trade receivable amounts are all held in sterling.
82
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
2021
(£’000)
294
236
3,330
132
–
3,111
7,103
–
(516)
(516)
6,587
31-Mar
2020
(£’000)
275
222
2,476
131
344
3,440
6,888
(172)
(530)
(702)
6,186
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.
16 Deferred Taxation
Asset/(liability) at 31 March 2019
Acquisition of subsidiary
Income statement (charge)/credit
Equity charge
(Liability)/asset at 31 March 2020
Income statement credit
Equity credit
Asset/(liability) at 31 March 2021
17 Financial Instruments
Deferred
capital
Share-based
Acquisition
allowances
payments
intangibles
£’000
£’000
£’000
(45)
–
(81)
–
(126)
25
–
149
–
130
(43)
236
563
915
–
(227)
11
–
(216)
23
–
Total
£’000
104
(227)
60
(43)
(106)
611
915
(101)
1,714
(193)
1,420
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.
Tatton Asset Management plc Annual Report and Accounts 2021
83
Financial Statements
Notes to the Consolidated Financial Statements continued
17 Financial Instruments continued
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 except for financial investments are categorised as loans and receivables and are classified as level 1. Financial investments
are categorised as financial assets at fair value through profit or loss and are classified as level 1 and the fair value is determined directly
by reference to published prices in an active market.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (LEVEL 1)
Financial investments in regulated funds or model portfolios
31-Mar
2021
(£’000)
163
31-Mar
2020
(£’000)
28
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.
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (LEVEL 3)
Contingent consideration
Balance at 1 April 2020
Paid in the year
Changes in fair value of contingent consideration
Balance at 31 March 2021
£’000
344
(160)
(184)
–
INTEREST RATE RISK
The Group finances its operations through a combination of retained profits and a bank facility which currently remains undrawn.
The Group would have an exposure to interest rate risk should this facility be drawn as it has a floating rate above the base rate. The Group’s
cash and cash equivalents balance of £16,934,000 was its only financial instrument subject to variable interest rate risk. The impact of
a 0.1% increase or decrease in interest rate on the post-tax profit is not material to the Group. At 31 March 2021, total borrowings were
£nil (2020: £nil).
84
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
2021
(£’000)
16,934
3,808
20,742
31-Mar
2020
(£’000)
12,757
3,110
15,867
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
2021
(£’000)
147
16
5
4
172
31-Mar
2020
(£’000)
75
19
17
5
116
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.
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:
Tatton Asset Management plc Annual Report and Accounts 2021
85
Financial Statements
Notes to the Consolidated Financial Statements continued
17 Financial Instruments continued
At 31 March 2021, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable)
as summarised below:
At 31 March 2021
Trade and other payables
Lease liabilities
Total
Current
Non-current
Within 6
months
6,228
113
6,341
6 to 12
months
–
114
114
1 to 5
years
–
516
516
Later than
5 years
–
–
–
This compares with the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows:
At 31 March 2020
Trade and other payables
Lease liabilities
Contingent consideration
Total
Current
Non-current
Within 6
months
5,761
37
–
5,798
6 to 12
months
–
84
172
256
1 to 5
years
–
530
172
702
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.
MARKET RISK
The Group has made investments in its own managed funds and portfolios and the value of these investments is subject to equity market
risk, being the risk that changes in equity prices will affect the Group’s income or the value of its holdings of financial instruments. If equity
prices had been 5% higher/lower, the impact on the Group’s Statement of Comprehensive Income would be £8,000 higher/lower due
to changes in the fair value of financial assets at fair value through profit or loss.
18 Equity
Authorised, called up and fully paid £0.20 ordinary shares
At 1 April 2020
Issue of share capital on exercise of employee share options
Issue of share capital on exercise of share warrant
At 31 March 2021
Each share in Tatton Asset Management plc carries one vote and the right to a dividend.
19 Own Shares
The following movements in own shares occurred during the year:
At 1 April 2020
Acquired in the year
At 31 March 2021
Number
55,907,513
863,401
1,118,151
57,889,065
Number of shares
413,411
361,746
775,157
£’000
996
973
1,969
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 EBT to satisfy future awards under the Group’s share-based payment schemes (note 20). 775,157 shares were held in the EBT at
31 March 2021 (2020: 413,411).
86
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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) TATTON ASSET MANAGEMENT PLC EMI SCHEME (“TAM EMI SCHEME”)
On 7 July 2017 the Group launched an EMI share option scheme relating to shares in Tatton Asset Management plc to enable senior
management to participate in the equity of the Company. 3,022,733 options with a weighted average exercise price of £1.89 were
granted, exercisable in July 2020. There have been 673,568 options exercised during the period from this scheme and 696,099 of these
options lapsed.
The scheme was extended on 8 August 2018, 1 August 2019 and 28 July 2020 with 1,720,138, 193,000 and 1,000,000 zero cost options
granted in each respective year. These options are exercisable on the third anniversary of the grant date. A total of 3,022,733 options
with a weighted average exercise price of £1.89 were granted, each exercisable in July 2020. The options vest in August 2021, August
2022 or July 2023 provided certain performance conditions and targets, set prior to grant, have been met. If the performance conditions
are not met, the options lapse.
A total of 4,386,070 options remains outstanding at 31 March 2021, 1,522,617 of which are currently exercisable. No options were forfeited
in the period (2020: 68,319 options were forfeited).
Within the accounts of the Company, the fair value at grant date is estimated using the appropriate models including both the Black-
Scholes and Monte Carlo modelling methodologies.
Outstanding at 1 April 2019
Granted during the period
Forfeited during the period
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Outstanding at 1 April 2020
Granted during the period
Exercised during the period
Lapsed during the period
Forfeited during the period
Outstanding at 31 March 2021
Exercisable at 31 March 2021
Number of
share options
granted
(number)
4,631,056
193,000
(68,319)
4,755,737
–
4,755,737
1,000,000
(673,568)
(696,099)
–
4,386,070
1,522,617
Weighted
average
price
(£)
1.19
–
0.52
1.15
–
1.15
–
1.70
1.83
–
0.66
1.89
(II) TATTON ASSET MANAGEMENT PLC SHARESAVE SCHEME (“TAM SHARESAVE SCHEME”)
On 7 July 2017, 5 July 2018, 3 July 2019 and 6 July 2020 the Group launched all employee Sharesave schemes for options over shares
in Tatton Asset Management 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 2018 TAM 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 TAM 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. Over the life of 2020 TAM Sharesave scheme it is estimated that, based
on current savings rates, 134,656 share options will be exercisable at an exercise price of £2.29. During the period, 189,833 options have
been exercised and 2,940 options have been forfeited.
Tatton Asset Management plc Annual Report and Accounts 2021
87
Financial Statements
Notes to the Consolidated Financial Statements continued
20 Share-Based Payments continued
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 below respectively.
Number of
share options
Weighted
average
Outstanding at 1 April 2019
Granted during the period
Forfeited during the period
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Outstanding at 1 April 2020
Granted during the period
Exercised during the period
Forfeited during the period
Outstanding at 31 March 2021
Exercisable at 31 March 2021
granted
(number)
131,976
102,493
(10,741)
223,728
26,176
223,728
70,894
(189,833)
(2,940)
101,849
10,588
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
2020
2.84
–
34.80
3.00
(0.06)
3.38
2019
2.12
–
30.44
3.00
0.35
3.96
2018
2.40
–
28.48
3.00
0.81
2.75
2017
1.89
1.70
26.00
3.00
0.66
4.50
2020
2.85
2.29
34.80
3.00
(0.06)
3.38
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
20.3 IFRS 2 SHARE-BASED OPTION COSTS
TAM EMI scheme
TAM Sharesave scheme
31-Mar
2021
(£’000)
3,716
24
3,740
price
(£)
1.70
1.75
1.85
1.73
1.70
1.73
2.08
1.70
2.01
1.81
1.70
2017
1.89
1.70
26.00
3.00
0.66
4.50
31-Mar
2020
(£’000)
84
24
108
88
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
21 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
Amber Financial Investments Limited
Nature of transactions
The Group provides discretionary fund management services, as
well as accounting and administration services.
Paradigm Investment Management LLP
The Group incurs finance charges.
Suffolk Life Pensions Limited
The Group pays lease rental payments on an office building held in
a pension fund by Paul Hogarth.
From 30 November 2020 Amber Financial Investments 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
Payable within 30 days
Jargonfree Benefits LLP
Repayment on demand
Paradigm Management Partners LLP
Repayment on demand
Paradigm Investment Management LLP Repayment on demand
Suffolk Life Pensions Limited
Payable in advance
Hermitage Holdings (Wilmslow) Limited Repayment on demand
Balances with related parties are non-interest bearing.
Value of
income/
(cost)
(£’000)
2021
Balance
receivable/
(payable)
(£’000)
226
–
–
(2)
(76)
(18)
29
–
–
(235)
(1)
–
Value of
income/
(cost)
(£’000)
297
15
1
(5)
(57)
4
2020
Balance
receivable/
(payable)
(£’000)
25
66
5
(234)
9
4
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.
Tatton Asset Management plc Annual Report and Accounts 2021
89
Financial Statements
Notes to the Consolidated Financial Statements continued
22 Alternative Performance Measures (“APMs”)
APM
Adjusted operating
profit before separately
disclosed items
Closest
Reconciling items to
equivalent measure
their statutory measure
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.
Adjusted earnings per
share – Basic
Earnings per share
– Basic
Adjusted earnings per
share – Diluted
Earnings per share
– Diluted
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 and the tax
thereon. See note 9.
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.
Exceptional items, share-based
payments and amortisation of client
relationship intangibles. See note 6.
Definition and purpose
An important measure where
exceptional items distort the
understanding of the operating
performance of the business. Allows
comparability between periods. See
also note 2.23.
An important measure where
exceptional items distort the
understanding of the operating
performance of the business. Allows
comparability between periods. See
also note 2.23.
An important measure where
exceptional items distort the
understanding of the operating
performance of the business. Allows
comparability between periods. See
also note 2.23.
An important measure where
exceptional items distort the
understanding of the operating
performance of the business. Allows
comparability between periods. See
also note 2.23.
Net cash generated from operations
before exceptional costs. To show
underlying cash performance. See also
note 2.23.
90
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
22 Alternative Performance Measures (“APMs”) continued
OTHER MEASURES
APM
Tatton – assets under
management (“AUM”)
and net inflows
Closest
Reconciling items to
equivalent measure
their statutory measure
None
Not applicable
Paradigm Consulting
members and growth
Paradigm Mortgages
lending, member firms
and growth
None
None
Not applicable
Not applicable
Dividend cover
None
Not applicable
CAGR in AUM and CAGR
in Tatton firm numbers
None
Not applicable
Average annual
net inflows
None
Not applicable
23 Post Balance Sheet Events
There were no material post balance sheet events.
24 Capital Commitments
Definition and purpose
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.
Net inflows measure the net of inflows
and outflows of customers assets in
the year.
Alternative growth measure to revenue,
giving an operational view of growth.
Alternative growth measure to revenue,
giving an operational view of growth.
Dividend cover (being the ratio of the
proposed final dividend against diluted
earnings per share before exceptional
items and share-based charges)
demonstrates the Group’s ability
to pay the proposed dividend.
The Cumulative Annual Growth Rate in
AUM and Tatton firm numbers since the
Group listed on the AIM Stock exchange
in July 2017.
The average annual net inflows since the
Group listed on the AIM stock exchange
in July 2017.
At 31 March 2021, the Directors confirmed there were no capital commitments (2020: none) for capital improvements.
25 Contingent Liabilities
At 31 March 2021, the Directors confirmed there were no contingent liabilities (2020: none).
Tatton Asset Management plc Annual Report and Accounts 2021
91
Financial Statements
Company Statement of Financial Position
AS AT 31 MARCH 2021
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
Net assets
Equity attributable to equity holders of the Company
Share capital
Share premium account
Own shares
Merger reserve
Retained earnings
Total equity
Note
5
17
13
14
15
16
12
31-Mar
2021
(£’000)
77,216
13
–
77,229
9,397
8,182
17,579
94,808
(1,791)
(1,791)
93,017
11,578
11,534
(1,969)
67,316
4,558
93,017
31-Mar
2020
(£’000)
77,216
5
235
77,456
9,264
7,657
16,921
94,377
(1,932)
(1,932)
92,445
11,182
8,718
(996)
67,316
6,225
92,445
The Company generated a profit of £1,017,000 during the financial year (2020: profit of £5,706,000).
The financial statements were approved by the Board of Directors on 14 June 2021 and were signed on its behalf by:
PAUL EDWARDS
Director
Company registration number: 10634323
92
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 MARCH 2021
At 1 April 2019
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on share-based
payments
Own shares acquired in the
year
At 31 March 2020
Profit and total
comprehensive income
Dividends
Share-based payments
Deferred tax on
share-based payments
Issue of share capital on
exercise of employee share
options
Own shares acquired in the
year
At 31 March 2021
Share
capital
(£’000)
11,182
Share
premium
(£’000)
8,718
–
–
–
–
–
–
–
–
–
–
11,182
8,718
–
–
–
–
–
–
–
–
396
2,816
Own
shares
(£’000)
–
–
–
–
–
(996)
(996)
–
–
–
–
–
–
–
11,578
11,534
(973)
(1,969)
Merger
reserve
(£’000)
67,316
Retained
earnings
(£’000)
5,397
Total
equity
(£’000)
92,613
–
–
–
–
–
5,706
5,706
(4,920)
(4,920)
85
85
(43)
(43)
–
(996)
67,316
6,225
92,445
1,017
(5,551)
2,953
1,017
(5,551)
2,953
(86)
(86)
–
–
3,212
(973)
93,017
67,316
4,558
–
–
–
–
–
–
The merger reserve was 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. The merger reserve is non-distributable.
Tatton Asset Management plc Annual Report and Accounts 2021
93
Financial Statements
Notes to the Company Financial Statements
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 2021 were authorised for issue by the Board of
Directors on 14 June 2021. 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 2021.
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.
94
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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 where 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.
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.
Tatton Asset Management plc Annual Report and Accounts 2021
95
Financial Statements
Notes to the Company Financial Statements continued
2 Accounting Policies continued
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
2021
(£’000)
3,740
31-Mar
2020
(£’000)
108
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:
Non-audit services
5 Investments
Cost and net book value at 1 April 2019, 31 March 2020 and 31 March 2021
The principal investments comprise shares at cost in the following companies:
Name of subsidiary
Nadal Newco Limited
Paradigm Partners Limited
Paradigm Mortgage Services LLP
Tatton Capital Group Limited*
Tatton Capital Limited
Tatton Investment Management Limited
Tatton Oak Limited
Tatton Crown Investments Limited*
Sinfonia Asset Management Limited
Country of incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
31-Mar
2021
(£’000)
69
18
31-Mar
2020
(£’000)
34
22
£’000
77,216
Holding
100%
100%
100%
100%
100%
100%
100%
100%
100%
Direct/Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
*
Indicates that this subsidiary is entitled to exemption from audit under section 479A of the Companies Act 2006 for the year ending 31 March 2021.
All entities above are included within the consolidated financial statements for TAM plc and all have the same registered address as
the Company.
96
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
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 Costs
Bank interest income
Interest payable in servicing of banking facilities
9 Taxation
Current tax income
Current tax on profits for the period
Deferred tax charge/(income)
Share-based payments
Adjustment in respect of previous years
Difference in tax rates
Total tax charge/(income)
31-Mar
2021
Number
11
31-Mar
2021
(£’000)
1,521
188
10
3,740
5,459
31-Mar
2021
(£’000)
794
31-Mar
2021
(£’000)
1
(181)
(180)
31-Mar
2021
(£’000)
–
149
–
–
149
31-Mar
2020
Number
12
31-Mar
2020
(£’000)
1,130
142
12
108
1,392
31-Mar
2020
(£’000)
347
31-Mar
2020
(£’000)
–
–
–
31-Mar
2020
(£’000)
–
4
(123)
(16)
(135)
Tatton Asset Management plc Annual Report and Accounts 2021
97
Financial Statements
Notes to the Company Financial Statements continued
9 Taxation continued
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% (2020: 19%)
Expenses not deductible for tax purposes
Income not taxable
Differences in tax rates
Share-based payments
Adjustments in respect of prior years
Group relief
Total tax charge/(credit)
31-Mar
2021
(£’000)
1,166
221
54
(1,501)
–
522
–
853
149
31-Mar
2020
(£’000)
5,571
1,059
25
(1,496)
(16)
4
(123)
412
(135)
In the 3 March 2021 Budget, it was announced that the UK corporation tax rate will increase to 25% from 1 April 2023. Deferred tax is
calculated using the rate expected to apply when the relevant timing differences are forecast to unwind.
10 Dividend Paid and Proposed
During the year, Tatton Asset Management plc paid the final dividend related to the year ended 31 March 2020 of £3,552,000, representing
a payment of 6.4p per share. In addition, the Company paid an interim dividend of £1,999,000 (2020: £1,789,000) to its equity
shareholders. This represents a payment of 3.5p per share (2020: 3.2p per share).
In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 March 2021 of 7.5p (2020: 6.4p) per share
which will absorb an estimated £4.3 million (2020: £3.6 million) of shareholders’ funds. It will be paid on 28 July 2021 to shareholders
who are on the register of members on 25 June 2021.
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.
98
Tatton Asset Management plc Annual Report and Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
13 Trade and Other Receivables
Amounts due from related parties
Prepayments and accrued income
Other debtors
31-Mar
2021
(£’000)
8,821
553
23
9,397
31-Mar
2020
(£’000)
9,184
50
30
9,264
All trade 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 made. The carrying value is considered a fair approximation of their fair
value. At 31 March 2021 Tatton Asset Management plc made full provision of £60,000 against the recoverability of amounts due from
a related party, Jargonfree Benefits LLP. This provision has been charged to the Statement of Total Comprehensive Income and there
has been no other provision made for impairment of receivable balances (2020: £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 due to related parties
Accruals
Other creditors
31-Mar
2021
(£’000)
8,182
31-Mar
2021
(£’000)
55
110
1,626
–
1,791
31-Mar
2020
(£’000)
7,657
31-Mar
2020
(£’000)
44
1,309
534
45
1,932
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.
16 Equity
Authorised, called up and fully paid £0.20 ordinary shares
At 1 April 2020
Issue of share capital on exercise of employee share options
Issue of share capital on exercise of share warrant
At 31 March 2021
Each share in Tatton Asset Management plc carries one vote and the right to a dividend.
Number
55,907,513
863,401
1 ,1 1 8 ,1 5 1
57,889,065
Tatton Asset Management plc Annual Report and Accounts 2021
99
Financial Statements
Notes to the Company Financial Statements continued
17 Deferred Taxation
Asset at 31 March 2019
Income statement credit
Equity charge
Asset at 31 March 2020
Income statement charge
Equity charge
Asset at 31 March 2021
18 Contingent Liabilities
Share-based
payments
£’000
143
135
(43)
235
(149)
(86)
–
Total
£’000
143
135
(43)
235
(149)
(86)
–
At 31 March 2021, the Directors confirmed there were no contingent liabilities (2020: none).
19 Capital Commitments
At 31 March 2021, the Directors confirmed there were no capital commitments (2020: none) for capital improvements.
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
21 to the consolidated financial statements.
20.1 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Other than the Directors and Officers of the Group (see note 21 to the consolidated financial statements), no other key management
personnel have been identified.
21 Events After the Reporting Period
There were no events after the reporting period.
100
Tatton Asset Management plc Annual Report and Accounts 2021
Consultancy, design and production
www.luminous.co.uk
Design and production
www.luminous.co.uk
Paradigm House,
Brooke Court, Wilmslow,
Cheshire
SK9 3ND