IntegraFin Holdings PLC
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ANNUAL REPORT
AND FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
30 SEPTEMBER 2023
Supportive
HIGHLIGHTS
Operational highlights
Year-end Closing Funds Under Direction*:
£55.0bn
10%
(2022: £50.1bn)
£53.6bn
Average Daily FUD*:
2%
(2022: £52.5bn)
Net inflows*:
£2.7bn
39%
(2022: £4.4bn)
230.3k
Client numbers*:
2%
(2022: 224.7k)
95%
Client retention*:
2%
(2022: 97%)
Adviser numbers*:
7.7k
2%
(2022: 7.5k)
Financial highlights
£134.9m
Revenue:
1%
(2022: £133.6m)
IFRS Profit before tax:
£62.6m
15%
(2022: £54.3m)
Underlying Profit before tax:
£63.0m
4%
(2022: £65.8m)
IFRS Earnings per shar
15.1p
e:
13%
(2022: 13.3p)
Underlying Earnings per shar
15.2p
e:
7%
(2022: 16.3p)
*Alternative performance measures (APMs)
APMs are financial measures which are not defined by IFRS,
these have been indicated with an asterisk. They are used
in order to provide better insight into the performance of
the Group. Further details are provided in the glossary, on
page 235.
CONTENTS
STRATEGIC REPORT
...................
2
Chair’s Statement
.........................
3
CEO Statement
............................
6
Market Overview
..........................
10
Strategy and Business Model
..........
13
Our Strategic Financial
Objectives
...................................
16
Key Financial Performance
Indicators
....................................
20
Task Force on Climate-Related
Financial Disclosures
.....................
23
Responsible Business –
Our People
..................................
45
Financial Review
...........................
53
Risk and Risk Management
............
60
Going Concern and Viability
Statement
...................................
69
Non-Financial Information
Statement
...................................
72
CORPORATE GOVERNANCE REPORT
...................................................
73
oard Leadership and Company Purpose
.................................................
76
.172 Statement
..................................................................................
80
ection 172(1) Statement
.....................................................................
87
he Role of the Board and its Responsibilities
...........................................
91
omposition, Succession and Evaluation
..................................................
94
udit and Risk Committee Report
...........................................................
97
omination Committee Report
................................................................
107
irectors’ Remuneration Report
..............................................................
113
irectors’ Report
..................................................................................
144
tatement of Directors’ Responsibilities
...................................................
150
B
S
S
T
C
A
N
D
D
S
FINANCIAL STATEMENTS
....................................................................
152
Independent Auditor’s Report to the Members of Integrafin Holdings plc
.......
152
Consolidated Statement of Comprehensive Income
....................................
166
Consolidated Statement of Financial Position
.............................................
167
Company Statement of Financial Position
..................................................
169
Consolidated Statement of Cash Flows
.....................................................
170
Company Statement of Cash Flows
.........................................................
172
Consolidated Statement of Changes in Equity
............................................
173
Company Statement of Changes in Equity
.................................................
174
Notes to the Financial Statements
............................................................
175
OTHER INFORMATION
............
234
Directors, Company Details,
Advisers
...................................
234
Glossary of Terms
......................
235
2
STRATEGIC
REPORT
2
3
CHAIR’S STATEMENT
Overview
I am pleased to introduce this year’s
annual report. IntegraFin Holdings
plc Group (IHP Group) has delivered
robust performance throughout FY23,
with our investment platform offering
– Transact – growing funds under
direction (FUD) to a record high.
We have remained focused on our
underlying strategic objective: to be
the number one provider of software
and services for our clients and
their financial advisers. We have
pursued this by maintaining best-in-
class service levels and expanding
the functionality of our investment
platform. Industry surveys continue to
show Transact as the highest ranked
for client service and functionality
amongst platforms with over £30.0
billion in assets.
This has resulted in net flows
onto the platform of £2.7 billion,
representing resilient performance
whilst growing our market share.
Over the financial year, advisers
registered on the platform increased
by 2% and client numbers by 2%.
The integration of Time4Advice (T4A)
into the Group continues, whilst
sales of the existing CURO product
continue to grow, with 2.8k licenced
users at the year-end.
Over the last financial year, IHP
Group has continued to be affected
by the consequences of the cost-
of-living crisis, high levels of global
inflation and increasing interest rates,
which have in turn unsettled equity
markets. I am proud of our resilient
performance in the face of such
headwinds.
Our financial and operational
performance has been robust, and
our people have been instrumental
in delivering a high-quality service.
Alexander Scott comments on the
results in more detail in his Chief
Executive Officer’s Review.
4
Developing our business
The digitalisation of the Transact
platform continues apace, with a focus
on improving the user experience
through enhanced, efficient processes.
Our investment in software developers
aims to continue delivering new
functionality and strengthening
our systems. Further detail on our
digitalisation strategy can be found
in the Strategy and Business Model
section of this report on page 13.
Sustainability and social issues are a
growing focus for our business. This
year, we were pleased to sign up to
the Women in Finance charter and to
receive the Living Wage accreditation
for the Group. We also joined the
10,000 Black Interns programme,
with our first cohort of interns starting
in Summer 2024. We continue
development of our sustainability
strategy, led by Victoria Cochrane in
her role as Designated Non-Executive
Director (DNED) for Environmental and
Social Sustainability.
Supporting our people
The varied hybrid models of office/
home working have all bedded in well.
To better support our staff, we altered
the balance of fixed versus variable
pay across the London office, Isle
of Man office and the regional sales
forces. This has proved popular, as
the results of our second staff survey
have shown.
The IHP board
The membership of the IHP board
has been stable throughout the
year. We announced on 8 July 2023
that we had recruited Euan Marshall
to become Group Chief Financial
Officer (CFO), and he will be joining
in January 2024. I look forward to
working with Euan, he will be a strong
addition to the board and senior
management team.
Christopher Munro, who has been
a Non-Executive Director (NED) on
various Group boards and Committees
since 2017, has decided to step down
from the board of the Company at
the end of September 2024. We are
profoundly grateful for his input and
expertise over the last seven years.
Governance and culture
This is the fourth year that the
2018 UK Corporate Governance
Code (the Code) has applied to the
Group. Confirmation of how we have
complied with the Code for the year
under review is set out on page 118.
We continue to monitor and prepare
for signalled Corporate Governance
reform.
We take great care of our corporate
culture and values, which are reflected
both in our employee relations and in
our interactions with clients, advisers,
and other key stakeholders. We believe
our culture of putting clients first has
been central to our compliance with
the new Consumer Duty requirements.
It is particularly pleasing that
we continue to rank so highly in
customer service polls undertaken by
Investment Trends and CoreData.
Following the publication of our
financial year 2022 results in
December 2022 and financial year
2023 interim results in May 2023, our
Company Secretary, Helen Wakeford,
and I offered meetings with our largest
shareholders. We held 17 meetings,
meeting 14 of our largest investors,
including three investors that we met
twice. The meetings gave shareholders
the opportunity to discuss topics of
concern and were felt by us to be
constructive and transparent. We plan
to continue open engagement with our
stakeholders outside of the boardroom
and this forms a critical aspect of
board-level activity.
We have rigorous Audit and Risk,
Nomination and Remuneration
Committees, which meet regularly
to review and challenge in-depth
5
the work of the executive. Further
detail on their activities over the year
can be found in this report. We are
committed to enhancing our corporate
governance processes and expect to
see continued benefits from doing so.
On pages 80 to 90, we present our
Section 172 (s172) statement, which
sets out how we consider our key
stakeholders in our decision making
and the key decisions we have made
throughout the financial year.
The board effectiveness review for
2023 was undertaken by an external
firm, Independent Audit Ltd, who also
conducted our last external review in
2020. The results of that and review
of the Chair is discussed on page 95
to 96.
Remuneration
The Directors’ Remuneration Report
is set out on page 113. In particular
there are changes noted in the
incentive arrangements for executive
management and employees more
generally. These changes are detailed
on pages 116 and 117.
Dividend
In line with our dividend policy
and in recognition of our financial
performance, we have declared a
second interim dividend of 7.0 pence
per ordinary share. Together with our
first interim dividend paid in June of
3.2 pence per ordinary share, this
takes the total dividend to 10.2 pence
per ordinary share.
Closing
I remain enormously impressed by
the professionalism and dedication
of our employees. Their continuing
commitment to putting our clients first
is a vital component of our compliance
with the Consumer Duty.
The members of the board would
again like to thank all our colleagues
for the hard work that they have put
in over the last financial year.
These results, the published clients’
satisfaction surveys and our ranking
within the platform sector are the
product of their efforts.
Richard Cranfield
Chair
13 December 2023
6
CEO STATEMENT
Overview
The Group has continued its record
of resilient growth, with Transact
demonstrating robust performance
in increasing funds under direction
(FUD), net inflows and client and
adviser numbers. This financial year
has been marked by persistently high
inflation and interest rates, with only
modest economic growth.
The first half of our financial year
saw relatively solid equity market
performance. Global equity markets
were volatile but there was an upward
trend during the period from October
2022 to March 2023. The latter
two quarters of financial year 2023
saw less volatility. Slowing inflation
towards year end led to a pause in
the rate rises that characterised much
of the year but the high cost of living
persisted.
Under these challenging conditions, we
support our clients and their financial
advisers through our combination of
proprietary technologies – the Transact
investment platform and CURO – and
our industry-leading customer service.
We remain focused on our goal of
making financial planning easier
and more efficient and, to this end,
we have continued our programme
to deliver organic growth through
investment in our people and our
technologies, seeking long-term
efficiencies through scale and ensuring
we continue to attract investors to our
platform.
7
Platform performance –
Transact overview
Throughout the period, Transact has
steadily grown both its adviser base
and client numbers. In the first half of
the year, we undertook a programme
of portfolio rationalisation as part of
preparations for the Consumer Duty
regulations, resulting in a one-time
reduction.
Platform inflows fell across the whole
advised retail sector due to the cost-
of-living crisis, which diminished the
available income for investment.
Consequently, our gross inflows fell
during the year. This nevertheless
represents strong performance in
a difficult market, being the third
highest level of gross inflows in the
industry which, coupled with high
retention, delivered 22% of net
inflows within the advised platform
market.
Transact grew its market share as a
result of these resilient net inflows.
Nevertheless, owing to both macro-
economic and industry factors,
outflows were substantially higher in
the year. In contrast to FY22 – where
sharply negative market movements
in the second half reduced otherwise-
robust net inflows – market
movements this year were broadly
positive.
Financial performance
Driven by the rise in FUD, revenue
grew during the year. Annual
commission on client funds remains
the main contributor to revenue, whilst
administration fees were the second
largest component. T4A’s contribution
also increased during this year.
Underlying expenses rose in 2023,
with most of the uplift stemming from
our increase in staff costs. This is in
line with our expectations, as the bulk
of the IT software hires stipulated in
our growth strategy fell within this
year. Other cost increases were driven
by both inflationary and scale-based
factors, as the Group continues to
invest in its key competencies.
The Group’s IFRS profit before tax
has risen by £8.3m, a 15% increase
over the prior year. However, there is
a decrease in underlying profit before
tax from last year. The underlying
figure excludes exceptional items,
which were elevated in FY22 due to
the impact of T4A post-combination
remuneration and the VAT decision.
The reduction in underlying profit
before tax is driven by the increased
investment in the business in this year
and next year; we then anticipate the
resultant improvements from scale
and efficiency to start to come through
from 2025.
The Group maintains its focus on
organic platform growth, which has
continued to yield steady increases in
both FUD and revenue. Our aim is to
achieve sustainable growth through
incremental improvements to our
proposition, thereby allowing us to
continue providing the high quality of
service to which we are committed.
Our people
We have continued with the IT and
software professional hiring plan
announced in mid-2022 and since then
we have added 27 such employees.
Based on this progress, we anticipate
finalising the plan during 2024. We
are already benefitting from the new
expertise and scale, allowing us to
accelerate our programme of platform
improvement.
Given the importance of our people to
the Group’s success, we have made
their wellbeing a priority during the
year. Responding to feedback from
the previous employee engagement
survey, we have reworked our
remuneration approach. This has led to
a tiered pay rise, changes to the bonus
system and enhanced maternity and
paternity benefits.
We have selected a new CFO, Euan
Marshall, who will be joining in January
2024. Euan brings with him significant
experience in listed financial services
companies and I look forward to
working with him to execute on our
Group strategy.
The Group has made other key senior
hires, specifically our first UK-based
Chief Technology Officer (CTO),
Damien Francis, and a new Group
Chief Risk Officer (CRO), Emma
Vernon, both of whom joined in
January 2023. These new perspectives
and skills will strengthen our strategy
as well as helping the Group adapt
to key changes taking place in the
industry.
8
Digitalisation programme
Led by our new CTO, our programme
of platform digitalisation has delivered
significant improvements. We have
aimed to reduce as many paper
routes as possible on the platform,
especially those relating to account
transfers, and we have introduced
efficient, intuitive digital alternatives.
The success of these initiatives means
that now all new accounts opened on
our platform are paperless and the
majority of wrappers in portfolios are
also opened on a paperless online
basis.
Our adviser support team is now well
established and has been making
use of new support functionality to
promptly address questions from our
clients and advisers; through our live
chat feature we have achieved a 96%
query resolution rate. In addition to
the technical improvements to the
platform, we have sought also to
expand our service offerings.
Our BlackRock Model Portfolio Service
(MPS), launched in November 2022,
has outperformed our expectations in
terms of adviser and client interest.
This service offers our clients access
to flexible, diversified model portfolios
investing in a broad range of markets.
Protecting our customers –
Consumer Duty
Consumer Duty represented perhaps
the largest regulatory change of
the year, with the legislation taking
effect in July 2023. Prioritising good
outcomes for our clients and advisers
has always been at the centre of
the Group’s activities. We were well
positioned to adapt to the new rules
and have ensured the necessary
changes have been implemented. This
includes mandatory training for all
employees and new joiners.
Our commitment to Consumer Duty is
embodied in our approach to interest
on client cash. With interest rates at
their highest level in recent years,
greater industry focus has been
placed on the interest generated from
client cash. In accordance with our
‘customer first’ principles, Transact
does not take any client cash interest
earned and instead passes it all onto
our clients. At the time of writing, we
are paying the highest interest rate
across the UK platform sector to our
clients.
Throughout 2023, we have moved
forward with our sustainability
initiatives including significantly
increased monitoring of energy
usage and waste, as well as applying
tangible initiatives such as solar
panels on our Melbourne office.
5
4
Capital at risk.
The value of investments and the income from them can fall as well as
rise and is not guaranteed. Investors may not get back the amount originally invested.
INVESTMENT APPROACH AND BELIEFS
BlackRock believe that superior investment outcomes are best achieved through
an optimised and disciplined investment process. The Transact – BlackRock MPS
investment process is underpinned by the following core beliefs.
EXPERT RISK MANAGEMENT
Leveraging BlackRock’s investment
expertise and global insight
Central to the investment process is the
belief that asset allocation is the key
driver of returns. The service draws on
the deep level of investment and risk
expertise across BlackRock to determine
the optimal asset allocation for each
model portfolio.
Dynamic asset allocation
BlackRock monitors the models,
maintaining a forward looking
view of investment returns and risk.
They will be adjusted periodically with
the aim of maintaining optimal asset
allocation balancing risk, return and cost.
ESG
How BlackRock incorporates ESG
factors in its investment process
BlackRock expects companies with better
ESG metrics to produce a better risk-
adjusted performance over the medium
to long term. It also thinks that the focus
on environmental concerns will be a
catalyst for growth across the globe in
the coming decades and it wants to
position its portfolios to capture it.
Whilst the Transact models do not have
an explicit ESG objective, BlackRock is
permitted to invest in ESG aligned
mutual funds and ETFs where it deems
appropriate, subject to the objectives
and constraints within the investment
guidelines which may, in some cases,
limit the ESG exposure.
GLOBALLY DIVERSIFIED
Spreading investment risk
The underlying investments offer
exposure to a broad range of markets
across multiple asset classes to offer
a globally diversified solution.
The models target between 60% and
80% of the allocation in low-cost index
mutual funds and Exchange Traded Funds
(ETFs) operated by BlackRock. To further
increase diversification the remainder will
invest in index funds from a range of
third-party, global investment managers
selected by BlackRock.
COST EFFECTIVE
Low ongoing fees, meaning
investors keep more of their returns
The models invest in a range of index
tracking funds and ETFs. These provide a
globally diversified solution with cost-
effective ongoing charges.
The weighted ongoing charges figure
(OCF) for each model will vary over time
but will target a maximum of 0.20% at
the point of rebalance. BlackRock’s
investment manager (IM) annual fee is
0.06%
1
.
Asset allocation
Asset allocation describes how your
investments are spread across different
investment types, including equities,
bonds, alternative investments, such
as commodities and cash.
There can be no guarantee that the
investment strategy will be successful,
and the value of investments may go
down as well as up.
Diversification
In investment terms, diversification is the
concept of spreading your investment
risk across a broad range of companies,
governments and countries rather than
being exposed to a single investment.
Diversification and asset allocation may
not fully protect you from market risk.
Index Funds
Index funds and ETFs are investments
that aim to track the performance of a
specific index. An index represents the
total return of a particular group of
securities – usually equities or bonds.
There is no guarantee that index funds
or ETFs will achieve perfect tracking of
their respective benchmark indices.
ESG stands for:
Environmental, Social and Governance
and refers to criteria used to evaluate the
robustness of a company’s governance
mechanisms and its ability to effectively
manage its environmental and social
impacts.
ESG screening may adversely affect the
value of a fund’s investments compared
to a fund without such screening.
BlackRock Investment Management (UK) Limited pay Integrated Financial Arrangements Ltd 0.02%
to cover part of the costs associated with the Transact – BlackRock MPS. This payment is included in
BlackRock’s IM Annual Payment fee.
11
10
THE TRANSACT – BLACKROCK
MPS MODELS
The Transact – BlackRock MPS
offers access to seven discretionary
model portfolios which aim to provide
long-term capital growth whilst
managing risk in accordance with
predefined risk ranges.
Each model portfolio aims to target a
different level of volatility which increases
across the range – higher volatility
represents higher risk.
The model portfolio name represents the
expected long-term percentage equity
holding, although the actual position will
vary depending on current market
conditions. Higher risk portfolios will
generally have a larger exposure to
equities and lower exposure to bonds.
The underlying investments are a blend of
index mutual funds and ETFs which provide
transparency, offer exposure to a broad
range of markets across multiple asset
classes and can be combined to offer a
diversified, cost-effective solution.
The weighted ongoing charges figure (OCF)
for each model will vary over time but will
target a maximum of 0.20% at the point of
rebalance. BlackRock’s investment manager
(IM) annual fee is 0.06%
.
For more information on the model
portfolios including charges, holdings and
to see the individual model factsheets
please go to Transact Online:
Templates > Transact – BlackRock MPS
BlackRock Investment Management (UK) Limited pay Integrated Financial Arrangements Ltd 0.02% to cover part
of the costs of the Transact – BlackRock MPS. This payment is included in BlackRock’s IM Annual Payment fee.
Source: BlackRock. Ongoing charges figure (OCF) as at 30 June 2023.
Source: BlackRock. Asset allocations as of 30 June 2023. Actual allocations may be different and change over time. Risk is
measured as annual volatility (standard deviation) on a three year half-life basis which means the first three years have a 50%
weighting. BlackRock includes more than 19 years of historic data in its risk modelling analysis.
0%
20%
40%
60%
80%
100%
MODEL
PORTFOLIO
GROWTH
25
GROWTH
40
GROWTH
50
GROWTH
60
GROWTH
70
GROWTH
80
GROWTH
95
FEES (OCF)
0.15%
0.16%
0.18%
0.19%
0.19%
0.19%
0.19%
VOLATILITY
TARGETS
3.0%-
6.0%
4.5%-
7.5%
6.0%-
9.0%
7.0%-
11.0%
8.5%-
12.5%
10.0%-
15.0%
>12.0%
INVESTOR
RISK
APPETITE
•
Lower willingness to take risk
•
Potentially lower reward
•
More bonds and cash
•
Higher willingness to take risk
•
Potentially higher reward
•
More equites (shares)
ASSET ALLOCATION AS AT 30 JUNE 2023
Cash
Corporate Bonds
High Yield Bonds
Government Bonds
Alternatives
Diversified Equities
Developed Market Equities
Emerging Market Equities
% of Asset Allocation
For Adviser use only
Produced by Integrated Financial Arrangements Limited
Transact – BlackRock MPS
Adviser Brochure
9
Outlook
The market outlook for the coming
year is more optimistic than it was
at the start of FY23 but headwinds
are anticipated to persist. Inflation
is expected to come down but at a
pace that is as yet unknown, and
the Bank of England base rate is
predicted to remain at a higher level
than has been seen in the past 10
years. By investing in the key drivers
of our competitive advantage – our
proprietary technology and our
industry-leading customer service –
the Group aims to continue to grow
our adviser, client and FUD base.
Throughout FY24, we will continue
our work on the platform digitalisation
project. Our digitalisation approach
will focus on further limiting
paper-based forms and expanding
straight-through processing. These
technological developments will
accelerate processing, making
transfers quicker and easier for clients
and advisers. We also seek to add
additional data analysis functionality
by making available to advisers
more data on the transactions they
perform.
Consumer Duty is expected to remain
one of the most prominent features
of the regulatory environment. We
put positive consumer outcomes at
the centre of our business model. To
secure continued adherence to the
new requirements, we will focus our
training and development to ensure
our people are well able to comply
with the objectives of Consumer Duty.
Following the successful beta client
test during the year, T4A’s next
generation Power Platform CURO
software will commence roll out to the
pipeline of adviser firms. We will seek
further innovation including a data
interface with the Transact platform.
In this period of ongoing economic
and market volatility, clients rely
more than ever on their advisers for
high quality, personalised financial
planning and support. As we have
always done, we’ll continue to support
UK financial advisers and their clients
by providing our combination of in-
house technology and well-trained
people delivering high quality service.
Our holistic financial planning solution
will serve clients and advisers alike in
managing their portfolios easily and
efficiently.
I would like to thank all my colleagues
across the Group for their diligent work
over the year. Their commitment and
dedication have been crucial in working
towards our strategic objective: to be
the number one provider of software
and services for our clients and their
financial advisers. I look forward to
continuing to grow our business and
deliver on our strategy throughout
FY24 and beyond.
Alexander Scott
IHP Group CEO
13 December 2023
10
MARKET OVERVIEW
Financial adviser outlook
The Group strategy focuses on
providing best in class services
and software that enable UK
financial advisers to deliver financial
plans for clients. The outlook
for UK financial advisers is very
positive. Consumer demand for
advice continues to increase as
responsibility for retirement savings
and income gradually shifts from
the UK government and employers
to individuals. The complexity and
ongoing changes to the tax system,
plus changing attitudes towards
work and retirement are also driving
demand for advice. Only 31% of
households with investable assets
above £100,000 use a financial
adviser, so there is scope for further
growth. Financial adviser numbers
are also important for T4A, where the
primary revenue is derived from a
licence fee per user.
Financial adviser dynamics
Over the past three years, the average
size of adviser firms has gradually
increased. There has been ongoing
private equity investment into medium
and large firms to support organic and
inorganic growth strategies. However,
some advisers and paraplanners in
acquired firms leave and re-start
their own businesses, so the pace
of consolidation lags the rate of
acquisitions.
Based on FCA data, the number of
adviser firms reduced from 5,246
in 2018 to 5,118 in 2021, only 128
fewer firms. Independent financial
advisers continue to win clients from
private banks and traditional wealth
managers, typically through a more
objective, goals-based approach to
financial planning. Transact and T4A
enable these advisers. Many traditional
wealth managers now offer their
discretionary investment management
(DIM) services via Transact to financial
advisers; we now have over 120 DIMs
available on the platform. Outsourced
DIM services are increasingly popular
with advisers seeking to reduce risk
and cost while also freeing up time for
financial planning.
Transact offers its platform services
to small, medium and large financial
adviser firms, whilst T4A is currently
focused on medium and large
financial adviser firms, including
large consolidators and aggregators.
Throughout the year, both Transact
and T4A have increased their adviser
numbers and licence numbers,
respectively.
11
Advised platform outlook
Analysts estimate the total UK wealth
management market at ~£3trn.
Growth is dependent on macro factors
such as asset returns, economic
performance and the savings rate.
The advised platform market is
currently ~£600bn, a fast-growing
sub-set of the UK wealth market.
Fundscape forecasts advised platform
growth at ~11% per annum over
the next five years. Transact’s target
market is growing because platforms
provide access to a wide range
of assets, consolidated reporting,
investment and retirement income
functionality across all tax wrappers.
Workplace pensions, legacy life and
pension products, direct to customer
products are migrated onto platforms
by financial advisers.
The schematic in figure 1 illustrates
the contestable market for platforms.
This process often takes place when
clients have accumulated some wealth
as the benefits of consolidation are
greater. Growth in platform assets
is especially important for Transact
where the primary revenue model is a
tiered basis point fee.
The schematic in figure 1 also
demonstrates at a high level how
financial advisers and the advised
platform market fit into the broader
UK wealth management market.
Advisers and platforms are replacing
private sector defined benefit schemes
as the key channel for affluent
clients pre-, at and post-retirement.
Furthermore, advisers are helping
clients pass wealth to children and
grandchildren. More than 50% of
client portfolios on Transact are within
linked family groups. Advisers are
improving how they engage the next
generation and retain them as clients.
FIGURE 1. HOW ADVISERS AND PLATFORMS FIT INTO
THE UK WEALTH MARKET
WEALTH
AGE
Many affluent
customers seek
financial advice
pre/at retirement
Less affluent
customers
annuitise or
self-manage in
retirement
Workplace
Pensions ~£500bn
Non advised
Products ~£1trn
Customers
accumulate
via workplace
pensions & non
advised products
Advised Platforms
~£500bn
Private sector
DB schemes
in run-off
~£1trn
Financial advisers are
helping clients pass
wealth to children and
grandchildren and
retaining the next
generation of clients
FIGURE 2. ADVISER PLATFORM ASSET GROWTH FORECAST
£1,200bn
£1,300bn
£1,100bn
£1,000bn
£900bn
£800bn
£700bn
£600bn
£500bn
£400bn
£300bn
2018
2019
2018-2023 CAGR
2023-2028 CAGR
2020
HISTORICAL
REALISTIC
PESSIMISTIC
OPTIMISTIC
2021
2022
2023
2024
2025
2026
2027
2028
16%
11%
7%
8%
Source: Fundscape Q323 November
12
Adviser and client numbers
Transact’s target market consists of
the approximately 13,000 registered
UK financial advisers that are not
tied or restricted in their choice of
platform. At the end of FY23, 7,683
such advisers were registered with the
Transact platform, compared to 7,537
in the previous year. There remains
a large pool of around 5,000 UK
financial advisers in our contestable
market. This constitutes a significant
growth opportunity for us.
Our client growth comes from existing
registered advisers who introduce
more clients to Transact and from new
advisers registering with Transact.
These two sources have led to our
client numbers growing by over 5,000
to 230,294.
We continue to survey our advisers
to better understand their needs
and the needs of their clients. This
survey shows that of our advisers,
the majority use Transact as their 1st
choice and 72.1% are “satisfied” or
“very satisfied” with our service.
Industry publications attest to the
effectiveness of our platform, with
Transact as the highest-ranking
platform above >£30bn FUD in the
CoreData survey. Our programme
of platform improvements aims to
further develop platform functionality
and maintain our industry-leading
satisfaction scores.
Market outlook
The advised platform market is
expected to grow over the next
few years, driven by rising adviser
numbers and investor assets.
Transact remains well-positioned
within the market, with our compelling
business proposition. Our focus
remains on organic growth through
continuous improvements to platform
functionality and maintaining our
leading customer service. This strategy
has yielded robust growth in FUD and
client/adviser numbers, despite the
challenging conditions of the past year.
Nevertheless, we continue to look for
ways to incorporate innovations in
our technology to add further value to
users of our platform.
The market remains competitive.
However, our proprietary technology
and award-winning client service focus
continues to distinguish our offering.
We remain committed to providing
high quality service and clear value-
for-money for our clients and their
advisers.
Jonathan Gunby
Transact CEO
13 December 2023
Note “Transact” is the operating name of
the investment platform run by Integrated
Financial Arrangements Ltd (IFAL).
13
STRATEGY AND BUSINESS MODEL
Our strategy and
business model
IHP Group has two core business
propositions, which complement
each other to make financial
planning easier for clients and
their UK financial advisers. We
do this by harnessing technology,
allied with high quality human
service. We prefer to insource,
and so we own and develop our
own software. Transact – our
investment platform - aims to
make financial planning easier
and CURO – our adviser practice
management solution - supports
advisers through the financial
advice process.
“Do the
right thing”
This is our core value, which
we believe ensures the
right outcomes for all our
stakeholders.
How?
Through our market-leading
investment platform which
makes financial planning easier
and CURO software that supports
the financial advice process.
The systems enable advisers to
implement financial plans for
our mutual clients, simply and
efficiently, actively supported by
skilled client service and adviser
support teams. Our people
provide responsive and proactive
customer service support on a
range of queries. Through our
two core offerings, we aim to
be the number one provider of
software and services for clients
and UK financial advisers.
Transact strategy
Transact's strategy is to make financial planning easier for financial advisers
and our shared clients. We deliver this by offering comprehensive platform
functionality and leading customer service at a competitive price.
Leading functionality
We lead the market on wrapper choice, client reporting, retirement income
functionality and investment choice for advisers and clients. This is supported
by independent adviser research from CoreData:
9.6/10
9.5/10
9.0/10
9.0/10
8.3/10
8.7/10
8.5/10
8.3/10
First for Choice of Unit Trusts
First for Impact of Cash Interest
First for Choice of Tax Wrappers
First for Range of Retirement Income Options
First for Overall Satisfaction
First for Choice of Discretionary Fund Management and
Model Portfolio Services (MPS)
First for Overall Technical Support
First for Flexibility of Reporting
FIGURE 3. MARKET LEADING PLATFORM FUNCTIONALITY
Schematic CoreData 2023 results (Large Platform Category >£30bn)
Our functionality is enabled by our software development capability and our
focus on advisers. We have an expert in-house software development team in
Melbourne, Australia where supply/demand dynamics for the specific skilled
developers that we need are superior to the UK. Our average developer tenure
is ~9 years, well above industry standards. It also means we are invested in
code quality and maintenance not just delivering new features and building
long-term complexity.
14
Leading service
We have a regional service model so
advisers and their support team can
build long-term relationships with
our operational staff. This helps us
to be more responsive, take more
ownership and solve problems faster
than other platforms. Last year, we
created specialist roles to improve
our service on the most complex
adviser processes and create career
progression for our people. As we
further digitalise the business, we
have invested in our online live chat
and co-browse functionality which has
proved very popular with advisers.
Our service is enabled by our software
capability and our ownership of all tax
wrappers. Owning tax wrappers means
the adviser and client experience
is consistent and seamless across
General Investment Accounts (GIAs),
Individual Savings Accounts (ISAs),
pensions, onshore and offshore bonds.
Value for money
We have implemented discounts and initiatives to simplify our charges. For
example, in FY22 we removed wrapper fees on junior pensions and in FY23, we
reduced our buy commission threshold, so no buy commission is payable by
family group portfolios over £100,000.
We are competitive on price and lead on value for money, particularly with the
inclusion of interest on client cash. Our interest rates on client cash are market
leading as we have always passed on 100% of interest to the client, we do
not skim client interest or “double dip”. Transact pays out one of the highest
effective rates on client cash in the industry. This has proven very popular with
advisers and clients, particularly as interest rates have increased. FCA attention
around client cash interest has grown as interest rates have risen; we believe
our approach is more in the spirit of the recently implemented Consumer Duty
regulation.
Advisers value the sustainability of our pricing, our profitability and our financial
strength. This helps to differentiate us from unprofitable new entrants as well as
many incumbent platforms.
FIGURE 4. TRANSACT’S STRATEGY AND BUSINESS MODEL
STRATEGY
To make financial planning easier
PROPOSITION
PROPOSITION ENABLERS
STRATEGIC INITIATIVES
Functionality
Service
Tax wrapper ownership
Software capability
Digitalisation
Value for money
Financial strength
Transfers
Consumer Duty
Adviser focus
Data services
The schematic in figure 4, above, illustrates our strategy and business model.
In a recent independent adviser study, ~25% of advisers cited Transact as
the platform leader, more than double any other player. In the same study,
more advisers say they are considering switching to Transact than to any other
platform. However, we will not be complacent. The key strategic initiatives for
Transact are greater digitalisation, data services, transfers, and Consumer Duty.
The first three initiatives are important elements of our platform functionality and
service that we want to improve and stay ahead of competitors.
15
Our final strategic initiative is the
FCA’s Consumer Duty. We have
always put the clients at the heart
of our business. But we will take
more responsibility for supply chain
oversight and invest more in our non-
advised proposition to meet the new
Consumer Duty standards. In addition,
we have made changes to our
governance, training, and reporting
and commenced projects to address
potential consumer harm risks.
T4A Strategy
T4A’s goal is to enable UK financial advisers to run their businesses more
efficiently by leveraging modern technology to help transform the way they work.
To facilitate this, we continue to provide CURO 3 – the current cloud-hosted
version – and have also developed CURO on Power Platform as a next generation,
Microsoft cloud-hosted solution.
Comprehensive functionality
CURO is designed and built to support
the entire advice process from the
initial engagement, information
gathering and analysis, financial
needs assessment, solutions and
recommendations, implementation to
ongoing review and monitoring.
CURO enables firms to leverage the
value of their data, which is centralised
and securely hosted on Microsoft’s
Power Platform. Using Microsoft’s fully
integrated applications such as Power
BI, Excel, Word and Power Automate,
firms can extract invaluable business
insights and efficiencies through
business and document automation.
T4A employs a team that is highly
experienced in the fields of software
development and financial services.
The business also surveys users
extensively to understand their needs
and to continue expanding the service
offering, to better serve the goal of
providing the best solution in the
market.
Leading integrations
T4A works strategically with
recognised and market-leading
software partners to help users avoid
duplicated data entry, to remove
error and time waste; it achieves this
through secure data sharing using
Microsoft’s Web API.
In addition to this expansive range
of integrations, T4A will build an
integration between CURO and the
Transact platform. Through this
synergy, we aim to bring further
efficiencies to those advisers who
make use of both of our software
solutions.
16
OUR STRATEGIC FINANCIAL OBJECTIVES
Achievement of our strategic financial objectives comes through the continuing
successful delivery of our Transact and CURO propositions.
The key drivers are:
Increasing market share by growing and retaining the
adviser users of both our investment platform and
CURO software. Growing both platform and CURO
users increases Group revenue;
Investing in our people and software in order that the
Group can continue to provide best in class service and
to enhance our offerings, but focusing on efficiency and
making our financial investment work for us;
Prudent expense management that ensures we
continue to generate strong cash profits for the benefit
of all our key stakeholders; and
Mindful capital management, evidenced by robust cash
reserves, which means we are well placed to weather
and capitalise on any economic environment that
prevails.
INCREASING
MARKET
SHARE
INVESTING
STRONG
CASH
PROFITS
MINDFUL
CAPITAL
MANAGEMENT
Strategic financial objectives and key risks
Our strategic financial priorities and the key risks to achieving them are below,
they sit alongside risk management activities and controls, on pages 60 to 68.
Sustainable FUD growth and
CURO user growth
How?
We put client and adviser experience
at the heart of our business model
through superior service and software
offerings. We believe this is key to
attracting and retaining advisers, users
of our investment platform and of our
CURO software.
Therefore, by continuously developing
the service we offer, by prudently
seeking to reduce, or simply maintain,
charges and by considering investment
opportunities that may enhance the
Group proposition, we achieve growth
and retention.
FY23 progress
Investment platform FUD has grown
by 10% year on year to £55.0 billion.
This is due to both positive net flows of
£2.7 billion, plus positive stock market
movements of £2.3 billion.
Advisers using the Transact platform
increased by 2% and CURO users
increased by 22%.
We have achieved resilient net inflows
through the service that we continue
to develop and invest in.
17
FY24 outlook
The global macro-economic outlook
is challenging and we recognise
increasing competition in the market
place.
However, we will continue to target
advisers not yet using our services
that are in our identified core
markets. We will continue to focus
on service and retaining existing UK
advisers and their clients, in addition
to encourage adviser users to move
additional clients onto Transact, as
they have experienced the benefits
that our service brings.
T4A will focus on rolling out next
generation CURO, and continue to
support the existing CURO3 software
and users.
Key risks
•
Service standard failure
•
Stock market volatility
impacting FUD
•
Strong, well capitalised
market entrants leading to
increased platform outflows and
suppressed net inflows.
Key financial performance
indicator
•
Average FUD
•
Client growth
•
Client retention
•
Adviser growth
•
Net inflows
Invest
How?
We have a proven track record
of investing in our people and all
aspects of our technology, therefore
ensuring our service quality and
software remains award winning
and operationally resilient.
We aim to continue to generate
profits and generate the best
outcomes for all key stake holders,
but investment decisions must not:
•
Risk Group capital beyond
reasonable levels;
•
Bring the Group into
commercial conflict with our
target market;
•
Make it difficult for us to meet
our regulatory responsibilities.
FY23 progress
£17.1 million (FY22: £14.1 million)
invested in platform and CURO
(and next generation CURO)
development in the year. This is
comprised of platform developer
and management cost, acquisition
of new equipment and training
costs.
We continued the investment
platform digitalisation initiative in
FY23, due to the efficiencies and
improved service that it generates
for clients and their advisers, it also
generates efficiencies for us.
T4A’s FY23 priority was continuing
the live testing of next generation
CURO.
FY24 outlook
We will continue the IT and platform
developer recruitment plan that
is well underway, investing in
additional headcount to support
systems and investment platform
development.
We have systems developments
that are already designed and
timetabled that will be implemented
and we look forward to making
further enhancements that benefit
and support the client and adviser
online experience in financial year
2024, as well as driving efficiencies
through our operations.
Key risks
•
Diversion of development
resource away from proposition
technology enhancements
•
Fall in employee retention
across the Group
Key financial performance
indicator
•
Profit before tax
•
Operating margin
18
Increase earnings
How?
Through growing client FUD and
wrappers on the investment
platform and by increasing T4A
CURO users, we increase revenue.
We achieve the FUD and wrapper
growth by retaining and increasing
penetration of our current adviser
base and by attracting new adviser
users.
We aim to maintain our strong
ratings amongst advisers and
increase our share of wallet from
contestable advisers in the market.
We are mindful of competition in
the market and are not complacent,
hence we invest prudently and
maintain focus on what we do well.
FY23 progress
Average FUD through the year
increased by 2% from £52.5 billion
in FY22 to £53.6 billion in FY23,
this led to a £0.4 million increase
in investment platform revenue
to £130.1 million (2022: £129.7
million).
T4A’s licence and consultancy fee
income grew from £3.9 million for
FY22, to £4.8 million for FY23. The
growth is attributable to recurring
revenue from existing CURO user
licences.
FY24 outlook
Again, the financial year closes on
a challenging economic outlook.
To protect revenue, we will
continue to focus on investing in
the investment platform, CURO and
next generation CURO, so that we
support and retain existing users
and increase market share.
Key risks
•
Service standard failure
•
Stock market volatility
impacting FUD
•
Strong, well capitalised
market entrants leading to
increased platform outflows
and suppressed net inflows.
Key financial performance
indicator
•
Average FUD
•
Net inflows
Generate cash
How?
We are a highly cash generative
business as all fees are received
as cash, as they become due and
payable. We expect to continue
generating cash profits.
Shareholder cash has increased over
time, enabling reinvestment and
ensuring we remain well capitalised
over and above our regulatory capital
requirement.
We will continue our controlled
approach to expense management
and we expect to continue generating
resilient cash profits.
FY23 progress
IFRS profit before tax in FY23,
generating profits from the cash
received, was £62.6 million, which is
an increase of 15% from £54.3 million
in FY22.
The rise in PBT is due to the net effect
of: recognition and settlement of the
backdated VAT liability of £9.4 million,
plus interest of £0.8 million in FY22;
and an increase in admin expenses, as
forecast and detailed in the Financial
review on page 53, in FY23.
FY24 outlook
We will continue to manage all Group
expenses carefully and monitor against
projections, whilst continuing to invest
as necessary in our people and system
development. It is expected the
Group’s strong liquidity profile will be
maintained.
19
Key risks
•
Service standard failure
•
Stock market volatility
impacting FUD
•
Strong, well capitalised market
entrants leading to increased
platform outflows and suppressed
net inflows.
•
Uncontrolled expenses
Key financial performance
indicator
•
Average FUD
•
Profit before tax
•
Operating margin
•
Earnings per share
Retain strong balance sheet
How?
We maintain robust capital
resources, supported by
emerging profit. We have no
debt and our regulatory capital
position remains resilient through
the economic cycle.
FY23 progress
The Group capital position, as
defined by Group net assets,
grew 9% and ended the year at
£189.5 million, up from £163.2
million at the end of FY22.
FY24 outlook
We will continue to manage our
capital prudently, to enable us
to meet our regulatory capital
requirements as the business
grows.
Key risks
•
Stock market volatility
impacting FUD
•
Capital strain
Key financial performance
indicator
•
Shareholder funds
Deliver on dividend policy
How?
Our policy is to pay between 60% and
65% of full year profit before tax as
two interim dividends.
FY23 progress
A first interim dividend was paid of
3.2p per ordinary share and a second
interim dividend declared of 7.0 pence
per ordinary share, in line with our
dividend policy (after excluding non-
underlying expenses).
FY24 outlook
Our dividend policy remains
unchanged, however, our income
may be impacted by continuing
market uncertainty due to the Russian
invasion of Ukraine, the Israel war with
Hamas, high inflationary pressure on
all costs, including recruitment, and
political instability.
Key risks
•
Stock market volatility impacting
FUD
•
Uncontrolled expenses
•
Capital strain
Key financial performance
indicator
•
Cash generation
•
Earnings per share
20
KEY FINANCIAL PERFORMANCE INDICATORS
We have several quantifiable
measures that we use to measure the
performance of our business against
our strategic financial objectives.
Our key financial performance
indicators and performance over
the last three financial years are
presented in the charts that follow.
Average daily FUD* £53.6 billion (+2%)
The value of average daily FUD is the
primary driver of Group revenue, as it
is the basis of the annual commission
charge, which constitutes 86% of
Group revenue. The value of average
daily FUD generates cash and drives
earnings growth.
As markets have stabilised during the
financial year, albeit with some day to
day volatility, so average daily FUD has
increased by 2% compared to FY22.
FY21
£47.2bn
£52.5bn
£53.6bn
FY22
FY23
Net inflows* of £2.7 billion (-39%)
Net inflows are a crucial component of
FUD growth and drive cash generation
and earnings growth.
Whilst net flows have decreased year
on year, our market share has risen
to 25%, demonstrating the strength
of our proposition through challenging
macro economic conditions.
FY21
£5.0bn
£4.4bn
£2.7bn
FY22
FY23
*Our KPIs include alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS.
They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235.
LINK TO STRATEGIC FINANCIAL OBJECTIVES:
Drive growth
Invest
Earnings
Cash generation
Strong balance sheet
Dividend policy
21
230,294 clients* (+2%)
Client numbers continue to grow at a
steady rate, although a project to close
portfolios with small residual balances
impacted growth in FY23.
Advisers bring new clients and new
flows to the platform, as well as their
existing clients bringing new flows.
Clients are a driver of FUD and wrapper
numbers, which generates cash through
annual fees and wrapper charges,
which grows earnings. Our client
retention rate remains impressive.
209k
225k
230k
FY21
FY22
FY23
Client retention* 95% (-2%)
FINANCIAL YEAR
2021
2022
2023
Levels of client retention
96%
97%
95%
Client retention is an important measure of satisfaction. It is also a driver of
ongoing revenue and we attribute our strong client retention levels to satisfaction
with our service and offering. The slight reduction in FY23 is due to the removal
of clients with small residual balances.
7,683 advisers registered on the investment platform* (+2%)
We continue to experience steady
growth in the number of advisers
using the platform, driving FUD, cash
generation and earnings growth. As
with client numbers, a project to close
portfolios with small residual balances
impacted growth in FY23.
FY21
7,161
7,537
7,683
FY22
FY23
*Our KPIs include alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS.
They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235.
22
IFRS profit before tax £62.6 million (+15%)
IFRS profit before tax has increased
by £8.3m (15%) in FY23. The material
factors driving the increase are:
total revenue and interest income
increasing by £7.0m, underlying
expenses increasing by £9.4m and
non-underlying expenses reducing by
£11.1m.
The drivers of the material movements
are explained in the Financial Review
on page 53.
£63.6m
FY21
£54.3m
FY22
FY23
£62.6m
Operating margin 42% (+4%)
Operating margin is operating profit
over revenue, expressed as a %,
representing the % of revenue that
translates to profit.
Operating margin has fallen over the
last two years, relative to the highs
of previous years, due to the planned
increases to the expense base,
primarily driven by increases in staff
costs and also the impact of non-
underlying expenses.
Operating margin remains robust for
the sector.
FY21
FY22
FY23
51%
41%
42%
IFRS Earnings per share 15.1p (+13%)
Earnings per share is a measure of the
amount of profit after tax the Group
has generated for shares in issues and
the value generated for shareholders.
EPS has increased in FY23 as profit
after tax has increased year-on-year.
FY21
FY22
FY23
15.4p
13.3p
15.1p
23
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
Foreword from Victoria Cochrane – Designated Group Non-Executive
Director for Environmental and Social Sustainability (ESS)
Following our first report on the Task Force on Climate-Related Financial
Disclosures (TCFD) last year, over the past 12 months we have made good
progress in developing and enhancing our carbon reporting and climate change
management.
We are supportive of the UK government’s overall ambition to reach a net zero
position by 2050 and continue to be committed to meeting or exceeding this goal.
During the year we engaged Brite Green Limited, an independent sustainability
consultancy, to assist us in better understanding the climate related risks to our
business as well as the material strategic, tactical and operational opportunities
we can leverage on our pathway towards net zero. There have been sensible and
constructive recommendations and we will seek to make changes to reduce our
controllable emissions as early as practically possible and to develop our strategic
offering in a manner that promotes the development of our business as well as
supports the needs of advisers, clients, and our people.
To enhance our assessment and understanding of the impacts, risks, and
opportunities climate change presents for our business, we have also conducted
climate scenario analysis based on global-mean temperature rises of 1.5
degrees (the expected outcome of meeting net zero targets by 2050), 2 degrees
(transition is delayed by 5-10 years) and 2.6 degrees (based on current national
pledges for reducing emissions).
The board has overseen the approach and activities being undertaken, providing
review and challenge to the recommendations identified as and supporting the
management team who are actively managing our material climate-related
risks and opportunities. Informed by the insights from this work, our developing
climate change strategy sets clear objectives, with initiatives to deliver in the
short (up to 2025), medium (up to 2035) and longer term (up to 2050).
Our search for new premises for the London head office presents a significant
short-to-medium-term opportunity to reduce our carbon footprint. By
incorporating sustainability criteria into the new premises selection process, in
conjunction with the data and understanding we have gathered about our office
space utilisation following our hybrid working model, we have the opportunity to
considerably reduce our Scope 1 and 2 operational carbon emissions.
During FY23, the board set specific targets for carbon reduction, our performance
over FY24 will be measured and monitored against these targets and initiatives.
24
Our climate change journey
We have made positive strides
during the year in understanding and
defining the next steps of our climate
change journey. Key highlights include
the following:
Resource enhancements –
we have strengthened our
capability by appointing a
dedicated resource covering our
Group sustainability agenda. The
individual has responsibility for:
documenting Group standards
and procedures; collating and
measuring carbon emissions;
monitoring progress on climate
related strategies; working
closely with the functional
areas of the business to ensure
that impacts of risks and
opportunities are understood
and timely and effectively
captured and managed; ensuring
that sustainability strategies
are embedded into the business
plans of the senior leadership
team.
Approach improvements –
the independent consultancy
review has resulted in significant
improvements to our carbon
data collection approach and
processes. As a consequence,
we have broadened the
boundaries of our Scope 3
data to include emissions from
purchased goods and services
and capital spend as well as to
re-calibrate certain categories,
e.g. wastewater, from the
position previously reported.
These are set out in detail
under the metrics section of this
report. As a result of improved
data collection and corrections
to some of the calculations, we
will be restating the FY22 prior
year data for Scope 1, 2 and 3
emissions which we will adopt
as the revised baseline against
which to measure future target
reductions.
Carbon reduction
implementation initiative –
an
important initiative delivered this
year has been the installation
of solar panels on the roof of
our office in Melbourne. This is
expected to provide up to 57
MWh annually of electricity for
the business. This is equivalent
to 5% of the Group’s energy
use, but 12% of the Group’s
Scope 2 carbon emissions due
to the higher carbon intensity
of the Australian national grid
compared to the UK. We are
in the process of moving our
London office-based data centre
off-premise into more energy
efficient premises. Both these
initiatives will reduce Scope 2
emissions going forward.
Independent consultancy
review –
we engaged Brite
Green to undertake an
independent review across
several areas. This included
a review of our approach
and procedures towards the
collection and reporting of our
Scope 1, 2 and 3 greenhouse gas
emissions; recommendations on
carbon reduction strategies as
part of our journey towards our
net zero objective; assistance in
defining strategic climate change
opportunities for the business
and a roadmap towards more
robust and insightful reporting.
Carbon reduction
opportunities –
the board has
been presented with a range of
opportunities that focus on four
key themes:
1.
Premises and flexible
working
2.
National differences in
energy emissions
3.
Site energy sources
4.
Data centre environments
25
By contrast, significantly more effort and consideration will be needed
in areas categorised under Scope 3, typically our purchased goods and
services and the asset owned investments.
We recognise that despite the progress made this year, we still have a
lot of work to do.
Understanding and managing climate change impacts from, and on, the
business is an iterative process and we are planning to address the following
aspects next year:
•
Producing carbon emission reduction plans that align with science-based
target best practice.
•
Committing to a climate transition plan to outline how we will become
carbon net zero by 2050 or before.
•
Establishing a sustainability forum comprised of members of the senior
management team who will drive forward the agreed strategy at an
operational level.
•
Encouraging employee engagement through training, workshops,
and employee forums.
•
Establishing a climate-related risk on the corporate risk register.
In addition to the above, we anticipate in the medium term looking into
the following:
•
Understanding and embracing the reporting and other requirements under
Taskforce for Nature-related Financial Disclosures (TNFD) and standards
developed, but yet to be adopted by the UK, on sustainability reporting
by the International Accounting Standard Board (IASB) and International
Sustainability Standards Board (ISSB).
•
Drafting a plan for transition to a lower-carbon economy using the
Transition Plan Taskforce (TPT) disclosure framework published in October
2023 within our future reporting.
•
Looking at the emissions generated in our supply chain and drafting a
Sustainable Supply Chain Charter.
•
Keeping abreast of the quality of environmental, social and governance
(ESG) metrics for assets held on the Transact platform to potentially
enable clients and financial advisers to make more informed investment
decisions.
Underlying these initiatives, we will continue to measure and report our carbon
emissions and the progress towards the reductions achieved to ensure that we
meet the goal of being carbon zero in the decade leading up to 2050.
Victoria Cochrane
Environmental and Social Sustainability Non-Executive Director
13 December 2023
The basis of our approach to
TCFD reporting
Our TCFD report follows the
recommended guidance published in
October 2021 covering the financial
disclosures, and as part of our
obligations required under Listing Rule
9.8.6R. The financial impacts have
been assessed to the extent that we
have been able to measure these
through the application of appropriate
analytical assessments based on the
available information to the Group.
The Supplemental Guidance for the
Financial Sector, in particular the
guidance for the insurance sector
and for asset owners, has been
considered but has not been deemed
relevant due to the nature of the
insurance contracts written by the
insurance companies in the Group and
the investment strategies not being
under the control of the Group. Our
TCFD report reflects the activities
undertaken by the Group during
financial year 2023. All Group entities,
including the regulated entities, have
been considered when identifying and
measuring the climate-related financial
impacts, risks and opportunities,
and their impact, which have been
incorporated on a consolidated basis
within this report.
26
TCFD Disclosure Summary
The TCFD’s recommendations were first launched in 2017 with disclosures structured around four themes, governance,
strategy, risk management and metrics and targets. In support of these themes there are 11 recommendations that
provide guidance for developing effective disclosure. Here we set out these requirements and the approach adopted in our
disclosures. We have assessed our current disclosure against the recommendations and identified the areas where further
opportunities exist for enhancing our Group activities and reporting.
TABLE 1. TCFD DISCLOSURE SUMMARY
THEME
DESCRIPTION
TCFD RECOMMENDED
DISCLOSURE
PAGES
OUR DISCLOSURE
Governance
Disclose the
organisations
governance around
climate-related risks
and opportunities.
•
Describe the board’s
oversight of climate-
related risks and
opportunities.
28-30
•
We have set out in more detail the
responsibilities and activities of
the board and its committees with
support from the ESS DNED.
•
We have explained how
management has participated in
defining risks and opportunities.
Inclusion of a sustainability forum
into the governance structure.
•
Describe management’s
role in assessing and
managing of climate-
related risks and
opportunities.
FURTHER OPPORTUNITIES FOR IMPROVEMENT
•
Establish and embed the sustainability forum into operational practices.
•
Develop deeper climate change knowledge across the board, management team and broader people base.
THEME
DESCRIPTION
TCFD RECOMMENDED
DISCLOSURE
PAGES
OUR DISCLOSURE
Strategy
Describe the actual
and potential
impacts of climate-
related risks and
opportunities on
the organisation’s
businesses,
strategy, and
financial planning
where such
information is
material.
•
Describe the climate-
related risks and
opportunities the
organisation has
identified over the short,
medium, and longer
term.
•
Describe the impact of
climate-related risks
and opportunities on
the organisation’s
businesses, strategy and
financial planning.
•
Describe the resiliency
of the organisation’s
strategy taking into
consideration different
climate related
scenarios, including a
2
o
C or lower scenario.
31-39
•
Defined short, medium and longer-
term time horizon strategies for the
Group.
•
We have set out our assessment
of how climate-related risk drivers
affect our strategy and business
objectives, operations, clients, and
products.
•
Our Group-wide scenarios have
identified risks and opportunities to
our strategy. We have assessed the
impact of these against business
viability and resiliency.
•
We have explained that we have not
yet incorporated the impact of risks
and opportunities into our financial
planning.
FURTHER OPPORTUNITIES FOR IMPROVEMENT
•
Continue to refine scenario assessments.
•
Develop further strategies and procedures to manage risks and capture strategic opportunities.
•
Reflect climate-related risks and opportunities into the financial planning process as appropriate.
27
THEME
DESCRIPTION
TCFD RECOMMENDED
DISCLOSURE
PAGES
OUR DISCLOSURE
Risk
management
Disclose how
the organisation
identifies, assesses,
and manages
climate-related
risks.
•
Describe the
organisation processes
for identifying and
assessing climate-
related risks.
•
Describe the
organisation processes
for managing climate-
related risks.
•
Describe how
the processes for
identifying, assessing,
and managing climate-
related risks are
integrated into the
organisations overall
risk management
40
•
We have explained how the
approach toward the identification
and management of climate-related
risks is integrated into the Group
Risk Management Framework. This
includes a measurement basis
consistent with other risks facing
the Group.
•
We have set out our assessment
of how climate-related changes
impacts the Group and creates risks
and opportunities.
FURTHER OPPORTUNITIES FOR IMPROVEMENT
•
Maintain appropriate corporate risk register entries to ensure climate-related risks remain on the agenda.
•
Embed into regular process management and functional review and assessment of climate-related risks.
THEME
DESCRIPTION
TCFD RECOMMENDED
DISCLOSURE
PAGES
OUR DISCLOSURE
Metrics and
targets
Disclose the metrics
and targets used to
assess and manage
relevant
climate-related
risks and
opportunities where
such information is
material.
•
Disclose the metrics
and targets used by the
organisation to assess
climate-related risks
and opportunities in
line with its strategy
and risk management
process.
•
Disclose Scope 1, 2 and
3 greenhouse gas (GHG)
emissions, and related
risks.
40-44
•
We have reported our operational
scope 1, 2 and 3 emissions having
reassessed the coverage and
conversion factors this year.
•
We have restated our 2022 position
and plan to use this as the revised
baseline position.
•
Operational Scope 1 and 2 targets
have been set. Scope 3 targets
will be developed for disclosure in
financial year 2024.
FURTHER OPPORTUNITIES FOR IMPROVEMENT
•
Set operational emissions reduction targets.
•
Embed delivery performance metrics.
•
Develop further transition targets and plans.
•
Continue to monitor the availability of ESG related data for life company and platform held assets.
•
Assurance certification of data reported.
28
1. Governance
Board and board committees
The board provides leadership and
direction and is accountable for the
long-term success of the Group. It
sets the Group strategic objectives,
see pages 13 to 15, within a risk
appetite framework. The board is
ultimately responsible for risks and
opportunities facing the business,
including those related to climate
change.
The Group board has assigned
a DNED, Victoria Cochrane, to
oversee our Environmental and
Social Sustainability (ESS) agenda.
Victoria assists the board in
ensuring the Group has appropriate
environmental and social strategies
that are integrated with its core
business strategy and contribute to
the long-term sustainability of the
Group; reviewing the strategies,
policies and performance in relation
to environmental and social matters,
suggesting ways to drive improvement
in these areas, and ensuring these
strategies continue to evolve and are
aligned to the culture and values of
the Group.
In support of the board and Victoria,
key tasks have been assigned to two
board committees:
•
the IHP Audit and Risk
Committee (ARC) which has the
responsibility for overseeing the
process of identifying climate-
related risks and opportunities
and reviewing and challenging
the assurance, where performed,
over the Group’s TCFD reporting
requirements; and
•
the IHP Remuneration Committee
(RemCo) which is responsible
for including climate-related and
ESS factors into executive and
company reward.
Collectively these ensure that the
following responsibilities are met:
•
establishing clear strategic goals
with appropriate supporting
business plans and resources
•
monitoring strategy
implementation, financial
performance and the integrity
of reporting
•
ensuring that effective audit,
risk management and compliance
systems are in place and
monitored.
The structure of our climate
governance is set out in figure 1.
below, with details of roles and
responsibilities for our climate-change
approach reflected in table 2.
Management’s role in assessing
and managing climate-risks and
opportunities
Following a review of our climate
change management practices, we
have expanded our climate governance
structure to support greater ownership
and accountability for climate issues
at all levels in the business. Building
from this, we aim, over the course of
financial year 2024, to strengthen the
ownership of climate issues across the
entire business and develop focused
action plans aligned to reduction
targets for key business functions to
manage and progress.
FIGURE 1. GOVERNANCE STRUCTURE
IHP Board
Remuneration
Committee (RemCo)
Chief Executive
Officer
Subsidiary
Boards
Business teams
Senior Leadership
Team (SLT)
ARCs of subsidiary
companies
Sustainability
Forum
Colleagues
Audit and Risk
Committee (ARC)
29
TABLE 2. ROLES AND RESPONSIBILITIES
IHP board and
ESS DNED
The board provides leadership, setting the Group strategy, and is accountable for the long-term
sustainability of the Group. It ensures likely risks and opportunities are reflected in the corporate
strategy and budgets and ensures sound operating practices are embedded into the business.
The Chair of the board ensures the board meets its responsibilities which includes climate change.
Assisted by the ESS DNED, they ensure climate-related matters actions and strategies are included
on the board meeting agendas at least three times during the financial year and are considered as
part of the board decisions and strategy contributing to the long-term sustainability of IntegraFin.
IHP board
committees:
Audit and Risk
Committee
(ARC),
Remuneration
Committee
(RemCo)
The ARC is responsible for oversight of risks to the business including those arising from climate-
related scenarios. ARC challenges management on progress of actions identified to manage the
risks and improve the overall control environment.
The ARC has responsibility for monitoring the quality of reporting of the Group’s GHG emissions
and future decarbonisation targets within the TCFD disclosure. The Group Chief Risk Officer (CRO)
oversees the delivery, completeness, and quality of the full TCFD report. The Group Internal
Audit team undertake thematic reviews of processes, procedures, and controls and suggest
improvements. Both will utilise external consultants and expertise when needed.
RemCo supports governance accountability by linking deliverables with remuneration. TCFD and
ESS targets will be reviewed in 2024.
CEO – IHP
The CEO, in conjunction with the board, defines the strategy, values and culture of the Group. The
CEO sets the leadership tone and leads the senior leadership team in delivering the Group strategy
and achievement of business targets. This includes responsibility for ensuring climate-related
change is embedded into the Group’s business strategy and plans.
Senior
leadership
team (SLT)
The SLT apply the plans to their business operations in support of the CEO. They are responsible
for business risk identification, including climate-related change and scenario risk and opportunities
assessments. In this regard they support the ARC with risk management activities. They are
responsible for embedding actions into their business plans, and support emissions data gathering
and delivering against targets.
Sustainability
Forum and
Sustainability
Manager
We will be implementing a Sustainability Forum comprising members of the SLT who will be
responsible for supporting and driving the implementation of the broader sustainability agenda.
The forum will support the CEO and SLT in delivering the wider Group sustainability plans and
initiatives and embedding a climate-aware Group culture. The forum will be supported by the
Sustainability Manager who provides internal expertise to colleagues. Collectively the forum and
Sustainability Manager project manage the TCFD reporting process.
Business
teams and
Employees
Business teams are responsible for identifying material climate change risks, opportunities and
impacts and for owning and/or supporting the delivery of related actions. This may include the
update and modification of processes operated within the business.
The Group aspires to ensure that climate change and the wider sustainability agenda is embedded
within the culture of our business. Over the coming year we will strive to ensure that our employees
are engaged in understanding the issues and impacts. We recognise that employees are usually
the first to see the change opportunities and we plan to utilise the employee engagement forum
to engage colleagues in managing the risks and opportunities and supporting the implementation
plans.
30
Progress during the year
During FY23, we set out to enhance
our understanding of relevant
climate risks and opportunities for
the business, improve our carbon
reporting and establish a roadmap
towards setting a net zero carbon
target. The board has overseen
progress of this programme across
the year and we are in the process of
developing a performance dashboard
to provide the board with ongoing
performance data.
Our board and senior management
team have also completed training
on the legal, economic, and strategic
aspects of climate change risks and
opportunities during the year.
Management conducted its first
climate scenario analysis which
provided further insight into climate-
related risks and opportunities. These
outcomes have been presented to
the ARC and board. The risks and
opportunities are considered by the
board and management when setting
and updating strategy, this includes
any financial impacts and assessment
through the Company’s viability
testing.
Remuneration
In FY23, performance-based awards
of executive directors were referenced
against four key areas, one of these
was risk, regulation and ESG.
More detail on how these were
measured can be found in the
Remuneration section on pages 131
to 133.
How climate-related risks and
opportunities are considered
across our Group
We have continued to embed the
consideration of climate-related risks
and opportunities across our business
throughout the year. This includes
engaging the business functions across
a range of activities, examples of which
are set out in the table below.
TABLE 3. EXAMPLES OF CLIMATE-RELATED BUSINESS ACTIVITIES
ACTIVITY
CONSIDERATION
Operations
Monitoring and management of our buildings’ exposure to
climate-related risks. Measurement and management of
operational emissions.
Procurement
and Supply
management
(including IT
services)
Monitoring suppliers’ contribution to our GHG emissions
and considering the resiliency of suppliers against potential
climate-related risks.
Actuarial and
Risk
Developed our approaches within our Group’s regulated
entities ICARA and ORSA processes reflecting on the risks
and impacts of climate-related changes.
Internal
Audit
Incorporated the assessment of climate-related risks and
management processes into our annual internal audit review
plans.
Compliance
Ensuring we assess and meet our climate-related standards
and obligations.
Financial
reporting
Consideration of the potential impacts of climate-related
changes on the financial statements.
Investor
Relations
Managing our investor stakeholders and supporting
voluntary disclosures through CDP (formerly known as
Carbon Disclosure Project).
Risk
Management
Embedding climate-related risks into our risk management
framework.
31
2. Strategy
Understanding the climate-related
risks and opportunities is fundamental
to shaping our strategy towards acting
as a responsible business. We have
considered the risks and impacts that
climate-related change might present
to our Group strategic objectives.
TABLE 4. CLIMATE-RELATED RISKS TO GROUP STRATEGIC OBJECTIVES
CLIMATE RISK DRIVER
CHALLENGES
RISKS
STRATEGIC OBJECTIVES
POTENTIALLY IMPACTED
1
Physical
The immediate risks
arising from weather-
related events and slow
onset climatic changes.
Acute, e.g.
•
Change in frequency of weather
events e.g. flooding, wildfires, high
winds.
•
Change in the severity of weather
events e.g. heatwaves, lower
temperatures.
Chronic, e.g.
•
Sea level rises
•
Changing precipitation
•
Rising temperatures
Operational
Reputational
Business Planning
and Environment
Transition
The financial risks arising
from the transition to a
lower carbon economy.
•
Arising from changes in policy
(changes in emission reduction
targets), technology (new low
carbon technologies imposed), social
pressures and consumer preferences
(demand for lower carbon products
and services).
•
Potential big shifts in the value of
assets or costs of doing business.
Market
Business Planning
and Environment
Reputational
Legal and
Regulatory
Liability/Regulatory
Action
The risk of actions
initiated by claimants
who have suffered loss
and damage arising
from climate change and
non-compliance with
regulations.
•
Climate laws and regulations are
being developed across jurisdictions
and lack of compliance could lead to
fines and/or penalties.
•
Active litigation ranges from
individuals and corporates, as well
as class actions where damage has
been caused and restitution sought.
Reputational
Legal and
Regulatory
Sustainable growth
Increase earnings
Retain strong
balance sheet
Sustainable growth
Retain strong
balance sheet
Generate cash
Increase earnings
Sustainable growth
Invest
1 Details of the risks and opportunities arising from the climate-related drivers to the group strategies, as well as the impacts of these risks
are set out in table 8.
32
Understanding our emissions
and the impacts on strategy
During this year we have achieved
more insight and understanding of
the sources and scale of emissions
across our business. We have
assessed these as:
• Operational emissions
– these
cover Scope 1, 2 and 3 arising
from running our operations e.g.
leased premises, electricity and
gas, and our goods and services
supply chain.
• Asset owner
– this represents
Scope 3 investments controlled
by us through the employee
pension fund or owned by the
life companies.
A review was performed of our
operational emission categories,
data collection procedures and the
application of the GHG protocol
conversion factors across our
business activities. We believe that
these categories fall more within
our immediate control and, as such,
will drive some of our short- and
medium-term initiatives. In order
for us to be able to set credible
strategies and targets to meet our
reduction aspirations, we needed
to assess where we are today. This
review provided valuable insights
into our operational emissions and a
range of strategic and tactical steps
and initiatives we could adopt to
reduce our Scope 1 and 2 emissions.
Further work is still required across
the broader Scope 3 elements which
we will complete as part of our target
setting for 2024.
Where we are today
Operational emissions
Our operational carbon footprint has been calculated and assessed across
the last two financial years to enable us to understand the most material
emission sources. The analysis, based on data from table 10 on pages 41 to
42, indicates that emissions from purchased goods and services represent
the largest single source, at 48% (FY22: 43%) of the total. Business travel,
commuting and homeworking combined, representing 26% (FY22: 26%) is the
next largest source, with electricity use and gas use combined representing
17% (FY22: 24%).
FIGURE 2. SUMMARY OF GHG EMISSIONS FOR IHP GROUP 2023¹
Electricity:
12.9%
Natural gas:
4.4%
Capital goods:
7.6%
Fuel and
energy related
activities: 1.0%
Waste generated
in operations:
0.3%
Business travel:
12.2%
Employee commuting
and homeworking:
14.0%
Purchased goods
and services:
47.6%
1 We have not yet included the emissions within our investment Scope 3 profile for the
Insurance assets given the level of complexity and uncertainty on the consistency of
published ESG profiles relating to these assets
An independent site audit was performed, with the aim of helping us understand
areas of opportunity for delivering reductions in our operational GHG emissions.
The immediate focus fell on Scope 1 and 2 gas and electricity emissions.
33
TABLE 5. ANNUAL ENERGY USAGE ACROSS IHP GROUP SITES
Site
ENERGY USE
(kWh)
FY23
FY22
Gas
Electricity
Total
Proportion
of total (%)
Gas
Electricity
Total
Proportion
of total (%)
UK
540,415
863,490
1,403,905
79%
800,092
860,201
1,660,293
82%
Australia
136,859
238,570
375,429
21%
108,655
255,757
364,412
18%
Total
677,273
1,102,060
1,779,333
908,747
1,115,958
2,024,705
Proportion of
total (%)
38%
62%
45%
55%
The largest energy-using site across our estate is the London Head Office on
Clement’s Lane, which uses 68% (FY22: 72%) of the total energy, 75% (FY22:
83%)
of the gas and 64% (FY22: 63%) of electricity.
TABLE 6. ANNUAL CARBON EMISSIONS BY LOCATION ACROSS IHP GROUP SITES
Site
TONNES OF CARBON EMISSIONS (
t CO
2e)
FY23
FY22
Scope 1
Scope 2
Total
Proportion
of total (%)
Scope 1
Scope 2
Total
Proportion
of total (%)
UK
99
179
278
57%
146
166
312
57%
Australia
25
188
213
43%
20
217
237
43%
Total
124
367
491
166
383
549
Proportion of
total (%)
25%
75%
30%
70%
In relation to carbon emissions, the almost-four-times higher carbon intensity of
the national grid in Australia compared to the UK results in the carbon emissions
from the Melbourne site being 51% (2022: 57%), whilst only using 22% (2022:
23%) of the electricity. Emissions from electricity use in Australia make up 38%
(2022: 40%) of the Group’s Scope 2 emissions.
As part of our 2022 initiatives, solar panels have been installed of our office in
Melbourne. This is expected to provide up to 57 MWh annually of electricity for
the business and reduce the Scope 2 emissions at our Melbourne office by 21%
going forward.
Based on the site audit we have set out a range of short- and medium-term themes
and initiatives that will help us reduce our operational Scope 1 and 2 emissions.
Strategic reduction themes – Scope 1 and 2 operational emissions
There are several strategic levers which we plan to deploy to reduce carbon
emissions, and these have either already been reflected or are now being
assessed as part of our financial planning requirements.
The table below shows strategies available to the Group. Some of the short-term
initiatives may contribute to estimated savings in the medium-term initiatives, for
example the site selection for the new London premises may capture some of the
reductions of carbon emissions identified in moving away from natural gas.
34
TABLE 7. STRATEGIC REDUCTION THEMES – SCOPE 1 AND 2 OPERATIONAL EMISSIONS
STRATEGIC
REDUCTION
THEME
COMMENTARY
ESTIMATED
SAVING
t CO
2e
TIMEFRAME
SHORT
(2023-25)
MEDIUM
(2025-35)
Site
selection and
specification
When selecting our new London premises, the site selection criteria will include
a requirement for efficient plant and equipment, a commitment to net zero from
the landlord, zero carbon electricity, on-site renewable energy (if possible), and
avoiding natural gas (if possible). On-site IT infrastructure will be assessed and
where possible will be limited and placed in efficient off-site co-location premises
or in the cloud.
80 t CO2e
Short term
Flexible
working
The use of flexible working offers the opportunity to appraise the size of office
space required. Our own studies indicate that whilst flexible working practices
have been adopted, the current space-management approach has resulted in a
sub-optimal utilisation. In the time left on the lease at Clement’s Lane, we will be
considering how to consolidate onto fewer floors and use the space to develop a
new model workplace to test the office aspects of a new digital workplace: a set
of technologies and policies to run a more efficient floorplan.
175 t CO2e
Short term
Renewable
energy -
Estimated
Carbon saving
A major part of our carbon reduction strategy will be a move to renewable energy.
This will largely be achieved from a new London site. However, in the short-term,
opportunities on our current leased premises are more likely be achieved through
power purchased agreements (PPAs) or green electricity tariffs. This has already
commenced following the solar array which has been installed at the Melbourne
site early this year, the benefits of which will be recorded in 2024.
396 t CO2e
Short to
Medium
term
Consolidate
operations in
high efficiency
and low carbon
environments
There are opportunities to move energy intensive operations to higher-efficiency
environments and lower carbon grids. This includes the remaining data centres
and servers in office environments.
84 t CO2e
Medium term
Move away
from natural
gas
Whilst there are a number of attractive renewable sources for electricity, there are
no price competitive low carbon substitutes for natural gas. As such, moving away
from the use of gas at all sites, should be a priority.
166 t CO2e
Medium term
Engage with
landlords
The company should seek to include green-lease clauses into leasehold
agreements, placing obligations on the landlord to deliver a net zero carbon
strategy.
28 t CO
2
e
Medium term
Asset owner
Given the complexity and diversity of
the underlying data required, we have
yet to establish our Scope 3 approach
as an asset owner for directly held
assets within the life companies and
employee pension funds. We will be
developing our insight and strategic
options with regard to these Scope 3
emissions as part of our medium-term
development plan. We aim to be no
less than in line with our peers and
to ensure that our policy as an asset
owner matches our corporate agenda
and targets in relation to climate
change. We will be transparent in
our approach in future reporting and
disclosures.
Looking forward – Scenario Analysis
The risks and impacts associated with climate change for our Group will be
determined by the global governmental, social and technological approach to
emissions reductions and projected temperature increase limits.
This review examines three possible climate scenarios, drawing on the
Intergovernmental Panel on Climate Change (IPCC) representative concentration
pathway (RCP) models and the Financial Stability Board (FSB) and Network for
Greening the Financial System (NGFS) scenarios. Each scenario represents the
modelled increases in global average temperatures from pre-industrialised levels
and the predicted mitigation approach that would deliver them.
35
The key facets of each scenario are summarised below.
FIGURE 3. SUMMARY OF CLIMATE RISKS IN SCENARIOS
Climate scenarios considered
Net Zero by
2050
Delayed
transition
Nationally
Determined
Contributions
(NDCs)
Assumed global temperature rise
Aligned to RCP 2.6
At least 50%
chance does not
exceed 1.5⁰C
Aligned to RCP 4.5
67% chance to
limit to 2⁰C
Integrated with
RCP 6.0
Likely to limit to
2.6⁰C
Key assumptions
Ambitious
climate policies
are introduced
immediately.
Innovation and
fast technological
changes, medium
to high use of
carbon dioxide
removals.
Global annual
emissions do not
start to decrease
until 2030.
In the short-
term fossil fuel is
used to recover
from economic
challenges.
From 2030 strong
climate policies
are implemented.
Including a tax on
carbon emissions,
and emissions
decline rapidly.
Current pledged
policies, even
if not yet
implemented and
not aligned to UN
ambition level, are
met.
Technology change
is slow, and policy
change is low.
Moderate to
severe physical
risks but relatively
low transition risks
in short term, high
in long term.
IntegraFin more
impacted by policy
and technology
changes
IntegraFin more
impacted by
physical climate
change impacts
Physical impacts
Acute
Low
Moderate
High
Chronic
Moderate
Moderate to high
Very high
Transition impacts
Market & tech
High
Very high
Very high
Reputation
Moderate to high
Moderate to high
Moderate
Policy & legal
High
High
Moderate
Society
Moderate
Moderate
High
Scenario analysis
We recognise that the profitability
of our business is closely correlated
to the fluctuations in both the global
and particularly the UK economies
from where our clients’ wealth
predominantly originates. However,
we have also considered a range of
other climate-related boundaries
and impacts on our business such as
our ability to maintain operational
capability, the resiliency of our supply
chains, the financial markets and the
social, political and economic factors
affecting our stakeholders. These have
been collated into what we consider to
be the more significant climate-related
risks which might affect the Group over
the short, medium and long term. The
exercise has also helped to highlight
possible management actions available
to mitigate the potential impacts.
In addition, we have recognised that
there are opportunities presented by
transitioning towards a low carbon
economy for the Group and our
stakeholders over the longer-term.
From a modelling perspective it
should be noted that scenarios are
not predictions and reflect a series
of assumptions to assess a range of
possible outcomes. Consequently,
climate related scenarios are
currently limited by factors such as
simplifications in terms of data inputs
and event outcomes which are likely to
influence the range of potential future
impacts. Given the limited level of
certainty, we use scenario analysis as
a useful input to assess potential risks
and opportunities at this point.
36
POTENTIAL MATERIALITY
OF IMPACT BY TIMEFRAME
CLIMATE-RELATED
RISK
POTENTIAL IMPACT
SCENARIO
2025
(SHORT
TERM)
2035
(MEDIUM
TERM)
2050
(LONG
TERM)
STRATEGIC RESPONSE
AND RESILIENCE
Acute and Chronic
(Physical)
The risk of longer-
term changes in
climate patterns such
as flooding, extreme
weather and higher
temperatures impacting
our operations. Failed
internal processes,
people and systems.
Potential disruption to
technology and data centres
and damage to offices at
risk of flooding resulting in
increased costs.
Potential disruption to
employee’s availability to
work and ability to travel
to office (transport, offices,
caring responsibilities).
Net Zero by
2050
Delayed
Transition
NDC’s
Include climate in supplier risk
assessments, develop contingency
plans for all cloud and data services.
Our ongoing investment in IT services
will support further flexibility to
location of working and efficiencies
across the hybrid working model.
Location of offices in London are
being reviewed.
IMPACT PROFILE HAS BEEN BASED ON THE GROUP RMF BUSINESS RISK IMPACT MATRIX (BRIAM)
Low
Medium
High
BRIAM impact score of less
than nine.
BRIAM impact score greater than nine
and less than 15.
BRIAM impact score greater than 15.
TABLE 8. SCENARIO-BASED RISKS, MATERIALITY AND AVAILABLE STRATEGIC RESPONSES.
Measuring risks and
opportunities
We have measured the impact of
the climate risks using the Group’s
business risk impact assessment
matrix (BRIAM). This assesses
the level of impact against five
categories: operational disruption,
financial impact, reputational and
media interest, regulation and duty
of care to clients. Individually and
collectively, these are considered to
be the significant drivers relevant to
the management and operation of
the business in the context of all our
stakeholders.
Managing the risks
The most significant scenario-based
risks identified are set out in table 8
below.
Key risks and opportunities
Drawing on the scenarios, we have identified the material risks and opportunities
and assessed these for impact.
To consider the impacts consistently on the business we used the Group’s risk
methodology, which considers both quantitative impacts (e.g. changes to revenue
or costs) and qualitative impacts (e.g. reputational and client impacts) and their
likelihood.
In line with guidance, we have assessed the risks and opportunities across three
operating categories:
•
Entity level
– reflects the Group-wide impact of climate related risks and
opportunities.
•
Portfolio level
– distinguishing our platform service from that of the life
companies and T4A.
•
Product level
– reflection of the T4A and insurance product risks.
Given the operating structure of the Group and the level of interdependency of
the Transact branded business, we considered the impact of each climate change
scenario to potentially have an influence on all three operating categories.
37
POTENTIAL MATERIALITY
OF IMPACT BY TIMEFRAME
CLIMATE-RELATED
RISK
POTENTIAL IMPACT
SCENARIO
2025
(SHORT
TERM)
2035
(MEDIUM
TERM)
2050
(LONG
TERM)
STRATEGIC RESPONSE
AND RESILIENCE
Policy legal and
regulatory
(Transition)
The risk that there
is a need to comply
with increasing legal,
regulatory, and
disclosure obligations.
A poor or deficient ESG
strategy across the Group
causing delays in compliance
with regulation requirements
leading to fines and severe
reputational damage.
Significant cost increases as
supply chains e.g. IT, data
centres and energy suppliers
accelerate delivery of zero
based services.
Potential for some product
offerings to be restricted or
sanctioned by regulators for
non-compliance.
Net Zero by
2050
Delayed
Transition
NDC’s
We take our regulatory
responsibilities seriously. Our Risk
and Compliance teams conduct
regular horizon scanning and review
regulatory publications on an ongoing
basis.
We are developing our TCFD reporting
and have identified strategies in the
short and medium term to reduce our
operation emissions.
We have developed our sustainability
team and will be implementing
policies that support our sustainability
values with suppliers.
Market
(Transition and physical)
The risk that climate
change or the transition
to a lower-carbon
economy negatively
impacts the global
economy, and therefore
the value of assets on
our platform and in
our range of managed
investment solutions.
Assets on our platform are
exposed to climate-related
risks, which can lead to
poor performance during
the transition to a low
carbon emissions economy,
impacting customer returns,
values of FUD and our fee
income.
Reduced net inflows to FUD
as investors react to market
volatility. Sustained levels of
economic inflation impacting
cost of living and available
disposable income.
Potential for earnings growth
to decline or stall coupled
with increase in costs putting
pressure on Group profit
margins.
Net Zero
by 2050
Delayed
Transition
NDC’s
We hold a diverse portfolio on the
platform which helps to mitigate
market shocks either in a region or
specific investment sector.
Our clients are advised and as
a result are well informed about
managing long-term investment
growth and objectives when markets
are volatile.
We maintain and actively grow
our IFA base and consequently fee
generating clients.
We proactively monitor market
movements, inflows and outflows to
ensure our operations are responsive.
This supports our financial planning
process to ensure income, costs
and capital is managed in line with
external factors.
Reputational
(Transition)
The perceived risk that
we are not contributing
or developing an
appropriate climate
strategy.
Poor public perception of
the Group as a result of
inadequate or misleading
disclosure regarding the
Group’s climate strategies.
Customers become unhappy
with the level of responsible
investment offered by
our IFA’s and move funds
from the platform to more
integrated solutions offered
by peers.
Deterioration in meeting
stakeholder expectations.
Net Zero
by 2050
Delayed
Transition
NDC’s
We are closely following regulatory
developments to ensure that we
reflect requirements in our business
strategy.
We have engaged with 3rd party
subject matter experts to obtain a
better level of insight and assessment
of the climate related risk to the
business.
We have developed and agreed some
challenging operational Scope 1 and
Scope 2 reduction targets.
We continue to be transparent and
engage in reporting through TCFD and
CDP on our climate related progress.
We are open about the steps and
actions that we still need to take
towards meeting our commitment of
meeting the Governments net zero
targets by 2050.
38
Managing opportunities
Opportunities are identified and
assessed slightly differently.
Often, they emerge from first
line ownership (see Governance
structure above), via our Horizon
Scanning Exercise, which is
conducted no-less-than-quarterly or
as a result of management action
plans and remediations presenting
opportunities as part of the
mitigation process.
For climate change specifically we
have used the scenario planning
exercise, as detailed above, to
consider opportunities on a forward-
looking basis up to 2050. These will
be considered and embedded into
our longer-term periodic horizon
scanning process.
As detailed in the Governance
section, opportunities are also
explored and identified by the
senior leadership team, aided,
were necessary, by engaging third
party specialists, and teams around
the business. through operational
process re-engineering, whereby
processes are regularly reviewed to
identify possible improvements which
include climate considerations; for
example, our Software Development
and Client Operations teams have
been identifying opportunities
to reduce the volume of paper
applications received by digitalising
the client onboarding process.
TABLE 9. OPPORTUNITIES
OPPORTUNITY
DEFINITION
TIMEFRAME
PROGRESS
IFA
Engagement
There is an opportunity for
us to engage in more depth
with our financial adviser base
to understand the demands
and expectations of clients
in relation to climate-related
investments.
Short,
medium,
long
Incorporated
within the group’s
strategic initiative
pathway.
POTENTIAL IMPACT
•
The retention of our financial adviser base is key to our strategy of growing
FUD and the business.
•
Developing our Transact and T4A product ensures we continue to use our
resources to create value for our stakeholders improving our reputation and
longer-term market share.
DELIVERY APPROACH:
We have 7,683 (FY22: 7,537) financial advisers and 230,294 (FY22: 224,705)
clients registered to use the Transact platform. This provides us with a unique
opportunity to engage with our IFA base to obtain a good understanding of our
clients’ expectations and demands in relation to climate-related investments and
supporting services.
We will continue to be responsive, where possible, for the inclusion of sustainable
investments onto the platform and for these to be included within tax-efficient
wrappers, as well as general investment portfolios.
We recognise that all parties are embracing the need to reduce their carbon
emissions. Through our in-house technology, we have the opportunity to develop
processes with the financial advisers and clients that embrace sustainable practices
e.g. paperless statements and digitalisation of on-line services.
OPPORTUNITY
DEFINITION
TIMEFRAME
PROGRESS
Operational
efficiencies
and
embedding a
sustainable
culture
There is an opportunity for
us to develop and deliver
operational efficiencies across
our business model.
Short,
medium,
long
Incorporated
within the group’s
strategic initiative
pathway.
POTENTIAL IMPACT
•
Developing carbon reduction strategies can lead to longer term cost
efficiencies.
•
Avoiding potential carbon taxes.
•
Developing sustainable operational practices will increase the business
resilience and eliminate potential climate-related shocks.
•
Improved reputation of the Group.
DELIVERY APPROACH:
We have identified a range of short-, medium- and longer-term opportunities to
develop and incorporate sustainable practices within our operations.
Implementation of the Sustainability Forum will engage senior leadership in
embedding climate, and wider ESG practices, across the Group.
Development of a sustainable culture, which is reflected in our strategy and
engagement of staff, financial advisers, clients and other external stakeholders.
39
Resilience of strategy and
viability assessment
The current viability testing is based
upon a three-year planning cycle.
We do not envisage any planning
impacts in the current three-year
cycle based on the scenarios set
out above. Specific climate-related
scenarios have a longer-term horizon
and consequently we have not yet
included any financial impacts based
on strategic opportunities in our
planning process for this financial
year. We have, therefore, largely
assessed the impacts of scenarios on
a qualitative basis.
We believe that the climate agenda
across our financial adviser base
and clients is developing but has yet
to develop any maturity on shaping
investment decisions.
The scenarios present insight
about the physical impacts to the
environment that a delayed transition
to net zero presents to our business
operations. In addition, it provides
the challenges we will face from a
rapid and strong government policy
and legislation implementation.
We are not unique in this situation
and consequently most companies
are equally assessing their related
financial and strategic impacts of
climate change scenarios.
By association we expect our
platform, which holds a diverse
portfolio of investments, to evolve
as markets and investors, over
time, select those companies
whose economic value continues to
grow because of embracing timely
and opportunistic climate-related
strategies.
The Group’s preferred scenario is
an orderly transition to net zero by
2050 as this aligns with the Group’s
current strategy. This outcome has
the least significant impact on key
stakeholders, as defined on page 80.
Our carbon and climate change transition plan
The below illustrates the achievements of the Group in the last two years and
sets out the next steps to be taken over the short, medium and long term for the
Group, as it transitions towards achieving its strategic goals of being net zero.
FIGURE 4. SUMMARY OF STRATEGIC INITIATIVE PATHWAY
•
Action delivery against net
zero roadmap
•
Measure, reduce and report
emissions and strategy
•
Asset owner engagement
and influence
•
Supply chain auditing
•
Sustainability strategy
embedded
•
New product development
•
Platform ESG insights
supporting IFA/Clients
LONG TERM
(2035-2050)
YEAR 1
REPORTING
2022
ACHIEVEMENTS
YEAR 2
REPORTING
2023
ACHIEVEMENTS
SHORT TERM
(2023-2025)
MEDIUM
TERM
(2025-2035)
•
Set net zero target and
roadmap
•
Measure, reduce emissions
and report
•
ESG materiality assessment
•
Full Climate Change Risks
register
•
Climate change register of
compliance
•
Employee awareness and
training
•
Supply chain climate change
standards
•
Validation of net zero
roadmap
•
Measure, reduce and report
emissions and strategy
•
Climate Change Risks
framework review and
updating
•
Employee, investor, client
engagement
•
Supply chain standards
extended to sustainability
•
Sustainability strategy
•
New product development
•
Adoption of ISSB and TFND
standards
•
Confirmed baseline year for
emissions
•
Create Scope 1-2 inventory
•
Measured emissions and
report
•
Recognised of climate
change risks & opportunities
•
Establishment of senior
governance responsibilities
•
Revised baseline year for
emissions
•
Updated Scope 1-2 and
created Scope 3
inventory
•
Measured and reported
emissions
•
Extended governance,
started full risks &
opportunities assessment
•
Engagement of business
leadership
40
3. Risk Management
Risk management is a core part of
our culture. Climate-related risks are
managed as part of our Group RMF
which defines the Group’s systems
of governance, risk appetite and risk
management processes. See pages 60
to 68 for more information on our risk
management processes.
We have assessed the impacts of
the three climate risk drivers against
the strategic objectives of the
Group. These are set out on page 31
above. We have utilised the scenario
assessment to measure the resiliency
of our business strategy and the
impact on the viability of our business
against the scenarios, as set out on
pages 36 to 37.
We have considered, in more detail,
the risk and opportunities facing
our business based on the scenario
parameters. Utilising our RMF
methodology we have evaluated
the business impacts of the risks
and opportunities identified and will
record these within the corporate risk
register. These profiles will be tracked
periodically to assess whether any
material changes have arisen and to
determine whether the forward-looking
response remains appropriate for our
strategy.
Understanding and managing
the risks
Once risks are identified, our Risk
Appetite Framework defines the
maximum level of residual risk the
board is willing to take in pursuit of its
strategic objectives and in the normal
course of business. Exceeding risk
appetite limits potentially presents a
financial or operational threat to the
business which could cause harm to
its customers or the firm. Whilst the
Group has not set any specific climate-
related appetites, it recognises that
existing appetites for operational and
financial thresholds maybe impacted
by climate change matters and
therefore considers root cause, of
which climate maybe one factor, for
any appetite breaches.
4. Metrics and targets
The Group adopted the reporting requirements of the Streamlined Energy and
Carbon Reporting (SECR) policy, as implemented by the UK Government in 2019.
We have been collating GHG emission data covering several financial years and
this has allowed us to establish further insight into the areas of our Scope 1 and
2 emissions and estimates for our Scope 3 emissions covering our operational
activities.
Carbon emissions calculation methodology and assumptions
Scope 1 covers emissions from sources that an organisation owns or controls
directly. For the Group, this comprises emissions from the use of gas to run
boilers.
Scope 2 covers emissions that an organisation makes indirectly, for example
when energy is purchased. For the Group, this comprises the purchase of
electricity. This is reported using the location-based accounting method using the
UK and Australian Government’s GHG conversion factors for 2023.
Both Scope 1 and 2 include emissions relating to entities and assets which the
Group own or control. Where possible, primary energy-use data has been used.
Where this is not available, estimations have been made based on average
energy usage on other sites where primary data is available. Where sites are
shared with other businesses, it is assumed that energy usage is proportionate
with office space leased.
Scope 3 comprises emissions which are a consequence of an organisation’s
business activities but that it does not directly control. For the Group these
activities, including the methodology for collecting the related emissions
data and any significant judgements or assumptions made to determine the
emissions, are shown in the table below.
TABLE 10. SCOPE 3 DATA METHODOLOGY AND ASSUMPTIONS
SCOPE 3 CATEGORY
CARBON EMISSIONS
CALCULATION
METHODOLOGY
SIGNIFICANT
JUDGEMENTS
OR ASSUMPTIONS
Purchased goods
and services and
capital goods
Emissions data calculated
by annual spend using
DEFRA UK Footprint
results.
Data for the top 30
suppliers of the Group
(all UK-based) in terms
of spend is used as this
is where we think we can
have the most influence
on supplier behaviour.
Fuel and energy
related activities
UK conversion factor
for Transmission and
Distribution losses
applied to total purchased
electricity use.
It is assumed that this is
a percentage of electricity
use.
41
Waste generated
in operations
Solid waste: Obtain waste
weight data and disposal
routes for all sites, or
where not available,
estimate based on sites
where data is available.
Water use: Water meter
readings requested from
landlord, or estimated
based on sites where
data is available.
Wastewater: Calculate
using GHG conversion
factors based on total
water usage.
Where primary data
is not available, it is
assumed that each Group
location has similar levels
of waste per employee
despite the differences
in geographical locations
within different countries
and differing rental
situations of premises.
Business travel
Expense claim data is
used to collect distance
travelled using type of
travel multiplied by the
relevant GHG conversion
factors
Where distance of travel
has not been recorded
an estimation has been
based on cost of travel.
Employee
commuting and
homeworking
Emissions estimated from
annual commuting and
homeworking survey,
which includes mode and
distance of travel and
typical number of days
travelled to the office per
week.
Results are based
on extrapolating the
responses of the
annual commuting and
homeworking survey
from 88% of the staff.
The data availability for Scope 3 emissions is not as accessible as for Scope 1
and 2 and therefore the data quality is not as high. We will continue to review
and refine our methods for collecting data for all Scopes to ensure the accuracy
of the reporting improves year-on-year.
42
Greenhouse gas (GHG) emissions data
TABLE 11. SCOPES 1, 2 AND 3
UK AND ISLE OF MAN
EMISSIONS (
t CO
2e)
AUSTRALIA EMISSIONS
(
t CO
2e)
TOTAL EMISSIONS
(
t CO
2e)
FY23
FY22
FY23
FY22
FY23
FY22
SCOPE 1 AND 2
Scope 1
99
146
25
20
124
166
Scope 2
(Location-based)
179
166
188
217
367
383
Total Scope
1 and 2
278
312
213
237
491
549
SCOPE 3
Purchased goods
and services
1,353
979
0
0
1,353
979
Capital goods
215
106
0
9
215
115
Fuel and energy
related activities
15
15
14
18
29
33
Waste generated
in operations
7
3
1
0
8
3
Business travel
226
52
121
15
347
67
Employee
commuting and
homeworking
348
451
52
73
400
524
Total Scope 3
2,164
1,606
188
115
2,352
1,721
Total Scope 1,
2 and 3
2,442
1,918
401
352
2,843
2,270
In FY23, energy use under Scopes 1 and 2 were down 11% due to a combination
of factors. Firstly, an unplanned reduction in boiler use in the London office and,
secondly, a decrease in electricity usage in Melbourne following the installation of
solar panels in April 2023.
Scope 3 carbon emissions are up 37%. This is largely due to increased
expenditure with key suppliers and a return to pre-pandemic levels of business
travel between the offices in Melbourne and the Isle of Man and London.
Other material movements in Scope 3 include a decrease in employee
commuting and homeworking emissions, as a consequence of obtaining more
detailed data directly from employees and placing less reliance on using national
estimated averages.
By far the biggest source of Scope 3 emissions is purchased goods and services
from our key suppliers. However, next year we hope to move from a purely
spend-based methodology to a hybrid methodology. Obtaining better data from
our suppliers about their emissions will improve the accuracy of our data and to
allow us to work with our suppliers to reduce emissions.
43
Intensity metrics
As with last year, we believe number of employees and office space remain
appropriate business specific metrics for calculating the Emissions Intensity
Ratio, as they are the main drivers of our energy consumption and, therefore,
emissions.
Restatement 2022
We have restated the published 2022 figures, where relevant, to use the most
appropriate calculations, conversion factors and data collection methodology. This
has resulted in substantial changes to the individual Scope 1, 2 and 3 emissions
figures, however, total emissions are only 3 t CO2 (0.
2%) higher than published.
We have also updated the FY22 data to include additional metrics such as
emissions from purchased goods and services, capital goods, fuel and energy
related activities and wastewater.
The updates and restatements to the emissions metrics reflects the continuous
improvements being made to the quality and completeness of data and data
collection methodologies.
Validation of metrics
The GHG data calculation methodology
process for FY23 has been validated
by external independent sustainability
consultants, Brite Green Limited, to
ensure it is appropriate and robust. In
addition, Brite Green have reviewed
the calculations and figures for FY23
and the restated figures for financial
year 2022 based on the agreed
methodology.
Boundary of reporting
We have not included any metrics
for Scope 3 emissions relating to
investments on our platform as we
have no control over the selection of
investments which is made by our
clients and their independent financial
advisers.
TABLE 12. INTENSITY METRICS
UK AND ISLE OF MAN
AUSTRALIA
TOTAL
FY23
FY22
FY23
FY22
FY23
FY22
Emissions Intensity Ratio – t CO2
per employee
4.4
3.7
4.9
4.5
4.5
3.8
Emissions Intensity Ratio – t CO2
per m2 of office space
0.5
0.4
0.4
0.3
0.5
0.4
44
Targets
We are committed to setting targets aligned with best practice and have
decided to follow the SBTi (Science Based Targets initiative) Net Zero Standard
framework. As a result, we are selecting FY22 as a base year against which to
set targets, instead of FY19 as indicated in last year’s report, as this is the most
recent year for which data is available.
We commit to reaching net-zero GHG emissions across the value chain by 2050
from a 2022 base year.
The following targets have been agreed:
SHORT
TERM
In the short term our main target will be to improve the
quality of our data and to engage with our key suppliers
to see how we can work together to reduce supply chain
emissions. This is critical as carbon emissions coming from
the supply chain represent 43% of total carbon emissions in
our base year.
MEDIUM
TERM
We commit to reducing absolute Scope 1 and 2 emissions
by 60% by the end of financial year 2033 from a 2022
base year. We will continue to collect data on our Scope 3
emissions to identify how we can reduce emissions and what
we can realistically commit to reducing.
We will look at offsetting emissions through high-quality
carbon credits from the voluntary carbon markets or
supporting nascent neutralisation technologies in order to
achieve carbon neutral certification.
LONG
TERM
As a minimum we commit to reducing absolute Scope 1, 2
and 3 GHG emissions 90% by 2050 from a 2022 base year.
45
RESPONSIBLE BUSINESS — OUR PEOPLE
Our people have always been, and will continue to be, our priority.
We know that our employees are
fundamental to our success and we
have worked this year to continue
to evolve our collaborative and
supportive culture through our
people strategy, aiming to recognise,
motivate and develop our talent by:
•
Reinforcing our purpose, strategy
and values;
•
Enabling our employees to
develop and grow through
training, development and career
opportunities;
•
Enhancing our engagement
activities;
•
Ensuring our practices support
inclusivity and employee well-
being.
In the past year we have focused
on enhancing the engagement of
our employees through the creation
of a feedback loop with the IHP
board, a primary focus on well-being
and ensuring our culture continues
to promote inclusion and belonging
for all.
We have continued to embed our
strategy, purpose and values to
support our employees to work
towards this common purpose as
we believe having a clear sense of
purpose is fundamental to success
both of the individual and the
organisation. We have achieved
this through initiatives such as the
annual town halls with the Group
CEO and IFAL CEO, regular Group
wide communications from the Group
CEO and transparency about the
progress we have made against the
commitments made as a result
of the 2022 engagement survey.
People and culture
Last year, the board approved an
employee engagement framework
and work has continued to ensure
the activities within this framework
have been implemented. These
have enhanced existing practices
and provided employees with the
opportunity to share their views:
•
Introduction of private sessions
between the non-executive board
and senior managers;
•
A people update from the Head of
HR at each Group board meeting
enhanced to include progress
against the commitments that
were made to employees further
to the 2022 engagement survey;
•
Maturing of the people
management information (MI)and
narrative provided to the Group
board to better understand people
trends within the Group;
•
Introduction of employee forums
at each employing company in the
Group.
We will continue to evolve these
activities in 2024.
Looking forward, we are committed to
maintaining a culture which ensures
employees are motivated, committed
to their role and supporting the Group
in achieving its goals. We are proud
of the culture we have created which
we will continue to strengthen so as
to retain and attract the best talent to
drive further success.
FY23 highlights
Obtained
London
Living Wage
accreditation
for the Group
Carried
out our
second Group
engagement
survey
Embedded
our new
performance
management
framework to underpin
our performance
related variable
pay structure
Created
a feedback
loop between
the board and
employees through
the introduction
of employee
forums
Built a
well-being
suite at our
London office
Enrolled all
managers in
mental health
training
Enhanced our
occupational
maternity and
paternity pay
schemes
Signed
up to the
“Women in
Finance”
charter
46
Implement
a mentoring
programme
Embed our
Training and
Development
strategy
Embed
our Social
strategy
Continue
to enhance
employee
engagement and
motivation
Progressing
our diversity,
equity, and
inclusion
initiatives
Deepening the
board oversight
of culture and how
it supports our
strategy
People engagement
Engagement survey
We strive to ensure employee
engagement is at the core of what
we do as we know that employees
are at the heart of our success. This
year we held our second annual Group
engagement survey which enabled us
to identify the progress we have made
since last year’s survey, what we are
doing well and future opportunities for
improvement.
The survey was comprised of
twelve sections: role, training and
development, leadership, reward
and recognition, wellbeing, inclusion,
communications, our Company, our
clients, engagement, enablement, and
empowerment. We were incredibly
pleased with the results of this years’
survey, which showed high levels of
engagement in almost all areas. We
scored particularly highly in relation to
employee wellbeing (94%), inclusion
(94%) and our values being aligned
to the way we do business (93%).
Our results in these areas were higher
than the external benchmarks and the
results we received last year.
We were also pleased to see that
there has been a positive impact on
the engagement scores of the areas
we focused on this year, particularly
that employees understand their
Company’s strategy and values (92%),
managers are communicating in a
timely manner (93%) and the ongoing
belief that our Company actively looks
for ways to improve and better our
service for clients (95%).
In response to this year’s feedback,
we have received from employees, we
have been able to create new localised
action plans for each subsidiary
company, recognising this multi-
tracked approach best engaged our
people to deliver results last year.
Health and well-being
We place great importance on
promoting the health and well-being
of our employees. We have continued
to encourage open communication
and the breaking down of stigmas
across the business this year so that
our employees are comfortable talking
and listening to each other.
We were pleased this continued to
be recognised within our employee
engagement survey, with 94% of
employees feeling their manager
supports and cares about their
wellbeing (up from 91% in FY22). We
will measure this again in next year’s
survey and hope to maintain our
strong performance in this key metric.
To ensure we promote the health
and wellbeing of our employees, we
have zero tolerance of any form of
bullying and harassment and this is
underpinned by our Anti-Harassment
and Bullying Policy, to which all
employees are required to adhere.
We understand the necessity
in supporting our employees in
managing their mental health.
This year we took a multi-pronged
approach by enrolling all managers
at our London office on a mental
health awareness course facilitated
by an external expert organisation,
provided non-mandatory sessions
which employees were able to attend
and continued to raise the number
of mental health first aiders in the
Group, encouraging employee access
to support when needed. Employees
can contact the mental health first
aiders if they are experiencing mental
health issues and need someone to
talk to. Additionally, we continue
to participate in mental health
awareness week. We used this week
to promote internal and external
resources to employees and to raise
FY24 priorities
47
money for Mind, the mental health
charity that aims to ensure no one
has to face mental health problems
alone.
These initiatives have been further
complemented by a suite of non-
salary benefits our employees and
their families can utilise if they are
struggling with their physiological or
psychological health. Our employees
and their families are eligible to join
our company-funded private medical
insurance. They also have direct
access to our employee assistance
programme, which is a confidential
service and offers professional help
and support on a wide range of life
and domestic concerns.
To promote and protect the well-
being of our employees we have
also built a well-being suite at our
London office, which is comprised of
a medical room, a multi faith room
and a well-being room.
We understand the importance of
continuing to shine a light on other
important topics and this year we
have published our first Menopause
Policy. We have also appointed
Menopause Champions for employees
if they require confidential support.
Additionally, a well-being hub
has been created on our intranet,
which provides access to tools and
resources to support this and other
areas of well-being.
Internal communications
Our executive team recognise
the importance of effective
communication with our employees, to
maintain our culture, keep employees
aligned in a hybrid environment and
identify opportunities for the future.
This year, we are pleased we have
enhanced our variety and formats of
communications. Our on-line updates
and internal monthly newsletter
ensure all employees across the
Group are aware of the key business
updates and feel included in the
business and its successes. Our Group
CEO, Alexander Scott, sends regular
updates to the whole Group.
Alexander and Jonathan have
continued to provide all-employee
Company updates in person. These
events update colleagues on our
financial results and our plans for the
future. In these sessions, attendees
are provided with the opportunity
to ask questions of the senior
management team as well engage at
the social events that follow.
Our NEDs host regular ‘manager
converse’ sessions with members of
the senior management team. This
forum allows the senior manager
to provide an update on key
departmental issues, future plans and
team environment. These meetings
are invaluable as they provide the
directors with insight into the culture
and operational detail of the business
in a structured format.
Engagement forums
To further enhance the feedback loop
between the board and the rest of the
workforce and utilise the knowledge
gained to improve on our employee
offering, Rita Dhut, DNED and Lucy
Smith, Head of Human Resources,
chaired the Group’s first engagement
forums this year.
Employees from each subsidiary
company were invited to attend the
sessions and the topics of discussion
were derived from key feedback from
the employee engagement survey.
We have evaluated the success of the
forums and have created an action
plan to implement improvements
in these areas. We will continue to
hold these sessions over the next
year, using key topics from the latest
engagement survey. The feedback
obtained within these sessions will
feed into our People strategy.
48
Talent management
We understand the importance of
retaining our existing talent and
taking steps to ensure we are best
placed to attract future talent. A key
component of this year’s progress is
the provision of wider ongoing training
and development opportunities and
the expansion of our internal Training
and Development team to enhance
the resource available. The team
also continue to work closely with
the business to secure fulfilment of
our internal and external training
obligations.
This year we have taken steps to
evolve our Training and Development
strategy and identified Training
priorities. The implementation of this
strategy started this year and will
continue into next year. The priorities
identified are:
Ensuring that we have robust talent
maps and succession plans in place
is key to preparing ourselves for the
future. This year we have ensured
that talent maps are in place for all
employees and succession plans are
in place for the senior management
team. Over the next year we will
continue to deepen our succession
plans and work towards providing the
appropriate training and support for
these successors.
Additionally, we have re-structured
our variable remuneration offering,
so the annual cash bonus is more
tangibly linked to performance. This
has had a positive impact on our
ability to attract and retain talent
this year. All managers have been
supported through this change
and the talent maps referenced
above have ensured that employee
performance has been regularly
reviewed throughout the year, so
the process is fair and equitable for
all. Our performance management
framework will continue to evolve over
the next year and all managers will be
provided with the appropriate training
and support.
A focus over the next year to support
our talent will be to design, implement
and embed mentoring programmes.
One strand will ensure all new starters
to the business have access to a
mentor to support their integration
into the Group. A further strand will
consider how we introduce mentoring
for Women in Leadership.
Support for certifications
We recognise the importance of
providing job-relevant training, both
in increasing our productivity and in
increasing employee engagement
and job satisfaction. To this end,
we encourage all our employees to
pursue professional qualifications to
strengthen their skills.
Our people are offered a range of
approved qualifications in the areas
of investment, pensions and other
relevant subjects; all employees
are eligible to undertake
these
qualifications. To support our
employees, the Group offers financial
support by funding the cost of exam
entry and the core study text, as
well as time support in the form of
additional study leave.
1.
Performance
management
2.
Regulatory
training
3.
New Manager
development
4.
Diversity,
Equity and
Inclusion
5.
Mental
health
49
Diversity, Equity and Inclusion (DE&I)
We firmly believe creating a culture of belonging will magnify our success and
we recognise the value of a diverse workforce and an equitable and inclusive
workplace. We continue to operate on the principle that greater diversity
of thought and experience within our business will deliver a more robust
performance for our stakeholders.
The Group already has a number of people processes in place to ensure that
its employees and potential employees are treated fairly and equitably, which
is underpinned by our Equal Opportunities Policy and our DE&I strategy. We
regularly review and update our policy in order to fulfil more effectively our
DE&I goals.
We work with our external recruitment partners to ensure a fair, non-
discriminatory and consistent recruitment process to provide opportunity to all
potential employees, irrespective of gender or any other characteristic.
To continue to demonstrate the value we place on working parents, we
strengthened our company maternity pay and company paternity pay offering
this year, our family friendly offering is now competitive within the financial
services industry.
We have augmented our collection of data on Group and company diversity. With
deeper analysis of the data and clarity on achievable yet ambitious milestones we
intend to progress our evidence-based DE&I strategy and framework.
For 2024 our planned actions include:
•
Partner with 10,000 Black Interns initiative.
•
Partner with universities to provide social education to students from
underprivileged backgrounds.
•
Review the structure of succession plans through the lens of equal
opportunity for all.
Community
We take pride that each year we
pro-actively source opportunities
to support charitable causes our
employees care about. This year,
we provided employees with the
opportunity to partake in supporting
the Turkey-Syria earthquake appeal.
The Company committed to matching
the employee donations and we raised
a total of £10,600.
To mark one year on from Russia’s
invasion of Ukraine, we also jointly
sponsored a ‘Rock for Ukraine’ event
in February 2023. The event was
held in London to raise money for the
refugees from the war in Ukraine. The
Company purchased tickets to the
event and all employees at the London
office were able to recognise the hard
work of their peers and nominate a
colleague to attend.
In a new initiative for the Group, we
partnered with Kingston University to
provide some of their finance students
from underprivileged backgrounds
with the opportunity to complete
work experience at our London office.
The first cohort of work experience
students joined us in September 2023
and the students were able to obtain
experience of working within several of
our departments.
Over the next year we will continue to
explore ways in which we can enhance
our community support and the
evolution of our social strategy.
50
Our workforce
Our workforce is located in the UK, Australia and the Isle of Man. The
headcount per subsidiary company, as at 30 September 2023, is as follows:
The charts below detail the gender ratio at each of the Group’s subsidiary
companies. These ratios are accurate as at 30 September 2023.
ISL
38%
62%
Female
Male
ILINT
89%
11%
Female
Male
T4A
Female
Male
30%
70%
IAD
Female
Male
21%
79%
Gender pay gap
IntegraFin Services Limited (ISL),
one of our Group subsidiaries, is
required to publish its gender pay
gap information on an annual basis.
These results have always compared
favourably to other companies in
our sector and our 2022 results
demonstrate the ongoing steps we
have taken to support an equitable and
inclusive workplace.
MEAN
GENDER
PAY GAP
INCL.
BONUS
MEDIAN
GENDER
PAY GAP
INCL.
BONUS
2018
12%
3%
2019
13%
5%
2020
14%
9%
2021
10%
4%
2022
18%
4%
We are pleased to see the median has
remained low, helping to evidence that
our overall pay structure remains fair
and equitable. It is acknowledged that
there has been a notable increase in
the mean gender pay gap this year.
This is due to the proportion of males
in more senior roles being adversely
affected by the following:
•
The retirement of some senior
female employees;
•
A higher proportion of senior
female employees reverting to
flexible working hours compared
to our senior male employees and,
as required by the rules, their
actual pay is included not their
full-time equivalent pay;
GROUP HEADCOUNT
IntegraFin Services Limited
457
IntegraLife International Limited
9
Time 4 Advice Ltd
69
IAD – (UK & Australia)
114
Total Group headcount
649
51
•
Senior female employees being
on maternity leave as at the
snapshot date and therefore
excluded, as required by the
rules, from our data;
•
The impact of senior females
being on maternity leave having
a disproportionate effect when
compared to males on paternity
leave.
We keep our pay and benefits structure
under review to ensure our salaries are
equitable when compared to internal
peers and the external market.
We will not exclusively advantage
females but will continue to remove
any actual or perceived barriers female
employees could have been more likely
to face than their male colleagues.
Diversity data
The Group employed 649 employees and 6 NEDs are officers of the Company.
The breakdown of our people by gender as at September 2023, was as follows:
Ethical standards
The Group is committed to high standards of governance, ethical and moral
standards. Our core value of ‘doing the right thing’ underpins all our operational
practices and informs our people’s conduct. This is formalised in our internal
policies which are made available to all employees on our intranet. We require
our employees to undertake regular, mandatory training to ensure awareness and
understanding of their provisions. Our ethical standards are comprised primarily
of the policies that govern employee conduct, including the Equal Opportunities
policy, Anti-Harassment and Bullying policy, Anti-Bribery and Corruption policy,
Anti-Money Laundering policy and Whistleblowing policy.
Anti-bribery and corruption
The Group has a zero-tolerance approach to financial crime to protect ourselves,
our clients and our stakeholders. We have laid out the controls and processes in
place to prevent financial crime in Our Anti-Bribery and Corruption policy and our
Anti-Money Laundering Policy, as well as the responsibilities of our staff, both
generally and in key departments or roles. The Anti-Bribery and Corruption policy
and the Anti-Money Laundering policy are both reviewed and updated annually by
the Money Laundering Reporting Officer.
Internal audit conducts audits of our operations, controls and processes based
on risk; areas and policies identified as high-risk, that includes financial crime
related polices, form part of the risk assessment exercise to produce the internal
audit plan. For more information on our internal audit approach, the Group
Internal Audit Charter is available on our website at:
https://www.integrafin.
co.uk/legal-and-regulatory-information/
.
MALE
FEMALE
NUMBER
%
NUMBER
%
Board directors
6
67
3
33
Senior managers
3
43
4
57
Direct reports
12
60
8
40
All employees
402
65
217
35
Total employees
649
52
Whistleblowing policy
Recognising that the ability to voice genuine concern without fear of reprisal
is essential, the Group maintains a Whistleblowing policy applicable to all
employees and available to view on our intranet. This reiterates our employees’
responsibilities in reporting suspicions, outlines the reporting lines for
whistleblowing concerns and establishes that whistleblowers are protected from
retaliation. As with all policies, we periodically audit the Whistleblowing policy in
line with the risks in the annual risk plan.
Human rights and modern slavery
We continue to recognise the important role we have to play in the support of
human rights and we do not tolerate modern slavery of any kind. The Group
continues to underpin this support through the publication and enforcement
of our modern slavery statement which applies to all Group companies and
all suppliers. The statement can be found at
https://www.integrafin.co.uk/
modern-slavery/
.
53
FINANCIAL REVIEW
Headlines
Group revenue remained broadly
steady in FY23, increasing by
1% to £134.9 million. This was
against another year of economic
volatility, due to elevated
inflation and rapidly increasing
interest rates, both of which
impacted the financial markets
and client wealth.
Despite ongoing global economic
challenges, FY23 ended with a
record 230,294 Transact platform
clients (FY22: 224,705) and
7,683 registered advisers (FY22:
7,537).
IHP Group has a strong liquidity
profile, largely due to regulatory
capital requirements, and
therefore benefited from UK
interest rates rising, with interest
received on cash increasing from
£0.6 million in FY22 to £5.3
million in FY23.
Headline IFRS profit before
tax rose 15% to £62.6 million
(FY22: £54.3 million), however
underlying profit before tax
fell by 4% to £63.0 million
(FY22: £65.8 million). The
reduction is due to an increase in
administration expenses, largely
driven by the ongoing strategic
programme of investment in
software and IT infrastructure
and offset by the increase in
corporate interest income.
Profit after tax rose 13% to
£49.9 million (FY22: £44.0
million).
EPS is 15.1p (FY22: 13.3p).
After removing all non-
underlying expenses in FY23,
underlying EPS* is 15.2p,
compared with 16.3p in FY22.
Transact platform operational performance
1 Other movements includes fees, tax charges and rebates, dividends and interest.
Funds Under Direction closed the year up 10% on FY22 at £55.0 billion.
FY23 gross inflows of £6.4 billion, in a competitive marketplace and with ongoing
economic pressure on our clients, are due to the reliability and quality of our
advised investment platform.
Whilst outflows have increased to £3.8 billion, the annualised rate is 7% of
opening FUD (FY22: 6%) therefore they are still within the historical banding,
as a percentage of FUD, that we expect. One factor driving outflows is clients
withdrawing savings as the cost of living has increased and also as the world has
returned to normal post lockdown.
Our net flows of £2.7 billion are strong for the sector and represent more than
50% of the increase in FUD in FY23.
T4A operational performance
In the 12 months to September 2022, T4A has increased CURO licence users by
22%, from 2,253 at 30 September 2022, to 2,752 at September 2023.
*Alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS.
They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235.
FY23
£m
FY22
£m
Opening FUD
50,070
52,112
Inflows
6,406
7,275
Outflows
(3,753)
(2,873)
Net flows
2,653
4,402
Market movements
2,272
(6,248)
Other movements
1
(36)
(196)
Closing FUD
54,959
50,070
54
Group financial performance
There are two streams of Group revenue: investment platform revenue
(96% of total revenue) and T4A revenue (4% of total revenue).
Investment platform revenue
Investment platform revenue has increased by £0.4 million year-on-year to
£130.1 million and comprises three elements, 99% (FY22: 98%) of which is
from a recurring source.
Annual commission income (an annual, ad valorem tiered fee on FUD) and
wrapper administration fee income (quarterly fixed wrapper fees for each of the
tax wrapper types available) are recurring. Other income is composed of buy
commission and dealing charges.
Average daily FUD for the year, arising from the performance of the assets in
client portfolios, increased by 2% in FY23 to £53.6 billion. Annual commission
income increased to £116.1 million in FY23. The increase in annual commission
revenue was moderated by the reduction in the annual commission rate from
0.27% to 0.26%, with effect from 1 July 2022, therefore only three months of
the reduction impacted FY22, but a full 12 months impacted FY23.
Recurring wrapper administration fee income increased by £0.7 million (6%)
year-on-year, reflecting the increase in the number of open tax wrappers for
both existing and new clients.
Buy commission, included in other income, has been deliberately reduced as
a component of revenue each year. Buy commission was £0.7 million in FY23
(FY22: £1.5 million), falling due to the threshold at which clients receive a
rebate of buy commission being reduced from £0.2 million which was the
threshold from 1 March 2022, to £0.1 million with effect from 1 March 2023.
The reduction in the buy commission threshold is another positive step in our
responsible pricing strategy, as we seek to remove an increasing proportion of
clients from the buy commission charge and simplify our fee structure.
Investment platform revenue
FY23
£m
FY22
£m
Annual commission income (recurring)
116.1
115.9
Wrapper fee income (recurring)
12.3
11.6
Other income
1.7
2.2
Total platform revenue
130.1
129.7
T4A revenue
T4A’s revenue was £4.8 million for
FY23, compared with £3.9 million for
FY22, an increase of 23%. This was
driven by an increase in recurring
revenue from additional CURO user
licences.
Interest income on corporate cash
Interest income rose from £0.8 million
in FY22 to £6.4 million in FY23. The
average Group corporate cash balance
was £186.3 million over the year and
the Bank of England base rate rose 3%
over the course of the financial year,
ending the financial year at 5.25%.
This resulted in interest income on
corporate cash balances rising £4.7
million, to £5.3 million. We also
received another £0.8 million, being
a combination of interest due from
the Vertus loan facility and interest
received from HMRC.
55
Operating expenses
FY23
£m
FY22
£m
Employee costs
53.9
47.1
Occupancy
2.8
2.4
Regulatory and professional fees
9.8
9.8
Other income – tax relief due to
shareholders
(1.6)
(2.4)
Other costs
6.8
6.3
Non-underlying expenses –
backdated VAT and interest
-
8.8
Non-underlying expenses – other
0.4
2.7
Total expenses
72.1
74.7
Depreciation and amortisation
2.5
3.0
Total operating expenses
74.6
77.7
Operating expenses on a statutory IFRS basis have reduced by £2.6 million,
or 3%.
Underlying expenses
Employee costs £53.9 million (+£6.8 million, +14%)
Costs have increased due to increased headcount and pay rises.
Group employee numbers through the year increased by 6% (FY22: 8%) from
an average of 594 in FY22 to an average of 631 in FY23, this accounted for
£2.7 million of the increase in costs. Notable senior additions are a CTO and
CRO. We have also recruited a further 26 people in IT through the year, as we
continue to implement plans announced in FY22 to significantly increase system
development capacity across the Group and drive future efficiencies.
We continued to enhance salaries to reflect the inflationary environment,
recognising the pressures being placed on our people due to the rise in the cost
of living. We also want to ensure we retain talent and we monitor the market
with regard to inflationary pressures and market-competitive salary levels.
Inflationary pay rises, including resultant impact on share scheme costs and
company pension contributions, increased costs by £3.7 million in FY23.
Current year VAT, included in Other costs (£3.6 million (+£0.4 million
(+13%))
Current year VAT has increased by £0.4 million, largely due to increased
investment platform development software fees, charged by IHP’s wholly
owned software development company and now subject to reverse charge VAT.
56
Occupancy costs £2.8 million (+£0.4 million, +17%), depreciation and
amortisation costs £2.5 million (-£0.5 million, -17%)
Occupancy costs increased by £0.4 million, and depreciation and amortisation
reduced by £0.5 million. The increase in occupancy costs is due to the head office
lease ending in June 2023 and the accounting impact of IFRS 16, the Leases
accounting standard, no longer applying. This means depreciation of the right of
use asset has been replaced by rent expense for the final three months of the
financial year. The lease is being renewed for a limited period.
Regulatory and professional fees £9.8 million (no change)
Regulatory and professional fees did not increase in FY23, due to an uplift in
professional fees being partially offset by regulatory fees that were lower than
expected.
Other income – tax relief due to shareholders £1.6 million (-£0.8 million,
-33%)
Tax relief due to shareholders relates to life insurance company tax requirements
and thus is subject to valuations at year-end, which are inherently dependent on
market valuations at that date.
Non-underlying expenses
Non-underlying expenses – other £0.4 million (-£2.3 million, -85%)
In FY22, within non-underlying expenses, we recognised £3.0 million of ongoing
expenses. This was attributable to the IFRS requirement that we recognise the
post combination deferred and additional consideration payable to the original
T4A shareholders in respect of the acquisition of T4A, as remuneration over the
four years from January 2021 to December 2024.
However, T4A has not met the minimum threshold for highly stretching targets
to earn the additional consideration element of post combination remuneration.
Therefore, the post combination expense in respect of the additional
consideration element that was recognised in FY21 and FY22 of £1.6 million has
been released, and we have not recognised any cost in FY23. This has led to the
reduction in non-underlying post combination remuneration expense for FY23
from £3.0 million to £0.4 million.
Moreover, the post combination consideration cost in respect of FY24 and FY25
is expected to reduce to £2.1 million and £0.5 million respectively, as only the
deferred consideration element will now be recognised.
57
Tax
The Group has operations in three
tax jurisdictions: UK, Australia and
the Isle of Man. This results in profits
being subject to tax at three different
rates. However, 96% of the Group’s
income is earned in the UK.
Shareholder tax on ordinary activities
for the year increased by £2.5
million, or 24%, to £12.8 million
(FY22: £10.3 million) due to the
increase in taxable profit and the
increase in corporation tax rate from
19% to 25%, with effect from 6 April
2023.
Our effective rate of tax over the
period was 20% (FY22: 18%).
The effective rate of tax in FY22
was dampened by the effect of
the backdated, non-recurring VAT
expense of £8.8 million, incurred
in September 2022, being tax
deductible.
Our tax strategy can be found at:
https://www.integrafin.co.uk/
legal-and-regulatory-information/.
Consolidated statement of financial position
Net assets have grown 10% (FY22: 8%), or £16.7 million, in the year to £189.9
million, and the material movements on the consolidated statement of financial
position are as follows:
Cash and significant cash flows
Shareholder cash has decreased by £5.1 million year on year to £177.9
million (FY22: £183.0 million). This is due to the strong cash flows generated
from operating activities being used to invest in gilts to maximise returns,
whilst maintaining minimal risk on assets supporting regulatory solvency
requirements. The gilt investments increased by £19.3 million from £3.1 million
to £22.3 million. We also paid dividends of £33.7 million in the year (FY22:
£33.7 million).
We continue to operate without any need for debt, so have not incurred an
increase in financing costs from the increase in base rate through the year,
rather, we benefited due to our strong corporate cash reserves.
Deferred tax asset, non-current provisions and non-current deferred
tax liability
The reduction in the deferred tax asset of £5.2 million to £0.8 million
(FY22: £6.0 million) the non-current provisions of £5.6 million to £40.5 million
(FY22: £46.1 million), and the current provision of £3.0 million to £7.7 million
(FY22: 10.7 million), plus the increase in non-current deferred tax liabilities of
£6.4 million to £7.3 million (FY22: 0.9 million) are all a function of the realised
and unrealised gains that have arisen on policyholder assets, as the value of
linked funds has risen year on year.
ILUK holds tax charges deducted from ILUK policyholders in reserve to meet
future tax liabilities and the tax reserve may be paid back to policyholders if
asset values do not recover such that the tax liability unwinds.
Investments and cash held for the benefit of policyholders and liabilities
for linked investment contracts (notes 17, 18 and 20)
ILUK and ILInt write only unit-linked insurance policies. They match the
assets and liabilities of their linked policies such that, in their own individual
statements of financial position, these items always net off exactly. These line
items are required to be shown under IFRS in the consolidated statement of
comprehensive income, the consolidated statement of financial position and the
consolidated statement of cash flows but have zero net effect.
Cash and investments held for the benefit of ILUK and ILInt policyholders have
risen to £24.4 billion (FY22: £22.2 billion). This increase of 10% is entirely
consistent with the rise in total FUD on the investment platform.
58
Capital resources and capital
management
To enable the investment platform
within the Group to offer a wide
range of tax wrappers, there are
three regulated entities within the
Group: a UK investment firm, a UK
life insurance company and an Isle of
Man life insurance company.
Each regulated entity maintains
capital well above the minimum
level of regulatory capital required,
ensuring sufficient capital remains
available to fund ongoing trading and
future growth. Cash and investments
in short-dated gilts are held to cover
regulatory capital requirements and
tax liabilities.
The regulatory capital requirements
and resources in ILUK and ILInt are
calculated by reference to economic
capital-based regimes.
IFAL is subject to Investment Firms
Prudential Regime (IFPR) regulatory
capital and liquidity rules introduced
in January 2022, following the
implementation in the UK of the
MiFIDPRU rule book.
These prudential rules require the
calculation of capital requirements
reflecting ‘K’ factor requirements that
cover potential harms arising from
business activities. The K factors are
calculated using formulae for assets
and cash under administration.
Regulatory Capital as at 30 September 2023
REGULATORY CAPITAL
REGULATORY
REGULATORY
REQUIREMENTS
CAPITAL RESOURCES
COVER
£m
£m
%
IFAL
33.3
44.4
133
ILUK
201.4
261.6
130
ILInt
23.8
41.1
173
Regulatory Capital as at 30 September 2022
REGULATORY CAPITAL
REGULATORY
REGULATORY
REQUIREMENTS
CAPITAL RESOURCES
COVER
£m
£m
%
IFAL
32.6
39.7
122
ILUK
186.9
244.0
131
ILInt
23.7
42.0
177
The Company’s regulated subsidiaries continue to hold regulatory capital
resources well in excess of their regulatory capital requirements. We will maintain
sufficient regulatory capital and an appropriate level of working capital. We will
use retained capital to further invest in the delivery of our service to clients, pay
dividends to shareholders and provide fair rewards to employees.
The following table shows the surplus capital held by the Group, after
consideration of the Group’s risk appetite and future dividend payments. This is
shown on a different basis to the above table, which is on a regulatory basis while
the below shows equity on an IFRS basis.
59
Capital as at 30 September
2023
2022
£m
£m
Total equity
189.9
173.2
Loans and receivables, intangible assets and
property, plant and equipment
(30.6)
(30.6)
Available capital pre dividend
159.3
142.6
Interim dividend declared
(23.2)
(23.2)
Available capital post dividend
136.1
119.4
Additional risk appetite capital
(72.7)
(76.2)
Surplus
63.4
43.2
Additional risk appetite capital is capital the board considers to be appropriate
for it to hold to ensure the smooth operation of the business such that it can
meet future risks to the business plan and future changes to regulatory capital
requirements without recourse to additional capital – see the Going Concern and
Viability Statement on pages 69 to 71.
The board considers the impact of regulatory capital requirements and risk
appetite levels on prospective dividends from its regulated subsidiaries.
IFAL’s Public Disclosures document contains further details and can be found
on our website at:
https://www.integrafin.co.uk/legal-and-regulatory-
information/
.
As stated in the Chair’s report, the board has declared a second interim dividend
for the year of 7.0 pence per ordinary share, taking the total dividend for the
year to 10.2 pence per share (FY22: 10.2p).
Dividends
During the year to 30 September
2023, IHP (the Company) paid a
second interim dividend of £23.2
million to shareholders in respect of
financial year 2022 and a first interim
dividend of £10.6 million in respect of
financial year 2023.
In respect of the second interim
dividend for financial year 2023, the
board has declared a dividend of 7.0
pence per ordinary share (FY22: 7.0p).
The financial year 2023 total dividends
paid and declared of £33.7 million
compares with full year interim
dividends of £33.7 million in respect of
financial year 2022.
60
RISK AND RISK MANAGEMENT
Understanding our risks is key to safeguarding our clients, shareholders and
employees. By maintaining an effective risk management framework we aim
to achieve good outcomes that meet the Group’s strategic objectives within
approved risk appetites.
Overview
Effective risk management is critical for the delivery of the Group’s strategic
objectives and supports positive outcomes for our stakeholders.
Risk management assists the board in understanding its current and future risks
and provides appropriate information that is incorporated into our strategic
decision making and business planning processes. It encompasses all strategic,
financial and operational risks that may prevent us from fulfilling our strategic
objectives, as set out on pages 16 to 19. The inherent risk environment faced
by the Group develops over time, the impact and mitigation of these risks are
set out in the Principal Risks and Uncertainties section on pages 63 to 68.
Risk management and ownership culture
Promoting a culture of awareness and ownership is essential for ensuring that
risk implications are considered and managed for our stakeholders, who are
defined on page 80.
The Group Risk Management Policy (RMP) establishes the requirement for risk
to be considered across all the Group’s operations. The RMP is overseen by the
IHP CEO, supported by the senior management team. The IHP CEO, together
with the CRO, is accountable to the board for effective risk management across
the Group. The RMP is reviewed at least annually.
The Risk Management Framework (RMF), which supports the RMP, defines the
Group’s systems of governance, risk appetite and risk management processes.
This framework drives a consistent approach to identifying, measuring and
controlling risks, forming a continuous and disciplined part of the evaluation of
business opportunities, uncertainties and threats in managing good stakeholder
outcomes, within approved risk appetites.
Risks are captured through regular discussions with senior management and
risk owners across the Group, using a robust and consistent measurement
methodology, which is designed to ensure the capture of potential harms arising
from business activities.
The measurement includes the application of stress testing and scenario
analysis and considers whether relevant controls are in place, along with
available management actions.
We ensure an embedded and consistent risk management approach is adopted,
coupled with effective policies and procedures, designed to prevent, minimise
and/or detect any risk of failure to comply with regulatory obligations. The
extent of the risk is compared to board-approved risk appetites, as well as
specific limits and triggers. Reporting forms an integral part of the governance
framework and breaches in limits or appetite thresholds are escalated through
the relevant Committees. There is also a clear process for the escalation of risk
events.
Governance
The IHP Audit and Risk Committee
(IHP ARC) supports the board and
is responsible for reviewing and
challenging the manner in which the
Group implements and monitors the
adequacy of the RMF. The role and
activities of the IHP ARC are set out on
pages 97 to 105.
The audit and risk governance
arrangements of the Group’s regulated
entities are undertaken by audit
and risk committees (ARC) for each
regulated entity. These regulated
entity ARCs, which provide risk and
compliance challenge and oversight,
along with Internal Audit assurance
of the regulated entities, are made up
of independent NEDs. The IHP ARC
receives updates at each meeting from
the respective Chair of the regulated
entity ARCs on key areas of escalation.
Together, they assist the respective
boards and senior management in
fostering a culture that encourages
good stewardship of risk and an
emphasis that demonstrates the
benefits of a risk-based approach to
management of the Group.
The “three lines” risk governance
model
The Group’s RMF is implemented
through a “three lines” model, to
enable delineation of responsibility and
to ensure that the Company operates
within the risk appetite defined by the
ARC and approved by the board.
The ’first line’ business is responsible
and accountable for managing risks
on a day-to-day basis within appetite
and in line with risk policies. This is
then combined with oversight from the
’second line’ Group risk management
and compliance functions, and
independent assurance is provided by
the ‘third line’ Group internal audit
function to form a ‘three lines’ model.
61
RISK APPETITE
Our risk appetite is the degree of risk that we are prepared to accept in pursuit
of our strategic financial objectives.
The board is responsible for establishing the risk strategy and approving the risk
appetite statements. We define our risk appetite statements on a quantitative
and qualitative basis, using the principal risk taxonomy set out in our RMF. This
provides a consistent approach from which each of our operating companies set
their own risk appetite statements to meet the common aims of the Group. We
have generally adopted an overall conservative approach, which is reflected in
our risk appetite preferences and in the overall approach to risk management.
Our risk appetite preferences, aligned to our risk exposures, business strategy
and our desire to ensure good outcomes for all our stakeholders, can be
articulated as follows:
RISK CATEGORY
RISK APPETITE PREFERENCES
Strategic and
business risk
We ensure that our business provides an acceptable level of return within the boundaries of
the risks that are taken which are aligned with our strategic aims and approved appetites. We
aim to manage market consensus to be in line with internal business planning forecasts. We
proactively engage with external agencies including, analysts, media, regulators and industry
groups. Our business model and investment supports our ambitions and strategy for delivering
against climate related obligations.
Operational risk
We do not actively seek to take operational risk to generate returns. We accept a level of
operational risk that means the controls in place should prevent material losses but should not
excessively restrict business activities.
We aim to have a zero-risk appetite for operational risk that creates harm to, or results in poor
client outcomes; this includes any harm arising from systematic failures, from our cultural
outlook or in any element of the client life cycle. We have a zero-risk appetite for material
regulatory breaches.
Market risk
We prefer secondary market risk through charges determined on clients’ portfolio values. This
is central to our proposition and we accept the potential impact of the volatility of market prices
on financial performance.
Capital and
liquidity risk
We have a prudent capital management approach and we currently invest shareholder assets in
high quality, highly liquid, short-dated investments.
We prefer savings and pension products with low capital requirements and without financial
guarantees.
Credit and
counterparty risk
We limit our exposures to credit institutions with a high credit quality score for bank deposits,
trading debtors and trading related, pre-funding activity. We have limited appetite for intra-
Group lending.
Insurance risk
As regards the writing and administration of insurance business, we have a preference for
savings and pensions products with low levels of sums assured and no financial guarantees.
Group risk
We accept certain risks and ensure that these are appropriately identified, managed, mitigated
and monitored through the Group risk register.
Concentration risk
The risks facing the Group are identified and recorded in the risk register. The inherent and
residual risk profile is regularly reviewed to understand and assess any concentration of risks
and to ensure these are appropriately managed and monitored through our risk appetites and
governance arrangements.
62
Risk exposures are regularly assessed by the Group’s risk management function
against risk appetite, using a comprehensive set of key risk indicators which
are reported to senior management, the subsidiary ARCs, and the IHP ARC as
appropriate.
Risk capital frameworks
The Company’s regulated subsidiaries fall under various risk capital regimes.
The regimes are guided by similar underlying risk principles, albeit the results
and reporting requirements are regime specific.
The Company’s regulated subsidiaries maintain a sound and appropriate
system of capital management in order to meet their strategic capital
objectives, preferring a simple system of capital management, which reflects
the nature of their businesses. At a legal entity level, the regulated subsidiaries
are capitalised at the required regulatory minimum, plus an adequate buffer
defined as part of their capital management, risk appetite and dividend policies.
Our stakeholders expect us to be resilient in our operations. We actively
manage our risk exposure against appetite across our defined principal risk
categories, as well as the emerging risks derived from management insight
and other reliable external sources to undertake stress and scenario testing.
These are used to identify additional impacts on the ability of the Group and its
regulated subsidiaries to meet capital and liquidity needs, due to changes in the
external environment that are over and above the amount of capital held. More
details of these are set out in the Principal Risks and Uncertainties statement,
pages 63 to 68.
Oversight is provided by management, ARCs and boards to ensure exposures
are adequately identified and acted upon in a timely manner. We ensure,
through our Risk Capital frameworks, that our regulated entities hold adequate
capital to meet obligations. During the reporting period, each regulated
subsidiary was fully compliant with the applicable risk capital regime and any
applicable solvency capital requirement (SCR). Additionally, the balance sheets
and SCRs are regularly monitored and, in line with regulatory requirements,
reported to the applicable regulators as required.
Regulatory capital requirements
For information on our compliance with the relevant regulatory capital
requirements, please see pages 58 to 59 in the Financial Review.
63
PRINCIPAL RISKS AND UNCERTAINTIES
The directors, in conjunction with the board and ARC, have undertaken a review of
the potential risks to the Group that could undermine the successful achievement
of its strategic objectives, threaten its business model or future performance and
considered non-financial risks that might present operational disruption.
The tables below set out the Group’s principal risks and uncertainties to the
achievement of the identified strategic objectives, risk trend for 2023 together
with a summary of how we manage the risks. These have been referenced to the
strategic objectives set out on pages 16 to 19.
Business and strategic risks
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
Service standard failure –
our high levels
of client and adviser retention are dependent
upon our consistent and reliable levels of
service. Failure to maintain these service
levels would affect our ability to attract and
retain business. There is a potential risk of
greater outflows than expected and/or a net
outflow of FUD impacting profitability and/
or the medium/long-term sustainability of the
platform.
Change over the year
Stable
Aligned to strategic financial objectives
Sustainable growth
Increase earnings
We manage the risk by providing our client service teams with extensive
initial and ongoing training, supported by experienced subject matter experts
and managers. The challenges facing the business and the wider industry,
have increased during the year, however monitoring service metrics has
allowed us to identify the areas where there is deviation from expected
service levels or where processing backlogs have arisen and to deliver
targeted remediation plans to ensure client outcomes and service standards
are maintained. We have substantially reduced backlogs relative to FY22 and
are better able to address them when they occur.
We also conduct satisfaction surveys to ensure our service levels are still
perceived as excellent by our clients and their advisers. Service standards
are also dependent on resilient operations, both current and forward looking,
ensuring that risk management is in place.
T4A continues to develop the delivery of next generation CURO.
Diversion of platform development
resources –
maintaining our quality and
relevance requires ongoing investment.
Any reduction in investment due to diversion
of resources to other non-discretionary
expenditure (for example, regulatory
developments) may affect our competitive
position.
Change over the year
Increase
Aligned to strategic financial objectives
Sustainable growth
Invest
Increase earnings
The risk of reduced investment in the platform is managed through a
disciplined approach to expense management and forecasting. We horizon
scan for upcoming regulatory and taxation regime changes and maintain
contingency to allow for unexpected expenses e.g. UK Financial Services
Compensation Scheme (FSCS) levies, which ensures we do not need to
compromise on investment in our platform to a degree that affects our
offering.
The risk has increased over the year driven in large part due to preparation
for, and the implementation of, the Consumer Duty regime for our regulated
entities, both as manufacturers and/or distributors.
We remain proactive in embedding all mandatory changes (e.g. Consumer
Duty, Operational Resilience, HMRC changes to lifetime allowances) through
our business-as-usual model. Our platform developers remain responsive to
the business needs and have increased developer resources over the year.
64
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
Increased competition –
cheaper and/or
more sophisticated propositions
–
we operate
in an increasingly competitive market, both for
clients and their advisers. Consolidation in the
adviser market makes it more challenging to
attract and retain business. The consequences
may be that greater outflows are experienced
than expected and/or a net outflow of FUD
impacting profitability and/or the medium/
long-term sustainability of the platform.
Change over the year
Increase
Aligned to strategic financial objectives
Sustainable growth
Increase earnings
The advised market remains our key target and competitor risk is mitigated
by focusing on providing exceptionally high levels of service and being
responsive to client and financial adviser feedback and demands through an
efficient process and operational base.
We also keep close to the landscape of our platform competitors, as well
as the trends impacting the financial adviser market. Our platform service
and developments remain award winning. We release a monthly update
to our proprietary platform technology, incorporating improvements and
new functionality. We continue to develop our digital strategy, expanding
our Transact Online interface allowing advisers direct processing onto the
platform. This is essential to remain relevant and competitive, improving both
functionality and service efficiency and allows us to continue to increase the
value-for-money of our service by reducing client charges, subject to profit
and capital parameters when deemed appropriate.
The Group continues to review its business strategy and growth potential. In
this regard, it primarily considers organic opportunities that will enhance or
complement its current service offerings to the adviser market.
T4A continues to broaden our service offering to advisers. We also continue to
support the diversification of the adviser market through the Vertus scheme
which continues to be successful.
Financial risks
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
Stock and bond market value volatility
(Market Risk) –
our core business revenue is
derived from our platform business which has
a fee structure based, in large part, upon a
percentage of the FUD. Depressed equity and
bond values have an impact on the revenue
streams of the platform business.
Change over the year
Increase
Aligned to strategic financial objectives
Sustainable growth
Increase earnings
Generate cash
Retain strong balance sheet
Deliver on dividend policy
The risk of depressed stock and bond market values, and the impact on
revenue, has been and remains high. External economic, political and
geopolitical factors continue to influence markets in 2023. The risk is
mitigated through a wide asset offering which ensures we are not wholly
correlated with one market, and which enables clients to switch assets in
times of uncertainty. In particular, clients are able to switch into cash assets,
which remain on our platform supported by our top quartile interest rates. In
addition, our wrapper fees are not impacted by market volatility as they are
based on a fixed quarterly charge.
We can closely monitor and control expenses by continually driving efficiency
improvements in our business processes including increasing online and
digital processing. Strong investment platform service and sales and
marketing activity ensures we attract new advisers and clients. Sustaining
positive net inflows during turbulent times presents the potential for longer-
term profitability.
This value volatility is not expected to ease in the foreseeable future and
while hedging options have been explored, they have been deemed expensive
in terms of the revenue protection they afford.
65
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
Uncontrolled expense risk –
higher expenses than expected and
budgeted for would adversely impact
cash profits.
Change over the year
Increase
Aligned to strategic financial
objectives
Generate cash
Deliver on dividend policy
The risk has increased over the year as a direct result of sustained inflationary
pressures on the UK and global economy.
The most significant element of our expense base is employee costs. These are
controlled through modelling employee requirements against forecast business
volumes. The Group has made sustainable salary increases to employees over the year
and built out its capability in several key areas across all three lines of risk governance
to support the business.
Planned investment in IT and software development deliver enhancements to our
proprietary platform enabling us to implement enhanced straight through processing
of operational activities. A robust multi-year costing plan is produced which reflects
the strategic initiatives of the business. This captures planned investment expenditure
required to build our operational capability and cost-effective scalability of the business.
Cost base variance analysis is completed monthly with any expenditure that deviates
unexpectedly from plan being rigorously reviewed to assess the likely trend with
reforecasts completed accordingly.
Occupancy and utility costs have also increased. Regulatory fees decreased slightly
while professional fees have increased in line with expectations, as a result of the broad
regulatory agenda.
Also notable, and a growing issue, is that suppliers are wrestling with the requirements
of climate initiatives in terms of disclosures, and with unit costs for sustainable or green
energy and supplies likely to attract a premium as organisations stride toward a net
zero carbon footprint. Such costs are difficult to control directly and may unexpectedly
impact the base case budget.
Capital strain (including liquidity)
–
unexpected, additional capital or
liquidity requirements imposed by
regulators may negatively impact our
solvency coverage ratio.
Change over the year
Stable
Aligned to strategic financial
objectives
Retain strong balance sheet
Deliver on dividend policy
We continuously monitor the current and expected future regulatory environment
and ensure that all regulatory obligations are or will be met. This provides a proactive
control to mitigate this risk. Additionally, we carry out an assessment of our capital
requirements, which includes assessing the regulatory capital required. We retain a
capital buffer over and above the regulatory minimum solvency capital requirements.
We await the detail of corporate tax changes resulting from the OECD Base Erosion and
Profit Shifting project relating to our Isle of Man life company, ILInt. We anticipate that
there will be a reduced level of retained income, which will impact the future coverage
levels of regulatory capital.
Credit risk
–
loss due to defaults
from holdings of cash and cash
equivalents, deposits, formal loans
and reinsurance treaties with banks
and financial institutions.
Change over the year
Stable
Aligned to strategic financial
objectives
Retain strong balance sheet
The Group seeks to invest its shareholder assets in high quality, highly liquid, short-
dated investments. For the banks holding corporate cash, maximum counterparty limits
are set in addition to minimum credit quality steps.
The Vertus loan scheme has an agreed commitment level and the value of the drawn
and undrawn balances are monitored regularly. Loans are made on approved business
cases.
66
Non-financial risks
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
Reputational risk –
the risk that current and
potential clients’ and their advisers desire to do
business with the Group reduces due to a lower
perception in the marketplace of the Group’s
offered services covering the Transact platform
and T4A adviser support software.
Change over the year
Stable
Aligned to strategic financial objectives
Sustainable growth
The Risk Management Framework provides the monitoring mechanisms
to ensure that reputational damage controls operate effectively and
reputational risk is mitigated.
Mitigation includes a focus on internal operational risk controls, error
management and complaints handling processes as well as root cause
analysis investigations. Additionally, controls include training for key
company staff on how to manage company reputation internally; regular
management and monitoring of the company websites and social media;
and engaging the services of an external PR firm to consult on reputational
matters.
Political and Geopolitical risk –
the risk of
changes in the political landscape within the UK
and between countries or geographies, disrupting
the operations of the business or resulting in
significant development costs.
Change over the year
Increase
Aligned to strategic financial objectives
Political and Geopolitical risk cannot be directly mitigated by the Group.
However, by closely monitoring developments through its risk horizon
scanning process, potential impacts are taken into consideration as part of
the business planning process.
The external geopolitical environment in 2023 has built on 2022 and
become increasingly uncertain through a series of significant global events,
including the continuing Russian invasion of Ukraine, the escalating conflict
in the Middle East, trade tensions between USA and China, the global
energy crisis and supply chain issues. Furthermore, domestic political
instability exists within both the UK and the USA with elections due
within the next 24 months. These dynamics and related events can cause
disruption to markets and macroeconomics with a direct impact on FUD for
the Group.
Operational risk
(including operational
resilience and the sustainability agenda)
–
the
risk of loss arising from inadequate or failed
internal processes, people and systems, or from
external events.
Change over the year
Increase
Aligned to strategic financial objectives
Sustainable growth
Invest
Increase earnings
Generate cash
The Group aims to minimise operational risks at all times, through a strong
and well-resourced control and operational structure. Note that operations
form an integral part of the ESG and sustainability agenda.
In terms of our progress in this area, please see the TCFD section, which
details our progress to reduce the Group’s carbon emissions and enhance
our reporting on pages 23 to 44, and the Responsible Business section
on pages 45 to 52 to see how the Group is ensuring diversity, equity and
inclusion is actively embedded across all areas of the business.
We note below the principal types of operational risk below and provide the
change over the year for each.
Sustainable growth
Invest
Increase earnings
Generate cash
Retain strong
balance sheet
Deliver on
dividend policy
67
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
People –
the inability to attract, retain and
motivate performing and values-aligned
employees within the business.
Significant attrition rates of such employees
or an inability to attract such new employees
can have a detrimental impact on the
service provided as well as poor adherence
to regulatory procedures and requirements
resulting in reputational damage and potential
compliance breaches.
Change over the year
Decrease
The business operates both performance management and talent recognition
programmes to reward high performing employee members, identify future
leaders, and retain and attract talent within the business.
We maintain a comprehensive career and training development programme
and provide a flexible working environment that meets our employees’
and business needs. These are supported by robust Group HR policies and
practices. Our benefits package is competitive.
No less than annually, the Group undertakes a staff engagement survey and
addresses any identified areas for improvement to drive high engagement.
Since the “great resignation” of 21/22 difficulties with the retention of
employees and the ability to attract new recruits in our UK and Australian
operations have significantly improved.
IT Infrastructure and software
–
ageing
and underinvested IT infrastructure and
software has the potential to cause the Group
disruption through systems outages, a failure
to plan and maintain operational capacity and
create vulnerabilities to operational resilience
and loss of a competitive market share as
newer technology emerges.
Change over the year
Stable
The continuous and evolving sophistication of the cyber threat to our IT
infrastructure environment means risk within this space remains high.
Wars and conflict contribute to a global technology environment that is
constantly under attack. Protecting our services against this continues to be
a core focus. We continue to carry out cyber penetration testing and evolve
our cyber security capabilities. Awareness training is provided to ensure
employees understand and recognise threats to our business systems.
Investment in IT and software development continues, with modernisation
of our digital workplace capabilities presenting opportunity for improved
security controls.
There is a full programme of digitalisation work to be delivered over the
business planning period for our proprietary investment platform, focussing
on the provision of online, straight through processes for common financial
planning practices, which will benefit our UK advisers and their clients. This
will also significantly increase the scalability of our investment platform.
Integration between adviser software applications is paramount, with data
access and synchronisation between systems being key requirements. Our
Application Programming Interfaces (APIs) are already integrated with many
third-party software providers, and we will continue to enhance our data
services to meet the demands of our clients in a secure manner.
68
PRINCIPAL RISK AND UNCERTAINTY
MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY
IT Resilience and Information Security
- the Group creates, obtains, stores,
processes and retrieve significant volumes of
commercial and corporate matters, some of
which is highly sensitive.
Change over the year
Increase
Data and continuity of services are critical focus areas for us given the increase
of risk in channels like cybersecurity. Ensuring that our core services are
resilient and that our controls around business and client data are robust is a
constantly evolving focus area. Resilience testing of the Transact platform, for
example, takes place every two months.
In particular, the Group has a dedicated financial crime team and an on-going
fraud and cyber risk awareness programme. Additionally, the Group carries out
regular IT system vulnerability testing. The crisis management team (CMT)
reviews the Group’s business continuity plans during the course of the year.
Key changes in the last year are the establishment of dedicated first and second
line Cyber Security teams, the heads of which are due to start in early 2024.
This will provide an improved governance and operational framework for Cyber
Security.
Beyond IT and cyber security, the Company also has a function led by the
Company’s Data Protection Officer (DPO) to manage information security risk
and compliance with UK GDPR. The DPO carries out monitoring and works with
the business to ensure the risks from its evolving physical and digital workplace
and business operations are managed.
Regulatory risk
- the financial services
regulated entities within the Group have
a full and stretching regulatory agenda.
Expanding law, regulation and guidance need
analysing and transitioning effectively into
business as usual to avoid failing to comply
with regulatory rules or standards.
Change over the year
Increase
The Group has an established compliance function that analyses regulation
and advises on and monitors how our financial services regulatory standards
are met.
The financial services regulated entities in the group ensure regulatory
standards are met through a framework of policies, procedures, governance,
training, horizon scanning, monitoring and engagement with our regulators.
Cross-departmental projects are established to deliver for significant regulatory
changes, with Group internal audit undertaking reviews during the project
phases and/or post-implementation thematic reviews. During the period such
projects included preparation and implementation of the FCA’s Consumer Duty,
which requires ongoing work to ensure it is embedded within operations, and
work to meet FCA PS21/3 Operational Resilience requirements.
Meeting the regulatory agenda is an imperative for the operation of our core
platform business. The regulatory agenda remains challenging, particularly in
light of the demands of the new Consumer Duty.
Emerging risk focus
Through regular conversations and
more formal quarterly risk review
meetings with risk owners and other
business stakeholders, attending
industry events and reviewing external
sources, emerging risks are identified.
These emerging risks by their nature
have uncertainty of likelihood and
impact on the business. Emerging
risks are categorised as near- (next
12 months), medium- and longer-
term (more than 3 years) and are
regularly reported and assessed, both
at the executive level and, no less than
quarterly, at ARCs and boards where
appropriate.
Emerging risks discussed during
2023 have included:
•
Changing expectations of the UK
and Isle of Man regulators.
•
Increasing regulatory scrutiny
or focus impacting our platform
business model.
•
Shift in tax regime which may
alter the tax benefits of pensions
and ISAs including the abolition
of inheritance tax.
•
The aging population of the UK,
the platform client base and
the advisers using our platform
and/or the CURO software and
the generational shift in wealth
to different generations with
differing preferences and needs.
The directors have carried out a
robust assessment of the principal
and emerging risks facing the Group,
including those that would threaten its
business model, future performance,
solvency or liquidity. Details of
the results and conclusions of this
assessment can be found in the “Going
Concern and Viability Statement”
section on pages 69 to 71.
69
GOING CONCERN AND VIABILITY STATEMENT
In accordance with the Code, the directors have assessed whether the Group
is considered a going concern over the following 12-month period, as well
as the prospects and viability of the Group over a period of three years.
Going concern
The Strategic Report sets out the Group’s business model, its strategic
objectives and the associated risks, and the annual financial review on pages
53 to 59.
Going concern is assessed over the 12-month period from when the Annual
Report is approved, and the board has concluded that the Group has adequate
resources to continue in operational existence for the next 12 months. As
detailed in the going concern disclosure in the financial statements in note 1,
this is supported by:
•
The current financial position of the Group;
•
Detailed cash flow and working capital projections; and
•
Stress-testing of liquidity, profitability and regulatory capital, taking
account of possible adverse changes in the economic climate
When making this assessment, the board has taken into consideration both the
Group’s current performance and the future outlook, including the impact of the
cost-of-living crisis, sustained levels of high inflation, increasing interest rates
and volatile equity markets. The environment has been challenging during the
year, but our financial and operational performance has been robust, and the
Group’s fundamentals remain strong.
Having conducted detailed cash flow and working capital projections, and
appropriate stress-testing on liquidity, profitability and regulatory capital; taking
account of the economic challenges mentioned above; the board is satisfied that
the Group is well-placed to manage its business risks. The board is also satisfied
that it will be able to operate within the regulatory capital limits imposed by
regulators, being the FCA, PRA, and IoM FSA.
The board has concluded that the Group has adequate resources and there
are no material uncertainties to the Group’s ability to continue to operate for
the foreseeable future, being a period of at least twelve months from the date
this Annual Report is approved. For this reason, they have adopted the going
concern basis for the preparation of the financial statements.
Viability
The key factors affecting the Group’s
viability and prospects are its market
position and recurring revenue.
Market position
Market position can be assessed
as follows: independent research
consistently rates Transact as the top
platform in the market (page 13);
and, the number of advisers using the
platform and the number of clients on
the platform both increased by 2%
during the year.
The above measures all demonstrate
adviser and client satisfaction with the
service provided.
Recurring revenue
The absolute level of revenue is
dependent on market values, but key
to the recurrence is the retention of
FUD. The T4A business also has a
level of recurring business through
repeat and long-term contracts to
provide the CURO service. Maintaining
the recurring revenue base across
these activities is achieved through
retaining client and advisers through
our service delivery. 98% of revenue
is of recurring nature (page 54).
Our approach is to focus on organic
growth of FUD through positive net
flows to the platform. We aim to
generate growth in revenue, and
to control costs, to ensure that the
Group’s profit margin is resilient over
the medium term.
70
Assessment period and measures
It is the board’s view that a three-
year time horizon is an appropriate
period over which to assess its
viability and prospects and to execute
its business plan. This assessment
period is consistent with the Group’s
current business plan projections
and the Internal Capital and Risk
Assessment process (ICARA) and
Own Risk and Solvency Assessments
(ORSA) of the Group’s regulated
entities. Consideration is also given to
projections beyond this period, though
this does not form part of the formal
assessment.
The strategy and business plan are
reviewed and discussed annually by
the board and updated as appropriate.
It considers the Group’s profitability,
cash flows, capital requirements,
dividend payments, and other key
variables such as liquidity and the
solvency requirements of the regulated
entities. These are considered under
stress and scenario tests, to ensure
the business has sufficient flexibility to
withstand such impacts by adjusting
its plans within the normal course of
business.
The stress and scenario tests applied
are severe, yet plausible, at both an
individual and combined level. We
recognise the importance that climate
change may have on our business and
our approach for the current financial
year towards climate related scenarios
is set out in our TCFD disclosures on
pages 23 to 44.
The key scenarios considered for the financial year are as follows:
Cyber-attack
A hacker exploits a loophole in security allowing them to gain network access
and extract data and information which is used for fraudulent purposes,
attracting significant media attention as well as a requirement to pay
compensation to clients and fines.
Undetected bug after system development
A bug introduced within a system release goes undetected for a period of time
which causes client trades to be executed incorrectly. This causes reputational
damage, and remediation plans require significant resource along with
compensation payments to clients.
Persistent high inflation and continued market uncertainty
Continued market uncertainty and an extended period of high inflation results
in a loss of confidence in capital and investment markets that has a detrimental
effect on revenues.
Supplier failures cause a severe impact to Transact’s service standards
Multiple suppliers cause Transact to be unable to fulfil its contractual obligations
to clients and the business is therefore overwhelmed by queries, exacerbated
by an outage of communication systems. This causes reputational damage,
and remediation plans require significant resources along with compensation
payments to clients.
Unforeseen customer harms as a result of a systemic process failure
Failure by our UK regulated entities to appropriately identify, implement or
embrace appropriate conduct standards, which causes consumer harm. This
causes reputational damage, as well as a requirement to pay compensation to
clients and fines.
Policyholder protection scheme levy event
An Isle of Man-authorized life company becomes insolvent, triggering
arrangements under the Life Assurance (Compensation of Policyholders)
Regulations 1991. ILInt makes the decision to pass through the levy to
policyholders to avoid becoming insolvent itself. A large number of policyholders
surrender their policies to avoid payment of the levy, and ILInt is therefore
required to top up the amount due. As a result, management determines that
ILInt is no longer viable.
71
To illustrate the severity of the scenarios modelled, the following table sets out
some of the key changes in parameters made in the scenarios. The most severe
scenarios modelled assumed a number of these changes occurred within the
same scenario during the business planning period.
ASSUMPTIONS UNDERLYING THE STRESS SCENARIOS
RISK FACTOR
STRESS APPLIED TO BASE CASE ASSUMPTION
Market downturn
A market fall of 33% over a one month period.
Mass lapse
30% drop in the number of clients over three months.
Increase in outflows
65% increase in outflow rates for up to twelve months.
Decrease in inflows
30% decrease in inflow rates for twelve months.
One-off spikes in operating costs
Up to £12.0m one-off spike in operating costs depending on the underlying
stress scenario.
Expense increase
Expense increase over business planning period 10%.
The results of the above stress and scenario tests led to the following
conclusions:
•
Under a range of stressed scenarios, no expected profit or liquidity issues
are expected to arise in the Group over the three-year business planning
period and beyond;
•
Each of the regulated entities has sufficient available capital to cover its
regulatory solvency requirements, and this is expected to continue over the
three-year business planning period and beyond; and
•
Under a range of stressed scenarios, the entities are still able to meet their
capital and liquidity requirements over the three-year business planning
period and beyond.
The directors’ assessment has been made with consideration and reference
to: the Group’s current position and three year business plan; the Group’s risk
appetite; the Group’s financial projections; and, the Group’s principal risks and
uncertainties, including uncertainty caused by the economic climate globally and
in the UK as well as the geopolitical uncertainty.
In accordance with the Code, the directors have assessed the Group’s prospects
by reference to the three-year planning period to September 2026. The directors
have a reasonable expectation that the Group will continue to meet its liabilities
as they fall due, and that it will be able to operate within the regulatory capital
limits imposed by the regulators over the period of this assessment and beyond.
72
NON-FINANCIAL INFORMATION STATEMENT
The Strategic Report includes non-financial information required in accordance
with section 414CB of the Companies Act 2006. The most directly relevant non-
financial information is signposted below; however, the Strategic Report does
touch on these topics briefly in other sections:
S414CB REQUIREMENT
RELEVANT STRATEGIC REPORT SECTION
Environmental matters
Taskforce on Climate-Related Financial Disclosures (TCFD)
Statement, pages 23 to 44
Employees
Responsible Business – Our People, pages 45 to 52, Nomination
Committee Report, pages 107 to 112
Social and community
Responsible Business – Our People
, pages 45 to 52
Human rights
Responsible Business – Our People, page 52
Anti-bribery and corruption
Responsible Business – Our People, page 51
Business model
Strategy and Business Model, pages 13 to 15
Principal risks and how they are managed
Risk and Risk Management, pages 60 to 68
Non-financial key performance indicators
Strategy and Business Model, pages 13 to 15, Key Financial
Performance Indicators, pages 20 to 22
Approval of the Strategic Report
A statutory requirement of the Annual Report is that the directors produce a
Strategic Report.
Section 172 of the Companies Act states that the purpose of the report is to
inform members of the Company and help them assess how the directors have
performed their duty. To fulfil this, directors must act in a way they consider, in
good faith, would be most likely to “promote the success of the Company for the
benefit of its members as a whole”.
The Strategic Report should provide shareholders with a comprehensive and
balanced overview of the Group’s business model, strategy, development,
performance, position and future prospects. The Strategic Report should be
clear, concise and unambiguous, and should demonstrate how the Company
has considered the interest of employees, and the impact of the Company’s
operations on the community and environment.
The directors believe that the Strategic Report on pages 2 to 72 meets all
relevant statutory objectives and requirements.
By order of the board,
Helen Wakeford
Company Secretary
13 December 2023
73
CORPORATE
GOVERNANCE
REPORT
73
74
INTRODUCTION
On behalf of the board, I am pleased to present the report setting out the
Group’s corporate governance arrangements, which reflect the standards
required by the 2018 UK Corporate Governance Code (the ‘Code’).
The Group’s purpose is to enable clients to easily manage their financial plans
with the help of their financial advisers though the provision of high-quality
financial software and customer service. Proportionate and effective governance
facilitates the Group in the overall delivery of that purpose whilst providing
assurance and accountability to all our stakeholders that their interests are
paramount.
We continue to abide by the overriding principles of the 2018 Code which are
designed to:
•
Promote the long-term sustainable success of the Company, generating
value for shareholders and contributing to wider society. Further details
relating to this are set out in the long-term consequences of decisions
section in the Companies Act Section 172 statement, on page 87;
•
Provide suitable opportunity for employee engagement in the business.
Further details relating to this are set out in the interests of the Group’s
employees section in the Companies Act Section 172 statement, on
page 87;
•
Assist the effective review and monitoring of the Group’s activities;
•
Help identify and mitigate significant risks to the Group, as set out in our
Risk Report on pages 60 to 68; and
•
Provide the necessary disclosures to stakeholders to make a meaningful
analysis of the Group’s business activities and its financial position.
To enable easy navigation our governance report has been structured to reflect
the composition of the Code. Where there are links to the content in our
strategic report, these are highlighted for the reader.
1.
Board Leadership and Company Purpose
2.
Division of Responsibilities and the Role of the Board
3.
Board Composition, Succession and Evaluation
4.
Audit Risk and Internal Control
5.
Remuneration
Statement of compliance
The Code sets out the principles and provisions relating to good
governance of UK listed companies and can be found on the Financial
Reporting Council’s (FRC) website at
www.frc.org.uk
.
The Company has, throughout the year ended 30 September 2023, applied
the principles, and complied with the provisions, of the Code except in
relation to the following:
75
Provision 36: The Company’s remuneration structure has adopted a
vesting period for deferred bonus shares of three years, rather than
the Code’s recommended five years. Minimum shareholding and post-
employment shareholdings requirements are in place for executive
directors as recommended by the Code. The Company believes that the
executive directors are sufficiently invested in the Company’s long-term
success and that further restrictions are not currently required. We will
however keep this under review.
Provision 38: The Company’s remuneration policy allows all employees,
including executive directors, the option annually to have a portion of
their cash bonus paid as a contribution into their pension. This does not
comply with the Code’s requirement for directors that only basic salary
should be pensionable. However, none of the executive directors currently
take advantage of this provision in the remuneration policy. The Company
plans to review the policy on pension sacrifice for the directors in the next
iteration of the remuneration policy.
Richard Cranfield
Chair
13 December 2023
76
BOARD LEADERSHIP AND COMPANY PURPOSE
BOARD OF DIRECTORS
Richard Cranfield
,
Non-Executive Chair
Appointed to the board:
26 June 2019
Skills and expertise:
Richard is a qualified (no longer practicing) Solicitor and has an MA in Economics
and Law from Cambridge University. His previous experience includes working
for Allen & Overy LLP (and its predecessor firm) between 1978 and 2022, being
a partner from 1985 to 2021.
External appointments:
•
Henderson High Income Trust Plc – Director, 2020 to present
Alexander Scott
,
Chief Executive Officer
Appointed to the board:
11 February 2014
Skills and expertise:
Alexander joined the Group as Actuary and Head of Group Technical Operations
in October 2009. From November 2010 he was Chief Financial Officer and Head of
Risk, becoming a director in July 2011. Alexander became Chief Executive Officer
in March 2020.
Alexander has a BSc in Actuarial Science from City University and is a Fellow
of the Institute of Actuaries. Alexander has spent thirty years in the insurance
market, quantifying and assessing risk and has held the Chief Risk Officer
function for both investment and insurance companies as well as holding the
Chief Actuary function. His previous experience includes various roles at Criterion
Assurance Group, including: Non-Executive Director (2003-2010); Director (1999-
2003); and Actuary (1997-1999), and Life Director and Chief Actuary at Sterling
Insurance Group between 2004 and 2009.
Jonathan Gunby
,
Executive Director
Appointed to the board:
2 March 2020
Skills and expertise:
Jonathan joined the Group in 2011 as Chief Development Officer and was
appointed to the board of Integrafin Financial Arrangements Limited (Transact) in
2018. He became an Executive Director of IHP in March 2020 and Chief Executive
Officer of Transact.
Jonathan has a BA in Business Studies from De Montfort University, Leicester,
and is a Fellow of the Chartered Institute of Marketing. He held senior marketing
roles at Royal Insurance Group across Life, Pensions and Fund Management and
at National and Provincial (N&P) Building Society. He served as a director in N&P’s
life assurance business, a joint venture with Aviva. Jonathan started a consulting
firm which, in 1999, was moved into NMG Holdings where Jonathan remained as
an Executive Director until 2011.
77
Michael Howard
,
Executive Director
Appointed to the board:
11 February 2014
Skills and expertise:
Michael co-founded the Group in 1999, was Executive Chair of the Group from
2001 until stepping down in October 2017 and becoming an Executive Director.
He founded ObjectMastery in Australia in April 1992, which developed the
software which underpinned the creation and development of the Transact
platform.
Michael holds a BA in Economics from York University and is qualified as a
chartered accountant. His previous experience includes working for Touche
Ross in the audit division in London (1980-1984) and Melbourne (1984-1986)
and working for Norwich Union Life Insurance, where he was responsible for
marketing and administration of investment funds including the launch of the
platform Navigator in 1990.
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Caroline Banszky
,
Independent Non-Executive Director
Appointed to the board:
22 August 2018
Skills and expertise:
Caroline is a qualified Chartered Accountant, having originally trained at what
is now KPMG. Her previous experience includes being Chief Executive of The
Law Debenture Corporation plc between 2002 and 2016, COO of SVB Holdings
PLC (now Novae Group plc) between 1997 and 2022 and Finance Director of
N M Rothschild & Sons Limited between 1995 and 1997.
External appointments:
•
Gore Street Energy Storage Fund plc - Chair of Audit Committee, 2018 to
present
•
Benefact Trust Limited– Director and Trustee, 2018 to present
•
The Open University - Member of the Investment Committee, 2016 to present
•
3i Group plc – Chair of Audit and Compliance Committee, 2014 to 2023
78
Victoria Cochrane
,
Senior Independent Non-Executive
Director and Designated Non-Executive Director for
Environmental and Social Sustainability
Appointed to the board:
28 September 2018
Skills and expertise:
Victoria is a qualified (non-practicing) Solicitor, with over twenty years’
experience as General Counsel and held various executive roles with Ernst
& Young between 2006 and 2013, including Global Head of Risk, where
she created the global enterprise risk management framework. Victoria’s
previous roles include: Non-Executive Director of Perpetual Income and
Growth Investment Trust plc between 2015 and 2020; Non-Executive Director
of Gloucester Insurance Limited between 2008 and 2013; Senior Adviser at
Bowater Industries Limited between 2014 and 2015; and Non-Executive Director
at HM Courts and Tribunal Service from 2014 to 2023.
External appointments:
•
Ninety one plc – Chair of the Audit and Risk Committee, 2019 to present
•
Euroclear Bank SA/NV – Non-Executive Director, 2016 to present
•
CBI – Senior Independent Director and Audit and Risk Committee and
Nominations Committee Chair, 2023 to present
Rita Dhut
,
Independent Non-Executive Director and
Designated Non-Executive Director for Employee Engagement
Appointed to the board:
22 September 2021
Skills and expertise:
Rita has a BSc in Business Studies from City University. Her previous
experience includes: various positions at Aviva Investors between 2001 and
2012, including Head of European Equities and Head of Pan-European Equity
Value Investing; and various positions at M&G between 1994 and 2000,
including Director of European Equities.
External appointments:
•
Financial Times Foundation for Financial Literacy – Founder Trustee and
Non-Executive Director, 2021 to present
•
JP Morgan European Investment Trust Plc – Non-Executive Director, 2019
to present and Chair from 2022 to present
•
Ashoka India Equity Investment Trust Plc – Non-Executive Director, 2018
to present
79
Robert Lister
,
Independent Non-Executive Director
Appointed to the board:
26 June 2019
Skills and expertise:
Robert has a BA in Classics from Oxford University. His previous experience
includes: Non-Executive Director of Credit Suisse Asset Management (UK)
Limited, between 2012 and 2022; Director of Aberdeen Smaller Companies
Income Trust PLC, between 2012 and 2022, Non-Executive Director of Investec
Wealth and Investment Limited between 2010 and 2020; Director of Rensburg
Sheppards PLC, between 2008 and 2010, as well as working for Dresdner
Kleinwort Wasserstein between 1998 and 2008 and Barclays de Zoete Wedd
between 1983 and 1998.
External appointments:
•
Cavendish Financial – Director, 2021 to present
•
The Salvation Army International Trustee Company – Director, 2016 to present
Christopher Munro
,
Independent Non-Executive Director
Appointed to the board:
1 February 2017
Skills and expertise:
Christopher is a qualified Chartered Accountant and has an LLB from Edinburgh
University. Christopher’s previous experience includes being Founding Partner
of London and Continental Partners LLP from 2016 to 2021, Director of Pacific
Capital Partners from 2004 to 2021, Director of Jupiter Enhanced Income Trust
from 1996 to 2009, CEO of River & Mercantile Investment Management from
1994 to 1996, Director of Robert Fleming Holdings Limited between 1988 and
1994 and Director of Jardine Fleming Holdings between 1983 and 1986.
All directors were in office throughout the financial year up to the date of the report.
80
S.172 STATEMENT
S.172 of the Companies Act (“the
Act”) requires each director to act in
the way they consider, in good faith,
would be most likely to promote
the success of the Company for
the benefit of its members as a
whole, and in doing so have regard
(amongst other matters) to:
(a) the likely consequences of any
decision in the long term,
(b) the interests of the Company's
employees,
(c) the need to foster the
Company's business relationships
with suppliers, customers and
others,
(d) the impact of the Company's
operations on the community and
the environment,
(e) the desirability of the Company
maintaining a reputation for high
standards of business conduct, and
(f) the need to act fairly as
between members of the Company.
Board leadership and Company purpose
Our purpose, values and strategy are set out on pages 13 to 15 and describe
the Company’s focus. The board’s focus is to ensure that the Group delivers
long-term sustainable value for all stakeholders.
To deliver this the board oversees the maintenance of a sound system of
internal controls and continually reviews the overall effectiveness of the Group’s
risk management systems.
The board also oversees the Group’s culture to ensure it is aligned with the
Company’s purpose, values and strategy.
Measuring performance against strategic objectives
Performance against the Company’s strategy, objectives, business plans and
budgets is considered at each board meeting. Working in co-ordination with
the Audit and Risk Committee the board maintains oversight of the Company’s
operations and ensures the Company fulfils its business objectives.
Considering stakeholders
The board’s role in promoting the long-term success of the Group requires
consideration of the balance of interests between all stakeholders – those
being our clients and advisers, employees, regulators, shareholders, suppliers,
and the community. Details of how the board has delivered its responsibilities
under s.172(1) of the Act during the financial year are outlined on pages 87
to 90. In addition, our s.172 statement outlines how the board has considered
stakeholders in its principal decision-making processes.
The following table supports our s.172 statement by setting out how we have
engaged and considered our key stakeholders during the year, the outcomes
and any highlights of such efforts.
81
Engaging with our stakeholders – what we did in the year
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Our clients
and advisers
Transact
•
Speaking/presenting to advisers and
paraplanners at ‘Connect day’ and regional
‘breakfast briefing’ events across the UK.
•
Engaging with advisers and paraplanners
at annual Personal Finance Society and
Chartered Institute for Securities and
Investment events and other conferences
during the year.
•
Distribution of annual client and adviser
surveys to gain feedback on common
development requests from clients and
advisers, in an effort to tailor and enhance
our services and functionality.
•
Liaising and coordinating with our user
firms as part of our Account Management
Programme to gain feedback on how best
we can develop our proposition for use by
user firms and their end clients.
•
Monthly newsletter to adviser firms to
provide updates and support on our
platform offering.
T4A
•
High-touch, pre-commitment engagement
with prospective clients to ensure
suitability between our software capability
and the needs of the firm.
•
Implementation consultants ensure that all
aspects of service delivery are planned and
delivered to clients until handed over to an
appointed account manager.
•
Proactive engagement with clients and
online training sessions to increase
understanding and use of technology
and to ensure best customer service is
provided.
•
T4A has engaged an independent third-
party to facilitate and chair quarterly user
groups to seek client feedback.
Transact
•
Comprehensively reviewed our products and
pricing to ensure full compliance with the
requirements of Consumer Duty.
•
Implemented new controls and
communication systems to ensure that
clients and advisers are kept fully apprised
of changes to their portfolio/assets,
especially pertaining to fees and risk.
•
Increased the flow of information between
Transact and the manufacturers of other
financial services products, largely fund
managers, fulfilling our requirements as
distributor to have oversight of whether
products are providing the end client value
for money and meeting intended outcomes.
•
Following feedback from clients, advisers
and firms we have made changes to our
offering including:
◦
e-signature capability with multiple
providers
◦
Increased security authentication via two-
step verification
◦
New online ‘transfer tracker’ has been
introduced
◦
The launch of our BlackRock-backed
Model Portfolio Service
◦
Comprehensive ‘Investor Reports’ that
can be sent by the adviser to the client in
the ‘Pick-Up-Page
T4A
•
Client feedback helps T4A to continually
improve the training and information it
provides to clievnts on the full range of
functionality that CURO can provide.
•
Clients are supported to customise specific
elements of CURO software to best support
the processes and services of the particular
adviser firms.
•
Client influence on Product Providers and
Platforms also helps drive up the availability
of data feeds from these external parties
such as valuations.
82
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Employees
•
Employee engagement and pulse surveys.
•
A ‘People Platform’ was implemented for the
London and Isle of Man offices.
•
At IAD, team leader/project lead meetings
and all-employee sessions are held
fortnightly.
•
The DNED for Employee Engagement, in
conjunction with the Head of HR, facilitates
quarterly employee forums.
•
Multiple in-person town halls led by
executive directors showcasing Group
performance and a business update.
•
‘Manager Converse’ sessions with the NEDs
are held during the year to give the NEDs
a deeper understanding of the Group and
generate interaction with managers beyond
the executive.
•
Monthly Transact newsletters and bi-annual
Group CEO email updates are distributed to
employees.
•
IHP has moved up to 11th place in the
FTSE Women Leaders report for FTSE 250
companies, which recognises our diverse
workplace.
•
The Training and Development function
was reviewed, with further resource being
agreed, to help support the overall HR and
training/development strategies for the UK/
Isle of Man offices.
•
Maternity and paternity pay was enhanced.
•
A Menopause Support Policy has been
approved and we have appointed a staff-
volunteered Menopause Champion.
•
ISL has received London Living Wage
accreditation and IAD UK has now applied
for it as well.
•
We are continuing to develop our Diversity
and Inclusion Strategy, policy and
framework for the Group.
•
Employee participation in the 2023
employee survey was 60% and feedback
indicated satisfaction with communication
of company objectives and manager
investment in employee wellbeing.
Improvements to internal communications
was highlighted as an area for development.
•
All managers were required to complete a
mental health training session.
•
The London office held various initiatives to
promote ‘Mental Health Awareness Week’,
including providing healthy breakfasts,
offering staff to attend externally facilitated
mental health seminars, and a charity
raffle collecting donations to support MIND
charity.
83
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Regulators
•
The IHP CEO provided regular updates at
the IHP board and IHP ARC meetings on
topics either discussed with, or that are
important to, the regulators during the year
including Consumer Duty, IT infrastructure,
best execution, diversity and inclusion, and
non-standard assets.
•
The boards and ARCs of IFAL and ILUK
are regularly briefed on regulatory
developments and expectations.
•
The ILInt board and ARC are regularly
briefed on regulatory developments and
expectations.
•
IHP’s remuneration committee, whose remit
covers the Group, is also regularly informed
of relevant regulatory developments and
expectations.
•
The boards of IFAL and ILUK receive
updates in relation to specific matters, such
as areas of interest to the FCA and PRA
including operational resilience; climate
change and diversity and inclusion.
•
The ILInt board receives updates on IoM
FSA initiatives.
•
The ILInt managing director and compliance
team maintains contact with the FSA and
the IFAL and ILUK’s compliance team
maintains regular contact with the FCA
and the PRA on behalf of IFAL and ILUK,
to ensure awareness of their respective
concerns, expectations and priorities.
•
The IFAL and ILUK compliance team actively
participates in the UK Platforms Group,
which engages with the FCA.
◦
ILInt’s managing director sits on the
executive committee of the Isle of Man
Insurance Association which meets
quarterly with the FSA.
•
All staff completed a Consumer Duty
training module in May 2023. All UK
executives and NEDs have received
multiple Consumer Duty training sessions
in preparation of the Consumer Duty
regulation coming into force.
•
We have interacted proactively with the
relevant regulators when planning and
executing decisions affecting the boards of
the Group and companies within the Group
•
NEDs participated in, and contributed to, a
session on the development of the Group’s
climate change strategy.
•
In January 2023, the PRA updated its
supervisory priorities for ILUK and other life
insurers and the compliance team is keeping
these under review.
•
In February 2023, both ILUK and IFAL (and
their peers) received letters from the FCA
setting out priorities for implementing the
Consumer Duty. The Consumer Duty team
undertook a gap analysis and made slight
adjustments to the project plan where
considered necessary.
84
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Shareholders
•
Institutional shareholder
roadshows hosted by the CEO
for half-year and year-end
results.
•
Ad hoc meetings with
investors after key information
updated to the market.
•
In-person Annual General
Meeting at our London
headquarters with the Chair
and all NEDs in attendance
to take questions from
shareholders.
•
Proactive consultation by
the Board’s Chair, and the
Company Secretary with
major shareholders on various
governance matters, with 17
meetings held during the year.
•
Board members receive a
quarterly Investor Relations
report.
•
CEO and Head of Investor
Relations provide updates
at each board meeting on
investor engagement and
market movements.
•
Ad hoc briefings to the board
on shareholder feedback
•
Extensive meetings have been held by IHP’s CEO with
major shareholders to explain the Group’s strategy,
financial plans, and operational enhancements.
•
The Chair and Company Secretary met with the
governance teams at major institutional investors to
share thoughts on a range of topics including ESG,
succession planning and remuneration.
•
We have engaged directly with MSCI ESG rating agency
(which provides guidance to institutional shareholders on
ESG data compliance) in order to enhance IHP’s rating
(now increased to BB), and to understand how we can
gain a higher score going forward.
•
Feedback from shareholders has, in part, contributed to
the following outcomes:
◦
We have recruited a Group Chief Financial Officer who
is expected to take up the role in early 2024;
◦
We are reviewing executive and senior management
reward to ensure that their incentives are based upon
our four anchors and focused towards sustainable
growth of the Group over the long-term;
◦
We have enhanced IHP’s website information and
disclosures; and
◦
We have compiled (in-house) HY and FY Company
consensus reporting to ensure there is more
information available for sell-side analysts to use for
their estimates for IHP Group performance.
•
We have enhanced our FY22 and HY23 reporting
presentations to analysts and investors given by
IHP’s CEO and IFAL’s CEO, by using an external
media company for producing and recording the live
presentation.
•
IHP’s CEO and Head of Investor Relations have attended
various investor conferences.
•
We have delivered a programme of IR video meetings with
potential investors in the US, UK and rest of Europe.
85
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Suppliers
•
We do not seek to disadvantage, or
compromise, suppliers with whom we
conduct business, in line with one of our
core principles of ethical behaviour.
•
We have refocused our efforts on supplier
management as we continue to enhance
our due diligence with regard to cyber-
security and business resilience. As we
evolve our ESG strategy, we will collaborate
with our suppliers in order to achieve our
ESG goals.
•
We remain focused on the correct
onboarding of all new suppliers ensuring
correct due diligence and contract reviews
are carried out. This is managed by our
dedicated supplier management manager.
•
Information is shared with management
and board committees where appropriate,
in order to provide assurance regarding
supplier selection and management.
•
We endeavour to pay all suppliers within
agreed payment terms.
•
We work with suppliers to ensure no
modern slavery or enforced labour exists
in the supply chain. We include specific
clauses in supplier contracts that their
employees must be paid National Minimum
Wage.
•
We undertake health checks on suppliers
highlighting areas that need more
information or where specific information
is missing, giving the business full
transparency of all suppliers.
•
We require annual cyber attestations to be
completed by our significant and material
suppliers.
•
We continue to focus on our Business
Continuity Plan and developing clear
exit strategies for material outsourcing
suppliers and significant suppliers.
86
OUR
STAKEHOLDER
HOW WE ENGAGE AND CONSIDER
OUR STAKEHOLDERS
OUTCOMES AND HIGHLIGHTS
Communities
•
We provide staff with an opportunity
to be involved in company-led charity
initiatives and consider feedback on charity
suggestions when they are submitted to
the People Platform.
•
The DNED for Environmental and Social
Sustainability is supporting the board and
management in developing the Group’s
social strategy.
•
Annual Christmas initiative: all London
and Isle of Man employees given £10 each
to donate to one of five selected charities.
•
Transact sponsored event to raise money
for Ukrainian refugees and
•
Disaster Emergency Committee (DEC):
Turkey-Syria Earthquake Appeal, the
Company matched employee donations,
resulting in £10,596 being donated to
the DEC.
•
Company matched employee donations
to MIND Charity during Mental Health
Awareness Week.
87
SECTION 172(1) STATEMENT
Understanding the views and
interests of our stakeholders helps
the Group make responsible and
balanced decisions. In doing so, we
aim to generate long-term value
for the Company’s shareholders
whilst contributing to wider society
by building strong and lasting
relationships with our other key
stakeholders. For our key stakeholders,
see those listed on page 80.
You can read more about how we
engage with and consider the needs of
our key stakeholders on pages 81 to
86 of the Governance Report.
Long-term consequences of decisions
IHP Group’s strategic objectives are stated on page 16 to 19. The Group’s
implementation of its strategy and our assessment of forward-looking risks
affecting its delivery in the future are set out within the strategic objectives. The
directors make strategic decisions on future direction, investment and stakeholder
value based on the clear, sustainable, long-term objectives.
By successfully achieving strategic objectives, which result in the ongoing and
increased success of the offering, the directors are able to take decisions which
share the Group’s success with its key stakeholders.
Interests of our employees
We value our people. They are the core of our high-quality service delivery to our
clients and advisers, so our employees’ well-being is paramount to the business’s
long-term sustainable success. Details on employee well-being and the culture
of the Group are outlined in the Responsible Business section on page 45. In
addition, the Directors’ Remuneration Report on page 113 sets out the Group’s
approach to remuneration which is intended to ensure equitable remuneration
across the Group and which improves value for employees.
Fostering business relationships
The Group’s business model and strategic objectives are set out on pages 16 to
19 and make clear the focus of the business on delivering high-quality service
to clients and advisers through investment in infrastructure and employees.
An integral part of our service offering is the provision of regular relationship
management to clients and advisers as they are our target market.
Fostering good relationships with our suppliers is an important factor in ensuring
we can continue to service our clients and advisers effectively. To help embed
good supplier management processes, we engage regularly with our suppliers and
ensure ongoing relationship management throughout the term of engagement.
We also ensure suppliers are paid within payment terms and do not seek to
disadvantage or compromise suppliers with whom we do business.
88
Impact on the community and the environment
The directors recognise that we have both a corporate and ethical responsibility
to minimise the impact of the Group’s business conduct on the environment and
community; this is considered during any principal decision-making processes by
the board.
The TCFD section on page 23 and the Responsible Business section on page
45 set out the impact of our operations on the environment and outline our
community activities that occurred during the year.
High standards of business conduct
The directors recognise that our service is only as good as the technology and
people behind it and that the Group’s reputation is built on high standards of
business conduct which must be maintained in order for the business to thrive
and grow. The board supports the CEO in embedding a culture that encourages
employees to act with integrity and to ‘do the right thing’, in line with the Group’s
values.
The Group maintains a number of policies governing employee conduct. These
are covered in detail in the People section on page 45.
The directors also recognise that as the business is regulated by three separate
regulators, as detailed on page 69, maintaining strong, open and productive
relationships with the respective regulators is also business critical.
Acting fairly between shareholders
All shareholders are treated equally, with information being made available to all
shareholders in a consistent manner. The board, supported by the Chair and CEO,
actively engages with the Group’s largest shareholders regularly and feedback
received is shared with the entire board.
89
PRINCIPAL DECISIONS AND CONSIDERATIONS OF
STAKEHOLDER INTERESTS
The table below summarises how the board and the wider Group have had regard to
the duties under Section 172(1) when considering specific matters during the year.
PRINCIPAL
DECISION
STAKEHOLDERS
IMPACTED
OUR CONSIDERATIONS
Price reductions
for the Transact
Platform
Clients
Advisers
Shareholders
Regulators
In December 2022, the IHP board considered the impact of price
reductions approved by IFAL, ILUK and ILInt for Transact, furthering
the simplification of our fee model and increasing transparency
and accessibility. As part of this process, the impacts on company
profitability and, therefore, shareholder value, were assessed. This
decision was in line with the Group’s strategic objectives to benefit
advisers and clients by reducing cost to client. The simplification is also
expected to attract new flows to Transact as the new model promotes
the accessibility of financial products to a wider community, which
ultimately supports the long-term sustainability of the business.
A capital and liquidity risk assessment was undertaken to ensure the
Group’s regulated entities continue to have sufficient capital to cover
their respective solvency risk appetites.
Reframe of
workforce
compensation
and benefits
Employees
Communities
In 2022, employees were consulted on their views of their work
environment and reward structure.
As a result of the feedback received the structure of reward for London-
and Isle of Man-based employees was restructured to enable greater
flexibility in the variable reward to facilitate recognition of exceptional
performance.
The Company also responded to feedback on the shape of our family
friendly benefits by enhancing maternity, paternity and adoption pay.
More information is provided in the people section and the remuneration
section of this report.
Appointment
of CFO
Clients
Advisers
Shareholders
Employees
Regulators
During FY22, the board determined that the Group would benefit
from the addition of a CFO. The appointment will facilitate the greater
diversity of thought at executive level and at the board and will
reinforce the skills amongst the management team, providing additional
and valuable support to the CEO. This move was partially in response to
feedback from stakeholders and the reception of the decision from the
relevant groups has been positive.
90
91
Governance
•
Review board evaluation
results and progress of prior
year’s evaluation actions
•
Review board and management
succession plans
•
Receive board committee
updates
•
Approve AGM documentation
•
Approve Modern Slavery
Statement
•
Review and approve changes to
various Group policies
Sustainability and stakeholder
engagement
•
Deep dive sessions on
environmental, social and
employee engagement
strategies
•
Review Board Diversity Policy
•
Receive HR updates including
monitoring culture and
employee survey feedback
•
Review shareholder feedback
from engagement sessions
with Chair, SID, Remuneration
Committee Chair and Company
Secretary
Risk management controls
•
Review quarterly risk reports
•
Approve Group’s Risk
Appetite Framework and Risk
Management Policy
•
Receive cyber security and
Consumer Duty training
Finance and reporting
•
Review quarterly and half-year
results
•
Monitor performance and
capital position
•
Approve annual report and
financial statements
•
Approve two interim dividends
•
Review HMRC VAT decision and
approve subsequent action
•
Review Group tax strategy
•
Review and monitor business
plans and projections, including
ongoing review of business
performance and comparison
to market consensus on
business performance
Business performance and
strategy
•
Consider current and future
business initiatives
•
Discuss Group strategy
including review of business
plans and pricing strategy
•
Monitor Group performance
against strategy
•
Review Transact, T4A and wider
industry market performance
updates
•
Review quarterly investor
relations updates including
analyses of Company share
price performance
•
Receive updates on and discuss
IT infrastructure and systems
and IT strategy
Key board activities during
the year
The role of the board
The board recognises the importance
of a clear division of responsibilities
between executive and non-executive
roles and, in particular, a clear
delineation of the Chair’s responsibility
to run the board and the CEO’s
responsibility for running the Group’s
business. The roles of Chair, CEO and
Senior Independent Director (SID)
are clearly defined and have been
approved by the board. The allocation
and division of responsibilities is
available on our website here:
https://
www.integrafin.co.uk/corporate-
governance/
.
Matters reserved for the board
The board is the main decision
making and review body for the
Company. It determines the overall
strategic direction of the Company
and is responsible for the overall
management of the Company and the
business operations for its subsidiaries.
The board’s remit is documented in
its terms of reference which include
details of matters reserved for the
board and matters delegated by
the board. The terms of reference
are reviewed and updated annually.
Matters which are reserved for
the board include strategy and
management, structure and capital,
financial reporting and controls,
internal controls, material contracts,
communication, board membership
and appointments, remuneration and
corporate governance matters. The
board determines which matters are
delegated to committees of the board
and the management team.
THE ROLE OF THE BOARD AND ITS RESPONSIBILITIES
92
Independence and time commitment
All of the NEDs are considered to be independent and the Chair was considered
to be independent on being appointed to the role. There are a number of ways
in which the independence of NEDs is safeguarded and in which their time
commitments are considered:
•
Meetings between the Chair and NEDs without management present occur
regularly;
•
The SID meets at least annually with each NED to discuss feedback on the
Chair’s performance;
•
NEDs’ tenure on the board is reviewed annually by the Nomination
Committee (NomCo) as part of board succession planning;
•
Any external commitments must be disclosed to the board as and when they
arise for consideration and approval before accepting; and
•
When making new director appointments, the board takes into account other
demands on directors’ time.
The board has reviewed the other commitments of the NEDs and concluded it is
satisfied that each NED remains able to commit sufficient time to dedicate to their
role as a director.
Conflicts of interest
The Company’s Articles of Association
permit the board to consider and
authorise situations where a director
has an actual, or potential, conflict
of interest in relation to the Group.
The Company maintains a conflicts
of interest register, which is reviewed
annually by the NomCo and the board.
In addition, prior to each board
meeting, the directors are asked to
declare any conflicts they may have
with regard to the business meeting.
Directors who declare a conflict of
interest may be authorised by the rest
of the board to participate in decision
making in accordance with section 175
of the Companies Act 2006.
The board considers and, if
appropriate, authorises any conflicts
or potential conflicts of interests of
directors and imposes any limitations,
qualifications or restrictions as
required or as recommended by the
NomCo.
93
Subsidiary governance
The Group’s regulated principal operating subsidiaries carry out their
business of providing investment and life insurance activities. Each of the
boards of Integrated Financial Arrangements Ltd (IFAL), IntegraLife UK
Limited (ILUK), and IntegraLife International Limited (ILInt) is comprised of
a mix of executive and NEDs in line with UK (IFAL and ILUK) and Isle of Man
(ILInt) regulatory requirements. In each case the membership of the board is
made up of a mix of skills and experience relevant to the board, resulting in
membership composed of both members with cross directorships within the
Group, and members who are independent of any other Group appointment.
We believe that this delivers the optimum governance to each entity.
The board and committee governance framework of the main regulated
operating subsidiaries is outlined below:
Each operating subsidiary Audit and Risk Committee (ARC) is responsible
for overseeing the internal controls and risk management systems for their
respective subsidiary and reporting assurances up to the IHP ARC annually that
these systems remain effective.
More details of how the board fulfilled its s.172(1) duties in relation to this
decision is noted in the “Principal Decisions” section on page 89. Further
information on how the Nomination Committee has been involved in subsidiary
board composition and succession planning under the new structure is outlined
on page 109.
IHP board
IHP
Remuneration
Committee
IHP
Audit and Risk
Committee
ILUK board
ISL board
ILUK
Audit and Risk
Committee
IHP
Nomination
Committee
IFAL board
IAD board
IFAL
Audit and Risk
Committee
ILInt board
T4A board
ILInt
Audit and Risk
Committee
94
COMPOSITION, SUCCESSION AND EVALUATION
Board composition
The Company has three executive directors and six independent NEDs (including
the Chair).
The Company has recently announced the selection of a CFO who will join the
executive team bringing the composition of the board to four executive directors
and six NEDs. The board will still meet the Code requirement that at least fifty
per-cent of the board (excluding the Chair) is comprised of independent NEDs.
Committees
There are three committees of the board: Audit and Risk, Nomination, and
Remuneration. The ARC and the Remuneration Committee (RemCo) are wholly
non-executive committees and the members are all independent NEDs. The Chair
of the board is a member of, and Chairs, the NomCo. The other members of the
NomCo comprise the SID), the CEO and two other independent NEDs, meaning
the committee has a majority of independent directors.
The membership and terms of reference of these board committees are
reviewed annually. The terms of reference for each committee is available on the
Company’s website
https://www.integrafin.co.uk/corporate-governance/
.
Board and committee meetings and attendance
BOARD MEETINGS
AUDIT AND RISK
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
ELIGIBLE ATTENDED
ELIGIBLE ATTENDED
ELIGIBLE ATTENDED
ELIGIBLE ATTENDED
Caroline Banszky
5
5
6
6
-
-
-
-
Victoria Cochrane
5
5
6
6
9
8
-
-
Richard Cranfield
5
5
-
-
9
9
10
10
Michael Howard
5
5
-
-
-
-
-
-
Robert Lister
5
5
6
6
5
4
10
10
Christopher Munro
5
5
-
-
9
8
10
10
Alexander Scott
5
5
-
-
9
9
-
-
Jonathan Gunby
5
5
-
-
-
-
-
-
Rita Dhut
5
5
3
3
-
-
8
8
Note: the Nomination Committee meeting missed by three NEDs was to shortlist candidates for subsidiary boards for interview.
The absences were due to the short notice of the meeting; all NEDs had reviewed and commented on the list of candidates beforehand.
Board succession
During FY22, the board agreed that the appointment of a CFO would enhance the
board, as well as providing additional and valuable support to the CEO.
The NomCo appointed an independent search firm to commence the selection
process, as a result of which the Company has announced that Euan Marshall will
be appointed to the role. A further announcement has been made giving details
of Euan’s commencement date in January.
Christopher Munro has indicated his intention to step down from the board in
FY24. The board will continue to assess the composition of the board and its
ongoing suitability throughout the year.
95
Directors’ induction
A tailored induction programme is prepared for each new director, based on their
individual needs. The programme comprises the following areas:
•
Information and materials: a comprehensive library of materials is provided
electronically, including prior board and committee papers and minutes,
information on Company values and culture, strategy materials, regulatory
information, and statutory and governance documentation and policies.
•
Scheduled meetings: individual meetings are arranged with key
stakeholders and employees to explore in more detail significant aspects of
the business and to assist with relationship building between the director
and management.
During the financial year, no new directors joined the IHP Board.
Directors’ development and training
Each board member is responsible for identifying training appropriate to their
needs, and the NEDs maintain individual annual training logs. The Chair and
Company Secretary ensure continuing training and development for all directors
based on individual requirements.
The board carries out periodic ‘deep dives’ into specific areas of the business
in order to broaden the board’s understanding of the Group’s business and the
opportunities and challenges it faces. During the financial year, training and deep
dive sessions were facilitated for the directors, covering the following topics:
•
market abuse and disclosure obligations
•
employee engagement strategy and monitoring culture
•
investor sentiment and market reaction
•
external market and macro-economic factors
•
Consumer Duty including FCA’s approach to supervision and firm
evaluation model
In addition, open Q&A sessions between the directors and management are held
periodically to facilitate engagement with the layer below the board.
Election and re-election of directors
The Company’s Articles of Association require all existing directors to retire from
office at each AGM and be eligible for re-election.
96
Board effectiveness review
In line with best practice and the requirements of the Code, the board and its
committees undertake an external evaluation every three years. With the assistance
of Independent Audit Ltd, the Company undertook an external evaluation in FY23.
Independent Audit Ltd were selected to support this year’s review as having
undertaken the first external evaluation in FY20, it was felt that the most value would
be gained by understanding how the board had developed in the intervening years.
FY22 board evaluation – progress update
AREA OF ASSESSMENT
AGREED ACTION
PROGRESS
Designated strategy
session
The board would reinstate, post-COVID, an
annual deep dive strategy session to allow
for more time to discuss longer-term strategy
and performance horizon scanning.
The board discussed strategic opportunities
throughout the year and deep dive sessions
were reinstated immediately after year end.
Stakeholder
engagement and ESG
The board has improved its oversight
of stakeholder engagement in 2022, in
particular that of employees. The board will
continue to increase its understanding of the
Group’s stakeholder engagement and ESG
strategies.
ESG is now a standing agenda item, with
quarterly updates to the board.
Information flows
between parent and
subsidiaries
With the recent governance restructure,
continue to improve the framework of
information flow between the operating and
other subsidiaries and the parent company.
Refinement of reporting between subsidiary
and parent ARCs has been established
and improvement of information flow is a
continuous focus of the boards.
FY23 board evaluation
Independent Audit Ltd presented their report to the Chair and subsequently to the
board in September 2023.
The areas identified for the board to focus on in FY23 and beyond are summarised
below:
Chair evaluation
The SID led the performance evaluation of the Chair by meeting separately with each
of the executive and NEDs, and the Head of Legal and Company Secretary. The SID
then met with the Chair to discuss the directors’ feedback and agree actions for 2024
and beyond.
AREA OF ASSESSMENT
AGREED ACTION
Improved communication to
and from subsidiary boards,
as well as within the IHP
board
IHP board members, subsidiary chairs and committee chairs commit to prioritising
improvements to the subsidiary reporting up to the board. There will also be a
renewed focus on improving communications outside of formal board meetings
Improved timeliness of
board papers
Too many board papers are arriving after the cut off for submission, thereby reducing
directors’ ability to properly review. Writers and reviewers therefore commit to more
regimented scheduling when drafting papers.
Improved conciseness of
papers to the board
Papers are to be shortened and will all include executive summaries. The size of board
packs will be reduced to encourage the distillation of key information.
97
AUDIT AND RISK COMMITTEE REPORT
Statement from the Chair
I am pleased to present the Audit and Risk Committee’s report for the
year ended 30 September 2023. The report provides insight into our work
undertaken this year.
I would like to welcome Rita Dhut to the committee following her appointment
in March and to thank all members for their work throughout the year.
The ARC has continued to consider the potential impact of the BEIS consultation
on Corporate and Audit Reform, and the emerging statements and consultation
from the FRC. Management continue to closely monitor developments and
report to the committee on the impact of the proposed changes on the
committee’s activities.
The committee continues to scrutinise management reporting on internal
controls, financial reporting and risk management. During FY23 the committee
commenced its oversight of the delivery of the Group’s agreed objectives. This
work is still in its infancy as we develop our strategy. For the environmental
aspects of this strategy, we have engaged the support of Brite Green,
sustainability consultants to enhance our disclosures. In addition, the committee
reviewed the Company’s development of the IT general controls and the
enhancement of the Group’s IT security framework.
I will be available to answer any questions at the AGM. Further details will be
set out in the Notice of AGM.
Further information on the activities of the Audit and Risk Committee is
provided below.
In FY24, the committee will continue to challenge management’s assessment
of and controls around the principal risks facing the business, both internally
and externally. The committee will continue to focus on the delivery of the ESG
objectives, the identification of the Group’s principal internal and external risks
and the development of the Group’s risk management framework, including with
respect to IT controls, continuously assessing whether the Group remains within
the risk appetite and to ensure that the Group is resilient to the ever changing
economic and social environment within which we operate. We also look forward
to welcoming
Euan in the role of CFO and working with him to deliver high
quality financial reporting for the Group.
Caroline Banszky
Chair, Audit and Risk Committee
13 December 2023
98
Membership and attendance
The members of the committee as at 30 September 2023 were:
The committee meets at least four times each year and may meet at other times,
as requested by the Chair. The committee met six times during this financial year.
The committee’s attendance is outlined on page 94.
All committee members are independent NEDs, as required by the Code, with
the ARC Chair being a qualified accountant. The board is satisfied that the
committee as a whole has an effective balance of skills and experience to perform
its responsibilities. Details of each member’s skills, education and experience are
outlined in the Directors’ Biographies on pages 76 to 79.
In FY23, Rita Dhut was appointed to the committee. The committee membership
is kept under review by the Chair of the committee, in collaboration with the
NomCo.
All committee members are provided with initial and ongoing training to
support them in carrying out their duties effectively. During the year, the
committee received training on the external platform market and the competitive
environment; directors’ s172 duties, market abuse and disclosure obligations;
and Consumer Duty.
Regular attendees at committee meetings include the board’s Chair, IHP CEO, the
IFAL CEO, Group Chief Financial Controller, Chief Actuarial Officer, CRO, Group
General Counsel, Group Head of Internal Audit, Company Secretary and the
Group’s external auditor.
Other NEDs are invited to attend meetings.
The committee Chair meets privately with the Group Chief Financial Controller,
Head of Internal Audit, Chief Actuarial Officer, CRO, external Audit Partner and
Independent Quality Assurance Partner at EY to discuss issued reports and
relevant financial and risk reporting and regulatory developments.
MEMBER
DATE OF APPOINTMENT
Caroline Banszky (Chair)
22 August 2018
Victoria Cochrane
28 September 2018
Robert Lister
4 September 2019
Rita Dhut
16 March 2023
99
Role of the Committee
The primary role of the committee is to ensure the integrity of the financial
and non-financial reporting and auditing processes and monitor the
effectiveness of the Group’s internal control and risk management systems to
ensure there are continuing, appropriate levels of external and internal audit
and risk assessment to cover all material risks (including fraud) and controls,
including financial, operational and compliance processes and procedures and
non-financial reporting, including in particular, assurance over the Company’s
reporting under TCFD requirements.
The committee is also responsible for oversight of the Group’s relationship
with the external auditor. This includes making recommendations to the board
in relation to the (re)appointment of the external auditor, approving its scope
of work, fees and terms of engagement, as well as regularly reviewing its
independence, objectivity and effectiveness.
The detailed responsibilities of the committee are set out in its terms of
reference which can be found at
https://www.integrafin.co.uk/corporate-
governance
.
Details of the work of the committee in discharging its responsibilities during
the financial year are outlined further below.
Key committee activities through the year
AREA OF CONSIDERATION
COMMITTEE REVIEW AND CONCLUSION
Financial reporting
During the financial year, the committee:
•
Reviewed and challenged the financial reporting undertaken by the Group, with
input and support from the Group’s external auditor;
•
Reviewed and considered the disclosures in the entire Annual report and financial
statements, recommended to the board the published Annual report and financial
statements and Half-year report and concluded that the reports were fair, balanced
and understandable;
•
Considered the consistency of accounting policies, the financial reporting process
and the disclosure of key accounting and financial risks. Further information on the
key financial and non-financial risks can be found on page 63; and
•
Reviewed the External Auditor report. The report confirmed that the External
Auditor identified the requirement to disclose a related party transaction under
IAS24.
Accounting
judgements and
estimates
The committee assessed and challenged the appropriateness of the judgements and
estimates applied by management in the preparation of the Annual report. This included
consideration of the following:
•
ILUK tax provisions
•
Goodwill
•
T4A post combination remuneration
These areas have been discussed with the external auditor to satisfy them that the
Group makes appropriate judgements and provides the required level of disclosure.
Following consideration of the above, the committee concluded that the accounting
treatment of the ILUK tax provisions should be classified as a significant judgement and
there are no items that should be classified as critical accounting estimates in the Annual
report and financial statements.
100
Going concern and viability
The directors are required to make
a statement in the Annual report
on IHP’s long-term viability. The
committee provided the board with
advice on the form and content of that
statement. In advance of the year end,
the committee reviewed the Group’s
proposed stress test scenarios and the
assumptions underlying them, used to
support the Viability statement.
At the year-end, management provided
a report to the committee setting out
its view of IHP’s long-term viability and
the proposed Viability statement, based
on the Group’s three-year business
plan. This report included, at both an
individual Company and consolidated
Group level, forecast outcomes of
the business plan under the stress
scenarios agreed with the committee,
detailing capital and liquidity
performance against an assessment of
risk appetite. The report was produced
on financial data to 30 September
2023 and included consideration of
various scenarios as set out on page
70, both individually and combined.
The committee discussed whether the
choice of a three-year period remained
appropriate. It concluded that this
remained appropriate due to the
nature of the business. Taking account
of the assessment of the Group’s
stress testing results, the committee
agreed to recommend the Viability
statement and three-year viability
period to the board for approval.
The committee concluded that
the Group has sufficient financial
resources and liquidity and is well-
placed to manage business risks in
the current economic environment,
having considered the potential
impacts of various risks, and can
continue operations for the foreseeable
future. The committee has therefore
concluded that the going concern basis
is appropriate.
Group wide financial
crime controls
•
Reviewed the progress made on the implementation of the recommendations made
by the Legal team to expand the Financial Crime team’s remit to T4A and IAD and to
add and enhance the wider Group controls.
Whistleblowing
Champions assurance
re whistleblowing
arrangements
•
Reviewed the Whistleblowing policy and the Whistleblowing framework for reporting
and confirmed that each are appropriate to the Group structure and organisation.
•
Jeremy Brettell, as a member of the IFAL Audit & Risk Committee, is a key contact
in the Whistleblowing Policy and fulfils the role of “whistleblower’s champion”
under the Senior Managers’ Regime whilst Caroline as Chair of the Audit and Risk
Committee has oversight of Whistleblowing for the Group.
The induction
and transition of
responsibilities to
the incoming Chief
Financial Officer
•
The Chair worked with the CEO and NomCo during the selection process of the
preferred candidate.
•
Following recommendation made by management and the NomCo, the Chair of
the committee reviewed the credentials and experience of the incoming CFO and
endorsed the appointment. The same process applied to the selection of the CRO,
whose appointment was reviewed by the NomCo.
TCFD reporting
•
The Company has published climate-related reporting in its Annual report and
financial statements based on the TCFD’s recommendations. Details on this
disclosure can be found on page 23.
•
In preparing the Annual report and financial statements, the committee was
provided with information on the methodology used by management for collecting
climate-related data for publication in the Annual report and financial statements.
•
The committee was made aware of the restatement of the FY22 emissions data. The
committee concluded that the impact of climate-related matters does not have a
material effect on the Group’s financial statements.
Committee evaluation
•
The committee underwent an external evaluation provided by Independent Audit
Ltd. We continued to improve the performance of the committee.
101
Fair, balanced and
understandable assessment
The committee also undertakes
a wider review of the content of
the Annual report and Financial
Statements to advise the board as to
whether, taken as a whole, it is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
performance, business model and
strategy. This supports the board in
providing the confirmations set out
on page 151 of the Statement of
Directors’ Responsibilities.
In considering the wider content
of the Annual report and financial
statements, the committee pays
particular attention to ensuring the
narrative sections provide context
for, and are consistent with, the
financial statements, and that
an appropriate balance is struck
between the articulation of successes,
opportunities, challenges and risks.
The committee concluded that,
taken as a whole, the interim and
annual reports were fair, balanced
and understandable and provided
the information necessary for
shareholders, and other stakeholders,
to assess the Group’s position and
performance, business model and
strategy.
Risk management
The committee oversees risk and
control matters at a Group level,
with matters which are regulated
entity-specific overseen by the
three regulated subsidiary ARCs.
Consistency is achieved through the
application, across all entities, of the
Group Risk Management Policy and
Framework.
Each subsidiary ARC has terms
of reference outlining their
responsibilities and the committee
receives updates at each meeting on
key areas for escalation from each
committee Chair including Consumer
Duty, service risk, and non-standard
assets.
During the financial year, the
committee:
•
oversaw the risk appetite
statements and risk management
framework and reviewed its
effectiveness in relation to IHP,
and how Group companies have
implemented the framework;
•
reviewed Group Risk
Management’s development of
T4A’s and IAD’s risk profiles;
•
reviewed the regular quarterly
risk reports presented by Group
Risk Management to ensure the
business continues to operate
effectively with the appropriate
risk profile under the hybrid
working model;
•
reviewed and challenged the Risk
Reports presented by Group Risk
Management, and considered
the progress of management
action taken in order to address
management points raised on IHP
specific risks;
•
considered the climate-related
risks and opportunities facing
the Group and how the regulated
entities have assessed the impact;
•
reviewed and assessed the Group’s
principal risks, uncertainties and
emerging risks and updated them
as appropriate;
•
assurance was sought from the
Chairs of the IFAL, ILUK and ILInt
ARCs that management points
raised have been addressed
through appropriate management
actions;
•
assisted the board in maintaining
an appropriate culture within the
Group, which emphasises and
demonstrates the benefits of the
risk-based management of the
Group; and
•
considered the points escalated
from the Group Company boards
or committees which affect IHP, or
the Group as a whole.
More details on the Group’s risk
management processes are outlined
on page 60.
102
Internal controls
The committee provides assurance to
the board on the effectiveness of the
Group’s system of internal controls.
A key aspect of this is the review of
all material/ key controls, including
reporting, operational and compliance
controls, that identify, assess, manage
and monitor top risks, which are an
important aspect of ensuring the
integrity of the Group’s financial
statements as a whole.
The Group’s internal controls comprise
elements that together provide an
effective and efficient framework,
enabling the Group to prepare for, and
if necessary, respond, to a variety of
operational, financial and commercial
risks.
During the financial year, the
committee:
•
received reports from
management on the effectiveness
of internal controls including over
critical IT and information security
risks and financial crime risks
encompassing the detection and
prevention of fraud, bribery and
corruption, money laundering and
market abuse;
•
reviewed annual control self-
attestations received from senior
management;
•
received quarterly reports from
the Group risk management
function on the risk management
framework which monitors top
risks against risk appetite and
target risk scores;
•
received regular reports from the
Group Internal Audit function on
the sufficiency and effectiveness of
the internal controls in those areas
of the business included in the
Group Internal Audit Plan for the
period. Actions identified through
internal audits are regularly
monitored and challenged
throughout the process until the
required action has been achieved;
and
•
reviewed the Group Head of
Internal Audit’s annual assessment
of the Group’s internal control
framework that included thematic
internal control observations
and risk and control culture
enhancements.
Over the course of the year,
management made significant progress
to enhance the design and operating
effectiveness of IT General Controls
to address improvement areas as
highlighted by the external auditors in
the prior year financial statements. At
the end of FY23, the external auditors
concluded, to the extent controls
could be assessed at that time, that
the design of IT General Controls
appears to be designed effectively.
The operation of these controls will
continue to be assessed in FY24.
The committee also continued
to discuss with management the
preparation needed to comply with
those provisions of the proposed UK
Corporate Code changes published in
May 2023 that will remain when the
updated Code is published in January
2024. which, if approved in the current
form, will apply to the Company from
1 October 2025. This includes setting
out a revised framework of prudent
and effective controls to provide a
stronger basis for reporting on and
evidencing their effectiveness.
Internal audit
The Group Internal Audit department
is focused on the delivery of high-
quality internal audit services to the
Group.
Its mission is to protect and
enhance the value, reputation and
sustainability of the Group, and
to help the Board and executive
management of the Group to meet
its strategic objectives centred
on making financial planning and
investment easier for UK financial
advisers and their clients.
To do this, the Group Internal Audit
department performs independent,
objective assurance and advisory
services designed to add value
and enhance risk management,
governance and internal controls.
The committee monitors the scope,
activity and resource of the Group
Internal Audit department formally
on a quarterly basis, and regularly
meets with the Group Head of
Internal Audit without executive
management present.
During the financial year, the
committee:
•
approved the Group Internal
Audit Charter setting out
the Group Internal Audit
departments purpose, authority,
scope and responsibility;
•
approved the rolling 12-month
Group Internal Audit Plan,
including proposed changes to
the plan each quarter to ensure
alignment with the Group’s key
risks. In setting the plan, Group
Internal Audit consider the
business strategy, regulatory
priorities and its independent
view of current, emerging and
systematic risks;
•
received and reviewed Group
Internal Audit reports at
committee meetings including
detailed review of any
recommendations made to
management, management’s
103
response, and views over
risk and control culture and
consumer outcomes;
•
monitored the status of any
open management action plans
including receiving updates from
the Chair of the IFAL, ILUK and
ILInt ARCs on the management
actions in response to the
findings and recommendations of
internal audit reports pertaining
to those entities;
•
challenged management on
action delivery;
•
reviewed all Group Internal Audit
reporting escalated by either
the IFAL, ILUK, or ILInt ARCs, or
activities within other companies
in the Group, which represent a
significant risk to the Group as a
whole;
•
noted the conclusion of the
annual Internal Audit report
that there were no significant
deficiencies that would need
to be disclosed in the Annual
report;
•
received reports on matters
relevant to the financial
reporting processes including
assurances on internal controls,
processes and fraud risk; and
•
assessed the effectiveness and
independence of the Group
Internal Audit function.
Delivery of internal audit plan
There were several internal audit
engagements completed during FY23,
in line with the approved Group
Internal Audit Plan. The results of
these internal audit engagements were
reported and discussed and follow up
actions were reviewed or requested
where necessary. The internal audit
engagements included, but were not
limited to, the following:
•
client assets and client money
compliance;
•
financial projections model;
•
Consumer Duty implementation;
•
platforms IT infrastructure;
•
user access management and
monitoring;
•
TCFD reporting;
•
operational resilience
requirements;
•
Internal Capital and Risk
Assessment (ICARA);
•
complaints handling; and
•
asset onboarding.
The Group Internal Audit function also
completed its annual assessment of
the Group’s risk management and key
internal controls relating to the Group’s
major business processes and top
risks that included an evaluation of the
Group’s annual fraud risk assessment.
Furthermore, using external IT security
testing experts, penetration testing
was completed across the Group’s
sites and IT environments including
T4A and IAD.
Effectiveness and independence
of Group internal audit function
During the financial year, the
committee performed its annual
assessment on the independence and
effectiveness of the Group Internal
Audit function. Based on the scale
and focus of the work conducted by
Group Internal Audit during the year
and considering the results of Group
Internal Audit’s report in respect to
its effectiveness and independence
completed during the year, the
committee concluded that the Group
Internal Audit function is working
effectively and independently in line
with relevant professional standards
and that the team is appropriately
qualified and staffed.
A private session also took place
between each of the four ARCs (see
structure on page 93) and the Group
Head of Internal Audit. The subsidiary
sessions took place in August 2023
and the IHP ARC session took place in
September 2023.
104
External auditor
Tenure
The last tender for the external auditor
was conducted in 2021, when EY was
appointed as the Group’s External
Auditor. EY’s re-appointment was
ratified by shareholders at the 2023
AGM. Michael Gaylor has been the lead
audit partner for two years.
Scope of the external audit plan
and fee proposal
During the financial year, the
committee:
•
reviewed EY’s overall work plan;
•
advised EY, through regular
communication, of any specific
matters which the committee was
considering from previous audits
and current operations;
•
approved EY’s remuneration and
terms of engagement, taking into
consideration feedback from the
three operating subsidiary ARCs;
•
assessed EY’s independence and
objectivity;
•
reviewed and approved external
auditor fees;
•
approved revisions to the External
Auditors Policy in relation to the
provision of non-audit services
and hiring of ex-employees;
•
considered quarterly reporting
on non-audit services and
audit-related non-audit services
provided by EY; and
•
assessed the effectiveness of the
external audit.
External auditor independence
and non-audit services
In order to safeguard the
independence and objectivity of the
external auditor, the ARC is responsible
for the development, implementation
and monitoring of the Group’s
policy on the provision of non-audit
services and oversight of the hiring of
personnel from the external auditor,
should this occur. The committee must
pre-approve any non-audit services,
in line with the requirements of the
FRC’s Revised Ethical Standard 2019.
The committee received a report at
each meeting analysing fees paid for
any non-audit work by the external
auditors. EY did not perform any non-
audit services during the 2023 financial
year. EY did provide Other Assurance
Services, in line with the Revised
Ethical Standard 2019. These services
were required by regulation and are
further disclosed under Note 8.
Full details of EY’s remuneration are
set out in Note 8 of the Financial
Statements.
Effectiveness of external audit
process
The ARC is responsible for assessing
the qualifications, expertise and
resources of the external auditor and
for reviewing the effectiveness of the
external audit process. As part of this
process, the views from executive
management, including leadership at
ISL, IAD and T4A, ARC members, and
the Chairs of the three subsidiary ARCs
are sought on the following:
•
the efficiency of the year-end
process;
•
the quality of the audit partner
and team;
•
the planning and execution of the
audit;
•
quality of audit reporting and
delivery;
•
extent and nature of challenge
demonstrated by EY in its work
and interaction with management;
and
•
EY’s independence and objectivity.
The committee also reviews the FRC’s
annual Audit Quality Inspection and
Supervision Report of EY and receives
a report from EY on its own internal
quality control procedures.
The responses indicated that, overall,
EY was performing in line with
expectations and has demonstrated
challenge and professional scepticism
in performing its role. The ARC
concluded that the external audit
process was effective, and the
committee remains satisfied that EY
continues to display the necessary
attributes of independence and
objectivity. Accordingly, the committee
has recommended to the board a
proposal for the reappointment of EY
as external auditor at the next AGM.
105
Committee self-evaluation
The following provides an update on progress against those areas agreed as
priority areas of focus for the committee in 2023:
The following areas were agreed as priority areas of focus for the committee
in 2024:
•
Schedule a risk identification deep dive session
•
The induction and transition of responsibilities to the incoming Group CFO
Monitor developments in relation to the BEIS corporate governance
and audit reform and ESG reporting.
AREA OF FOCUS
PROGRESS
Schedule a risk identification deep
dive session.
The induction and transition of
responsibilities to the incoming
Group CFO.
The CFO will join the Group in FY24.
This action will therefore carry
forward into the new financial year.
Monitor developments in relation to
the BEIS corporate governance and
audit reform and ESG reporting.
Management continue their analysis
of the changes and reported to the
committee throughout the year.
106
107
NOMINATION COMMITTEE REPORT
Statement from the Chair of the Nomination Committee
I am pleased to present the Nomination Committee’s report for 2023.
We welcomed Robert Lister to the committee in March and I would like to extend
my thanks to all members for their work throughout the year.
Membership and attendance
The members of the Nomination Committee at 30 September 2023 were:
The committee meets at least once each year and may meet at other times as
requested by the Chair. The committee met nine times during the financial year,
due to the committee’s wider remit of oversight of subsidiary board succession
planning and increased senior management succession planning.
The committee’s attendance is outlined on page 94.
Composition
In adherence with the Code, the majority of members of the NomCo are
independent NEDs. The Chair of the board chairs the committee. However,
he is not permitted to chair when the committee is dealing with nominating a
successor to the Chair.
The CEO is a member of the committee, as permitted by the Code. We note
that some proxy advisory companies advise a vote against the Chair of the
Committee at AGM in circumstances where the CEO is a member of the
Committee. However, we believe that the CEO contributes valuable insight
into the composition of the management team, interaction of the board with
management and cultural fit of candidates to the board and senior management
team and that his membership of the committee does not affect the independent
decision making by the committee. The CEO recuses himself from any discussion
or recommendation about him.
During the year, the Company reviewed advice from the Company Secretary
regarding feedback from the proxy advisers in advance of the AGM on the
composition of the committee. The feedback did not indicate any significant
concerns with the composition however it is clear that for some investors the
balance of independent non-executives did not align with their expectations. As
a result, and upon considering the mix of skills and experience of the members,
the board appointed Robert Lister to the committee.
Training
The Group provides initial and ongoing training for committee members, to
support them in carrying out their duties effectively. This is delivered through
in-house technical employees, through the attendance at formal conferences as
required, and an in-house training programme.
MEMBER
DATE OF APPOINTMENT
Richard Cranfield (Chair)
1 August 2019
Victoria Cochrane
28 September 2018
Robert Lister
16 March 2023
Christopher Munro
2 February 2018
Alexander Scott
2 March 2020
108
Role of the committee
The primary purpose of the committee is to develop and maintain a formal,
rigorous and transparent procedure, and to lead the process for, board and
committee appointments and reappointments, including making recommendations
to the board. To achieve a balanced board, the committee considers the board’s
size and composition, the extent to which skills, experience and attributes are
represented and the need to maintain high standards of corporate governance.
The role and responsibilities of the NomCo are set out in its terms of reference
which can be found at
www.integrafin.co.uk/corporate-governance
.
Key committee activities through the year
AREA OF FOCUS
WORK CONDUCTED
Board composition and
succession planning
•
Considered the skills, tenure and independence of the NEDs and made
recommendations to the board for reappointment.
•
Reviewed the composition of the IHP board including reviewing the mix of skills,
experience and expertise, identifying any gaps and ensuring diversity, including of
thought and ideas.
Management succession
planning
•
Reviewed the emergency and long-term management succession plans.
•
Interviewed a short-list of candidates and recommended to the board a candidate
for CFO.
Operating Subsidiaries
board succession
planning
•
Discussed succession plans for the IFAL board Chair.
•
Reviewed board and committee member composition.
•
Supported the selection of NEDs to the IFAL and ILUK boards on rotation of
incumbents who had reached the end of their tenure.
Diversity and Inclusion
•
The committee discussed the Group’s diversity and inclusion strategy.
•
The committee reviewed proposals from the Head of HR with regard to the
collection and reporting of diversity data within the Group.
•
The committee reviewed the board’s Diversity Policy.
•
Board composition in relation to tenure, skills and diversity at operating
subsidiary level was also reviewed.
Committee evaluation
•
The committee did not conduct a self-assessment of the effectiveness of the
committee, the individual members and the committee Chair in FY23 as the board
and its committees were part of the wider external board evaluation process.
109
Succession planning
IHP board succession planning
The IHP board composition remained
stable during FY23. There were no
resignations or appointments made
during the year.
The committee reviewed the size,
composition and skill set of the board
and its committees. The committee
considered the composition of the
board in the context of Christopher
Munro’s indicated intention to step
down from the board in FY24 and
of the selection of Euan Marshall
as CFO and his additional skills and
experience.
The committee also considered the
skills and tenure of the NEDs. We
continue to keep in mind the profile of
our board members and formulate our
succession planning accordingly.
Subsidiary board and committee
succession planning
During the financial year, the
committee assisted the regulated
operating subsidiaries. IFAL and
ILUK both required support with the
process of appointing new NEDs as
existing board members reached the
end of their tenure. In the Spring, we
supported the process of recruiting a
new NED, Mary Gavigan, as a member
of the ILUK board and Chair of the
IFAL ARC upon the retirement of Neil
Holden. Jeremy Brettell replaced
Neil Holden as Chair of ILUK. In the
summer months, a further search
was undertaken for two new non-
executives in anticipation of the
retirement of Jeremy Brettell. We were
pleased to be able to assist with the
search for a new Chair of the ILUK ARC
and a new NED of the IFAL board.
Senior management succession
planning
Senior management succession
planning continues to be a key focus
of shareholders and the committee.
With the appointment of the CRO, CTO
and the upcoming appointment of the
CFO, the committee is satisfied that
the management succession plan is
strengthened but maintains oversight
of developments to ensure a resilient
pipeline which will support the future
success of the business.
110
Diversity and inclusion
Inclusivity throughout the business is
important to us and we continue to
focus on this by developing our diverse
talent pipeline. The board supports
the Hampton-Alexander Review on
gender diversity and the Parker Review
on ethnic diversity. I am pleased to
say that we have 33% representation
of women on our board (FY22: 33%)
and 57% female representation in
roles which we define internally as our
senior management equivalent (FY22:
67%). In addition, one member on our
board is ethnically diverse (FY22: one)
and our SID is female.
We recognise that developing diverse
talent at the executive, senior
management and direct report levels is
important and this is being considered
in the Group’s ongoing leadership
succession plans.
Board diversity policy
The board has a Diversity Policy which
is reviewed and assessed annually.
New appointments to any Group or
subsidiary board are made on merit,
taking into account the different skills,
industry experience, independence,
knowledge and background required
to achieve a balanced and effective
board. When identifying suitable
candidates for appointment to any
Group board, we consider candidates
on merit against objective criteria and
with due regard for the benefits of
diversity on the board.
Equal opportunities policy
The Group has an Equal Opportunities
Policy which applies to all employees.
We are proud to have a culture of
developing our workforce to provide
opportunities for promotion within
the organisation, alongside recruiting
external talent to enhance diversity
of thought. Internal opportunities
not only include traditional vertical
promotions, but in many cases
opportunities to move to different
departments within the Group
and learn new skills or undertake
professional development. This
approach ensures that we develop a
pool of talented individuals who may
have the potential for succession into
senior roles. We support employees by
providing relevant training, assistance
and resources to help them succeed
in their new roles. In the last year,
72 employees accepted internal
job opportunities (FY22: 118). In
contrast, 112 job opportunities were
filled by employees hired externally
(FY22: 132).
111
Composition of the board
The board’s membership comprises a mix of long-standing and more recent
appointments who collectively deliver a balance of historical knowledge and
industry experience.
2
3
3
1
Age profile of the board
(number of directors)
50-55
60-65
65-70
70+
33%
67%
Board gender split (%)
Women
Men
Tenure of board
(number of directors)
0-3 years
3-6 years
6-9 years
9+ years
5
2
1
1
89%
11%
Ethnic diversity of the board (%)
Caucasian
Ethnically
diverse
Board skills matrix disclosure
(number of directors)
Accounting/Finance
Asset/Fund Management
Compliance
Executive Management
Insurance
Legal/Governance
People
Actuarial
Audit
ESG
Financial Services
IT/Technology
Marketing
Risk Management
112
Renewal of existing NED
appointments
The committee reviewed the profile
of board tenure of our NEDs in light
of its future needs. As part of this, it
considered the renewal of Christopher
Munro’s term as a NED, his second
three-year term of which was due
to expire in FY23. The committee
agreed, taking account of the
current cycle of board development
and succession and Christopher’s
knowledge of and contribution to
the business, to recommend to the
board for approval the renewal of his
appointment for a further three-year
term, subject to annual re-election by
shareholders which was approved at
the AGM. This decision was taken in
the February AGM.
Board effectiveness
An external board evaluation
effectiveness review was conducted
during the year. The review was
conducted by Independent Audit Ltd
who conducted our first review in
2020. The board considered that using
the same firm would provide insight
into how the board had developed
in the intervening three years. Full
details are set out on page 95 above.
Victoria Cochrane, our SID, also met
with the directors to appraise my own
performance, and Victoria and I have
discussed the feedback received.
Committee self-evaluation
The NomCo conducted a self-assessment of the effectiveness of the
committee, the individual members and the committee Chair in FY23. In
addition to considering the composition of the committee as described above,
the internal evaluation considered the performance of the committee and
concluded that the committee continues to be effective.
The following provides an update on progress against those areas agreed as
priority areas of focus for the committee in FY23:
The following areas were agreed as priority areas of focus for the committee
in 2024:
•
Further oversight into executive’s pipeline and talent development
Richard Cranfield
Chair, Nomination Committee
13 December 2023
AREA OF FOCUS
PROGRESS
Continue to strengthen oversight
and input into the Group’s
operating subsidiary NED
appointments.
The committee has participated in the
selection process for the non-executive
hires in the subsidiary firms.
Further oversight into executive’s
pipeline and talent development.
The committee continues to review
proposals for building a pipeline of talent
into the succession planning process.
113
DIRECTORS’ REMUNERATION REPORT
Annual statement by the Chair of the Remuneration Committee
(unaudited)
Remuneration Overview
As Chair of the Remuneration
Committee I am pleased to present the
Directors’ Remuneration Report for the
year ended 30 September 2023.
In keeping with prior years the report
is set out in four sections.
•
This letter which summarises
our remuneration ethos and
objectives and how the
committee has worked to
deliver those during the year;
•
A summary of our remuneration
policy “at a glance” along with
the outcomes for our executive
directors can be found on page
120;
•
A summary of our approach to
directors’ remuneration can be
found on page 122;
•
Our annual directors’
remuneration report which can
be found on page 124 and sets
out how the committee has
delivered its responsibilities
throughout the year.
•
A summary of how we have
applied the policy can be found
on page 127.
Our current Directors’ Remuneration
Policy (DRP) was approved by over
92% of shareholders at the 2022 AGM.
Our remuneration philosophy is
underpinned by a responsible and
sustainable remuneration structure,
recognising that employees are one of
our key stakeholders. However, as we
develop and diversify our management
team to support the demands of
the business, our structure has to
be adaptable to attract and retain
talent, and to reward delivery of our
objectives and corporate goals.
Whilst we remain committed to
ensuring that employees participate
in our success on broadly the same
terms as our executive directors and
senior managers, where we take steps
to drive exceptional performance
amongst our management team, we
do so in a way that focuses delivery
not on short-term outcomes but on
the sustainable long term future
success of the Group. Our objective is
to align their financial interests with
the interests of our investors, whilst
keeping their reward measured and
proportionate, and avoiding a “them
and us” culture within the workforce.
Recognising the challenges of the
external economy, the Company
awarded meaningful but responsible
pay-rises in June, weighting pay
rises in favour of those on the lowest
salaries, for whom the cost of living
has had the greatest impact. As a
result pay rises of 8% or more were
awarded to lower earners whilst the
most senior leaders received more
prudent rises.
During the year, we welcomed Rita
Dhut as an additional member of the
committee, broadening the skills and
experience of the membership.
The committee continues to review
the structure and composition of
remuneration for directors and senior
leaders. The committee’s work so
far indicates that the overall limits
on variable reward set out in the
FY21 DRP, approved by shareholders
at the AGM in 2022, are no longer
sufficient to facilitate the flexibility
required to deliver a model which both
attracts and retains the talent that will
effectively support the business over
the longer term. Instead, a wide-
ranging restructure of the DRP will be
required.
114
The committee is not seeking to
increase the incentive limits set out
in the 2021 DRP in this annual report,
however, the committee engaged and
will engage with shareholders on any
proposed changes during FY23 and
early FY24, before tabling a change
of policy for approval at a General
Meeting.
Further details of all these themes
are provided in the Director’s
Remuneration Report below.
Board and senior management
changes
There were no changes to the
board composition during the year.
However, the board has recruited a
CFO to further enhance the skills of
the executive team. The RemCo has
reviewed the proposed reward and
confirmed that it meets the framework
of the DRP.
In addition, a CRO joined the senior
management team in January.
Together with the Senior Independent
NED, the Chair of the board and
the Company Secretary, I attended
a number of investor meetings
throughout the year to understand
investor sentiment on, amongst other
matters, executive reward. I am
pleased to report that the messages
we received were in line with our own
views on the link between reward and
performance.
Executive Directors’ remuneration
It remains one of our key principles
to create, maintain and improve
value provided to our customers,
shareholders and employees and
to share profits between all three
of these stakeholders. This reward
philosophy remains unchanged. We
are committed to sharing our success
evenly across the workforce through
the use of responsible, sustainable and
proportionate variable remuneration.
We have set out further the rationale
for our approach to executive director
remuneration on pages 122 to 123.
The key features of our reward
framework are as follows:
Base salary
–
Our ethos is to pay
base salaries which are set at a
level to attract and retain talented
and valued employees. Salaries are
benchmarked externally but the
external market is only one factor
taken into consideration when
assessing appropriateness of salaries.
Internal parity and the desire to
maintain an inclusive, sustainable and
responsible reward framework are
equally important.
Relatively modest additional
incentives
–
Above basic salary, our
maximum total additional incentive
opportunity is currently 100% of
salary per annum. In accordance
with our approach of keeping staff
and executive award aligned, it is
rare for any executive director’s
total annual variable remuneration
award to exceed 65% of salary. As a
result, remuneration for senior roles
currently sits in the lower quartile of
the FTSE 250. We recognise that this
has an impact on our ability to attract
and retain the highest quality talent
and that therefore for some roles, a
more flexible approach to variable
reward is required.
Distinctive approach to performance
measurement
–
Historically we have
not had mechanical performance
targets which apply to variable
pay awards, because we believe
that applying formulaic measures
can lead to undesirable behaviours
and / or outcomes. We do however
recognise that there is a need to
hold management responsible and
accountable for the long-term success
and stability of the business. The
committee will therefore continue
to exercise independent judgement
and discretion when authorising
cash bonus and deferred bonus
remuneration outcomes, taking into
account both company and individual
performance. Variable remuneration
awards are now more closely linked to
pre-set target deliverables, including
ESG outcomes. We continue to
develop performance metrics for the
exercise of the deferred element of
any awards however this is linked to
the development of a more flexible
variable reward structure which will
be the subject of a revised Directors’
Remuneration Policy. Investors will be
engaged in the development of that
new Policy in due course.
Our performance measurement
framework will still consider the same
four anchors – financial performance;
stakeholder outcomes; risk, regulation
and ESG; and strategy delivery, but
within those criteria specific target
deliverables will be set.
115
Alignment with wider workforce
whilst rewarding the long term
sustainable and responsible
business mode
– Our approach
to remuneration for executive
directors is consistent with that for
all employees. It has always been our
culture that we do not use reward
to grow the wealth of our executives
and senior managers at the expense
of our wider workforce. Our reward
framework is designed to drive
equitability in the remuneration
outcomes in order to drive alignment
in the high performance of all our
employees. We recognise that our
proposition relies upon our workforce
performing to the highest standard to
deliver the best service proposition
to the market and support all our
stakeholders in their success. Our
variable cash bonus and Share
Incentive Plan (SIP) reward incentive
structure reflects this ethos because
it is aligned across the workforce and
all employees (excluding T4A) are
awarded cash bonuses and invited to
participate in the SIP under the same
performance framework.
At the commencement of this
performance year and in response
to feedback from the work force
provided by way of our annual
employee engagement survey, the
committee endorsed a restructure
of the fixed and variable reward for
the ISL, ILInt and IAD UK employees,
recognising that fixed reward is
of fundamental importance to our
people, particularly during these
times of extraordinary inflation
and cost of living pressures. The
rebalancing of reward resulted in all
employees below the most senior
managers receiving a higher fixed
salary and a lower target cash bonus
of 10%, but with the potential to
receive a cash bonus award of up
to 20% for performance recognised
as excellent. The out-turn of this
approach has been to provide
employees with the assurance of
competitive rates of fixed reward,
total compensation which is
equivalent to the outcome prior to
the reframe, but with the possibility
of enhanced bonuses to reward
excellence.
At the same time, we recognise
the importance of focusing senior
management on the long-term
sustained performance of the
business. Adjusting reward for the
most senior managers to reduce the
scope for variable reward would be
inconsistent with this approach. As
a result, we have maintained the
cash bonus element of reward for the
most senior employees at 30% and
retained the ability for all members
of the management team, including
executive directors, to be considered
for an additional bonus award
deferred into shares. As a reflection
of our measured reward structure the
quantum of these deferred awards
currently remains capped at 33%.
As its next step to transforming the
reward framework, the committee is
considering the mix of cash, medium,
and long-term incentives available to
senior management, whilst retaining
the overall alignment of interests
with the wider workforce. Whilst
the design of a new proposal is at
an advanced stage, further details
of these plans will be presented to
shareholders in due course and in
advance of seeking approval at a
General Meeting.
The pension policy for executive
directors is equivalent to that of the
workforce but both Jonathan and
Alexander have elected to cap their
contributions at the HMRC annual
allowance which at the beginning of
the financial year was £4,000, rising
to £10,000 following the budget
changes. As a result, at 1.49% for
Alexander and 1.49% for Jonathan,
the actual employer pension
contributions made in respect of
executive directors are well below the
12.3% of salary contribution available
to all employees. Our current pension
arrangements therefore align with the
new Corporate Governance Code as
regards the alignment of executive
pensions with the wider workforce.
Employees (including the executive
directors) may also elect to sacrifice
a percentage of their cash bonus
award and receive additional employer
contributions. This diverges from the
Code provision, but neither Alexander
nor Jonathan take advantage of this
opportunity.
116
Share ownership
– Our executive
directors are significant shareholders
in the Company with Alexander and
Jonathan having a direct or indirect
interest in 1,305,570 shares and
960,189 shares, respectively. Michael
Howard as founder executive director
has a direct or indirect interest in
32,000,000 shares. With the exception
of employees of T4A, all UK and Isle
of Man based employees with the
required accrued service are invited
to become shareholders by way of the
all staff SIP which we are delighted
to report, during financial year 2023,
has once again had a 100% uptake
for Free Shares and has had a 69.79%
uptake for Partnership and Matching
shares. All IAD employees based in
Australia are invited to participate in a
parallel scheme created in accordance
with local remuneration rules.
In summary, we retain our belief
in simple and transparent reward
which is linked to Group success and
individual personal performance; long
term engagement amongst the more
senior management; and which is
delivered in a way that is sustainable,
and does not drive a them-and-
us reward culture, undesirable
behaviours or encourage excessive
risk taking:
•
We have designed our
remuneration structure to be
inclusive and to align executive
remuneration with that of the
workforce.
•
We encourage share ownership
by all staff to align the success of
the business with their own and
support this by way of company-
operated share ownership plans.
•
We operate an HM Revenue &
Customs tax-advantaged Share
Incentive Plan (SIP) for UK and
Isle of Man employees (excluding
T4), as well as a parallel scheme
for our Australian employees.
•
The Group’s deferred bonus share
option plan has a maximum award
opportunity of 33% of salary.
•
For executive directors, we
reference performance against
four key areas – financial
performance; stakeholder
outcomes; risk, regulation and
ESG; and strategy delivery.
The committee takes a
holistic approach to reviewing
performance, linking the award
and the out-turns of the award
to defined performance metrics.
Malus and clawback provisions
are available to the committee to
use in the event of non-delivery,
should the committee wish to
exercise their discretion to do so.
•
We will develop our variable
reward framework for our
most senior managers to align
with these foundations whilst
driving long term, sustainable
and responsible growth of the
business.
We believe our approach to
remuneration supports both
the objectives of the Group,
our shareholders and our other
stakeholders, and is aligned to the key
principles shared between us.
117
Remuneration outcomes for year ended 30 September 2023
The Company achieved robust and resilient financial results with profit before
tax of £62.6 million (15% increase on prior year). Directors’ salary and bonus
awards were made in accordance with the Policy.
The Company restructured the reward framework for ISL and ILInt employees
to reflect employee sentiment shared by way of employee engagement survey.
The restructuring did not result in an increase to overall reward but rebalanced
compensation to increase fixed reward, reduce target cash bonuses whilst
building greater personal performance measures into variable reward out-turns.
The Company and the committee then reviewed salaries in June and determined
that against a backdrop of inflationary and talent pressures it would be
appropriate to structure fixed remuneration awards in a way that directed the
available resources to those who needed them most. The average award to
all employees who were eligible for an increase was 7.3%. Salary increases
for executive directors were also considered, carefully taking into account the
competitive positioning of their packages as against the market. As a result,
awards were made of 4% for Alexander and Jonathan, which was lower than the
average for all employees.
Directors’ bonuses were awarded within the parameters of the Policy. Alexander
was awarded a cash bonus of 30% and a target bonus award deferred into
shares of 31.5%. Jonathan was awarded a cash bonus of 30% and a target
bonus award deferred into shares of 31.5%. Michael Howard did not receive a
bonus. The committee considered that these bonus awards were a fair reflection
of the Company’s overall performance.
In order to further align incentives with performance, the deferred share awards
for our more senior managers, including Alexander and Jonathan, have this year
been assessed by reference to individual and Group performance.
In making these awards the Remuneration Committee considered the
quantitative and qualitative anchors. In particular, the committee considered
the performance of the Company over the financial year against its strategic
objectives; the business plans approved by the Board; market consensus;
regulatory requirements; the current state of financial markets and the
recruitment market. The focus throughout the financial year has been the
delivery of organic growth, improvement in service delivery and systems
enhancements and variable awards have been assessed against the extent to
which these deliverables have been achieved.
Alignment with shareholders
We are mindful of our shareholders’
interests and are keen to ensure a
demonstrable link between reward and
value creation. We remain committed
to an open and ongoing dialogue with
our shareholders regarding executive
remuneration and we welcome
feedback.
To this end I, along with other non-
executive members of the Board
and our Company Secretary met
with a selection of our investors to
understand their views and consider
feedback around our reward structure.
We have listened to those views and
hope that this report clearly articulates
our ethos whilst also demonstrating
the connection of reward out-turns to
individual performance.
I hope that you find this year’s report
informative and look forward to
receiving your continued support at
the forthcoming AGM.
Signed on behalf of the IHP
Remuneration Committee
Christopher Munro
Chair of the IHP Remuneration
Committee
13 December 2023
118
This report has been prepared in
accordance with the provisions of
the Companies Act 2006 and the
Large and Medium-Sized Companies
and Groups Regulations 2013, as
amended.
The Report describes how the board
has complied with the provisions set
out in the UK Corporate Governance
Code 2018 relating to remuneration
matters.
The Remuneration Committee
confirms throughout the financial
year that the Company has complied
with these governance rules and best
practice provisions.
UK Corporate Governance Code –
Provision 40
When developing the DRP and
considering its implementation,
the committee was mindful of
the UK Corporate Governance
Code and considers that the
executive remuneration framework
appropriately addresses the following
considerations:
AREA OF FOCUS
OUR APPROACH
Clarity
Our approach to remuneration supports the strategic
objectives of the Company, and we seek to maintain a
simple remuneration model which is communicated to
stakeholders, including shareholders and employees in a
clear and transparent way.
Simplicity
We consider that our remuneration framework is simple
and effective. Our incentive framework comprises only a
cash bonus award, an all-employee share incentive plan
and a deferred bonus share option award.
Risk
We believe our approach to performance measurement
supports appropriate consideration of risk management
and a long-term view of the business based on
sustainable growth. Total remuneration is structured in
a way which does not encourage short-term risk taking
in order to deliver financial outcomes for executives. The
annual bonus rewards performance against four anchors
for the business, ensuring a holistic view of business
performance.
Predictability
The maximum opportunities are outlined in the
Remuneration Policy. Taking into account our approach
to incentives, total remuneration is predictable in
comparison with other listed companies.
Proportionality
Our executive director remuneration is aligned with that
of the wider workforce and the result is a total reward
structure that for the most senior executives is low in
comparison to the wider FTSE 250.
Alignment to
culture
Our overall approach to remuneration and the associated
remuneration policy for executive directors is consistent
with that for all employees. Our remuneration structure
is designed to be responsible, inclusive and to ensure
that we reward on merit. Our pension policy is aligned
across the workforce. However, out-turns for the most
senior management currently fall below those of the
wider workforce, given the effect of HMRC funding limits.
We consider that our approach is fully aligned with our
culture.
We do however recognise that investors wish to see reward tied to long-
term managed and sustainable growth of the business. We do not believe
that a traditional LTIP will best achieve these objectives. We will consult with
shareholders regarding our plans to achieve greater alignment with investor
sentiment by way of a DRP which will be tabled for shareholder consideration in
early FY24.
119
120
1. DRP ‘at a glance’
ELEMENT
OPERATION
OUT-TURNS FY23 AND IMPLEMENTATION IN FY24
Base salary
•
Increases will take into account
a number of factors including the
scale of the role and the individual’s
experience and wider workforce
increases.
The salary increase awarded was 4% for Alexander
and 4% for Jonathan which was below the UK and
IoM workforce increase of 7.3%.
Salary with effect from 1 June 2023:
•
Alexander Scott, CEO: £481,700
•
Jonathan Gunby, Executive Director: £481,700
Benefits
1
•
Includes, for example, death in
service, private medical insurance
and a discount to the fees for use of
the Transact Platform.
•
Executive directors are eligible to
receive the same benefits on the
same terms as the wider workforce.
•
Benefits for Alexander and Jonathan comprise
private healthcare, death in service and PMI.
•
Alex, Jonathan and Michael Howard benefited
from the discounted platform charges.
Pension
•
The pension policy is equivalent to
that of the wider workforce.
•
The executive directors’ current
pension arrangements are lower
than those of the workforce.
•
Alexander received a £7,000 pension
contribution (1.49%).
•
Jonathan received a £7,000 pension contribution
(1.49%).
Variable reward
comprising
i) an annual
cash bonus
element; and
ii) a deferred
bonus award of
shares
•
Total maximum opportunity is 100%
of salary.
•
The committee retains flexibility to
adjust the balance between cash
and deferred bonus awards within
the parameters set out in this policy
and the scheme rules.
•
The deferred bonus awards will
usually vest on the third anniversary
of the grant date.
•
Deferred bonus awards granted
under the company’s PSP are
subject to malus and clawback
provisions as described below.
•
Ordinarily, we do not expect awards to be in
excess of 65% of salary.
•
Awards are made by reference to delivery
against defined metrics which are based on a
mixture of individual and Group performance.
•
The committee uses judgement and discretion
when determining outcomes under the annual
bonus and deferred bonus awards.
•
Outcomes are made by reference to the four
anchors – financial performance; stakeholder
outcomes; risk, regulation and ESG, and
strategy delivery.
•
For 2022 Alexander was awarded a cash bonus
of 30% and a bonus award deferred into shares
of 31.5%. Jonathan was awarded a cash bonus
of 30% and a bonus award deferred into shares
of 31.5%.
All employee
share incentive
plan
The plan is operated in line with HMRC
guidance.
Executive directors are eligible to participate in
the all-employee SIP on the same terms as all
employees.
121
ELEMENT
OPERATION
OUT-TURNS FY23 AND IMPLEMENTATION IN FY24
Shareholding
guidelines
•
Executives are expected to build up and hold 100% of salary in shares over four years, for
in-employment shareholding guidelines.
•
Post-employment, these guidelines will apply in full (i.e. 100% of salary) for the first
year post departure and taper down to half (i.e. 50% of salary) for the second year post
departure. This policy does not apply to shares purchased with an Executive’s own funds and
applies only to awards that vest after the approval of the 2021 Remuneration Policy.
Non-Executive
Director fees
Fees are paid quarterly
Fees with effect from 1 October 2021:
•
Board Chair: £140,000
•
Base fee for Non-Executive Director: £70,000
•
Additional fee for chairing a Committee: £10,000
•
Additional fee for role of Senior Independent
Director: £7,500
•
No changes for 2022/2023
FY23 remuneration outcomes for our executive directors
Alexander Scott, CEO
Total remuneration
Fixed –
£469,400
Cash bonus –
£144,510
Deferred bonus –
£151,761
Other –
£7,688
£773,359
Jonathan Gunby, Executive Director
Fixed –
£469,400
Cash bonus –
£144,510
Deferred bonus –
£151,761
Other –
£7,400
£773,071
122
2. DRP summary - The IntegraFin approach to executive remuneration
Our approach to executive director remuneration is, we believe, aligned to our
culture, our strategy and our success to date. In 2021 we considered it afresh as
part of our triennial Policy review and whilst we still believe that it supports our
success, we recognise the need to develop our approach to reflect the need to
attract and retain the best possible talent who will be instrumental in building and
developing the proposition over the coming years.
Modest incentive quantum
We currently operate only an annual bonus with a portion deferred into shares,
and the level normally does not exceed 65% of salary. This approach has aligned
to our values and culture such that our executives and the wider workforce
are rewarded on the same terms, with only the addition of the deferred bonus
element being available to the more senior managers, the purpose of which is to
drive forward and strategic thinking and resilience of the Group. A comparison
with a more typical FTSE 250 package is illustrated below.
INTEGRAFIN APPROACH
TO EXECUTIVE PAY
ILLUSTRATIVE
FTSE 250 PACKAGE
Salary
•
No more than market rate
Salary
•
Market rate
Bonus max 100% of
salary
•
Maximum of 100% of
salary, but ordinarily not
expected to exceed 65%
of salary
Bonus max 150% of
salary
•
Deferral of half for
3 years
•
Targets set up front
No long term incentive
•
Typical deferral of half
for 3 years (33% of
salary max)
•
Performance assessed
on “look-back” basis
Performance shares max
175% of salary
•
Performance period of
3 years + 2-year holding
period
•
Targets set up front
Our approach to Senior
Management incentives
Our current reward structure has
delivered the flexibility required to
enable the committee to effectively
recognise management performance
for the period since listing.
We do however recognise that as
we refresh our senior leadership and
build our pipeline of talent to take
the Group forward, there is a need
to structure our reward to recognise
that those individuals do not have
shareholdings in the Group of a
quantum which significantly enhance
those individuals’ income or wealth,
and that a more flexible structure
with the potential for higher reward
in the form of equity is appropriate
to properly link incentives to desired
out-turns.
We are therefore undertaking a review
of the structure and composition of
variable remuneration to recognise
past, short-term and long-term
delivery of the Group’s objectives.
We believe that an appropriately
structured model will continue to drive
the right behaviours whilst enabling
the Group to attract and retain talent
in a competitive market.
123
Approach to performance
measurement
Historically we have used a “look-
back” approach when it comes
to assessing performance and
determining bonus outcomes. This
year we have continued to award cash
and deferred bonuses based on the
look-back approach but the awards
themselves are more closely linked to
the delivery of metrics agreed by the
committee during the performance
year. Those metrics are still aligned
with the four anchors that underpin
our business success.
We believe that this design continues
to promote long-term thinking, and
to promote actions which deliver
long-term success whilst maintaining
alliance with workforce reward and
reflecting our culture of not creating
wealth for our directors at the expense
of our workforce.
A critical contributor to the success
of the Group is the high standard of
client service delivered, collectively,
by our staff. Our approach allows the
committee to assess performance
in the round, taking into account all
relevant factors in order to ensure
that outcomes are appropriate and
aligned with the experience of our
wider stakeholder but guided by the
objectives under each anchor. As a
result, our Executives’ strategic focus
is on growing inflows on a controlled
and responsible trajectory, in order
to maintain the level of customer
satisfaction through delivery of
the best platform, supported by
exceptional service and the provision
of associated ancillary services which
make it easier for our clients and
advisers to plan and manage their
financial affairs.
Approach to performance assessment is underpinned by
the Remuneration Committee considered qualitative and quantitative
actual performance within this framework (individual performance
is also considered).
Strategy
delivery
Risk and
regulation
(including
ESG)
Stakeholder
outcomes
Financial
performance
PERFORMANCE ASSESSMENT — OUR FOUR QUANTITATIVE ANCHORS
Through this approach we look to drive
sustainable long-term value for all
our stakeholders. We believe that our
performance measurement framework
is the best way to achieve this and
support our culture.
Performance is assessed within a
framework which includes consideration
of individual and company performance
against four anchors and, for individual
performance, pre-set metrics.
The committee considers that this
is a controlled, responsible and
proportionate approach to executive
pay in the round in the context of
low overall quantum and internal
alignment.
124
3. Annual Remuneration Report
This report details the remuneration
arrangements in place for people
who were directors of the Company
during the financial year.
There have been no changes to
Directors’ remuneration throughout
the year save for the annual bonus
award made in December 2022 and
the annual pay award made in
June 2023.
Wider workforce - IAD and T4A
Note that throughout this report,
there are various references and/or
comparatives to the wider workforce
or the wider UK workforce. The
structure of reward for T4A employees
continues to be gradually integrated
into the IntegraFin business model.
Whilst basic pay rise awards have
been benchmarked and aligned,
variable remuneration continues
to differ reflecting the different
incentives applicable to the T4A
business. Therefore references to
wider workforce currently excludes
T4A employees save where expressly
included. In some instances it also
excludes our Australian employees
in IAD as Australian employment
arrangements differ from those in
the UK.
Governance
Committee membership during the year
The members of the Remuneration Committee at 30 September 2023 were:
Role of the RemCo
The purpose of the committee is to review, set and agree aspects of the overall
remuneration policy and strategy for the Group and the total compensation
package for certain officers and employees within the Group. It does so with a
view to aligning remuneration with the successful achievement of the Group’s
long-term objectives while taking into account the Code, relevant regulatory
requirements, market rates and value for money.
By delegation from IFAL and ILUK, the committee monitors the content and
application of the Company’s remuneration policy to individuals whose roles
bring them into scope of the FCA and PRA remuneration codes and the Corporate
Governance Code. To the extent that the committee does not approve their
individual remuneration, the committee considers whether the total reward
for each of those employee remains compliant with the provisions of the
relevant code. The committee is also responsible for reviewing an annual
statement prepared by IFAL setting out how IFAL complies with FCA regulatory
requirements on remuneration.
In all its activities, the committee gives due consideration to laws and
regulations, the provisions of the Code, the requirements of the UK Listing
Authority’s Listing, Prospectus and Disclosure Guidance and Transparency Rules
and other applicable rules, as appropriate, and to shareholder feedback.
Composition of the Remuneration Committee
The board appointed Rita Dhut to the RemCo in FY23. The committee is now
comprised of three independent NEDs and the Chair of the Board and therefore
the composition continues to comply with the requirements of the Code.
Following the implementation of MiFIDPRU, IFAL is required to comply with the
provisions of SYSC19G. When reviewing the composition of the committee,
consideration was given to the requirements under SYSC19G and the ongoing
obligations for ILUK under the Solvency II regime. The committee composition
continues to comply with both requirements.
The committee ensures that members take individual responsibility for
identifying training appropriate to their needs and for keeping appropriate
records of such training. Each committee member provides copies of their
training record to the Company Secretary annually and undertakes all regulatory
training requested by the Group.
DATE OF APPOINTMENT
Christopher Munro (Chair)
19 January 2018
Richard Cranfield
17 December 2019
Rita Dhut
22 March 2023
Robert Lister
1 September 2021
125
Committee meetings and
attendance
The committee meets at least twice
annually and more frequently when
required. The committee has met
ten times during this financial year.
Attendance by each member of the
committee as at 30 September 2023
is set out in the Board and Committee
attendance table on page 94.
The Head of Legal and Company
Secretary and the Head of Human
Resources attend all meetings and
other individuals such as the CEO, the
Group Counsel, and external advisers
may be invited to attend for all or part
of any meeting.
The Committee’s work throughout
the year
The committee has performed
its duties with a view to aligning
remuneration with the successful
achievement of the Group’s long-
term objectives while taking into
account the Code, relevant regulatory
requirements, market rates and value
for money.
The committee has undertaken the
following this financial year:
AREA OF FOCUS
WORK CONDUCTED
Governance
•
Reviewing the Committee Terms of Reference to
ensure their continuing appropriateness.
•
Considering the membership of the Committee
and the provisions of the Code and recommending
the appointment of Rita Dhut to the Committee
to enhance the skills on the Committee and to
demonstrate the importance of remuneration
considerations in the context of our employee
engagement strategy.
•
Considering the FCA and PRA remuneration
requirements in respect of employees who hold
Senior Management Functions within the business
or who have been identified as Remuneration Code
Staff.
Awards
•
Reviewing the appropriateness of the proposed
annual staff pay award by reference to the FCA, PRA
and FRC expectations, and the DRP.
•
Approving the proposed remuneration for the
executive directors and senior managers.
•
Considering proposals for the remuneration of
the CFO.
•
Considering the appropriateness of remuneration
for Code staff and the staff pay award.
•
Reviewing and approving the making of deferred
bonus awards to executive directors and senior
managers.
•
Approving the grant of the Free Share Award.
•
Considering and developing proposals for a
restructure of variable remuneration.
126
Committee self-evaluation
The committee continued to develop its performance in the context of the
feedback from the 2022 self-evaluation. In particular the Chair of the committee
and the Chair of the board have met with institutional investors to share insight
into and receive feedback on our remuneration model. The committee has
continued its work to more closely align the linkage of variable remuneration to
individual as well as Company performance and to introduce clearer objectives
and measures of performance and is developing the framework further to align
with stakeholder interests.
Feedback regarding the interaction between the committee and the regulated
subsidiary boards continues to be considered and there is a structure in place
for cascade of information from the committee Chair to the chairs of the UK
regulated subsidiary ARCs.
DRP
The DRP was approved by ordinary resolution at the Company’s AGM held on
24 February 2022 and can be found on pages 94 to 102 of the Company’s
Annual Report and Financial Statements for the year ended 30 September 2021,
which is available in the Investor Information section of the Company’s website
integrafin.co.uk
.
Statement of voting at the AGM
The Company remains committed to ongoing shareholder dialogue and takes a
close interest in voting outcomes. The following table sets out voting outcomes in
respect of the resolutions relating to approving directors’ remuneration matters at
the Company’s AGM for the last three annual meetings:
YEAR
RESOLUTION
VOTES FOR /
DISCRETIONARY
% OF
VOTE
VOTES
AGAINST
% OF
VOTE
VOTES
WITHHELD
2023
Approve the Director’s Remuneration Report
221,114,781
92.18
18,760,062
7.82
0
2022
Approve the Director’s Remuneration Policy
216,703,830
91.90
19,098,977
8.10
1,361,995
2022
Approve the Director’s Remuneration Report
214,085,945
90.89
21,456,381
9.11
1,622,476
2021
Approve the Remuneration Report
181,687,872
81.57
41,040,519
18.43
4,742,263
127
4. Application of the Policy
How the Policy was applied in FY23
Summary of total remuneration – executive directors (audited)
GROSS
BASIC
SALARY
BENEFITS
1
PENSION
TOTAL
FIXED PAY
ANNUAL BONUS
LTIP
OTHER
2
TOTAL
VARIABLE
PAY
TOTAL
CASH
BONUS
DEFERRED
SHARES
DIRECTOR
YEAR
£'000
£'000
£'000
£'000
£'000
£'000
£’000
£’000
£’000
£'000
Alexander Scott
2023
469
1
7
477
145
152
0
8
305
782
2022
443
1
4
448
93
146
0
8
247
704
Jonathan Gunby
2023
469
1
7
477
145
152
0
7
304
781
2022
443
1
4
448
116
146
0
8
270
703
Michael Howard
2023
0
0
0
0
0
0
0
0
0
0
2022
0
0
0
0
0
0
0
0
0
0
1 Benefits for Alexander Scott were £922 for 2023 and £842 for 2022
Benefits for Jonathan Gunby were £922 for 2023 and £842 for 2022
2 Other remuneration relates to Share Incentive Plan awards and the employee discount on platform charges.
Michael Howard receives nil remuneration from the Company, but his employer,
ObjectMastery Pty Ltd, receives a fee of AUD80k for his executive appointment to
IAD Pty Ltd, a company within the Group.
Base salary (audited)
The basic annual salaries for Alexander Scott and Jonathan Gunby were reviewed
in June 2023 in accordance with the Company’s all-employee pay review resulting
in the following changes to the annualised salary figures:
DIRECTOR
BASIC ANNUAL SALARY
AS AT 1 JUNE 2022
SALARY EFFECTIVE
AS AT 1 JUNE 2023
£’000
£’000
Alexander Scott
463
481
Jonathan Gunby
463
481
Benefits
Executive directors do not receive any benefits which are not available to all
employees. Benefits for the executive directors comprise private health care,
death in service benefits and an employee discount on platform charges.
128
Incentives
IntegraFin has a culture focused on
our principal stakeholders – customers,
shareholders and employees. Our
incentive structure has been developed
to support this culture:
Alignment across all staff
All staff are eligible for an annual cash
bonus award and to participate in the
all staff SIP. Our incentive structure
is designed to align across the
workforce and all employees are made
awards under the same performance
framework. This ensures that the
executive team and the workforce
share in the success of the business
and drives a culture of inclusivity in
the reward structure.
Aligned pension provision
The majority of UK and Isle of Man
employees, including executive
directors have access to three pension
arrangements which interrelate.
It is key that, save with respect to
employees of T4A, the Company’s
executive directors are not eligible
for pension benefits which differ
from or exceed those available to
other UK staff.
i) Salary Sacrifice pension
Employees (including directors)
can fund as much as they wish.
The Company will match 1% of
basic annual salary for every 2%
of basic annual salary sacrificed,
up to a maximum of 4% employer
contributions.
ii) Employer funded
contractual-enrolment
company pension scheme
Employer contributions are 9% of
post-pension-sacrifice salary but
participants may elect to reduce
that if contributions would exceed
HMRC tax free contribution
allowance. If an employee does
not sacrifice into (i) above, the
employer contribution to the
contractual enrolment company
pension scheme will be 9% of
basic or lower.
iii) Employees (including
directors) are eligible to
sacrifice a maximum of 25% of
any variable cash bonus award
into their pension
Any such contribution will receive
30% employer contribution. The
committee continues to review
the appropriateness of this
arrangement The Company’s
directors’ pension funding
arrangements are not excessive
and align completely with those
available to the wider workforce.
Australian based employees of
IAD participate in a comparable
arrangement structured to comply
with the Australian tax rules.
T4A operates an employer and
employee funded auto-enrolment
scheme. All employees of T4A,
including executive directors who do
not hold executive office elsewhere
in the Group, are able to participate
on equivalent terms. We continue
to look at the synergies between
the T4A remuneration structure and
that of the wider workforce but will
not make any significant changes to
the arrangements currently in place
without due consideration of the
interests of both the Company and
the employees.
Proportionate incentive opportunity
Our maximum total variable
remuneration opportunity for
executive directors is 100% of salary,
and ordinarily in practice we do
not expect awards to exceed 65%
of salary. This relatively modest
incentive level (compared to normal
UK practice) supports the alignment of
executive and workforce reward.
Variable reward comprises
Cash
bonus and deferred shares awards
The company operates a directors’
discretionary bonus arrangement with
the anticipated award of 65% of basic
salary arranged as follows:
i) Immediate Cash bonus
Anticipated 10% of salary awarded
in November and settled in
December.
ii) Deferred cash bonus
Anticipated 20% of salary awarded
in November with 10% settled in
February and a further 10% in
April provided the director remains
in service and not in their notice
period by reason of being a “bad
leaver”.
Each element is only payable if the
employee remains employed on
the payment date. We believe that
this both rewards performance and
encourages loyalty.
iii) Deferred bonus into shares
The company operates a
discretionary deferred bonus
share option plan by which cash
bonuses of up to 33% of salary,
less employer funded Free and
Matching SIP shares, are deferred
into share options. The holding
period is three years and there is
no post vesting holding period.
The plan therefore does not comply
with the components specified in the
Code relating to a phased release of
awards and a five year holding period.
129
At present we believe that a three-
year vesting period is adequate.
We maintain flexibility on the
proportion of each element of the
awards. The Company is focused
on the long-term delivery of
outcomes which balance the interests
of customers, employees and
shareholders and this is best served by
ensuring that executive behaviour is
focused on investment in the platform
and ancillary activity in accordance
with the Group’s strategy and purpose.
Four qualitative and quantitative
anchors
The Committee considers company
and individual performance against
four qualitative and quantitative
anchors:
•
Financial performance
•
Stakeholder outcomes
•
Risk and Regulation (including
Environmental, Social and
Governance)
•
Strategy delivery
Each director’s delivery of their
objectives is assessed against each
anchor, as well as the Group’s delivery
in the round. Whilst the committee
has not set targets for apportionment
of variable awards against each
anchor, the awards are assessed by
reference to delivery of those anchors
and awards are adjusted for non-
delivery.
Within those anchors, the RemCo
considers a wide variety of
management information available to
the Board and its committees. Whilst
the committee considers metrics
linked to each anchor, the essence of
the process is to use the metrics to
arrive at a balanced judgement as to
whether an award is warranted and, if
so, at what level.
Annual bonus (cash and deferred
share) awards for FY23 (audited)
DIRECTOR
CASH AWARD
DEFERRED AWARD
£’000
£’000
Alexander Scott
145
30% of salary
152
31.5% of salary
Jonathan Gunby
145
30% of salary
152
31.5% of salary
The cash and deferred award
percentages are by reference to the
basic salary on 30 September 2023.
This is aligned to the approach taken
for all employees.
The bonus for Alexander is
recommended by the board Chair. The
bonus for Jonathan is recommended
by Alexander. The committee considers
detailed information which covers
factors such as financial performance,
risk, compliance, conduct, internal
controls, client and client adviser
metrics, and delivery of strategy.
This year, as in past years, we
reviewed the board Chair’s and the
CEO’s proposals in that context, and
considered whether the executive
directors had delivered appropriate
stakeholder, financial and strategic
performance, whilst also managing risk
and maintaining internal controls.
130
For FY23 the assessment of whether cash and deferred bonus awards
were justified was in particular informed by the following metrics and
performance in the year:
Quantitative anchor (metrics and performance)
Financial performance
Ensure effective financial
performance of the Group by:
•
Delivering financial performance
against forecast, in accordance
with projections and market
expectations.
•
Sustaining service excellence
within the context of managed
expenses.
•
Managing costs and headcount
effectively.
•
Managing the dividend flow and
distributable reserves/regulatory
capital from subsidiaries.
Measures of success
•
Net inflows
•
Earnings per share
•
Expense ratio
•
Profit margin
•
Share price
•
Market cap
•
T4A user licences
•
Payment of a dividend
•
External factors outside of the
Company’s control, e.g. sudden
FTSE and global movements.
Out-turns
In FY23:
•
Financial performance fell below
original projections but, in the
main, this was due to negative
market movements outside the
Company’s control.
•
Profit margin has reduced as
a result of the historical VAT
charges and interest thereon;
and the removal of T4A post
combination remuneration.
Normalised profit results in a
reduced profit of just 6.5%.
•
Service delivery, whilst subject
to stretch, continued to be
regarded as market leading
by our Financial Advisers and
has not impacted on financial
performance.
•
Dividend flow and distributable
reserves/regulatory capital
from subsidiaries to support
Group dividend were managed
effectively and dividends to
shareholders have been paid in
line with policy.
•
Forward-looking projections
indicate that the Company is well
placed to sustain performance
over the coming year taking into
account stress-tested scenarios.
Stakeholder outcomes
Create, maintain and improve
value to our four groups of
stakeholders – customer,
shareholders, suppliers and
employees by:
•
Identifying and executing
opportunities for consistent
growth in gross and net inflows
and sustained or improved market
share of net inflows.
•
Sustaining our platform’s adviser-
voted industry awards.
•
Ensuring adviser satisfaction with
the Company’s propositions.
•
Creating a culture which
encourages openness, honesty,
prevents harm and results in
behaviours that are consistent
with the Group’s values.
•
Maintaining a staff attrition rate
that remains within appetite.
•
Ensuring that the Group does not
risk capital beyond reasonable
levels, does not create any
commercial conflict or make
it difficult to meet regulatory
responsibilities.
131
Measures of success
•
Net inflows
•
Adviser + user/client retention
•
Market share of inflows
•
Adviser voted awards received
•
Market research results (internal
and external)
•
Staff attrition rates
•
Staff engagement survey results
•
Under performance rates
•
Shareholder engagement
•
Performance and management of
third-party suppliers
Out-turns
In FY23, the Company delivered
the following:
Clients and advisers
•
Market share of gross inflows
remained above 10% and net
flows make up approximately 22%
of the market.
•
Transact rated first in CoreData
UK Investment Platform study
2023 and won Schroders UK
Platform award 2023 “Platform of
the Year”.
•
Clients benefited from further
price reduction on buy
commission, removal of wrapper
fees on junior pensions and the
reduction in fee for non-advised
clients.
•
Clients and advisers benefit from
continued investment in the
development of digital onboarding
tools.
Employees
•
Changes to performance related
pay for London and Isle of Man
staff has addressed concerns over
basic pay levels and strengthened
the basis on which performance is
measured and rewarded.
•
100% of eligible employees took
up the SIP free share award and
69.79% took up the Partnership
Share award.
•
The Employee emphasised
employee focus on the delivery
of enhancements to the work
environment London based
employees.
Shareholders
•
The Company distributed
dividends in accordance with its
dividend policy.
•
The share price has remained
stable throughout the year.
•
In order to add strength and
depth to our Group financial
reporting and financial
management the Board has
selected a CFO to start in
January 2024.
Suppliers
•
The Group settled around 95%
of its invoices within 30 days of
receipt in the last fiscal year.
No one stakeholder is prioritised
over the others and the Committee
considers the balance of the
outcomes for stakeholders when
determining the appropriateness of
variable remuneration awards.
132
Risk, regulation and ESG
•
Effective leadership of risk
management by reference to
all capital liquidity, operational
resilience and compliance
with regulatory requirements
applicable to the Group, including
those applicable to the Company
as a UK listed plc and those
applicable to our UK investment
firm, UK insurance firm and Isle of
Man insurance firm.
•
Demonstrable adherence to
internal, legal and regulatory
policies, law and rules.
•
Effective management of internal
governance of the Group both
at Board level and through the
subsidiaries and management
structure and the interrelationship
with the delivery of the strategy
and financial performance.
•
Making moral decisions and
demonstrating a values-driven
approach that seeks to prevent
rather than cure.
•
Effective delivery of the
environmental response plan.
Measures of success
•
Complaint and error metrics
•
Review of non-compliance or
sanctions affecting the Group
•
Customer satisfaction
•
Internal audit reports and
findings, and the resolution
thereof
•
Performance against Risk control
self-assessment
•
Progress on environmental
response plan
Out-turns
In FY23 the Company delivered:
•
Ongoing engagement with the
FCA, the PRA and the IoM FSA on
matters such as board succession
and non-standard assets.
•
Internal Audit programme
completed.
•
Risks including regulatory
compliance managed within
appetite. Minor risk appetite
breaches promptly identified and
addressed.
TCFD reporting reviewed and
enhanced. The above achievements
are also underpinned by the following:
•
The Group has shown appropriate
adherence to internal, legal and
regulatory policies, laws and rules
and board reports demonstrate
appropriate understanding and
implementation of regulatory
change projects.
•
Monitoring, auditing and other
assurance activities demonstrate
appropriate attention to
maintaining the internal control
environment.
The committee considers all of
these aspects when determining
the appropriateness of a variable
remuneration award. No individual
weighting is applied to one or more of
these aspects so that the committee
has the flexibility to adjust the award
by reference to the impact of internal
and external constraints on the
delivery of each.
The committee considers the steps
taken to recruit and retain talent
within the organisation. In doing
so, the committee receives reports
on staff numbers, recruitment and
retention, and internal development
opportunities by way of promotions
and movement between departments
and business functions.
The committee considers the
appropriateness of executive reward
in the context of these measures.
133
Strategy delivery
Ensuring that the Group and
each of its subsidiary companies
achieves its strategic goals
through:
•
Continuous improvement of
the platform functionality,
responding to customer
feedback.
•
Enhanced resilience of the
core platform and associated
services.
•
Increased number of advisers
and clients using CURO.
•
Growth of ancillary services to
enhance the adviser and client
experience.
Measures of success
•
Assessment of the ancillary
services offered to clients and
advisers
•
Management of expenses
•
Number of retained advisers and
clients
•
Number of new advisers and
clients
•
Number of advisers and clients
using CURO
Out-turns
In FY23, the key strategic deliverables
by the Company were:
•
Delivery of organic growth.
•
Improvement in service delivery.
•
Continuing the development of
the enhanced CURO proposition
on Power Platform software.
•
Continued delivery of system
enhancements.
134
How the Committee’s discretion
was applied
In determining the award for the
executive directors, we considered
the Group’s performance against its
strategic objectives, the business
plans approved by the Board,
market consensus, regulatory
requirements, the current state of
financial markets and the recruitment
market. The committee weighed up
the performance of the Company in
FY23 and the future projections for
FY24. Consideration was given to
the extent to which we delivered the
superior customer service to which
we aspire and to the Group’s financial
performance. Financial performance
was considered by reference to the
business plan shared with the board
at the beginning of the financial year
and to the delivery of stakeholder
expectations. Having balanced these
deliverables the committee then
considered whether the proposed
awards were sustainable given the
current projections and future plans
and deliverables within the Group.
We sought assurance that the
recommendations were made in
accordance with a balanced view of
future profitability and in the interests
of all stakeholders, not just based on
backward looking performance, and
that the awards were consistent with
the expectations of our regulators
and our other stakeholders regarding
proportionate reward that focused
executive remuneration on sustainable
delivery over the medium to long
term whilst discouraging inappropriate
risk taking or focus on driving up
share price at the expense of other
stakeholder outcomes.
The committee concluded that
payment of an award was appropriate
given the Group’s delivery in the
financial year and sustainable in light
of the forward-looking projections
and the forecast performance of the
Company over the coming year. The
committee discussed the quantum
of the proposals and evaluated the
appropriate level of awards to the
Directors.
In considering the anchors we
reviewed the performance of the
external market and the impact of
factors that the Group could not
control, alongside the delivery of the
platform and stakeholder outcomes
that it could.
We considered the impact of stock
market volatility on the Company’s
financial performance.
We considered the ongoing investment
in T4A, their delivery of their business
plan, and the Company’s steps to align
the independent businesses to deliver
optimum outcomes for customers.
Based on a holistic assessment
of Group performance, including
consideration of the 2023 outcomes
set out in the table above, and
individual performance, the committee
granted the following awards:
Alexander Scott was granted an overall
award (cash and deferred bonus
shares) equal to 61.5% of salary. In
making this award, the committee
had particular regard to the financial
performance of the Group, the delivery
of the shareholder experience and
progress towards climate related
commitments. The committee
allocated the award as 30% cash and
31.5% deferred into shares.
Jonathan Gunby was granted an
overall award (cash and deferred
bonus shares) equal to 61.5% of
salary. In making this award, the
committee had particular regard to the
financial performance of the Group,
the delivery of new and retention of
existing business through the platform
proposition, enhancement of the
technology offering and management
of the delivery ancillary services in
support of our strategic objectives. The
committee allocated the award as 30%
cash and 31.5% deferred into shares.
The deferred bonus award is granted
following the announcement of the
Group’s annual results. Awards will
vest after three years and will be
subject to malus and clawback
provisions as detailed in the DRP.
In certain circumstances, the
Committee has the right to reduce or
withhold the deferred bonus award.
This includes but is not limited to
where there has been a material
misstatement and/or significant
downward revision in the financial
results, where the calculated number
of shares awarded to an individual
director is determined to be too
high, or where the Award Holder has
engaged in misconduct justifying the
director’s summary dismissal.
Going forward the committee is
giving consideration to applying
performance conditions to the
deferred share award.
135
LTIPs
The Company does not currently
operate a traditional LTIP and, in FY22,
no award was made to executive
directors that was dependent on
performance conditions relating to
more than one year. Awards made to
executive directors in respect of FY23
were assessed against the delivery
of performance conditions; however,
they are not under the framework of
an LTIP.
SIP
Executive directors can participate
in the SIP. The board may make an
award to participants of Free Shares
up to the value of 3% of salary or
£3,600 (whichever is lower) and may
permit participants to subscribe for
Partnership Shares up to the value of
1.5% of salary or £1,800 (whichever
is lower). For every Partnership Share
purchased, two Matching Shares were
awarded. The £3,600 and £1,800 limits
are set by applicable legislation and
will be revised automatically in the
event of any changes to the legislation.
During FY23, the maximum SIP award
was granted to qualifying employees
(including Alexander Scott and
Jonathan Gunby). The Partnership
and Matching Share Award was made
on an evergreen basis and therefore
all qualifying employees will be able
to continue to participate in the plan
unless it is revoked by the committee.
Based on the Group’s performance in
FY23 the board has not revoked that
award. The board has considered the
Group’s performance in FY23 and,
with the approval of the Remuneration
Committee, has approved the making
of a further maximum SIP Free
Share award to qualifying employees
(including Alexander Scott and
Jonathan Gunby) when the Company
is not in a closed period. This will be
following the announcement of the
Group’s financial results.
Pension contributions
Pension contributions for Alexander
Scott and Jonathan Gunby are
currently made by reference to
the relevant personal allowance.
In the FY23 performance year, the
employer’s pension contribution for
both Alexander Scott and Jonathan
Gunby was £2,000 for the period 1
October 2022 to 31 March 2023 and
£5,000 for the period 1 April 2023 to
30 September 2023.
In line with our remuneration
principles, pension contributions for
executive directors are aligned with
those available to the wider workforce.
In FY23, at 1.49% of basic salary, both
Alexander Scott and Jonathan Gunby
received pension contributions below
the minimum level contributed in
respect of the wider workforce.
The minimum employer contribution
available to all employees in FY23
was 9%. For employees other than
executive directors the Group has
made contributions to personal
pension arrangements for those
employees who have sacrificed
salary. Whilst this benefit is available
to executive directors, none of the
current executive directors has
sacrificed salary.
136
Shareholding guidelines
In-employment
In the 2021 DRP, the Company
adopted in-employment shareholding
guidelines pursuant to which a serving
executive director must build up and
maintain a holding of IntegraFin shares
with a value (as determined by the
committee) at least equal to 100%
of salary over a period of four years.
Unvested share options awarded under
deferred bonus arrangements and
shares subject to other share awards
which are no longer subject to any
performance condition (including any
exercisable but unexercised awards)
count towards the requirement, on
a net of assumed tax basis where
relevant.
Individual shareholdings for each of
Alexander Scott, Jonathan Gunby and
Michael Howard are set out below and
all meet the minimum requirements
under the policy.
Post-employment
The Company has adopted post-
employment shareholding guidelines
pursuant to which an executive
director must retain for 12 months
following cessation of employment
such of their “relevant shares”
as have a value (as determined
by the committee) equal to the
in-employment guidelines most
recently applicable to them, and for
a further 12 months such of their
“relevant shares” as have a value (as
determined by the committee) equal to
50% of the in-employment guidelines
most recently applicable to them.
Shares which the executive director
has purchased or which they acquire
pursuant to share plan awards granted
before this Policy came into effect
are not “relevant shares” for these
purposes.
The committee retains discretion
to vary the shareholding guidelines
to take account of compassionate
circumstances.
No executive directors have left office
since the implementation of the policy
and therefore there is no report to
provide in this respect.
137
Percentage change in remuneration of directors compared to the
average employee
The table below shows the percentage movement in the salary, benefits
and annual bonus for the Directors compared to that for the average Group
employee over the past five years.
The SIP scheme is provided to all UK and Isle of Man employees, including
executive directors, but excluding T4A and is not included above.
DIRECTOR
FY23
FY22
FY21
FY20
FY19
SALARY
/ FEES
%
BENEFITS
%
BONUS
%
SALARY
/ FEES
%
BENEFITS
%
BONUS
%
SALARY
/ FEES
%
BENEFITS
%
BONUS
%
SALARY
/ FEES
%
BENEFITS
%
BONUS
%
SALARY
/ FEES
%
BENEFITS
%
BONUS
%
Alexander
Scott
4
31.25
11.71
7
26.6
(10.1)
2.5
19.5
(-0.7)
56.4
0.0
63.8
3.8
-
(9.4)
Jonathan
Gunby
4
31.25
1.76
7
26.6
(1.4)
2.5
1
19.5
0.6
-
-
-
-
-
-
Michael
Howard
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
-
-
Caroline
Banszky
-
-
-
33.3
-
-
0
-
-
0.0
-
-
119.1
-
-
Victoria
Cochrane
-
-
-
29.2
-
-
0
-
-
0.0
-
-
0.0
-
-
Richard
Cranfield
-
-
-
40
-
-
0
-
-
0.0
-
-
-
-
-
Rita
Dhut
-
-
-
0
-
-
0
-
-
-
-
-
-
-
-
Robert
Lister
-
-
-
28.3
-
-
0
-
-
0.0
-
-
-
-
-
Christopher
Munro
-
-
-
45
-
-
(14.3)
-
-
(30.0)
-
-
25.8
-
-
Average
employee
(exc. T4A)
7.3
31.25 (37.46)
2
7.3
26.6
16.75
3.2
19.5
17.98
2.9
5.5
12.8
3.6
26.8
1.1
Notes to the table:
Alexander Scott’s basic remuneration increased in 2020 upon appointment as CEO.
Jonathan Gunby was appointed in 2020 and there is therefore no comparable data for 2019.
1
Jonathan’s basic salary increased 2.5% year on year, however in 2020 Jonathan purchased annual leave and therefore received lower basic and
variable remuneration in 2020 than Alexander.
2
The reduction in the average employee bonus award is reflective of the restructure of employee reward to increase basic and reduce the variable
proportion to a targets met out-turn of 10% (2022 - 20%).
Michael Howard receives nil remuneration from the Group but his employer, ObjectMastery Pty Ltd, receives a fee of AUD80k for his executive
appointment to IAD Pty Ltd, a company within the Group. This fee remained consistent until FY23.
Christopher Munro was appointed to interim chair in 2019 and then stood down from this position in 2020 which is why there is a fee differential year
on year.
In 2021 the NED fees were restructured resulting in a reduction in the fee payable to Christopher Munro.
The change in salary/ fees for the directors is based on the salary as at 30 September for each financial year.
Some staff received a deferred share bonus award in 2020, 2021, 2022 and 2023 which is why there is a significant increase from 2019.
The table does not include salary and benefits movement for IAD employees employed in Australia as their employment benefit package differs
from the UK staff package in recognition of different compensation and benefit rules in Australia. It has therefore been deemed inappropriate to
include their remuneration in this comparison. Similarly, the “average employee” calculation in the table excludes T4A due to slight differences in the
remuneration structure.
138
CEO pay ratio table
The following table sets out the ratio of the CEO’s pay to each of the
Group’s median, lower quartile and upper quartile pay for UK employees for
the last five years.
The salary and total remuneration ratios for 2023 above are based on the
following figures:
METHOD
25TH PERCENTILE
PAY RATIO
MEDIAN PAY
RATIO
75TH PERCENTILE
PAY RATIO
FY23
Salary
Method A
11:1
8:1
7:1
Total remuneration
17:1
13:1
9:1
FY22
Salary
Method A
14:1
10:1
6:1
Total remuneration
16:1
12:1
8:1
FY21
Salary
Method A
14:1
11:1
7:1
Total remuneration
16:1
13:1
9:1
FY20
Salary
Method A
17:1
13:1
9:1
Total remuneration
18:1
15:1
10:1
FY19
Salary
Method A
n/a
n/a
n/a
Total remuneration
18:1
15:1
10:1
FY23
CEO
25TH PERCENTILE
PAY RATIO
MEDIAN PAY
RATIO
75TH PERCENTILE
PAY RATIO
Salary
469,367
41,641
58,492
70,133
Total remuneration
780,839
47,273
61,764
89,028
The CEO pay ratios were calculated using ‘Option A’, set out in the Companies
(Miscellaneous Reporting) Regulations 2018. Under this method, the full pay
and benefits of each UK employee were used to identify those employees that
represented the Group’s median, lower quartile and upper quartile pay for UK
employees. The full pay and benefits of these employees were then used to
calculate the ratios as at 30 September 2023. The Group elected to use Option
A as its method of calculation as it felt that using the full pay and benefits of all
employees was the most accurate method of identifying those employees that
represented the Group’s mean median, lower quartile and upper quartile pay
for UK employees. To determine the full-time equivalent pay and benefits of
non-standard workers, part-time workers’ remuneration was grossed up to the
equivalent full time pay.
The ratio for the median and 75th percentile has decreased in FY23. There has
been no overall change to the reward structure or benefits provision in the year.
The Company has however experienced higher turnover in FY23 compared to
prior years, resulting in a net reduction in the number of employees included in
the comparative calculation. In addition, the remuneration used to calculate the
gap is based upon remuneration awarded in respect of the reference year and
therefore the reduced bonus awarded for the IHP CEO in FY22 has resulted in a
decreased pay gap.
139
Executive director remuneration compared to wider workforce
Our approach to remuneration for executive directors is consistent with that for
all employees.
•
Incentives
–
our incentive structure is aligned across the workforce,
excluding T4A, and all employees are made awards under the same
performance framework. For more senior employees a portion is deferred
into shares.
•
Pension
– for all employees the maximum company contribution available
in FY23 was 22%. Whilst executive directors are eligible to receive the same
level as (but no more than) all employees, the pension currently provided to
executive directors is 1.49% of salary, considerably lower than the pension
provided to the workforce.
•
SIP
–
all-employees receive SIP shares based on company performance.
This year the maximum of 3% of salary (up to a maximum of £3,600) was
awarded, with additional partnership and matching shares available.
Relative importance of spend on pay
The following table sets out the percentage change in profit, dividends paid and
overall spend on pay in the year ending 30 September 2023, compared to the
year ending 30 September 2022.
Payments to past directors (audited)
There were no payments to past directors
Payments for loss of office (audited)
No director received payment for loss of office in FY23
FY23 £m
FY22 £m
PERCENTAGE CHANGE
IFRS profit after tax
49.9
44.0
13%
Dividends
33.7
33.7
0%
Employee remuneration costs
46.0
38.3
20%
140
Share Awards made during the year (audited)
1 Deferred share awards form part of the annual incentive, for which awards were determined based
on performance to 30 September 2022.
2 SIP Free Share awards were determined based on Group performance to 30 September 2022. SIP
Partnership and Matching awards are loyalty awards. The awards are evergreen and are purchased
monthly and will continue unless revoked by the Remuneration Committee. The award date shown is
the first purchase date following publication of the Company’s annual report and financial statements
but the amount reflects the award for the full financial year.
3 The face-value of the deferred bonus share award is calculated using average share price from
15 December 2022 to 19 December 2022 which was £3.02. The face value of the Free Shares is
calculated using the share price paid by the SIP administrator on the date of purchase which was
£2.99. The face value of the Partnership and Matching Share award is calculated using the total
number of Partnership and Matching Shares bought on behalf of the relevant individuals during the
financial year and an average share price for matching share purchases.
4 The SIP is operated in line with HMRC guidance.
TYPE OF INTEREST
AWARDED
BASIS ON WHICH
AWARD MADE
2
DATE OF
AWARD
FACE
VALUE
AWARDED
3
PERCENTAGE
RECEIVABLE
FOR MINIMUM
PERFORMANCE
NUMBER
OF
SHARES
AWARDED
END OF
DEFERRAL
PERIOD
Alexander
Scott
Deferred
bonus
Conditional
share award
33% salary less
award of SIP Free and
Matching shares
20.12.2022
£145,656
100%
48,187
20.12.2025
SIP
Free Shares
3% (Free and
Matching shares)
of Salary subject to
maximum of £3,600
each per annum and
1.5% (for Partnership
Shares) subject to a
maximum of £1,800
per annum
06.01.2023
£3,598
100%
1,205
N/A*
Partnership
Shares
23.01.2023
£1,800
675
Matching
Shares
23.01.2023
£3,600
1,350
Dividend
Shares
27.01.2023
30.06.2023
178
142
Jonathan
Gunby
Deferred
bonus
Conditional
share award
33% salary less
award of SIP Free and
Matching shares
20.12.2022
£145,656
100%
48,187
20.12.2025
SIP
Free Shares
3% (Free and
Matching shares)
of Salary subject to
maximum of £3,600
each per annum and
1.5% (for Partnership
Shares) subject to a
maximum of £1,800
per annum
06.01.2023
£3,598
100%
1,205
N/A*
Partnership
Shares
23.01.2023
£1,800
675
Matching
Shares
23.01.2023
£3,600
1,350
Dividend
Shares
27.01.2023
30.06.2023
178
142
141
Shareholding requirements and directors’ share interests (audited)
No share awards other than the all staff SIP and the deferred bonus Share Option
Plan award were awarded to executive directors during the financial year.
During the FY21 policy review, the Company implemented a requirement that
executive directors are required to build up a holding of one year’s salary
equivalent in shares within four years of appointment. In assessing whether an
individual director meets this requirement, the Company will include shares held
in the director’s own name, those held in any pension over which the director
directs the investment profile, and those unvested shares held in an employee
share plan.
We recognise that the Investment Association guidance recommends that
executive directors hold two year’s basic salary equivalent in shares within two
years of appointment, however the Company believes that it is incompatible
with social diversity to require a new director to acquire any more than one
year’s salary equivalent in shares in a period any less than four years from
appointment. To do so would require the director to be so economically
advantaged that it would exclude individuals from wider, more diverse
backgrounds from taking up an appointment with the board. The Company
believes that by limiting the requirement to one year’s basic salary, permitting
the inclusion of a wider range of shares and providing a period of four years for
the accrual of those shares, the appropriate balance is struck between inclusion,
and directors’ personal investment in the long-term outcomes of the Company.
DIRECTOR/
CONNECTED
PERSON
1P ORDINARY
SHARES
TOTAL
2018 SIP
SHARES
1
DEFERRED
BONUS SHARE
SCHEME (NO
PERFORMANCE
CONDITIONS)
VESTED BUT
UNEXERCISED
OPTIONS
EXERCISED
SHARES
HELD AT
30.09.2023
TOTAL
PERCENTAGE
OF BASIC PAY
/ FEE HELD IN
SHARES
SHARES
HELD AT
30.09.2022
TOTAL
PERCENTAGE
OF BASIC PAY
/ FEE HELD IN
SHARES
Alexander Scott
1,148,260
11,413
145,897
47,152
0
1,305,570
652%
1,253,833
629%
Jonathan Gunby
2
803,665
11,413
145,111
46,677
0
960,189
479%
908,452
441%
Michael Howard
3
32,000,000
0
0
0
0
32,000,000
175,449%
32,000,000
175,532%
Christopher Munro
1,003,324
0
0
0
0
1,003,324
1,003,324
Caroline Banszky
7,500
0
0
0
0
7,500
7,500
Victoria Cochrane
3,750
0
0
0
0
3,750
3,750
Richard Cranfield
4
20,000
0
0
0
0
20,000
10,000
Rita Dhut
15,000
0
0
0
0
15,000
15,000
Robert Lister
6,015
0
0
0
0
6,015
6,015
(1) Includes dividend reinvestment shares relating to SIP shares.
(2) Includes Cheryl Gunby shareholdings and family trusts controlled by Jonathan.
(3) Michael Howard’s shareholding is shown as a percentage of the fee paid to ObjectMastery for his services to the IHP board.
(4) Includes Gillian Cranfield shareholdings.
The value of each director’s shareholding has been calculated by reference to the
average of the share price over the final three months of the financial year.
The value of unvested and unexercised share options is shown net of Income Tax
at the additional rate and Employee’s NI.
The rate for Michael Howard has been calculated by reference to the exchange
rate on 30 September of the relevant financial year.
No Directors have any other vested or unvested share options as at the end of
the FY23.
142
Shareholder return performance graph and CEO pay over the same period
This graph shows the Company’s total shareholder return performance from
Admission to 30 September 2023
The Company has chosen to show total shareholder return against the FTSE 250
total return over the same period, as the Board considers this to be the most
appropriate comparator.
TOTAL SHAREHOLDER RETURN PERFORMANCE VS FTSE 250
SINCE 2 MARCH 2018
0
50
100
150
200
250
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Aug-21
Nov-21
Feb-22
May-22
Feb-23
May-23
Aug-23
Aug-22
IHP
FTSE 250 TR
The following table shows the history of the Chief Executive Officer’s
remuneration since admission:
Note to the table
The figures for FY18 and FY19 relate to the previous CEO, Ian Taylor. The figures for FY20 to date
relate to the current CEO, Alexander Scott.
CEO
REMUNERATION
CEO SINGLE
FIGURE OF
REMUNERATION
ANNUAL BONUS
PAYOUT (AS A
% OF MAXIMUM
OPPORTUNITY)
LTIP VESTING
OUT-TURN (AS A
% OF MAXIMUM
OPPORTUNITY)
FY23
£782k
61.5%
N/A
FY22
£695k
52.4%
N/A
FY21
£704k
62%
N/A
FY20
£639k
72%
N/A
FY19
£751k
82%
N/A
FY18
£769k
83%
N/A
143
Fees for the Chair and Non-Executive Directors (audited)
There has been no increase to the remuneration paid to the Chair and NEDs
during the financial year. In respect of the financial year ending 30 September
2023 the amounts are as follows.
ELEMENT OF REMUNERATION
BY DIRECTOR
FY23 (£)
PERCENTAGE
INCREASE ON FY22
Chair
140,000
0
Base Fee
70,000
0
Senior Independent NED
7,500
0
Committee Chair (excl NomCo)
10,000
0
Advisers
Deloitte LLP (Deloitte) is retained as adviser to the Remuneration Committee.
Deloitte was appointed by the committee, and the committee is satisfied the
advice provided by Deloitte is objective and independent. Deloitte is a founding
member of the Remuneration Consultants Group and voluntarily operates under
the Code of Conduct in relation to executive remuneration consulting in the UK.
Deloitte has provided advice on the content of this Directors’ Remuneration
Report. For FY23, total fees were £23k, with fees on a time and materials basis.
Deloitte has provided no other services to the Company during the financial year.
Korn Ferry LLP provided information to support the benchmarking of
remuneration for executive directors and senior managers.
In addition to Deloitte, the following people have provided material advice or
services to the committee during the year:
•
Alexander Scott – CEO
•
Helen Wakeford – Head of Legal and Company Secretary
•
Lucy Smith – Head of Human Resources
144
DIRECTORS’ REPORT
The directors present their report and financial statements for the year ending
30 September 2023.
The content of the ‘Management Report’ required by the FCA Disclosure and
Transparency Rule DTR4.1 is in the Strategic Report and the Governance section
of the Annual report and financial statements, which also contains details of likely
future developments identified by the board. This information is shown in the
Strategic Report rather than in the Directors’ Report under sections 414 C (11)
of the Companies Act.
The Corporate Governance Report on page 7 forms part of the Directors’ Report.
Information disclosed in accordance with the requirements of the applicable
sections of the FCA Listing Rule LR9.8 (Annual Financial Report) can be found
here:
Principal risks and uncertainties
The review of the business and principal risks and uncertainties are disclosed in
the Strategic Report at pages 2 to 72.
Internal control and risk management systems
A description of the Group’s internal control and risk management systems in
relation to the financial reporting process is set out on pages 60 to 68 of the
Strategic Report.
Directors
The executive directors who served during the financial year were Alexander
Scott, Jonathan Gunby and Michael Howard.
The NEDs who served during the financial year were Richard Cranfield, Caroline
Banszky, Victoria Cochrane, Rita Dhut, Christopher Munro and Robert Lister.
All of the current directors are standing for re-election at the upcoming AGM.
The appointment and replacement of directors is governed by the Company’s
Articles of Association, the UK Corporate Governance Code, the Companies Act
2006 and related legislation. The directors may exercise all the powers of the
Company.
Details of Long-Term Incentive
Schemes
The Directors’ Remuneration Report
Directors’ Interests in the Company’s
Shares
The Directors’ Remuneration Report
Major Shareholders’ Interests
Directors’ Report
Non-Executive Directors’ terms of
appointment
Directors’ Report
Directors’ transactions in the
Company’s Shares
Director’s Report
Details of non-financial reporting
Corporate Social Responsibility Report
145
Service contracts and letters of appointment
All executive directors have written service contracts in place with an employing
Company in the Group. Although the executive directors’ service contracts do
not have fixed end dates, they may be terminated with six months’ notice from
either side. In the event that notice is given to terminate the executive director’s
contract, the Company may make a payment in lieu of notice or place the
individual on garden leave.
Entitlement to any variable remuneration arrangements will be determined in
accordance with the relevant plan rules and the DRP. Executive directors’ service
contracts do not make any other provision for termination payments.
NEDs do not have service contracts but are bound by letters of appointment
which are available for inspection on request at the Company’s registered office.
NEDs are appointed for a three-year term, subject to confirmation by
shareholders at the following annual general meeting and annual re-election at
each subsequent annual general meeting.
Details of Non-Executive Directors’ terms of appointment
Details of the NEDs’ terms of appointment are set out below:
NON-EXECUTIVE
DIRECTOR
DATE OF FIRST
APPOINTMENT
DATE OF LATEST
RENEWAL TERM
DATE FOR FURTHER
RENEWAL TERM
Christopher Munro
1 February 2017
13 February 2023
N/A
Caroline Banszky
22 August 2018
22 August 2021
22 August 2024
Victoria Cochrane
28 September 2018
28 September 2021
28 September 2024
Richard Cranfield
25 June 2019
25 June 2022
25 June 2025
Robert Lister
26 June 2019
26 June 2022
26 June 2025
Rita Dhut
22 September 2021
N/A
22 September 2024
Directors’ interests
Details of the directors’ interests in the Company’s ordinary shares can be found
on page 141, within the Remuneration Report. During the financial year, rights
for share options were granted to Alexander and Jonathan under the Company’s
deferred bonus Share Option Plan.
Throughout the financial year, no director had any material interest in a contract
to which the Company or any of its subsidiary undertakings was a party (other
than their own service contract) that requires disclosure under the requirements
of the Companies Act 2006.
Directors’ indemnities
The Company has made qualifying third-party indemnity provisions for the
benefit of its directors. These provisions were for the purposes of section 234
of the Companies Act 2006 and were in force throughout the financial year
and remain so at the date of this report. In addition, the Company maintains
Directors’ and Officers’ Liability insurance which gives appropriate cover for legal
action brought against its directors.
146
Status of Company
The Company is registered as a
public limited Company under the
Companies Act 2006.
Stakeholders
The Group considers its principal
stakeholders to be clients, advisers,
employees, regulators, shareholders,
suppliers, and communities. Details on
the Group’s stakeholder engagement
is outlined on page 81.
Diversity and inclusion
The Company recognises the benefits
of companies having a diverse board
and sees diversity at board level
as important in maintaining good
corporate and board effectiveness.
The Group has an established
board Diversity Policy dealing with
appointments to the board.
The objective of the Group’s board
Diversity Policy is to ensure that new
appointments to any board within the
Group are made on merit, taking into
account the different skills, industry
experience, independence, knowledge
and background required to achieve
a balanced and effective board. The
Policy also states that the Company
will only use executive search firms
that have signed up to the Voluntary
Code for Executive Search Firms.
When determining the composition
of the board, consideration is given
to the diversity of board members
and, when possible, appointments
are made with a view to achieving a
balance of skills with diversity. More
information on the Group’s approach
to Diversity and Inclusion is outlined
in the People section on page 45.
Share capital
Structure of the Company’s capital
As at 30 September 2023, the
Company’s issued and fully paid-
up share capital was 331,322,014
ordinary shares of £0.01 each. The
Company does not hold any treasury
shares. The ordinary shares have
attached to them equal voting,
dividend and capital distribution
rights.
Voting rights
At any General Meeting, on a show
of hands, any member present in
person has one vote and every
proxy present, who has been duly
appointed by a member entitled to
vote on a resolution, has one vote.
On a poll vote every person present
in person or by proxy has one vote
for every share held. All shares carry
equal voting rights and there are no
restrictions on voting rights.
Two employee benefit trusts (EBTs)
operate in connection with the Group’s
deferred bonus share option plan. The
Trustees of the EBTs may exercise
all rights attaching to the shares in
accordance with their fiduciary duties
other than as specifically restricted
in the relevant Plan governing
documents. The Trustees of the EBTs
have informed the Company that
their normal policy is to abstain from
voting in respect of the Company’s
shares held in trust. The Trustees of
the Company’s two Share Incentive
Plans (SIPs) will vote as directed by
SIP participants in respect of the
allocated shares but the Trustees will
not otherwise vote in respect of the
unallocated shares held in the SIP
Trusts.
Restrictions on share transfers
There are restrictions on share
transfers, all of which are set out
in the Company’s Articles. The
board may decline to register: a
transfer of uncertificated shares in
the circumstances set out in the
Uncertificated Securities Regulations
2001; a transfer of certificated shares
that are not fully paid; a transfer
to more than four joint holders; a
transfer of certificated shares which
is not in respect of only one class
of share; a transfer which is not
accompanied by the certificate for
the shares to which it relates; a
transfer which is not duly stamped
and deposited at the Transfer Office
(or such other place in England and
Wales as the directors may from time
to time decide); or a transfer where
in accordance with section 794 of
the Companies Act 2006 a notice
(under section 793 of that Act) has
been served by the Company on a
shareholder who has then failed to
give the information required within
the specified time.
Purchase of own shares
At the 2023 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 2024.
Whilst such authority would only be
used if the board was satisfied that
to do so would be in the interests of
shareholders, the board considers it
desirable to have the general authority
in order to maintain compliance with
the regulatory capital requirements or
targets applicable to the Group.
The Company did not purchase any
of its own shares during the financial
year. However, the Employee Benefit
Trusts purchase the Company’s shares
from time to time as authorised
under the Trust Deeds in respect of
awards granted under the Company’s
employee share schemes.
147
Substantial shareholders
As at 13 December 2023, the
Company had been notified of the
following interests in 3% or more of
the Company’s issued ordinary share
capital disclosed to the Company
under Rule DTR 5. The information
provided below was correct as at the
date of notification. It should be noted
that these holdings are likely to have
changed since being notified to the
Company. However, notification of any
change is not required until the next
applicable threshold is crossed.
The percentage provided was correct
at the date of notification.
The interests of the directors, and
any persons closely associated, in the
issued share capital of the Company
are shown on page 141.
SHAREHOLDER
NATURE OF
HOLDING
NUMBER OF
ORDINARY
SHARES AT 30
SEPTEMBER 2023
% OF VOTING
RIGHTS AT 30
SEPTEMBER 2023
NUMBER OF
ORDINARY SHARES
AT 13 DECEMBER
2023
% OF VOTING
RIGHTS AT
13 DECEMBER
2023
Michael Howard
Direct
25,911,753
7.82%
25,911,753
7.82%
Indirect
6,088,247
1.84%
6,088,247
1.84%
BlackRock Inc.
Indirect
24,634,941
7.43%
21,651,470
6.53%
Securities
Lending
121,115
0.03%
570,804
0.17%
Contracts for
difference
2,147,909
0.64%
2,169,066
0.65%
Liontrust Investment
Partners LLP
Direct
16,910,112
5.10%
16,910,112
5.10%
Montanaro Asset
Management Limited
Direct
10,040,000
3.03%
10,040,000
3.03%
Directors’ interests
Save for the shareholding details set
out in the Directors’ Remuneration
Report, there has been no change to
the interests of any of the directors or
their Persons Closely Associated during
the financial year.
148
Dividends
In FY23, the Company paid two interim
dividends. Both dividends were paid
by reference to the Company’s issued
and allotted share capital on the record
date.
An interim dividend of 7.0 pence per
share - £23.2 million - was paid on
27 January 2023.
An interim dividend of 3.2 pence per
share - £10.6 million - was paid on
30 June 2023.
An interim dividend of 7.0 pence
per share - £ 23.2 million - has been
declared by the board and will be paid
in January 2024.
The Trustees of the EBTs have each
waived dividends on shares declared
in the Company shares held by those
trusts and the Trustees of the SIP have
waived dividends on unallocated shares
in the Company shares held by it.
Employee information and
engagement
The Company has no employees
(FY22: nil), but the Group had 649
employees at year end (FY22: 595).
The Group continues to promote
a culture whereby employees are
encouraged to develop and to
contribute to the overall aims of the
business.
The Company has considered
the requirements of s.172 of the
Companies Act on page 80, to ensure
that the interests of employees are
considered by the board in discussions
and decision making, and the
associated provisions of the 2018
Corporate Governance Code regarding
the method of engagement with the
workforce. Details of how the Company
has engaged with its employees are
outlined on page 82 of the Governance
Report and in the Responsible Business
section on page 45.
Significant agreements and
change of control
All the Company’s share plans contain
provisions relating to a change of
control. In the event of a change
of control, outstanding awards and
options may be lapsed and replaced
with equivalent awards over shares
in the new company, subject to the
Remuneration Committee’s discretion.
Engagement with suppliers
The Group monitors its relationships
with key suppliers and relationship
meetings are held with suppliers of
critical business services. The Group
monitors its payment performance
with suppliers and further details are
set out in the Stakeholder Engagement
section on page 85 above.
Articles of Association
The Articles of Association may be
amended by special resolution of the
shareholders.
149
Emissions
For commentary on emissions, please
see the TCFD section on page 42.
Political donations
The Group does not make political
donations.
Employment of disabled people
The Company’s policy regarding
employment, training, career
development and promotion of
disabled employees, and employees
who become disabled whilst in
employment, is to make reasonable
adjustments as required.
Post year end events
As detailed in note 34, there were no
reportable events after the reporting
date, apart from the declaration of
the second interim dividend (FY22:
none, apart from the declaration of the
second interim dividend).
Disclosure of information to
external auditor
Each of the persons who is a director
at the date of approval of this report
confirms that:
•
So far as the director is
aware, there is no relevant
audit information of which the
Company’s auditor is unaware;
and
•
The director has taken all the
steps that they ought to have
taken as a director in order to
make themselves aware of any
relevant audit information and
to establish that the Company’s
auditor is aware of that
information.
This confirmation is given in
accordance with the provisions of
section 418 of the Companies Act
2006.
Auditor
Resolutions to reappoint EY as
external auditor of the Company
and to authorise the Audit and
Risk Committee to determine its
remuneration will be proposed at the
AGM to be held on 29 February 2024.
2024 AGM
The AGM will be held in person at the
Company’s headquarters in London
on 29 February 2024. Details of the
resolutions to be proposed at the
AGM are set out in the separate
circular which has been sent to all
shareholders and is available on
the Company’s website at
https://
www.integrafin.co.uk/shareholder-
information/
.
By order of the board,
Alexander Scott
Chief Executive Officer
13 December 2023
150
STATEMENT ON DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Annual report and financial
statements in accordance with applicable United Kingdom law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have elected to prepare the Group and
parent Company financial statements in accordance with UK-adopted international
accounting standards (IFRSs). Under Company law the directors must not
approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and the Company and of the
profit or loss of the Group and the Company for that period.
In preparing these financial statements the directors are required to:
•
select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
•
make judgements and accounting estimates that are reasonable and
prudent;
•
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 is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the Group
and Company financial position and financial performance;
•
in respect of the Group financial statements, state whether IFRSs have been
followed, subject to any material departures disclosed and explained in the
financial statements;
•
in respect of the parent Company financial statements, state whether
IFRSs have been followed, subject to any material departures disclosed and
explained in the financial statements; and
•
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company and/ or the Group will continue
in business.
151
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s and Group’s transactions and
disclose with reasonable accuracy, at any time, the financial position of the
Company and the Group and enable them to ensure that the Company and the
Group financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and parent Company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a strategic report, directors’ report, directors’ remuneration report
and corporate governance statement that comply with that law and those
regulations. The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s website.
Directors’ responsibilities pursuant to DTR4
The directors confirm, to the best of their knowledge:
•
that the consolidated financial statements, prepared in accordance with
IFRSs give a true and fair view of the assets, liabilities, financial position
and profit of the parent Company and undertakings included in the
consolidation taken as a whole;
•
that the annual report, including the strategic report, includes a fair review
of the development and performance of the business and the position of
the Company and undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face; and
•
that they consider the annual report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s position, performance, business
model and strategy.
By order of the board,
Helen Wakeford
Company Secretary
13 December 2023
152
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
INTEGRAFIN HOLDINGS PLC
Opinion
In our opinion:
•
IntegraFin Holdings plc’s Group financial statements
and Parent Company financial statements (the
‘financial statements’) give a true and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 30 September 2023. and of the Group’s
profit for the year then ended;
•
the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
•
the Parent Company financial statements have been
properly prepared in accordance with UK adopted
international accounting standards as applied in
accordance with section 408 of the Companies Act
2006; and
•
the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements of IntegraFin
Holdings plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 30 September 2023
which comprise:
GROUP
PARENT COMPANY
Consolidated Statement
Company Statement of
of Comprehensive Income
Financial Position as at 30
for the year ended 30
September 2023
September 2023
Consolidated Statement of
Company Statement of
Financial Position as at 30
Cash Flows for the year
September 2023
ended 30 September 2023
Consolidated statement
Company Statement of
of Cash Flows for the year
Changes in Equity for the
ended 30 September 2023
year ended 30 September
2023
Consolidated Statement of
Notes 1 to 36 to the
Changes in Equity for the
financial statements
year ended 30 September
2023
Notes 1 to 36 to the
financial statements
FINANCIAL
STATEMENTS
153
The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted
international accounting standards and as regards the Parent
Company financial statements, as applied in accordance with
section 408 of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and the
Parent Company in conducting the audit.
Conclusions relating to going concern
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.
Our evaluation of the Directors’ assessment of the Group
and Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
•
obtaining an understanding of the Directors’ going
concern assessment process and obtaining the
Directors’ going concern assessment covering the
period 12 months from the date of authorisation of the
financial statements;
•
assessing and challenging the assumptions used in
management’s forecast and determining the model
are appropriate to enable the Directors to make an
assessment on the going concern;
•
testing the clerical accuracy of the model;
•
evaluating the capital and liquidity position of the
Group;
•
assessing the appropriateness of the stress and
reverse stress test scenarios that consider the key
risks identified by management. We evaluated
management’s analysis by testing the clerical
accuracy and challenging the conclusions reached in
the stress and reverse stress test scenarios;
•
performing enquiries of management and those
charged with governance to identify risks or events
that may impact the Group’s ability to continue as a
going concern. We also reviewed the management
paper presented to the board, minutes of meetings of
the board and regulatory correspondence; and
•
assessing the appropriateness of the going concern
disclosures by comparing the consistency with the
Directors’ assessment and for compliance with the
relevant reporting requirements.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group and Parent Company’s
ability to continue as a going concern for a period of 12
months from when the financial statements are authorised
for issue.
In relation to the Group and Parent Company’s reporting
on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention
to in relation to the directors’ statement in the financial
statements about whether the directors considered
it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future
events or conditions can be predicted, this statement is
not a guarantee as to the Group’s ability to continue as a
going concern.
154
Overview of our audit approach
An overview of the scope of the Parent Company
and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality
and our allocation of performance materiality determine
our audit scope for each company within the Group.
Taken together, this enables us to form an opinion on
the consolidated financial statements. We take into
account size, risk profile, the organisation of the Group
and effectiveness of Group-wide controls, changes in the
business environment, the potential impact of climate
change and other factors such as recent Internal audit
results when assessing the level of work to be performed at
each company.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial
statements, we selected eight components covering entities
within the United Kingdom, Isle of Man and Australia.
Of the eight components selected, we performed an audit
of the complete financial information of seven components
(‘full scope components’) which were selected based on
their size or risk characteristics. For the remaining one
components (‘specific scope components’), we performed
audit procedures on specific accounts within that component
that we considered had the potential for the greatest impact
on the significant accounts in the financial statements either
because of the size of these accounts or their risk profile.
The charts below illustrate the coverage obtained from the
work performed by our audit teams.
Profit on ordinary activities
before taxation attributable
to shareholders
100%
Full scope
components
0%
Specific scope
components
Revenue
100%
Full scope
components
0%
Specific scope
components
Total assets
98%
Full scope
components
2%
Specific scope
components
Audit scope
•
We performed an audit of the
complete financial information
of seven components and audit
procedures on specific balances for
a further one components.
•
The components where we
performed full or specific audit
procedures accounted for 100%
of Profit on ordinary activities
before taxation attributable to
shareholders, 100% of Revenue
and 98% of Total assets.
Key audit
matters
•
Recognition of revenue.
Materiality
•
Overall Group materiality of £3.1m
which represents 5% of profit on
ordinary activities before taxation
attributable to shareholders.
155
Involvement with component teams
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken
at each of the components by us, as the primary audit
engagement team, or by component auditors from other EY
global network firms operating under our instruction.
Of the seven full scope components, audit procedures were
performed on one of these by both the primary audit team
and component audit team based on where the procedures
were performed from a client perspective. For the remaining
six components all procedures were performed by the
primary team.
The primary team interacted regularly with the component
teams where appropriate during various stages of the audit,
reviewed relevant working papers and were responsible for
the scope and direction of the audit process. This, together
with the additional procedures performed at Group level,
gave us appropriate evidence for our opinion on the Group
financial statements.
Climate change
There has been increasing interest from stakeholders as
to how climate change will impact the Group. The Group
has considered the physical and transition risks from
climate change and has identified this as an emerging
risk, but has concluded that these do not currently pose
a material risk to the Group, as described in note 1 to the
financial statements on page 175. Climate change risk is
further assessed on pages 23 to 44 in the Task Force for
Climate related Financial Disclosures and on page 66 in
the principal risks and uncertainties, which form part of
the “Other information,” rather than the audited financial
statements. Our procedures on these disclosures therefore
consisted solely of considering whether they are materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appear to
be materially misstated.
Our audit effort in considering climate change was focused
on evaluating management’s assessment of the impact of
physical and transition risk, and management’s resulting
conclusion that there was no material impact from
climate change on the recognition and measurement of
the assets and liabilities in these financial statements as
at 30 September 2023 and the adequacy of the Group’s
disclosures in the financial statements which explains the
rationale. We also challenged the Directors’ considerations
of climate change in their assessment of going concern and
viability and associated disclosures.
Based on our work we have not identified the impact of
climate change on the financial statements to be a key audit
matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. 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 our opinion
thereon, and we do not provide a separate opinion on these
matters.
156
Risk
Recognition of revenue (£134.9 million, 2022:
£133.6 million)
Refer to the accounting policies (pages 178 to 179); and
Note 5 of the Consolidated Financial Statements (page 200)
Revenue is material to the Group and is a key focus
of stakeholders. As disclosed in note 5 of the financial
statements, the Group categorise revenue into five sub-
categories:
•
Annual commission income (£116.1m, PY £115.98m)
is charged for the administration of products on the
Transact platform.
•
Wrapper fee income (£12.3m, PY £11.6m) is charged
for each of the tax wrappers held by clients.
•
Advisor back-office technology (comprising license
income and consultancy income) (£4.8m, PY £4.0m)
is the rental charge for use of access to T4A’s CRM
software and the charge for consultancy services
provided by T4A.
•
Other income (£1.7m, PY £2.2m) are charges levied
on the acquisition of assets which comprises buy
commissions and dealing charges.
Annual commission income, wrapper fee income and
other income account for 96% of total fee income. These
revenues are automatically calculated by the Integrated
Administration System (‘IAS’) IT platform. There is a risk
therefore that revenue may be misstated due to failure or
manipulation of the calculation methodology within IAS.
The principal data inputs into the automated fee calculations
include the quantity and pricing of underlying positions and
commission percentages.
There is therefore a risk that revenue may be materially
misstated due to errors in the underlying data inputs into
IAS.
There is also the risk that stakeholder expectations place
pressure on management to manipulate the recognition of
revenue. This may result in an overstatement of revenue to
meet targets and expectations.
In relation to License and Consultancy Income there is a risk
that revenue is not recognised in line with the terms of the
underlying contracts and agreements.
157
Our response to the risk
For all material revenue streams, we have:
•
confirmed and updated our understanding of the
procedures and controls in place throughout the
revenue process at the Group through walkthrough
procedures; and
•
performed enquiries of management and performed
journal entry testing in order to address the risk of
management override.
In the prior year audit we identified design deficiencies in
relation to IT General Controls. These deficiencies were
remediated by management during the current year and we
concluded the IT General Controls were designed effectively
from the point of remediation.
As the IT General Controls were not considered to be
effective for the full year, we performed additional tests
of detail and tests over information prepared in respect of
the functionality of the IAS system and the accuracy of the
inputs to the system.
Our testing of annual commissions, wrapper fee income and
buy commissions income was split into two elements:
1. Testing to address the risk of failure or manipulation
within the calculation. We have:
•
recalculated all revenue sub-categories (annual
commissions, buy commissions and wrapper fees)
using the criteria and logic per the underlying
agreements with investors;
•
performed a variance analysis between the EY
recalculated revenue balance per each sub-category
and the amounts per the general ledger, investigating
any material differences;
•
performed completeness checks between the IAS
reports and general ledger; and
•
on a sample basis, reperformed calculations that are
automatically performed in IAS and form part of the
inputs into the revenue calculations. For example, the
daily average value of the portfolio which forms part of
the annual commission calculation.
2. Testing to address the risk of data inputs being
incorrect. On a sample basis, we have:
•
agreed inputs to the underlying agreements for
onboarding clients onto the platform;
•
agreed the fee terms used in the revenue calculation
to the published Transact Commission and Charges
Schedule;
•
for annual commissions recalculated the average
portfolio value used within the fee calculations based
on the daily pricing per IAS;
•
for annual commissions, agreed the quantity
of positions per portfolio back to the custodian
statements per IAS;
•
agreed fees paid back to bank statements; and
•
as part of cut off testing, performed analytical reviews
over pre year end and post year end journals to
ensure these relate to the correct period by agreeing
to IAS reports.
For licence income, consultancy income and other income,
on a sample basis we have:
•
agreed the fee terms used in the calculation to
agreements; and
•
agreed the fees to underlying agreements and
invoices and vouched balances to the bank
statements.
Key observations communicated to the Audit and
Risk Committee
Based on the procedures performed, we have no matters
to report in respect of revenue recognition.
158
In the prior year, our auditor’s report included the
following key audit matters which we do not consider to
be key audit matters for the 2023 audit:
•
‘Valuation of assets held for the benefit of the
policyholders to cover unit-linked liabilities’ due to
the low quantum of level 3 investments;
•
‘Impairment of goodwill and intangibles in Group and
investments in subsidiaries in Parent Company’ due
to the significant headroom available; and
•
‘First year audit transition’ which is no longer
applicable for the current year.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit
opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £3.1
million (2022: £3.1 million), which is 5% (2022: 5%) of
profit on ordinary activities before taxation attributable to
shareholders. We believe that profit on ordinary activities
before taxation attributable to shareholders is the most
relevant performance measure to the stakeholders of the
Group.
159
We determined materiality for the Parent Company to be
£0.58 million (2022: £0.63 million), which is 1% (2022:
1%) of net assets. The Parent Company primarily holds the
investments in Group entities and, therefore, net assets
is considered to be the key focus for users of the financial
statements.
During the course of our audit, we reassessed initial
materiality based on 30 September 2023 financial
statement amounts and adjusted our audit procedures
accordingly.
Performance materiality
The application of materiality at the individual account
or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment,
our judgement was that performance materiality was 75%
(2022: 50%) of our planning materiality, namely £2.3
million (2022: £1.5 million). We have set performance
materiality at 75% due to a lower expectation of
misstatement following our first year audit.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in excess
of £0.15 million (2022: £0.15 million), which is set at
5% of planning materiality, as well as differences below
that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in
forming our opinion.
Other information
The other information comprises the information included
in the Annual Report, including the Strategic Report,
Governance Report and Other Information sections, other
than the financial statements and our auditor’s report
thereon. The Directors are responsible for the other
information contained 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 this 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 the audit,
or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether 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 the other information, we are required to
report that fact.
We have nothing to report in this regard.
160
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
•
the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
•
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
Group and the Parent Company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
•
the Parent Company financial statements and the part
of the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified
by law are not made; or
•
we have not received all the information and
explanations we require for our audit.
161
Corporate Governance Statement
We have reviewed the directors’ statement in relation to
going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group and
Parent Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review by the
Listing Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
•
Directors’ statement with regards to the
appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified
set out on page 69;
•
Directors’ explanation as to its assessment of
the Parent Company’s prospects, the period this
assessment covers and why the period is appropriate
set out on page 71;
•
Director’s statement on whether it has a reasonable
expectation that the Group will be able to continue in
operation and meets its liabilities set out on page 71;
•
Directors’ statement on fair, balanced and
understandable set out on page 151;
•
Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out
on page 68;
•
The section of the Annual Report that describes the
review of effectiveness of risk management and
internal control systems set out on page 101; and
•
The section describing the work of the Audit and Risk
Committee set out on page 97.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 150, 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 and 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
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.
162
Explanation as to what extent the audit was
considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention
and detection of fraud rests with both those charged with
governance of the Parent Company and management.
•
We obtained an understanding of the legal and
regulatory frameworks that are applicable to the
Group and determined that the most significant are
those that relate to the reporting framework (UK-
adopted international accounting standards, the
Companies Act 2006 and UK Corporate Governance
Code) and relevant tax compliance regulations.
In addition, we concluded that there are certain
significant laws and regulations which may have
an effect on the determination of the amounts and
disclosures in the financial statements being the
Listing Rules and relevant Prudential Regulation
Authority (‘PRA’) and Financial Conduct Authority
(‘FCA’) rules and regulations.
•
We understood how IntegraFin Holdings plc is
complying with those frameworks by making enquiries
of management, internal audit, those responsible
for legal and compliance matters and those charged
with Governance. We also reviewed correspondences
between the Parent Company and UK regulatory
bodies; reviewed minutes of the Board, and the Audit
and Risk Committee; and gained understanding of the
Group’s approach to governance framework.
•
We assessed the susceptibility of the Group’s
financial statements to material misstatement,
including how fraud might occur by meeting with
management to understand where they considered
there was susceptibility to fraud. We have considered
performance targets and their potential influence on
efforts made by management to manage or influence
the perceptions of analysts. We considered the
controls that the Group has established to address
risks identified, or that otherwise prevent, deter
and detect fraud, including in a remote-working
environment and how senior management monitors
these controls. We also considered areas of significant
judgements, complex transactions and economic or
external pressures and the impact these have on the
control environment. Where the risk was considered to
be higher, we performed audit procedures to address
each identified fraud risk.
•
Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations. Our procedures involved journal entry
testing, with a focus on manual journals and journals
indicating large or unusual transactions based on our
understanding of the business; enquiries of senior
management and the Group’s legal adviser, including
those at full and specific scope; and focused testing,
as referred to in the key audit matters section above.
We also enquired about the policies that have been
established to prevent non-compliance with laws and
regulations by officer and employees and the Parent
Company’s methods of enforcing and monitoring
compliance with such policies. We inspected significant
correspondence with the PRA and FCA.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at
https://www.frc.org.uk/
auditorsresponsibilities
. This description forms part of our
auditor’s report.
163
Other matters we are required to address
•
Following the recommendation from the audit
committee, we were appointed by the Parent Company
on 24 February 2022 to audit the financial statements
for the year ending 30 September 2022 and
subsequent financial periods.
•
The period of total uninterrupted engagement including
previous renewals and reappointments is two years,
covering the years ending 30 September 2022 to 30
September 2023.
•
The audit opinion is consistent with the additional
report to the Audit and Risk Committee.
Use of our report
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Parent Company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and
the Parent Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Michael Gaylor (Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
13 December 2023
164
165
166
Note
2023
2022
£m
£m
Revenue
5
134.9
133.6
Cost of sales
(3.9)
(2.1)
Gross profit
131.0
131.5
Expenses
Administrative expenses
8
(74.6)
(77.7)
Expected credit losses on financial assets
16, 22
(0.1)
(0.2)
Operating profit
56.3
53.6
Interest income
9
6.4
0.8
Interest expense
25
(0.1)
(0.1)
Net policyholder returns
Net income/(loss) attributable to policyholder returns
12.1
(38.5)
Change in investment contract liabilities
(1,056.0)
2,770.3
Fee and commission expenses
18
(193.3)
(192.6)
Policyholder investment returns
10
1,249.3
(2,577.7)
Net policyholder returns
12.1
(38.5)
Profit on ordinary activities before taxation attributable to
policyholders and shareholders
74.7
15.8
Policyholder tax (charge)/credit
(12.1)
38.5
Profit on ordinary activities before taxation attributable to
shareholders
62.6
54.3
Total tax attributable to shareholder and policyholder returns
11
(24.8)
28.2
Less: tax attributable to policyholder returns
12.1
(38.5)
Shareholder tax on profit on ordinary activities
(12.7)
(10.3)
Profit for the financial year
49.9
44.0
Other comprehensive (loss)/income
Exchange (losses)/gains arising on translation of foreign operations
(0.1)
0.1
Total other comprehensive (losses)/income for the financial year
(0.1)
0.1
Total comprehensive income for the financial year
49.8
44.1
Earnings per share
Earnings per share – basic
7
15.1p
13.3p
Earnings per share – diluted
7
15.1p
13.3p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
All activities of the Group are classed as continuing.
Notes 1 to 36 form part of these Financial Statements.
167
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note
2023
2022
£m
£m
Non-current assets
Loans receivable
16
6.3
5.5
Intangible assets
12
21.4
21.8
Property, plant and equipment
13
1.1
1.2
Right-of-use assets
14
1.0
2.1
Deferred tax asset
26
0.7
6.0
30.5
36.6
Current assets
Investments
21
22.4
3.1
Prepayments and accrued income
22
17.2
17.2
Trade and other receivables
23
3.6
2.0
Current tax asset
14.3
15.0
Cash and cash equivalents
19
177.9
183.0
235.4
220.3
Current liabilities
Trade and other payables
24
19.5
21.5
Provisions
27
7.7
10.7
Lease liabilities
25
0.3
1.9
27.5
34.1
Non-current liabilities
Provisions
27
40.5
46.1
Contingent consideration
28
-
1.7
Lease liabilities
25
0.8
0.9
Deferred tax liabilities
26
7.2
0.9
48.5
49.6
Policyholder assets and liabilities¹
Cash held for the benefit of policyholders
20
1,419.2
1,458.6
Investments held for the benefit of policyholders
17
23,021.7
20,715.8
Liabilities for linked investment contracts
18
(24,440.9)
(22,174.4)
-
-
Net assets
189.9
173.2
168
Note
2023
2022
£m
£m
Equity
Called up equity share capital
3.3
3.3
Share-based payment reserve
29
3.4
2.6
Employee Benefit Trust reserve
30
(2.6)
(2.4)
Foreign exchange reserve
31
(0.1)
-
Non-distributable reserves
31
5.7
5.7
Retained earnings
180.2
164.0
Total equity
189.9
173.2
These Financial Statements were approved by the Board of Directors on 13 December 2023 and are signed on their behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 36 form part of these Financial Statements.
169
Note
2023
2022
£m
£m
Non-current assets
Investment in subsidiaries
15
35.3
33.3
Loans receivable
16
6.3
5.5
41.6
38.8
Current assets
Prepayments
22
-
0.1
Trade and other receivables
23
0.1
0.2
Cash and cash equivalents
26.0
33.1
26.1
33.4
Current liabilities
Trade and other payables
24
2.5
2.4
Loans payable
16
1.0
1.0
3.5
3.4
Non-current liabilities
Contingent consideration
28
-
1.7
Loans payable
16
6.0
7.0
6.0
8.7
Net assets
58.2
60.1
Equity
Called up equity share capital
3.3
3.3
Share-based payment reserve
29
2.7
2.2
Employee Benefit Trust reserve
30
(2.4)
(2.1)
Profit or loss account
Brought forward retained earnings
56.7
50.7
Profit for the year
31.6
39.8
Dividends paid in the year
(33.7)
(33.8)
Profit or loss account
54.6
56.7
Total equity
58.2
60.1
The Company has taken advantage of the exemption in section 408 (3) of the Companies Act 2006 not to present its
own income statement in these Financial Statements.
These Financial Statements were approved by the Board of Directors on 13 December 2023 and are signed on their
behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 36 form part of these Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION
170
RESTATED
2023
2022
£m
£m
Cash flows from operating activities
Profit on ordinary activities before taxation attributable to policyholders
and shareholders
74.7
15.8
Adjustments for income statement non-cash movements:
Amortisation and depreciation
2.5
3.0
Share-based payment charge
2.1
2.0
Interest charged on lease
0.1
0.1
(Decrease)/increase in contingent consideration
(1.7)
0.9
(Decrease)/increase in provisions
(8.6)
38.5
Adjustments for cash effecting investing and financing activities:
Interest on cash and loans
(6.4)
(0.8)
Adjustments for statement of financial position movements:
(Increase)/decrease in trade and other receivables, and prepayments
and accrued income
(1.6)
0.5
(Decrease)/increase in trade and other payables
(2.0)
4.0
Adjustments for policyholder balances:
(Increase)/decrease in investments held for the benefit of policyholders
(2,305.9)
1,071.3
Increase/(decrease) in liabilities for linked investment contracts
2,266.5
(879.0)
Increase/(decrease) in policyholder tax recoverable
10.0
(6.0)
Cash generated from operations
29.7
250.3
Income taxes paid
(22.4)
(13.5)
Interest paid on lease liabilities
(0.1)
(0.1)
Net cash flows generated from operating activities
7.2
236.7
Investing activities
Acquisition of property, plant and equipment
(0.7)
(0.3)
Purchase of financial instruments
(22.3)
(3.0)
Redemption of financial instruments
3.0
5.0
Increase in loans
(0.8)
(2.1)
Interest on cash and loans
6.4
0.8
Net cash generated from/(used in) investing activities
(14.4)
0.4
CONSOLIDATED STATEMENT OF CASH FLOWS
171
RESTATED
2023
2022
£m
£m
Financing activities
Purchase of own shares in Employee Benefit Trust
(0.4)
(0.5)
Purchase of shares for share scheme awards
(1.1)
(1.3)
Equity dividends paid
(33.7)
(33.7)
Payment of principal portion of lease liabilities
(1.9)
(2.4)
Net cash used in financing activities
(37.1)
(37.9)
Net (decrease)/increase in cash and cash equivalents
(44.3)
199.2
Cash and cash equivalents at beginning of year
1,641.6
1,442.4
Exchange losses on cash and cash equivalents
(0.1)
-
Cash and cash equivalents at end of year
1,597.1
1,641.6
Cash and cash equivalents consist of:
Cash and cash equivalents
177.9
183.0
Cash held for the benefit of policyholders
1,419.2
1,458.6
Cash and cash equivalents
1,597.1
1,641.6
Notes 1 to 36 form part of these Financial Statements.
See note 36 for details on 2022 restated balances.
172
COMPANY STATEMENT OF CASH FLOWS
RESTATED
2023
2022
£’000
£’000
Cash flows from operating activities
Loss before interest and dividends
(2.0)
(4.9)
Adjustments for non-cash movements:
(Decrease)/increase in contingent consideration
(1.7)
0.9
Adjustment for statement of financial position movements:
Decrease/(increase) in trade and other receivables
0.2
(0.2)
Increase in trade and other payables
0.1
-
Net cash flows used in operating activities
(3.4)
(4.2)
Investing activities
Dividends received
33.3
45.0
Interest received
0.9
0.2
Increase in loans receivable
(0.8)
(2.0)
Net cash generated from investing activities
33.4
43.2
Financing activities
Purchase of own shares in Employee Benefit Trust
(0.3)
(0.5)
Purchase of shares for share scheme awards
(1.3)
(1.3)
Repayment of loans
(1.0)
(1.0)
Interest expense on loans
(0.6)
(0.2)
Equity dividends paid
(33.7)
(33.8)
Net cash used in financing activities
(37.1)
(36.8)
Net (decrease)/increase in cash and cash equivalents
(7.1)
2.2
Cash and cash equivalents at beginning of year
33.1
30.9
Cash and cash equivalents at end of year
26.0
33.1
Notes 1 to 36 form part of these Financial Statements.
See note 36 for details on 2022 restated balances.
173
CALLED UP
EQUITY
SHARE
CAPITAL
NON-
DISTRIBUTABLE
INSURANCE
AND FOREIGN
EXCHANGE
RESERVES
SHARE-
BASED
PAYMENT
RESERVE
EMPLOYEE
BENEFIT
TRUST
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
£m
£m
£m
£m
£m
£m
Balance at 1 October 2021
Comprehensive income for the year:
3.3
6.2
2.4
(2.1)
153.5
163.3
Profit for the year
-
-
-
-
44.0
44.0
Movement in currency translation
-
0.1
-
-
-
0.1
Total comprehensive income for
the year
-
0.1
-
-
44.0
44.1
Share-based payment expense
-
-
2.0
-
-
2.0
Settlement of share based payment
-
-
(1.5)
-
-
(1.5)
Purchase of own shares in EBT
-
-
-
(0.5)
-
(0.5)
Excess tax relief charged to equity
-
-
(0.3)
-
-
(0.3)
Exercised share options
-
-
-
0.2
(0.2)
-
Release of actuarial reserve
-
(0.5)
-
-
0.5
-
Other movement
-
(0.1)
-
-
(0.1)
(0.2)
Distributions to owners -
Dividends paid
-
-
-
-
(33.7)
(33.7)
Balance at 30 September 2022
3.3
5.7
2.6
(2.4)
164.0
173.2
Comprehensive income for the year:
3.3
5.7
2.6
(2.4)
164.0
173.2
Profit for the year
-
-
-
-
49.9
49.9
Movement in currency translation
-
(0.1)
-
-
-
(0.1)
Total comprehensive income for
the year
-
(0.1)
-
-
49.9
49.8
Share-based payment expense
-
-
2.1
-
-
2.1
Settlement of share based payment
-
-
(1.5)
-
-
(1.5)
Purchase of own shares in EBT
-
-
-
(0.4)
-
(0.4)
Excess tax relief charged to equity
-
-
0.2
-
-
0.2
Exercised share options
-
-
-
0.2
-
0.2
Distributions to owners -
Dividends paid
-
-
-
-
(33.7)
(33.7)
Balance at 30 September 2023
3.3
5.6
3.4
(2.6)
180.2
189.9
Notes 1 to 36 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
174
CALLED UP
EQUITY
SHARE
CAPITAL
SHARE-
BASED
PAYMENT
RESERVE
EMPLOYEE
BENEFIT
TRUST
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
£m
£m
£m
£m
£m
Balance at 1 October 2021
Comprehensive income for the year:
3.3
1.7
(1.8)
50.7
53.9
Profit for the year
-
-
-
39.8
39.8
Total comprehensive income for the year
-
-
-
39.8
39.8
Share-based payment expense
-
2.0
-
-
2.0
Settlement of share-based payments
-
(1.5)
-
-
(1.5)
Purchase of own shares in EBT
-
-
(0.3)
-
(0.3)
Distributions to owners - dividends
-
-
-
(33.8)
(33.8)
Balance at 30 September 2022
3.3
2.2
(2.1)
56.7
60.1
Comprehensive income for the year:
Profit for the year
-
-
-
31.6
31.6
Total comprehensive income for the year
-
-
-
31.6
31.6
Share-based payment expense
-
1.9
-
-
1.9
Settlement of share-based payments
-
(1.4)
-
-
(1.4)
Purchase of own shares in EBT
-
-
(0.3)
-
(0.3)
Distributions to owners - dividends
-
-
-
(33.7)
(33.7)
Balance at 30 September 2023
3.3
2.7
(2.4)
54.6
58.2
Notes 1 to 36 form part of these Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
 
175
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
General information
IntegraFin Holdings plc (the “Company”), a public limited
Company incorporated and domiciled in the United
Kingdom (“UK”), along with its subsidiaries (collectively the
“Group”), offers a range of services which are designed to
help financial advisers and their clients to manage financial
plans in a simple, effective and tax efficient way.
The registered office address, and principal place of
business, is 29 Clement’s Lane, London, EC4N 7AE.
A) BASIS OF PREPARATION
The consolidated Financial Statements have been prepared
and approved by the directors in accordance with IFRSs.
The Financial Statements have been prepared on the
historical cost basis, except for the revaluation of certain
financial instruments, which are stated at their fair value,
have been prepared in pound sterling, which is the
functional currency of the Company and are rounded to the
nearest thousand.
Climate risks have been considered where appropriate
in the preparation of these Financial Statements, with
particular consideration given to the impact of climate risk
on the fair value calculations and impairment assessments.
This has concluded that the impact of climate risk on the
financial statements is not material.
Going concern
The financial statements have been prepared on a going
concern basis, following an assessment by the board.
Going concern is assessed over the 12-month period from
when the Annual Report is approved, and the board has
concluded that the Group has adequate resources, liquidity
and capital to continue in operational existence for the next
12 months. This is supported by:
•
The current financial position of the Group:
◦
The Group maintains a conservative balance
sheet and manages and monitors solvency and
liquidity on an ongoing basis, ensuring that it
always has sufficient financial resources for the
foreseeable future.
◦
As at 30 September 2023, the Group had
£177.9 million of shareholder cash on the statement
of financial position, demonstrating that liquidity
remains strong.
•
Detailed cash flow and working capital
projections; and
•
Stress-testing of liquidity, profitability and regulatory
capital, taking account of possible adverse changes in
trading performance.
When making this assessment, the board has taken into
consideration both the Group’s current performance and
the future outlook, including the impact of the cost-of-living
crisis, sustained levels of high inflation, increasing interest
rates and volatile equity markets. The environment has
been challenging during the year, but our financial and
operational performance has been robust, and the Group’s
fundamentals remain strong.
 
176
1. Basis of preparation and significant accounting policies (continued)
As detailed in the Going Concern and Viability Statement
(page 69), stress and scenario testing has been carried
out, in order to understand the potential financial impacts
of severe, yet plausible, scenarios on the Group. This
assessment incorporated a number of stress tests covering
a broad range of scenarios, including a cyber attack, system
and process failures, and persistent high inflation with
continued market uncertainty.
Having conducted detailed cash flow and working capital
projections, and stress-tested liquidity, profitability
and regulatory capital; taking account of the economic
challenges mentioned above; the board is satisfied that the
Group is well placed to manage its business risks. The board
is also satisfied that it will be able to operate within the
regulatory capital limits imposed by the Financial Conduct
Authority (FCA), Prudential Regulation Authority (PRA), and
Isle Man Financial Services Authority (IoM FSA).
The board has concluded that the Company has adequate
resources and there are no material uncertainties to the
Company’s ability to continue to operate for the foreseeable
future, being a period of at least twelve months from
the date the financial statements are approved. For this
reason, they have adopted the going concern basis for the
preparation of the financial statements.
Basis of consolidation
The consolidated Financial Statements incorporate the
Financial Statements of the Company and its subsidiaries.
Where the Company has control over an investee, it
is classified as a subsidiary. The Company controls an
investee if all three of the following elements are present:
power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its
power to affect those variable returns. Control is presumed
to exist where the Group owns the majority of the voting
rights of an entity. Control is reassessed whenever facts
and circumstances indicate that there may be a change in
any of these elements of control.
Subsidiaries are fully consolidated from the date on which
control is obtained by the Company and are deconsolidated
from the date that control ceases. Acquisitions are
accounted for under the acquisition method. Intercompany
transactions, balances, income and expenses, and profits
and losses are eliminated on consolidation.
The Financial Statements of all of the wholly owned
subsidiary companies are incorporated into the
consolidated Financial Statements. Two of these
subsidiaries, IntegraLife International Limited (ILInt)
and IntegraLife UK Limited (ILUK) issue contracts with
the legal form of insurance contracts, but which do not
transfer significant insurance risk from the policyholder to
the Company, and which are therefore accounted for as
investment contracts.
In accordance with IFRS 9, the contracts concerned
are therefore reflected in the consolidated statement of
financial position as investments held for the benefit of
policyholders, and a corresponding liability to policyholders.
177
1. Basis of preparation and significant accounting policies (continued)
Changes in accounting policies
i) There have been no new standards, amendments to
standards or interpretations adopted during the financial
year that had a material effect.
ii) Future standards, amendments to standards, and
interpretations not yet effective are noted below.
The following amendments are effective for periods
beginning on or after 1 January 2023:
IFRS 17 Insurance Contracts
In June 2022, the IASB issued amendments to IFRS
17 which will replace IFRS 4 Insurance Contracts.
IFRS 17 establishes the principles for the recognition,
measurement, presentation and disclosure of insurance
contracts within the scope of the Standard. The Group
would be required to provide information that faithfully
represents those contracts, such that users of the financial
statements can assess the effect insurance contracts have
on the entity’s financial position, financial performance
and cash flows.
The Group has performed an assessment regarding the
impact of IFRS 17 on the Financial Statements and, while
the insurance companies in the Group do administer
insurance business and hold capital relating to the risks
associated with this, there is no significant insurance
risk in any of the contracts. Therefore all contracts are
investment contracts under IFRS 9, and IFRS 17 has no
impact.
Disclosure of Accounting Policies (Amendments to
IAS 1 and IFRS Practice Statement 2)
In February 2021, the IASB issued amendments to IAS
1 to assist in determining which accounting policies
to disclose, with reference to materiality and how to
determine which policies fall into this category. IFRS
Practice Statement 2 includes guidance to support this.
The Group has assessed the impact of this amendment
and does not note any significant impact.
Definition of Accounting Estimates (Amendments
to IAS 8)
In February 2021, the IASB issued amendments to IAS 8
to clarify how to distinguish changes in accounting policies
from changes in accounting estimates. That distinction
being that changes in accounting estimates are applied
prospectively to future transactions and events, but changes
in accounting policies are applied retrospectively to past
transactions and events.
The Group has assessed the impact of this amendment and
does not note any significant impact.
Deferred Tax Related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12)
In May 2021, the IASB issued amendments to IAS 12 which
will require recognition of deferred taxes on particular
transactions which, on initial recognition, give rise to equal
amounts of taxable and deductible temporary differences.
The Group has assessed the impact of this amendment and
does not note any significant impact.
Amendments to IAS 12: International Tax Reform
Pillar Two Model Rules
Amendments to IAS 12 Income Taxes have been introduced
in response to the OECD’s BEPS Pillar Two Model Rules. The
amendments include a temporary mandatory exception
from accounting for deferred taxes arising from the Pillar
Two model rules and a requirement to disclose that the
exception has been applied immediately and retrospectively.
IHP has taken up this exemption for FY23.
The Group is continuing to assess whether it will be in scope
of the Pillar Two model Rules. If so, the rules would be
expected to apply to the Group from 1 October 2024 and
give rise to a financial impact. However, the Group does
not anticipate that any tax liabilities that may arise from its
overseas operations will be material to the Group, as most
of its revenue and profits are generated in the UK and taxed
at a rate of 25%.
The following amendments are effective for periods
beginning on or after 1 January 2024:
Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1)
In October 2022, the IASB issued amendments to IAS 1
regarding how conditions with which an entity must comply
within twelve months after the reporting period, affect the
classification of a liability.
The Group has assessed the impact of this amendment
and does not note any significant impact.
178
1. Basis of preparation and significant accounting policies (continued)
The following amendments are effective for the
period beginning 1 January 2025:
The Effects of Changes in Foreign Exchange Rates
(IAS 21)
In August 2023, the IASB issued amendments to IAS
21 to provide guidance to specify when a currency is
exchangeable and how to determine the exchange rate
when it is not.
The Group has assessed the impact of this amendment and
does not note any impact as the only non-Sterling currency
in use is Australian Dollars.
No other future standards, amendments to standards, or
interpretations are expected to have a material effect on
the financial statements.
B) PRINCIPAL ACCOUNTING POLICIES
Revenue from contracts with customers
Revenue represents the fair value of services supplied by
the Company. All fee income is recognised as revenue on an
accruals basis and in line with the provision of the services.
Fee and commission income is recognised at an amount
that reflects the consideration to which the Group expects
to be entitled in exchange for providing the services.
The performance obligations, as well as the timing of their
satisfaction, are identified, and determined, at the inception
of the contract.
When the Group provides a service to its customers,
consideration is generally due immediately upon satisfaction
of a service provided at a point in time or at the end of the
contract period for a service provided over time. The Group
has generally concluded that it is the principal in its revenue
arrangements because it typically controls the services
before transferring them to the customer.
The Group has discharged all of its obligations in relation
to contracts with customers, and the amounts received or
receivable from customers equal the amount of revenue
recognised on the contracts. All amounts due from
customers are therefore recognised as receivables within
accrued income, and the Group has no contract assets or
liabilities.
Fee income comprises:
Annual commission income
Annual commission is charged for the administration of
products on the Transact platform, and is levied monthly in
arrears on the average value of assets and cash held on the
platform. The value of assets and cash held on the Platform
is driven by market movements, inflows, outflows and other
factors.
Wrapper fee income
Wrapper fees are charged for each of the tax wrappers held
by clients and are levied quarterly in arrears based on fixed
fees for each wrapper type.
Annual commission and wrapper fees relate to services
provided on an on-going basis, and revenue is therefore
recognised on an on-going basis to reflect the nature of the
performance obligations being discharged. As the benefit to
the customer of the services is transferred evenly over the
179
1. Basis of preparation and significant accounting policies (continued)
service period, these fees are recognised as revenue evenly
over the period, based on time elapsed.
Accrued income on both annual commission and wrapper
fees is recognised as a trade receivable on the statement
of financial position, as the Group’s right to consideration is
conditional on nothing other than the passage of time.
Licence income
Licence income is the rental charge for use of access to
T4A’s CRM software. The rental charge is billed monthly
in advance, based on the number of users. Revenue is
recognised in line with the provision of the service.
Consultancy income
Consultancy income relates to consultancy services
provided by T4A on an as-needs basis. Revenue is
recognised when the services are provided.
Other income
This comprises buy commission and dealing charges. These
are charges levied on the acquisition of assets, due upon
completion of the transaction. Revenue is recorded on the
date of completion of the transaction, as this is the date
the services are provided to the customer. As the benefit
to the customer of the services is transferred at a point
in time, these fees are recognised at the point they are
provided.
Interest income
Interest on shareholder cash, policyholder cash, loans and
coupon on shareholder gilts are the sources of interest
income received. These are recognised in the Consolidated
Statement of Comprehensive Income in interest income
and within policyholder returns. Under IFRS 9, interest
income is recorded using the effective interest method
for all financial assets measured at amortised cost
and is recognised in the Consolidated Statement of
Comprehensive Income.
Cost of sales
Cost of sales relate to costs directly attributable to
the supply of services provided to the Group and
are recognised in the Consolidated Statement of
Comprehensive Income on an accruals basis.
Administrative expenses
Administration expenses relate to overhead costs and are
recognised in the Consolidated Statement of Comprehensive
Income on an accruals basis.
Fee and commission expenses
Fee and commission expenses are paid by ILUK and ILInt
policyholders to their financial advisers. Expenses comprise
annual commission which is levied monthly in arrears on
the average value of assets and cash held on the platform
in the month and upfront fees charged on new premiums on
the platform.
Investments
Fixed asset investments in subsidiaries are stated at cost
less any provision for impairment.
Other investments comprise UK Government gilts held
as shareholder investments. The Group held a gilt in the
prior year that matured in the current year, which was
held at fair value through profit or loss as it fell under the
‘other’ business model, and was stated at quoted bid price
which equates to fair value, with any resultant gain or loss
recognised in profit or loss.
New gilts were acquired in the current financial year, which
were assessed upon purchase and deemed to meet the
criteria to classify as amortised cost under IFRS 9 Financial
Instruments, namely:
•
they are held within a business model whose objective
is to hold assets in order to collect contractual cash
flows; and,
•
the contractual terms of the financial assets give
rise on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Investment contracts – investments held for the
benefit of policyholders
Investment contracts held for the benefit of policy holders
are comprised of unit-linked contracts. Investments held
for the benefit of policyholders are stated at fair value and
reported on a separate line in the statement of financial
position, see accounting policy on financial instruments for
fair value determination. Investment contracts result in
financial liabilities whose fair value is dependent on the fair
value of underlying financial assets. They are designated at
180
1. Basis of preparation and significant accounting policies (continued)
inception as financial liabilities at ‘fair value through profit
or loss’ in order to reduce an accounting mismatch with the
underlying financial assets. Gains and losses arising from
changes in fair value are presented in the Consolidated
Statement of Comprehensive Income within “Policyholder
investment returns”.
Investment inflows received from policyholders are invested
in funds selected by the policyholders. The resulting
liabilities for linked investment contracts are accounted for
under the ‘fair value through profit or loss’ option, in line
with the corresponding assets as permitted by IFRS 9.
As all investments held for the benefit of policyholders are
matched entirely by corresponding linked liabilities, any
gain or loss on assets recognised through the Consolidated
Statement of Comprehensive Income are offset entirely
by the gains and losses on linked liabilities, which are
recognised within the “change in investment contract
liabilities” line. The overall net impact on profit is therefore
£nil.
Investment contracts are measured at fair value using
quoted mid prices that are available at the reporting
date and are traded in active markets. Where this is not
available, valuation techniques are used to establish
the fair value at inception and each reporting date. The
Company’s main valuation techniques incorporate all factors
that market participants would consider and are based on
observable market data. The financial liability is measured
both initially and subsequently at fair value. The fair value
of a unit-linked financial liability is determined using the
fair value of the financial assets contained within the funds
linked to the financial liability.
Dividends
Equity dividends paid are recognised in the accounting
period in which the dividends are declared and approved.
Intangible non-current assets
Intangible non-current assets, excluding goodwill, are
stated at cost less accumulated amortisation and comprise
intellectual property software rights. The software rights
were amortised over seven years on a straight line basis, as
it was estimated that the software would be rewritten every
seven years, and therefore have a finite useful life. The
software rights are now fully amortised, but due to ongoing
system development and coding updates no replacement is
required.
Goodwill is held at cost and, in accordance with IFRS, is not
amortised but is subject to annual impairment reviews.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. Subsequent
costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated
with the item will flow to the Group and the cost can be
measured reliably. Repairs and maintenance costs are
charged to the Consolidated Statement of Comprehensive
Income during the period in which they are incurred.
The major categories of property, plant, equipment are
depreciated as follows:
ASSET CLASS
ALL UK AND ISLE
OF MAN ENTITIES
AUSTRALIAN
ENTITY
Leasehold
improvements
Straight line over
the life of the lease
Straight line over
40 years
Fixtures &
fittings
Straight line over
10 years
Straight line over
10 years
Equipment
Straight line over 3
to 10 years
Straight line over
3 years
Motor vehicles
N/A
25% reducing
balance
Residual values, method of depreciation and useful lives
of the assets are reviewed annually and adjusted if
appropriate.
Goodwill and goodwill impairment
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the identifiable
net assets of the acquired entity at the date of acquisition.
Goodwill is recognised as an asset at cost at the date when
control is achieved and is subsequently measured at cost
less any accumulated impairment losses.
Goodwill is allocated to one or more cash generating
units (CGUs) expected to benefit from the synergies of
the combination, where the CGU represents the smallest
identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from
181
1. Basis of preparation and significant accounting policies (continued)
other assets or group of assets. Goodwill is reviewed for
impairment at least once annually, and also whenever
circumstances or events indicate there may be uncertainty
over this value. The impairment assessment compares the
carrying value of goodwill to the recoverable amount, which
is the higher of value in use and the fair value less costs of
disposal. Any impairment loss is recognised immediately in
the Consolidated Statement of Comprehensive Income and
is not subsequently reversed.
Intangible assets acquired as part of a business
combination
Intangible assets acquired as part of a business combination
are recognised where they are separately identifiable and
can be measured reliably.
Acquired intangible assets consist of contractual customer
relationships, software and brand. These items are
capitalised at their fair value, which are based on either the
‘Relief from Royalty’ valuation methodology or the ‘Multi-
period Excess Earnings Method’, as appropriate for each
asset. Subsequent to initial recognition, acquired intangible
assets are measured at cost less accumulated amortisation
and any recognised impairment losses.
Amortisation is recognised in the consolidated statement of
comprehensive income within administration expenses on
a straight line basis over the estimated useful lives of the
assets, which are as follows:
ASSET CLASS
USEFUL LIFE
Customer relationships
15 years
Software
7 years
Brand
10 years
The method of amortisation and useful lives of the assets
are reviewed annually and adjusted if appropriate.
Impairment of non-financial assets
Property, plant and equipment, right-of-use assets and
intangible assets are tested for impairment when events or
changes in circumstances indicate that the carrying amount
may not be recoverable. Recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use (being
the present value of the expected future cash flows of the
relevant asset).
The Group evaluates impairment losses for potential
reversals when events or circumstances warrant such
consideration.
Goodwill is tested for impairment annually, and once an
impairment is recognised this cannot be reversed. For more
detailed information in relation to this, please see note 12.
Pensions
The Group makes defined contributions to the personal
pension schemes of its employees. These are chargeable to
Consolidated Statement of Comprehensive Income in the
year in which they become payable.
Foreign currencies
Transactions in foreign currencies are translated into
the functional currency at the exchange rate in effect at
the date of the transaction. Foreign currency monetary
assets and liabilities are translated to sterling at the year
end closing rate. Foreign exchange rate differences that
arise are reported net in the Consolidated Statement of
Comprehensive Income as foreign exchange gains/losses.
The assets and liabilities of foreign operations are
translated to sterling using the year end closing exchange
rate. The revenues and expenses of foreign operations
are retranslated to sterling at rates approximating the
foreign exchange rates ruling at the relevant month of
the transactions. Foreign exchange differences arising on
retranslation are recognised directly in the reserves.
182
1. Basis of preparation and significant accounting policies (continued)
Taxation
Current income tax
The taxation charge is based on the taxable result for
the year. The taxable result for the year is determined in
accordance with enacted legislation and taxation authority
practice for calculating the amount of corporation tax
payable.
Policyholder tax comprises corporation tax payable at
the policyholder rate on the policyholders’ share of the
taxable result for the year, together with deferred tax at
the policyholder rate on temporary differences relating to
policyholder items.
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted at the reporting date in countries
where the Group operates and generates taxable income.
Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base.
The amount of the asset or liability is determined using
tax rates that have been enacted or substantively enacted
by the reporting date and are expected to apply when the
deferred tax assets/liabilities are recovered/settled.
With regard to capital gains tax on policyholders’ future
tax obligations, management has determined that reserves
should be held to cover this, based on a reserve charge
rate of 20%. The deferred capital gains upon which the
reserve charges are calculated are reflected in the closing
deferred tax balance.
We are aware of the proposed BEPS Pillar 2 changes which
might impact the tax rate in some jurisdictions in future
years and continue to monitor for updates.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no
longer probable that sufficient tax profit will be available
to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the
deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets,
the Group relies on the same forecast assumptions
used elsewhere in the financial statements and in other
management reports, which, among other things, reflect
the potential impact of climate-related development on the
business, such as increased cost of production as a result of
measures to reduce carbon emissions.
The Group offsets deferred tax assets and deferred tax
liabilities if and only if it has a legal enforceable
right to set off current tax assets and current tax liabilities
and the deferred tax assets and deferred tax liabilities relate
to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities
which intend to either settle current tax liabilities and
assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which
significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Policyholder Tax
HMRC requires ILUK to charge basic rate income tax on its
life insurance policies (FA 2012, s102). ILUK collects this
tax quarterly, by charging 20% tax (FY22: 20%) on gains
from assets held in the policies, based on the policyholder’s
acquisition costs and market value at each quarter end.
Additional charges are applied on any increases in the
previously charged gain. The charge is adjusted by the
fourth financial year quarter so that the total charge for the
year is based on the gain at the end of the financial year.
When assets are sold at a loss or reduce in market value
by the financial year end, a refund of the charges may be
applied. Policyholder tax is recorded as a tax expense/(tax
credit) in the statement of comprehensive income, with a
corresponding asset/(liability) recognised on the statement
of financial position (under IAS 12).
183
1. Basis of preparation and significant accounting policies (continued)
Segmental reporting
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating
decision-maker is responsible for allocating resources and
assessing performance of the operating segments and
has been identified as the Chief Executive Officer of the
Company.
Client assets and client monies
Integrated Financial Arrangements Ltd (IFAL) client assets
and client monies are not recognised in the parent and
consolidated statements of financial position as they are
owned by the clients of IFAL.
Lease assets and lease liabilities
Right-of-use assets
The Group recognises right-of-use assets on the date
the leased asset is made available for use by the Group.
These assets relate to rental leases for the office of the
Group, which have varying terms clauses and renewal
rights. Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and
adjusted for any re-measurement of lease liabilities. The
cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement
date.
Depreciation is applied in accordance with IAS 16:
Property, Plant and Equipment. Right-of-use assets are
depreciated over the lease term. See note 13 and 14.
Lease liabilities
The Group measures lease liabilities in line with IFRS
16 on the balance sheet as the present value of all
future lease payments, discounted using an incremental
borrowing rate at the date of commencement. After the
commencement date, the amount of lease liabilities is
increased to reflect the addition of interest and reduced
for the lease payments made. The Group’s incremental
borrowing rate is the rate at which a similar borrowing
could be obtained from an independent creditor under
comparable terms and conditions. See note 25.
Short-term leases
The Group defines short-term leases as those with a lease
term of 12 months or less and leases of low value assets.
For these leases, the Group recognises the lease payments
as an operating expense on a straight line basis over the
term of lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances from
instant access and notice accounts, call deposits, and
other short-term deposits with an original maturity of
three months or less. The carrying amount of these assets
approximates to their fair value.
Cash and cash equivalents held for the benefit of the
policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to
corresponding liabilities.
184
1. Basis of preparation and significant accounting policies (continued)
Financial instruments
Financial assets and liabilities are recognised when the
Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised
when the rights to receive cash flows from the assets
have expired or have been transferred and the Group
has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognised when
the obligation specified in the contract is discharged,
cancelled or expires.
At initial recognition, the Group classifies its financial
instruments in the following categories, based on the
business model in which the assets are managed and
their cash flow characteristics:
(i) Financial assets and liabilities at fair value
through profit or loss
This category includes financial assets and liabilities
acquired principally for the purpose of selling or
repurchasing in the short-term, comprising of listed
shares and securities.
Financial instruments in this category are recognised
on the trade date, and subsequently measured at fair
value. Purchases and sales of securities are recognised
on the trade date. Transaction costs are expensed
in the Consolidated Statement of Comprehensive
Income. Gains and losses arising from changes in fair
value are presented in the Consolidated Statement of
Comprehensive Income within “investment returns”
for corporate assets and “net income attributable to
policyholder returns” for policyholder assets in the period
in which they arise. Financial assets and liabilities at
fair value through profit or loss are classified as current
except for the portion expected to be realised or paid
beyond twelve months of the balance sheet date, which
are classified as long-term.
(ii) Financial assets at amortised cost
These assets comprised of accrued fees, trade and
other receivables, loans, investments in quoted debt
instruments and cash and cash equivalents. These are
included in current assets due to their short-term nature,
except for the element of the loan payable to subsidiary
which is to be settled after 12 months, which is included
in non-current assets.
Financial assets are measured at amortised cost when
they are held within the business model whose objective
is to hold assets to collect contractual cash flows and
their contractual cash flows represent solely payments of
principal and interest.
The carrying value of assets held at amortised cost are
adjusted for impairment arising from expected credit losses.
(iii) Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and
other payables and loans payable. These are initially
recognised at fair value. Subsequent measurement is at
amortised cost using the effective interest method. Trade
and other payables are classified as current liabilities due to
their short-term nature. The loan is split between current
and non-current liabilities, based on the repayment terms.
Impairment of financial assets
Expected credit losses are required to be measured through
a loss allowance at an amount equal to:
•
the 12-month expected credit losses (expected credit
losses from possible default events within 12 months
after the reporting date); or
•
full lifetime expected credit losses (expected credit
losses from all possible default events over the life of
the financial instrument).
A loss allowance for full lifetime expected credit losses
is required for a financial instrument if the credit risk of
that financial instrument has increased significantly since
initial recognition, as well as to contract assets or trade
receivables, where the simplified approach is applied
to assets that do not contain a significant financing
component.
For all other financial instruments, expected credit losses
are measured at an amount equal to the 12-month
expected credit losses.
Impairment losses on financial assets carried at amortised
cost are reversed in subsequent periods if the expected
credit losses decrease.
185
1. Basis of preparation and significant accounting policies (continued)
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 an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation.
If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate
that reflects, when appropriate, the risks specific to the
liability. When discounting is used, the increase in the
provision due to the passage of time is recognised as a
finance cost.
The ILUK policyholder reserves, which are part of the
provisions balance, arises from tax reserve charges
collected from life insurance policyholders, which are held
to cover possible future tax liabilities. If no tax liability
arises the charges are refunded to policyholders, where
possible. As these liabilities are of uncertain timing
or amounts, they are recognised as provisions on the
statement of financial position.
Balances due to HMRC are considered under IAS 12
Income Taxes, whereas balances due to policyholders are
considered under IAS 37 Provisions, Contingent Liabilities
and Contingent Assets.
Share-based payments
Equity-settled share-based payment awards granted
to employees are measured at fair value at the date of
grant. The awards are recognised as an expense, with a
corresponding increase in equity, spread over the vesting
period of the awards, which accords with the period for
which related services are provided.
The total amount expensed is determined by reference to
the fair value of the awards as follows:
(i) Share Incentive Plan (SIP) shares
The fair value is the market price on the grant date. There
are no vesting conditions, as the employees receive the
shares immediately upon grant.
(ii) Performance share plan (PSP) share options
The fair value of share options is determined by applying
a valuation technique, usually an option pricing model,
such as Black Scholes. This takes into account factors such
as the exercise price, the share price, volatility, interest
rates, and dividends.
At each reporting date, the estimate of the number of
share options expected to vest based on the non-market
vesting conditions is assessed. Any change to original
estimates is recognised in the statement of comprehensive
income, with a corresponding adjustment to equity
reserves.
186
2. Critical accounting estimates and judgements
Critical accounting estimates are those where there is
a significant risk of material adjustment in the next 12
months, and critical judgements are those that have
the most significant effect on amounts recognised in the
accounts.
In preparing these Financial Statements, management has
made judgements, estimates and assumptions about the
future that affect the application of the Group’s accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Management uses its knowledge
of current facts and applies estimation and assumption
techniques that are aligned with relevant accounting
policies to make predictions about the future. Actual results
may differ from these estimates.
Estimates and judgements are reviewed on an ongoing
basis and revisions are recognised in the period in which
the estimate is revised. There are no assumptions made
about the future, or 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.
Judgements which do not involve estimates
The assessment to recognise the ILUK policyholder
provision comes from an evaluation of the likelihood of a
constructive or legal obligation, and whether that obligation
can be estimated reliably. The provision required has been
calculated based on an assessment of tax payable to HM
Revenue & Customs (HMRC) and refunds payable back to
policyholders.
187
3. Financial instruments
(i) Principal financial instruments
The principal financial instruments, from which financial
instrument risk arises, are as follows:
•
Trade and other receivables
•
Accrued fees
•
Investments – Gilts
•
Investments – Listed shares and securities
•
Trade and other payables
•
Loans receivable and loans payable
(ii) Financial instruments by category
As explained in note 1, financial assets and liabilities
have been classified into categories that determine their
basis of measurement and, for items measured at fair
value, whether changes in fair value are recognised in the
statement of comprehensive income. The following tables
show the carrying values of assets and liabilities for each
of these categories for the Group:
FINANCIAL ASSETS:
FAIR VALUE THROUGH PROFIT OR LOSS
AMORTISED COST
RESTATED
2023
2022
2023
2022
£m
£m
£m
£m
Cash and cash equivalents
-
-
177.9
183.0
Cash and cash equivalents policyholder
-
-
1,419.2
1,458.6
Investments - Listed shares and securities
0.1
0.1
-
-
Investments - Gilts
-
3.0
22.3
-
Loans receivable
-
-
6.3
5.5
Accrued income
-
-
12.5
12.1
Trade and other receivables
-
-
3.2
2.0
Investments held for the policyholders
23,021.7
20,715.8
-
-
Total financial assets
23,021.8
20,718.9
1,641.4
1,661.2
RESTATED
Assets which are not financial instruments
2023
2022
£m
£m
Prepayments
4.7
5.1
Current tax asset
14.3
15.0
Trade and other receivables – repayment interest due from HMRC
0.4
-
Total financial assets
19.4
20.1
See note 36 for details on 2022 restated balances.
188
3. Financial instruments (continued)
FINANCIAL LIABILITIES:
FAIR VALUE THROUGH PROFIT OR LOSS
AMORTISED COST
RESTATED
2023
2022
2023
2022
£m
£m
£m
£m
Trade and other payables
-
-
0.7
1.6
Lease liabilities
-
-
1.1
2.8
Other payables
-
-
5.9
5.4
Liabilities for linked investments contracts
23,021.7
20,715.8
1,419.2
1,458.6
Total financial liabilities
23,021.7
20,715.8
1,426.9
1,468.4
RESTATED
Liabilities which are not financial instruments
2023
2022
£m
£m
Accruals and deferred income
7.8
8.3
PAYE and other taxation
2.6
2.2
Other payables – due to HMRC
0.9
2.3
Deferred consideration
1.6
1.7
Contingent consideration
-
1.7
12.9
16.2
See note 36 for details on 2022 restated balances.
The following tables show the carrying values of assets and
liabilities for each of these categories for the Company:
FINANCIAL ASSETS:
FAIR VALUE THROUGH PROFIT OR LOSS
AMORTISED COST
2023
2022
2023
2022
£m
£m
£m
£m
Cash and cash equivalents
-
-
26.0
33.1
Trade and other receivables
-
-
0.1
0.2
Loans receivable
-
-
6.3
5.5
Total financial assets
-
-
32.4
38.8
FINANCIAL LIABILITIES:
FAIR VALUE THROUGH PROFIT OR LOSS
AMORTISED COST
RESTATED
2023
2022
2023
2022
£m
£m
£m
£m
Other payables
-
-
0.4
0.3
Loans payable
-
-
7.0
8.0
Due to Group undertakings
-
-
-
0.1
Total financial liabilities
-
-
7.4
8.4
189
3. Financial instruments (continued)
RESTATED
Liabilities which are not financial instruments
2023
2022
£m
£m
Accruals and deferred income
0.3
0.3
PAYE and other taxation
0.1
0.1
Deferred consideration
1.6
1.7
Contingent consideration
-
1.7
2.0
3.8
(iii) Financial instruments not measured at
fair value
Financial instruments not measured at fair value include
cash and cash equivalents, accrued fees, investments
held in gilts, loans, trade and other receivables, and trade
and other payables. Due to their short-term nature and/
or expected credit losses recognised, the carrying value of
these financial instruments approximates their fair value.
(iv) Financial instruments measured at fair
value – fair value hierarchy
The table below classifies financial instruments that are
recognised on the statement of financial position at fair
value in a hierarchy that is based on significance of the
inputs used in making the measurements. The levels of
hierarchy are disclosed on the next page.
The following table shows the three levels oaf the fair value
hierarchy:
• Level 1:
quoted prices (unadjusted) in active markets
for identical instruments;
• Level 2:
instruments which are not actively traded but
provide regular observable prices; and
• Level 3:
inputs that are based on Level 1 or Level 2
data, but for which the last known price is over a year
old (unobservable inputs).
The following table shows the Group’s financial instruments
measured at fair value and split into the three levels:
2023
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
£m
£m
£m
£m
Assets
Term deposits
182.0
-
-
182.0
Investments and securities
740.3
181.9
0.5
922.7
Bonds and other fixed-income securities
16.5
1.0
-
17.5
Holdings in collective investment schemes
21,754.5
143.3
1.7
21,899.5
Investments held for the benefit of policyholders
22,693.3
326.2
2.2
23,021.7
Investments – listed shares and securities
0.1
-
-
0.1
Total
22,693.4
326.2
2.2
23,021.8
Liabilities
Liabilities for linked investments contracts
22,693.3
326.2
2.2
23,021.7
Total
22,693.3
326.2
2.2
23,021.7
190
3. Financial instruments (continued)
2022
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
£m
£m
£m
£m
Assets
Term deposits
63.9
-
-
63.9
Investments and securities
631.9
137.9
0.3
770.1
Bonds and other fixed-income securities
10.9
1.2
-
12.1
Holdings in collective investment schemes
19,730.4
137.7
1.6
19,869.7
Investments held for the benefit of policyholders
20,437.1
276.8
1.9
20,715.8
Investments
3.1
-
-
3.1
Total
20,440.2
276.8
1.9
20,718.9
Liabilities
Liabilities for linked investments contracts
20,437.1
276.8
1.9
20,715.8
Contingent consideration
-
-
1.7
1.7
Total
20,437.1
276.8
3.6
20,717.5
Level 1 valuation methodology
Financial instruments included in Level 1 are measured at
fair value using quoted mid prices that are available at the
reporting date and are traded in active markets. These are
mainly Open-Ended Investment Companies (OEICs), Unit
Trusts, Investment trusts and Exchange Traded Funds.
The price is sourced from our 3rd party provider, who
source this directly from the stock exchange or obtain the
price directly from the fund manager.
Level 2 valuation methodology
Financial instruments included in Level 2 are measured at
fair value using observable mid prices traded in markets
that have been assessed as not active but which provide
regular observable prices. These are mainly Structured
products and OEICs.
The price is sourced from the structured product provider
or from our 3rd party provider, who obtain the price
directly from the fund manager.
Level 3 valuation methodology
Financial instruments included in Level 3 are measured at
fair value using the last known price and for which the price
is over a year old. These are mainly OEICs and Unit Trusts.
These instruments have unobservable inputs as the current
observable market information is no longer available. Where
these instruments arise management will value them based
on the last known observable market price.
The prices are sourced as noted in Level 1 and Level 2
above.
For the purposes of identifying Level 3 instruments,
unobservable inputs means that current observable market
information is no longer available. Where these instruments
arise management will value them based on the last known
observable market price. No other valuation techniques are
applied.
191
3. Financial instruments (continued)
Level 3 sensitivity to changes in unobservable
measurements
For financial instruments assessed as Level 3, based on
its review of the prices used, the Group believes that any
change to the unobservable inputs used to measure fair
value would not result in a significantly higher or lower fair
value measurement at year end, and therefore would not
have a material impact on its reported results.
Review of prices
As part of its pricing process, the Group regularly reviews
whether each instrument can be valued using a quoted
price and if it trades on an active market, based on
available market data and the specific circumstances of
each market and instrument.
The Group regularly assesses instruments to ensure they
are categorised correctly and Fair Value Hierarchy (FVH)
levels adjusted accordingly. The Group monitors situations
that may impact liquidity such as suspensions and
liquidations while also actively collecting observable market
prices from relevant exchanges and asset managers.
Should an instrument price become observable following
the resumption of trading the FVH level will be updated to
reflect this.
Changes to valuation methodology
There have been no changes in valuation methodology
during the year under review.
Transfers between Levels
The Group’s policy is to assess each financial instrument it
holds at the current financial year end, based on the last
known price and market information, and assign it to a
Level.
The Group recognises transfers between Levels of the fair
value hierarchy at the end of the reporting period in which
the changes have occurred. Changes occur due to the
availability of (or lack thereof) quoted prices and whether a
market is now active or not.
Transfers between Levels between 01 October 2022 and 30
September 2023 are presented in the table below at their
valuation at 30 September 2023:
TRANSFERS FROM
TRANSFERS TO
£M
Level 1
Level 2
32.3
Level 2
Level 1
20.9
The reconciliation between opening and closing balances of
Level 3 assets are presented in the table below:
2023
2022
£m
£m
Opening balance
1.9
1.9
Unrealised gains or losses in the
year ended 30 September 2023
(0.1)
(0.4)
Transfers in to Level 3 at 30
September 2023 valuation
0.4
0.4
Transfers out of Level 3 at 30
September 2023 valuation
-
-
Purchases, sales, issues and
settlement
-
-
Closing balance
2.2
1.9
Any resultant gains or losses on financial assets held for the
benefit of policyholders are offset by a reciprocal movement
in the linked liability.
192
3. Financial instruments (continued)
(v) Capital maintenance
The regulated companies in the Group are subject to
capital requirements imposed by the relevant regulators
as detailed below:
LEGAL ENTITY
REGULATORY REGIME
IFAL
IFPR
ILUK
Solvency II
ILInt
Isle of Man risk based capital regime
Group capital requirements for 2023 are driven by
the regulated entities, whose capital resources and
requirements as detailed below:
IFAL
30 SEPTEMBER
ILUK
30 SEPTEMBER
ILINT
30 SEPTEMBER
2023
2022
2023
2022
2023
2022
£m
£m
£m
£m
£m
£m
Capital resource
44.4
39.7
269.2
244.0
46.6
42.0
Capital requirement
33.3
32.6
215.8
186.9
27.1
23.7
Coverage ratio
133%
122%
125%
131%
172%
177%
The Group has complied with the requirements set by
the regulators during the year. The Group’s policy for
managing capital is to ensure each regulated entity
maintains capital well above the minimum requirement.
Further information is detailed in the Risk and Risk
Management section of this report on page 60 and in the
Financial Review on page 53.
193
4. Risk and risk management
This note supplements the details provided in the Risk
and Risk Management section of this report on page 60.
Risk assessment
The board has overall responsibility for the determination
of the Group’s risk management objectives and policies
and, whilst retaining ultimate responsibility for them, it
has delegated the authority for designing and operating
processes that ensure the effective implementation of the
objectives and policies to the Group’s risk function.
Risk assessment is the determination of quantitative
values and/or qualitative judgements of risk related to a
concrete situation and a recognised threat. Quantitative
risk assessment requires calculations of two components
of risk, the magnitude of the potential impact, and the
likelihood that the risk materialises. Qualitative aspects of
risk, despite being more difficult to express quantitatively,
are also taken into account in order to fully evaluate the
impact of the risk on the organisation.
(1) Market risk
Market risk is the risk of loss arising either directly or
indirectly from fluctuations in the level and in the volatility
of market prices of assets, liabilities and other financial
instruments.
(a) Price risk
Market price risk from reduced income
The Company’s dividend income from its regulated
subsidiaries, IFAL, ILUK and ILInt, is exposed to market
risk. The Group’s main source of income is derived from
annual management fees and transaction fees which are
linked to the value of the clients’ portfolios, which are
determined by the market prices of the underlying assets.
The Group’s revenue is therefore affected by the value of
assets on the platform, and consequently it has exposure
to equity market levels and economic conditions.
The Group mitigates the second order market price risk
by applying fixed charges per tax wrapper in addition to
income derived from the charges based on clients’ linked
portfolio values. These are recorded in note 5 as wrapper
fee income and annual commission income, respectively.
This approach of fixed and variable charging offers an
element of diversification to its income stream. The risk of
stock market volatility, and the impact on revenue, is also
mitigated through a wide asset offering which ensures the
Group is not wholly correlated with one market, and which
enables clients to switch assets, including into cash on the
platform, in times of uncertainty.
Sensitivity testing has been performed to assess the
impact of market movements on the Group’s Profit for the
year. The sensitivity is applied as an instantaneous shock
at the start of the year, and shows the impact of a 10%
change in values across all assets held on the platform.
IMPACT ON PROFIT AND EQUITY FOR THE YEAR
2023
2022
£m
£m
10% increase in asset values
8.7
8.5
10% decrease in asset values
(8.7)
(8.5)
194
4. Risk and risk management (continued)
Market risk from direct asset holdings
The Group and the Company have limited exposure to
primary market risk as capital is invested in high quality,
highly liquid, short-dated investments.
Market risk from unit-linked assets
The Group and the Company have limited exposure to
primary market risk from the value of unit-linked assets as
fluctuations are borne by the policyholders.
(b) Interest rate risk
The Group receives interest on its cash and cash equivalents
of £177.9 million (FY22: £183.0 million), on its loans of £6.3
million (FY22: £5.5 million) and on financial investments
of £22.4 million (FY22: £3.1 million). The Group mitigates
interest rate risk by diversifying its investments, which
include government gilts which have a fixed rate of interest.
Sensitivity testing has been performed to assess the impact
of a 1% change in interest rates. This would be expected
to increase/decrease interest received on cash and cash
equivalents by £1.7 million (FY22: £1.8 million) and on
loans by £0.1 million (FY22: £0.1 million), which would
increase/decrease profit after tax and equity by £1.4 million
(FY22: £1.5 million).
(c) Currency risk
The Group is not directly exposed to significant currency risk
however it is exposed to currency risk which arises on the
platform software maintenance and support fees charged by
IAD Pty, which are charged in Australian Dollars. The total
amount of software maintenance and support fees in FY23
amounted to £7.2 million (FY22: £6.2 million).
Sensitivity testing has been performed to assess the impact
of a 10% change in the GBP-AUD exchange rate. This would
be expected to cause an increase/decrease of £0.7 million
(FY22: £0.6 million) on the software maintenance and
support fees.
The table below shows a breakdown of the material foreign
currency exposures for the unit-linked policies within the
Group:
2023
2022
CURRENCY
£m
%
£m
%
GBP
24,279.2
99.3
22,021.1
99.3
USD
133.4
0.5
127.0
0.6
EUR
15.9
0.1
16.4
0.1
Others
12.4
0.1
9.8
0.0
Total
24,440.9
100.0
22,174.3
100.0
99.3% of investments and cash held for the benefit of
policyholders are denominated in GBP, its base currency.
Remaining currency holdings greater than 0.1% of the
total are shown separately in the table. However, it is
recognised that the majority of investments held for the
benefit of policyholders are in collective investment schemes
and some of their underlying assets are denominated in
currencies other than GBP, which increases the funds under
direction currency risk exposure. A significant rise or fall in
sterling exchange rates would not have a significant first
order impact on the Group’s results since any adverse or
favourable movement in policyholder assets is entirely offset
by a corresponding movement in the linked liability.
195
4. Risk and risk management (continued)
(2) Credit (counterparty default) risk
Credit risk is the risk that the Group or Company is
exposed to a loss if another party fails to meet its financial
obligations. For the Company, the exposure to counterparty
default risk arises primarily from loans directly held by the
Company, while for the Group this risk also arises from
fees owed by clients.
Assets held at amortised cost
(a) Accrued income
This comprises fees owed by clients. These are held at
amortised cost, less expected credit losses (“ECLs”).
Under IFRS 9, a forward-looking approach is required
to assess ECLs, so that losses are recognised before the
occurrence of any credit event. The Group estimates that
pending fees three months or more past due are unlikely to
be collected and are written off. Based on management’s
experience, pending fees one or two months past due are
generally expected to be collected, but consideration is
also given to potential losses on these fees. Historical loss
rates have been used to estimate expected future losses,
while consideration is also given to underlying economic
conditions, in order to ensure that expected losses are
recognised on a forward-looking basis. This has led to the
additional recognition of an immaterial amount of ECLs.
Details of the ECLs recognised in relation to accrued
income can be seen in note 22.
(b) Loans
Loans subject to the 12 month ECL are £6.3m (FY22:
£5.5m). While there remains a level of economic
uncertainty in the current climate, leading to potentially
higher credit risk, there is not considered to be a significant
increase in credit risk, as all of the loans are currently
performing to schedule, and there are no significant
concerns regarding the borrowers. There is therefore no
need to move from the 12 month ECL model to the lifetime
ECL model. Expected losses are recognised on a forward-
looking basis, which has led to the additional recognition of
an immaterial amount of ECLs.
In addition to the above, the Company has committed a
further £5.0m in undrawn loans.
Details of the ECLs recognised in relation to loans can be
seen in note 16. No ECLs have been recognised on the
undrawn loan commitments, as any ECLs would not be
considered to be material.
(c) Cash and equivalents
The Group has a low risk appetite for credit risk, which
is mainly limited to exposures to credit institutions for its
bank deposits. A range of major regulated UK high street
banks is used. A rigorous annual due diligence exercise
is undertaken to assess the financial strength of these
banks with those used having a minimum credit rating of
A (Fitch).
In order to actively manage the credit and concentration
risks, the board has agreed risk appetite limits for the
regulated entities of the amount of corporate and client
funds that may be deposited with any one bank; which
is represented by a set percentage of the respective
bank’s total customer deposits. Monthly monitoring of
these positions along with movements in Fitch ratings
is undertaken, with reports presented to the Directors
for review. Collectively these measures ensure that the
Group diligently manages the exposures and provide
the mitigation scope to be able to manage credit and
concentration exposures on behalf of itself and its
customers.
Counterparty default risk exposure to loans
The Company has loans of £6.3m (FY22: £5.5m).
There are no other loans held by the Group.
Counterparty default risk exposure to Group companies
As well as inconvenience and operational issues arising from
the failure of the other Group companies, there is also a risk
of a loss of assets. The Company is due £81k (FY22: £160k)
from other Group companies.
196
4. Risk and risk management (continued)
Counterparty default risk exposure to other receivables
The Company has no other receivables arising, due to the
nature of its business, and the structure of the Group.
Across the Group, there is exposure to counterparty
default risk arising primarily from:
•
corporate assets directly held by the Group;
•
exposure to clients; and
•
exposure to other receivables.
The other exposures to counterparty default risk include a
credit default event which affects funds held on behalf of
clients and occurs at one or more of the following entities:
•
a bank where cash is held on behalf of clients;
•
a custodian where the assets are held on behalf of
clients; and
•
Transact Nominees Limited (TNL), which is the legal
owner of the assets held on behalf of clients.
There is no first order impact on the Group from one of
the events in the preceding paragraph. This is because
any credit default event in respect of these holdings will
be borne by clients, both in terms of loss of value and loss
of liquidity. Terms and conditions have been reviewed by
external lawyers to ensure that these have been drafted
appropriately. However, there is a second order impact
where future profits for the Group are reduced in the event
of a credit default which affects funds held on behalf of
clients.
There are robust controls in place to mitigate credit risk,
for example, holding corporate and client cash across a
range of banks in order to minimise the risk of a single
point of counterparty default failure. Additionally, maximum
counterparty limits and minimum credit quality steps are
set for banks.
Cash and cash equivalents and investments are classed
as stage 1 on the expected credit loss model (meaning
that they are not credit-impaired on initial recognition
and have not experienced a significant increase in credit
risk since initial recognition) with no material expected
credit loss provision held.
Corporate assets and funds held on behalf of clients
There is no significant risk exposure to any one UK
clearing bank.
Counterparty default risk exposure to clients
The Group is due £12.3m (FY22: £11.8m) from fee
income owed by clients.
Impact of credit risk on fair value
Due to the limited direct exposure that the Group and the
Company have to credit risk, credit risk does not have a
material impact on the fair value movement of financial
instruments for the year under review. The fair value
movements on these instruments are predominantly due
to changes in market conditions.
197
4. Risk and risk management (continued)
(3) Liquidity risk
Liquidity risk is the risk that funds are not accessible
such that the Company, although solvent, does not have
sufficient liquid financial resources to meet obligations
as they fall due, or can secure such resources only at
excessive cost.
As a holding company, the Company’s main liquidity risk is
related to paying out shareholder dividends and operating
expenses it may incur. Additionally, the Company has made
short term commitments, in the form of a capped facility
arrangement, to Vertus Capital SPV1 Limited (‘Vertus’)
(as one of Vertus’ sources of funding) to assist Vertus
in developing its business, which is to provide tailored
niche debt facilities to adviser firms to fund acquisitions,
management buy-outs and other similar transactions.
Across the Group, the following key drivers of liquidity risk
have been identified:
•
liquidity risk arising due to failure of one or more of
the Group’s banks;
•
liquidity risk arising due to the bank’s system failure
which prevents access to Group funds; and
•
liquidity risk arising from clients holding insufficient
cash to settle fees when they become due.
The Group’s liquidity risk arises from a lack of readily
realisable cash to meet debts as they become due. This
takes a number of forms – clients’ liabilities coming due,
other liabilities (e.g. expenses) coming due, insufficient
liquid assets to meet loan repayments to subsidiary
companies and future payment commitments over the next
three years following the acquisition of T4A.
The first of these, clients’ liabilities is primarily covered
through the terms and conditions with clients’ taking their
own liquidity risk, if their funds cannot be immediately
surrendered for cash.
Payment of other liabilities depends on the Group having
sufficient liquidity at all times to meet obligations as they
fall due. This requires access to liquid funds, i.e. working
banks and it also requires that the Group’s main source
of liquidity, charges on its clients’ assets, can also be
converted into cash.
The payment of loan obligations is covered by the upward
dividends from subsidiary entities which were assessed
against the financial plans and capital projections of the
regulated entities to ensure the level of affordability of the
future dividends.
The purchase price for T4A comprised three elements,
a fixed sum payable on deal completion which has been
settled, a further fixed sum to be paid in four equal annual
instalments and a variable amount by reference to T4A’s
performance over that four year period. The payment of
these future obligations is expected to be met from the
company’s own reserves and dividends it expects to receive
from its subsidiaries.
The Group has set out two key liquidity requirements: first,
to ensure that clients maintain a percentage of liquidity in
their funds at all times, and second, to maintain access to
cash through a spread of cash holdings in bank accounts.
There are robust controls in place to mitigate liquidity risk,
for example, through regular monitoring of expenditure,
closely managing expenses in line with the business plan,
and, in the case of the Vertus facility, capping the value of
loans. Additionally, the Group holds corporate and client
cash across a range of banks in order to mitigate the risk of
a single point of counterparty default failure.
Maturity schedule
The following table shows an analysis of the financial assets
and financial liabilities by remaining expected maturities as
at 30 September 2023 and 30 September 2022. All financial
liabilities are undiscounted.
In addition to the financial assets and financial liabilities
shown in the tables below, the Company committed a
further £5.6m in undrawn loans. These are available to be
drawn down immediately.
198
4. Risk and risk management (continued)
FINANCIAL ASSETS:
2023
UP TO 3
MONTHS
3-12
MONTHS
1-5
YEARS
OVER 5
YEARS
TOTAL
£m
£m
£m
£m
£m
Investments held for the policyholders
23,021.7
-
-
-
23,021.7
Investments
-
-
22.4
-
22.4
Accrued income
12.5
-
-
-
12.5
Trade and other receivables
3.2
-
-
-
3.2
Loans
-
-
6.3
-
6.3
Cash and cash equivalents
177.9
-
-
-
177.9
Cash held for the benefit of policyholders
1,419.2
-
-
-
1,419.2
Total
24,634.5
-
28.7
-
24,663.1
RESTATED
2022
UP TO 3
MONTHS
3-12
MONTHS
1-5
YEARS
OVER 5
YEARS
TOTAL
£m
£m
£m
£m
£m
Investments held for the policyholders
20,715.8
-
-
-
20,715.8
Investments
0.1
-
3.0
-
3.1
Accrued income
12.1
-
-
-
12.1
Trade and other receivables
2.0
-
-
-
2.0
Loans
-
-
5.5
-
5.5
Cash and cash equivalents
183.0
-
-
-
183.0
Cash held for the benefit of policyholders
1,458.6
-
-
-
1,458.6
Total
22,371.6
-
8.5
-
22,380.1
See note 36 for details on 2022 restated balances.
FINANCIAL LIABILITIES:
2023
UP TO 3
MONTHS
3-12
MONTHS
1-5
YEARS
OVER 5
YEARS
TOTAL
£m
£m
£m
£m
£m
Liabilities for linked investment contracts
24,440.9
-
-
-
24,440.9
Trade and other payables
6.6
-
-
-
6.6
Lease liabilities
0.1
0.3
0.9
-
1.3
Total
24,447.6
0.3
0.9
-
24,448.8
2022
UP TO 3
MONTHS
3-12
MONTHS
1-5
YEARS
OVER 5
YEARS
TOTAL
£m
£m
£m
£m
£m
Liabilities for linked investment contracts
22,174.4
-
-
-
22,174.4
Trade and other payables
7.0
-
-
-
7.0
Lease liabilities
0.6
1.3
0.9
-
2.8
Total
22,182.0
1.3
0.9
-
22,184.2
As per note 3, accruals, deferred consideration and contingent consideration have been reclassified as non-financial instruments and
have therefore been removed from this table.
199
4. Risk and risk management (continued)
(4) Outflow risk
Outflows occur when funds are withdrawn from the
platform for any reason. Outflows typically occur where
clients’ circumstances and requirements change. However,
these outflows can also be triggered by operational failure,
competitor actions or external events such as regulatory or
economic changes.
Outflow risk is mitigated by focusing on providing
exceptionally high levels of service. Outflow rates
are closely monitored and unexpected experience is
investigated. Despite the current challenging and uncertain
economic and geopolitical environment, outflow rates
remain stable and within historical norms.
(5) Expense risk
Expense risk arises where costs increase faster than
expected or from one-off expense “shocks”.
The Group and the Company has exposure related to
expense inflation risk, where actual inflation deviates from
expectations. As a significant percentage of the Group’s
expenses are staff related the key inflationary risk arises
from salary inflation. The Group and the Company have
no exposures to defined benefit staff pension schemes or
client related index linked liabilities.
The Group’s expenses are governed at a high level by
the Group’s Expense Policy. The monthly management
accounts are reviewed against projected future expenses
by the board and by senior management and action is
taken where appropriate.
200
5. Disaggregation of revenue
The Group has the following categories of revenue:
•
Annual commission - based on a fixed percentage
applied to the value of the client’s portfolio each
month.
•
Wrapper fee income - based on a fixed quarterly
charge per wrapper.
•
Other income – buy commission is based on a set
percentage charge applied to each transaction. Dealing
charges are charged based on a fixed fee for each type
of transaction.
•
Adviser back-office technology – licence income
based on a fixed monthly charge per number of users.
Consultancy income is charged based on the services
provided.
FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER
2023
2022
£m
£m
Annual commission income
116.1
115.8
Wrapper fee income
12.3
11.6
Other income
1.7
2.2
Adviser back-office technology
4.8
4.0
Total revenue
134.9
133.6
6. Segmental reporting
The revenue and profit before tax are attributable to
activities carried out in the UK and the Isle of Man.
The Group has three classes of business, which have been
organised primarily based on the products they offer, as
detailed below:
•
Investment administration services – this relates to
services performed by IFAL, which is the provider of
the Transact wrap service. It is the provider of the
General Investment Account (GIA), is a Self-Invested
Personal Pension (SIPP) operator, an ISA manager and
is the custodian for all assets held on the platform
(except for those held by third party custodians).
•
Insurance and life assurance business – this relates to
ILUK and ILInt, insurance companies which provide the
Transact Personal Pension, Executive Pension, Section
32 Buy-Out Bond, Transact Onshore and Offshore
Bonds, and Qualifying Savings Plan on the Transact
platform.
•
Adviser back-office technology - this relates to T4A,
provider of financial planning technology to adviser
and wealth management firms via the CURO adviser
support system.
Other Group entities relates to the rest of the Group, which
provide services to support the Group’s core operating
segments.
Analysis by class of business is given below.
201
Statement of comprehensive income – segmental information for the year ended 30 September 2023:
INVESTMENT
ADMINISTRATION
SERVICES
INSURANCE
AND LIFE
ASSURANCE
BUSINESS
ADVISER
BACK-OFFICE
TECHNOLOGY
OTHER
GROUP
ENTITIES
CONSOLID-
ATION
ADJUSTMENTS
TOTAL
£m
£m
£m
£m
£m
£m
Revenue
Annual commission income
63.1
53.0
-
-
-
116.1
Wrapper fee income
3.0
9.3
-
-
-
12.3
Adviser back-office technology
-
-
4.8
-
-
4.8
Other income
1.2
0.5
-
76.0
(76.0)
1.7
Total revenue
67.3
62.8
4.8
76.0
(76.0)
134.9
Cost of sales
(2.1)
(0.6)
(0.7)
(0.5)
-
(3.9)
Gross profit/(loss)
65.2
62.2
4.1
75.5
(76.0)
131.0
Administrative expenses
(42.2)
(30.2)
(5.5)
(72.3)
75.6
(74.6)
Expected credit losses on financial assets
-
-
-
(0.1)
-
(0.1)
Operating profit/(loss)
23.0
32.0
(1.4)
3.1
(0.4)
56.3
Interest expense
-
-
-
(0.7)
0.6
(0.1)
Interest income
1.2
4.4
-
1.4
(0.6)
6.4
Net policyholder returns
Net income/(loss) attributable to policyholder
returns
-
12.1
-
-
-
12.1
Change in investment contract liabilities
-
(1,056.0)
-
-
-
(1,056.0)
Fee and commission expenses
-
(193.3)
-
-
-
(193.3)
Policyholder investment returns
-
1,249.3
-
-
-
1,249.3
Net policyholder returns
-
12.1
-
-
-
12.1
Profit/(loss) on ordinary activities before
taxation attributable to policyholders and
shareholders
24.2
48.5
(1.4)
3.8
(0.4)
74.7
Policyholder tax credit/(charge)
-
(12.1)
-
-
-
(12.1)
Profit on ordinary activities before
taxation attributable to shareholders
24.2
36.4
(1.4)
3.8
(0.4)
62.6
Total tax attributable to shareholder and
policyholder returns
(5.0)
(18.7)
0.5
(1.7)
(0.1)
(24.9)
Less: tax attributable to policyholder returns
-
12.1
-
-
-
12.1
Shareholder tax on profit on ordinary
activities
(5.0)
(6.6)
0.5
(1.7)
(0.1)
(12.8)
Profit/(loss) for the period
19.2
29.8
(0.9)
2.1
(0.3)
49.9
6. Segmental reporting (continued)
202
6. Segmental reporting (continued)
Statement of comprehensive income – segmental information for the year ended 30 September 2022:
INVESTMENT
ADMINISTRATION
SERVICES
INSURANCE
AND LIFE
ASSURANCE
BUSINESS
ADVISER
BACK-OFFICE
TECHNOLOGY
OTHER
GROUP
ENTITIES
CONSOLID-
ATION
ADJUSTMENTS
TOTAL
£m
£m
£m
£m
£m
£m
Revenue
Annual commission income
63.4
52.6
-
-
-
116.0
Wrapper fee income
2.8
8.7
-
-
-
11.5
Adviser back-office technology
-
-
3.9
-
-
3.9
Other income
1.3
0.9
-
64.4
(64.4)
2.2
Total revenue
67.5
62.2
3.9
64.4
(64.4)
133.6
Cost of sales
(0.7)
(0.4)
(0.5)
(0.5)
-
(2.1)
Gross profit/(loss)
66.8
61.8
3.4
63.9
(64.4)
131.5
Administrative expenses
(43.0)
(28.8)
(5.3)
(64.6)
64.0
(77.7)
Expected credit losses on financial assets
(0.1)
-
-
(0.1)
-
(0.2)
Operating profit/(loss)
23.7
33.0
(1.9)
(0.8)
(0.4)
53.6
Interest expense
-
-
-
(0.4)
0.3
(0.1)
Interest income
0.1
1.0
-
-
(0.3)
0.8
Net policyholder returns
Net income/(loss) attributable to policyholder
returns
(38.5)
-
-
-
(38.5)
Change in investment contract liabilities
-
2,770.3
-
-
-
2,770.3
Fee and commission expenses
-
(192.6)
-
-
-
(192.6)
Policyholder investment returns
-
(2,577.7)
-
-
-
(2,577.7)
Net policyholder returns
-
38.5
-
-
-
(38.5)
Profit/(loss) on ordinary activities before
taxation attributable to policyholders and
shareholders
23.8
(4.5)
(1.9)
(1.2)
(0.4)
15.8
Policyholder tax credit/(charge)
-
38.5
-
-
-
38.5
Profit on ordinary activities before
taxation attributable to shareholders
23.8
34.0
(1.9)
(1.2)
(0.4)
54.3
Total tax attributable to shareholder and
policyholder returns
(4.4)
32.6
0.3
(0.4)
0.1
28.2
Less: tax attributable to policyholder returns
-
(38.5)
-
-
-
(38.5)
Shareholder tax on profit on ordinary activities
(4.4)
(5.9)
0.3
(0.4)
0.1
(10.3)
Profit/(loss) for the period
19.4
28.1
(1.6)
(1.6)
(0.3)
44.0
203
6. Segmental reporting (continued)
Statement of financial position – segmental information for the year ended 30 September 2023:
INVESTMENT
ADMINISTRATION
SERVICES
INSURANCE AND
LIFE ASSURANCE
BUSINESS
ADVISER
BACK-OFFICE
TECHNOLOGY
TOTAL
£m
£m
£m
£m
Assets
Non-current assets
10.3
19.1
1.1
30.5
Current assets
78.0
154.6
2.8
235.4
Total assets
88.3
173.7
3.9
265.9
Liabilities
Current liabilities
8.4
18.1
1.0
27.5
Non-current liabilities
0.8
47.5
0.2
48.5
Total liabilities
9.2
65.6
1.2
76.0
Policyholder assets and liabilities
Cash held for the benefit of policyholder
-
1,419.2
-
-
Investments held for the benefit of policyholders
-
23,021.7
-
-
Liabilities for linked investment contracts
-
(24,440.9)
-
-
Total policyholder assets and liabilities
-
-
-
-
Net assets
79.1
108.1
2.7
189.9
Non-current asset additions
0.3
0.3
0.0
0.6
204
6. Segmental reporting (continued)
Restated Statement of financial position – segmental information for the year ended 30 September 2022:
INVESTMENT
ADMINISTRATION
SERVICES
INSURANCE AND
LIFE ASSURANCE
BUSINESS
ADVISER
BACK-OFFICE
TECHNOLOGY
TOTAL
£m
£m
£m
£m
Assets
Non-current assets
10.4
25.4
0.8
36.6
Current assets
71.8
144.7
3.8
220.3
Total assets
82.2
170.1
4.6
256.9
Liabilities
Current liabilities
10.5
22.5
1.1
34.1
Non-current liabilities
1.9
47.6
0.1
49.6
Total liabilities
12.4
70.1
1.2
83.7
Policyholder assets and liabilities
Cash held for the benefit of policyholder
-
1,458.6
-
1,458.6
Investments held for the benefit of
policyholders
-
20,715.8
-
20,715.8
Liabilities for linked investment contracts
-
(22,174.4)
-
(22,174.4)
Total policyholder assets and liabilities
-
-
-
-
Net assets
69.8
100.0
3.4
173.2
Non-current asset additions
0.2
0.1
-
0.3
See note 36 for details on 2022 restated balances.
Segmental information: Split by geographical location
2023
2022
£m
£m
Revenue
United Kingdom
129.4
128.3
Isle of Man
5.5
5.3
Total
134.9
133.6
2023
2022
Non-current assets
£m
£m
United Kingdom
23.4
25.1
Isle of Man
0.1
-
Total
23.5
25.1
205
7. Earnings per share
2023
2022
Profit
Profit for the year and earnings used in basic and diluted earnings per share
£49.9m
£44.0m
Weighted average number of shares
Weighted average number of Ordinary shares
331.3m
331.3m
Weighted average numbers of Ordinary Shares held by Employee Benefit Trust
(0.5m)
(0.4m)
Weighted average number of Ordinary Shares for the purposes of basic EPS
330.8m
330.9m
Adjustment for dilutive share option awards
0.5m
0.4m
Weighted average number of Ordinary Shares for the purposes of diluted EPS
331.3m
331.3m
Earnings per share
Basic
15.1p
13.3p
Diluted
15.1p
13.3p
Earnings per share (“EPS”) is calculated based on the
share capital of IntegraFin Holdings plc and the earnings
of the consolidated Group.
Basic EPS is calculated by dividing profit after tax
attributable to ordinary equity shareholders of the
Company by the weighted average number of Ordinary
Shares outstanding during the year. The weighted
average number of shares excludes shares held within the
Employee Benefit Trust to satisfy the Group’s obligations
under employee share awards.
Diluted EPS is calculated by adjusting the weighted
average number of Ordinary Shares outstanding to assume
conversion of all potentially dilutive Ordinary Shares.
206
8. Expenses by nature
The following expenses are included within administrative expenses:
Group
2023
2022
£m
£m
Depreciation
2.1
2.6
Amortisation
0.4
0.4
Wages and employee benefits expense
52.8
46.1
Other staff costs
1.1
1.0
Auditor’s remuneration:
- auditing of the Financial Statements of the Company pursuant to the legislation
0.2
0.1
- auditing of the Financial Statements of subsidiaries
0.6
0.4
- other assurance services
0.4
0.3
Other professional fees
4.8
4.7
Regulatory fees
3.9
4.2
- Non-underlying expenses - backdated VAT
-
8.0
- Non-underlying expenses - interest on backdated VAT
-
0.8
- Other non-underlying expenses – deferred consideration
2.1
2.1
- Other non-underlying expenses –contingent consideration
(1.7)
0.9
- Other non-underlying expenses
-
(0.3)
Short-term lease payments:
- land and buildings
0.6
0.1
Other occupancy costs
2.2
2.3
Other costs
6.7
6.4
Other income – tax relief due to shareholders
(1.6)
(2.4)
Total administrative expenses
74.6
77.7
“Other income – tax relief due to shareholders” relates to the release of policyholder reserves to the statement of comprehensive income.
Company
2023
2022
£m
£m
Wages and employee benefits expense
0.7
0.6
Non underlying expenses:
- Remuneration
0.3
3.0
Auditor’s remuneration:
- auditing of the Financial Statements of the Company pursuant to the
legislation
0.2
0.2
Other professional fees
0.6
0.8
Other costs
0.2
0.2
Total administrative expenses
2.0
4.8
207
8. Expenses by nature (continued)
Wages and employee benefits expense
The average number of staff (including executive directors) employed by the Group during the financial year
amounted to:
2023
2022
No.
No.
CEO
2
2
Client services staff
232
223
Finance staff
72
69
Legal and compliance staff
39
38
Sales, marketing and product development staff
65
64
Software development staff
139
131
Technical and support staff
82
67
631
594
The Company has no employees (2022: nil).
Wages and employee (including executive directors) benefits expenses during the year, included within administrative
expenses, were as follows:
2023
2022
£m
£m
Wages and salaries
43.9
36.3
Social security costs
4.8
4.2
Other pension costs
2.0
3.6
Share-based payment costs
2.1
2.0
52.8
46.1
Compensation of key management personnel
Key management personnel are defined as those persons having authority and responsibility for planning, directing
and controlling the activities of the entity and as such, only directors are considered to meet this definition.
2023
2022
£m
£m
Short-term employee benefits*
3.0
2.9
Post-employment benefits
0.2
0.2
Share based payment
0.5
0.4
Social security costs
0.5
0.4
4.2
4.1
Highest paid director:
Short-term employee benefits*
0.6
0.6
Other benefits
0.2
0.2
No.
No.
Number of directors for whom pension contributions are paid
8
8
*Short-term employee benefits comprise salary and cash bonus.
208
9. Interest income
GROUP
2023
COMPANY
2023
GROUP
2022
COMPANY
2022
£m
£m
£m
£m
Interest income on bank deposits
5.3
0.5
0.6
-
Interest income on tax repayments
0.4
-
-
-
Interest income on loans
0.4
0.4
0.2
0.2
Interest income on financial investments
0.3
-
-
-
6.4
0.9
0.8
0.2
All interest income is calculated using the effective interest rate method, except for interest income on tax repayments.
10. Policyholder investment returns
2023
2022
£m
£m
Change in fair value of underlying assets
1,024.2
(2,729.2)
Investment income
225.1
151.5
Total policyholder investment returns
1,249.3
(2,577.7)
11. Tax on profit on ordinary activities
Group
a) Analysis of charge in year
The income tax expense comprises:
2023
2022
£m
£m
Corporation tax
Current year - corporation tax
12.7
10.0
Adjustment in respect of prior years
(0.1)
0.7
12.6
10.7
Deferred tax
Current year
0.1
(0.4)
Change in deferred tax charge/(credit) as a result of higher tax rate
-
-
Total shareholder tax charge for the year
12.7
10.3
Policyholder taxation
UK policyholder tax at 20% (2022: 20%)
-
-
Deferred tax at 25% (2022: 25%)
11.8
(33.8)
Prior year adjustments
-
(4.9)
Tax deducted on overseas dividends
0.3
0.2
Total policyholder taxation
12.1
(38.5)
Total tax attributable to shareholder and policyholder returns
24.8
(28.2)
209
11. Tax on profit on ordinary activities (continued)
b) Factors affecting tax charge for the year
The tax on the Group's profit before tax differs from the
amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
2023
2022
£m
£m
Profit on ordinary activities before taxation attributable to shareholders
62.6
54.3
Profit on ordinary activities multiplied by effective rate of
Corporation Tax 22% (2021: 19%)
13.8
10.3
Effects of:
Non-taxable dividends
-
-
Group relief
-
-
Income / expenses not taxable / deductible for tax purposes multiplied by
effective rate of corporation tax
(0.6)
(0.2)
Adjustments in respect of prior years
0.1
0.7
Effect of change in tax rate
-
-
Effect of lower tax rate jurisdiction
(0.6)
(0.5)
Other adjustments
-
-
12.7
10.3
Add policyholder tax
12.1
(38.5)
24.8
(28.2)
Company
a) Analysis of charge in year
2023
2022
£m
£m
Deferred tax charge/(credit) (see note 26)
-
-
b) Factors affecting tax charge for the year
2023
2022
£m
£m
Profit on ordinary activities before tax
31.6
39.9
Profit on ordinary activities multiplied by effective rate of
Corporation Tax 22% (2021: 19%)
7.0
7.6
Effects of:
Non-taxable dividends
(7.3)
(8.5)
Income / expenses not taxable / deductible for tax purposes multiplied
by effective rate of Corporation Tax
-
0.6
Group loss relief to ISL
0.3
0.3
-
-
210
12. Intangible assets – Group
SOFTWARE
AND IP
RIGHTS
GOODWILL
CUSTOMER
RELATIONSHIPS
SOFTWARE
BRAND
TOTAL
£m
£m
£m
£m
£m
£m
Cost
At 1 October 2022
12.5
18.3
2.1
2.0
0.3
35.2
At 30 September 2023
12.5
18.3
2.1
2.0
0.3
35.2
Amortisation
At 1 October 2022
12.5
-
0.3
0.5
0.1
13.4
Charge for the year
-
-
0.1
0.3
-
0.4
At 30 September 2023
12.5
-
0.4
0.8
0.1
13.8
Net Book Value
At 30 September 2022
-
18.3
1.8
1.5
0.2
21.8
At 30 September 2023
-
18.3
1.7
1.2
0.2
21.4
Cost
At 1 October 2021
12.5
18.3
2.1
2.0
0.3
35.2
At 30 September 2022
12.5
18.3
2.1
2.0
0.3
35.2
Amortisation
At 1 October 2021
12.5
-
0.1
0.2
0.1
12.9
Charge for the year
-
-
0.2
0.3
-
0.5
At 30 September 2022
12.5
-
0.3
0.5
0.1
13.4
Net Book Value
At 30 September 2021
-
18.3
2.0
1.8
0.2
22.3
At 30 September 2022
-
18.3
1.7
1.5
0.2
21.8
All intangible assets are externally generated.
Goodwill impairment assessment
In accordance with IFRS, goodwill is not amortised,
but is assessed for impairment on an annual basis. The
impairment assessment compares the carrying value of
goodwill to the recoverable amount, which is the higher
of value in use and the fair value less costs of disposal.
The recoverable amount is determined based on value
in use calculations. The use of this method requires the
estimation of future cash flows and the determination of a
discount rate in order to calculate the present value of the
cash flows.
The goodwill relates to the acquisition of IAD Pty in July
2016 and T4A in January 2021.
The carrying amount of the IAD Pty goodwill is allocated to
the two cash generating units (“CGUs”) that relate to the
Transact platform, as these are benefitting from the IAD PTY
acquisition. The carrying amount of the goodwill for T4A is
allocated to the CGU that relates to the CURO software as
this is the source of revenue for T4A.
211
12. Intangible assets – Group (continued)
IAD Pty
2023
2022
£m
£m
Investment administration services
7.2
7.2
Insurance and life assurance business
5.7
5.7
Total
12.9
12.9
Other assumptions are as follows:
2023
2022
Discount rate
13.2%
13.3%
Period on which detailed forecasts are based
5 years
5 years
Long-term growth rate
2.0%
1.0%
The carrying amount of the T4A goodwill is all allocated to
the below CGU:
T4A
2023
2022
£m
£m
Adviser back-office technology
5.3
5.3
Other assumptions are as follows:
2023
2022
Discount rate
14.0%
11.6%
Period on which detailed forecasts are based
5 years
5 years
Long-term growth rate
2.0%
2.0%
The recoverable amounts of the above CGUs have been
determined from value in use calculations based on cash
flow projections from formally approved budgets covering
a five-year period to 30 September 2028. Post the five
year business plan, the growth rate used to determine
the terminal value of the cash generating units was based
on a long-term growth rate of 2.0%. The discount rate is
assessed on an annual basis and has been calculated using
the weighted average cost of capital.
Based on management’s experience, the key assumptions
on which management has calculated its projections are
net inflows, market growth and expense inflation.
The annual impairment tests relating to both acquisitions
indicated that there is significant headroom in the
recoverable amount over the carrying value of the CGUs.
There is therefore no indication of impairment.
Projected cash flows are impacted by movements in
underlying assumptions, including equity market levels,
number of CURO users, employee numbers and cost
inflation. The Group considers that projected cash flows
of the investment administration services and insurance
and life assurance business CGUs are most sensitive to
movements in equity markets, because they have a direct
impact on the level of the Group’s fee income, while the
adviser back-office technology CGU is most sensitive to
the number of CURO users, as this forms the basis of its
licence income.
A sensitivity analysis has been performed, with key
assumptions being revised adversely to reflect the
potential for future performance being below expected
levels. This estimated that a fall in equity markets of
approximately 45%, or a reduction of CURO users of
approximately 30% compared to expectations, would
be required before the carrying value of any CGU would
exceed the recoverable amount.
212
13. Property, plant and equipment – Group
LEASEHOLD
IMPROVEMENTS
EQUIPMENT
FIXTURES AND
FITTINGS
MOTOR
VEHICLES
TOTAL
£m
£m
£m
£m
£m
Cost
At 1 October 2022
1.7
3.7
0.2
-
5.6
Additions
0.1
0.4
0.1
0.1
0.7
Disposals
-
(0.4)
-
-
(0.4)
Reclassification
-
(0.2)
0.2
-
-
Foreign exchange
-
(0.1)
-
-
(0.1)
At 30 September 2023
1.8
3.4
0.5
0.1
5.8
Depreciation
At 1 October 2022
1.4
2.9
0.1
-
4.4
Charge in the year
0.1
0.7
0.1
-
0.9
Disposals
-
(0.5)
-
-
(0.5)
Reclassification
-
(0.1)
0.1
-
Foreign exchange
-
(0.1)
-
-
(0.1)
At 30 September 2023
1.5
2.9
0.3
-
4.7
Net Book Value
At 30 September 2022
0.3
0.8
0.1
-
1.2
At 30 September 2023
0.3
0.5
0.2
0.1
1.1
Cost
At 1 October 2021
1.7
3.6
0.2
-
5.5
Additions
-
0.3
-
-
0.3
Disposals
-
(0.2)
-
-
(0.2)
At 30 September 2022
1.7
3.7
0.2
-
5.6
Depreciation
At 1 October 2021
1.3
2.3
0.1
-
3.7
Charge in the year
0.1
0.8
-
0.9
Disposals
-
(0.2)
-
-
(0.2)
At 30 September 2022
1.4
2.9
0.1
-
4.4
Net Book Value
At 30 September 2021
0.4
1.3
0.1
-
1.8
At 30 September 2022
0.3
0.8
0.1
-
1.2
The Company holds no property, plant and equipment.
213
14. Right-of-use assets – Property – Group
Cost
£m
At 1 October 2022
6.6
Additions
0.4
Disposals
(5.2)
Foreign exchange
(0.1)
At 30 September 2023
1.7
Depreciation
£m
At 1 October 2022
4.5
Charge in the year
1.4
Disposals
(5.2)
At 30 September 2023
0.7
Net Book Value
At 30 September 2022
2.1
At 30 September 2023
1.0
Cost
£m
At 1 October 2021
6.5
Foreign exchange
0.1
At 30 September 2022
6.6
Depreciation
£m
At 1 October 2021
2.8
Charge in the year
1.7
At 30 September 2022
4.5
Net Book Value
At 30 September 2021
3.6
At 30 September 2022
2.1
Depreciation is calculated on a straight line basis over the
term of the lease.
During the year, the right of use asset for the Group’s
Clement’s Lane office was fully depreciated as the lease
came to an end in June 2023. The Group has ‘security of
tenure’ and therefore the original lease continues until it
is terminated by either party. The Group intends to occupy
the building whilst the terms of the new lease are finalised.
Costs of the lease from July 2023 onwards were therefore
recognised directly in the statement of comprehensive
income as occupancy costs.
214
15. Investment in subsidiaries
2023
2022
£m
£m
Carrying value at 1 October
33.3
31.6
Share-based payments
2.0
1.7
Carrying value at 30 September
35.3
33.3
The Company has investments in the ordinary share capital
of the following subsidiaries at 30 September 2023:
NAME OF COMPANY
HOLDING
% HELD
INCORPORATION
AND SIGNIFICANT
PLACE OF BUSINESS
BUSINESS
Direct holdings
Integrated Financial Arrangements
Ltd
Ordinary Shares
100%
United Kingdom
Investment
Administration
IntegraFin Services Limited
Ordinary Shares
100%
United Kingdom
Services Company
Transact IP Limited
Ordinary Shares
100%
United Kingdom
Software provision &
development
Integrated Application Development
Pty Ltd
Ordinary Shares
100%
Australia
Software maintenance
Transact Nominees Limited
Ordinary Shares
100%
United Kingdom
Non-trading
IntegraLife UK Limited
Ordinary Shares
100%
United Kingdom
Life Insurance
IntegraLife International Limited
Ordinary Shares
100%
Isle of Man
Life Assurance
Transact Trustees Limited
Ordinary Shares
100%
United Kingdom
Non-trading
Objective Funds Limited
Ordinary Shares
100%
United Kingdom
Dormant
Objective Wealth Management
Limited
Ordinary Shares
100%
United Kingdom
Dormant
Time For Advice Limited
Ordinary Shares
100%
United Kingdom
Financial planning
software
Indirect holdings
IntegraFin Limited
Ordinary Shares
100%
United Kingdom
Non-trading
ObjectMastery (UK) Limited
Ordinary Shares
100%
United Kingdom
Dormant
IntegraFin (Australia) Pty Limited
Ordinary Shares
100%
Australia
Non-trading
215
15. Investment in subsidiaries (continued)
The Group has 100% voting rights on shares held in each
of the subsidiary undertakings.
All the UK subsidiaries have their registered office
address at 29 Clement’s Lane, London, EC4N 7AE.
ILInt’s registered office address is at 18-20 North Quay,
Douglas, Isle of Man, IM1 4LE. IntegraFin (Australia) Pty’s
registered office address is at Level 4, 854 Glenferrie Road,
Hawthorn, Victoria, Australia 3122. Integrated Application
Development Pty Ltd.’s registered office address is 19-25
Camberwell Road, Melbourne, Australia.
The above subsidiaries have all been included in the
consolidated Financial Statements.
Integrated Financial Arrangements Ltd is authorised and
regulated by the Financial Conduct Authority. The principal
activity of the Company and its subsidiaries is the provision
of ‘Transact’, a wrap service that arranges and executes
transactions between clients, their financial advisers and
financial product providers including investment managers
and stockbrokers.
IntegraFin Services Limited (ISL), is the Group services
company. All intra-group service contracts are held by this
services company.
Integrated Application Development Pty Ltd (IAD Pty)
provides software maintenance services to the Group.
IntegraFin Limited is the trustee of the IntegraSIP Share
Incentive Plan, which was set up to allocate Class C Shares
in the capital of the Company to staff. IntegraFin Limited
undertakes no other activities.
Transact Nominees Limited holds customer assets as
a nominee company on behalf of Integrated Financial
Arrangements Ltd.
IntegraFin (Australia) Pty Limited is currently non-trading.
Transact IP Limited licenses its proprietary software to
other members of the IntegraFin Group.
IntegraLife UK Limited is authorised by the Prudential
Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority.
Its principal activity is the transaction of ordinary long-
term insurance business within the United Kingdom.
IntegraLife International Limited is authorised and
regulated by the Isle of Man Financial Services Authority
and its principal activity is the transaction of ordinary
long-term insurance business within the United Kingdom
through the Transact Offshore Bond.
Time For Advice Limited is a specialist software provider for
financial planning and wealth management.
216
16. Loans
This note analyses the loans payable by and receivable to
the Company. The carrying amounts of loans are as follows:
Loans receivable
2023
2022
£m
£m
Loans receivable from third parties
6.5
5.7
Interest receivable on loans
0.1
-
Total gross loans
6.6
5.7
Expected credit losses
(0.3)
(0.2)
Total net loans
6.3
5.5
Movement in the expected credit losses for the loan is as
follows:
2023
2022
£m
£m
Opening expected credit losses
(0.2)
(0.2)
Increase during the year
(0.1)
-
Balance at 30 September
(0.3)
(0.2)
The loans receivable are measured at amortised cost with
the expected credit losses charged straight to the statement
of comprehensive income.
Loans payable
2023
2022
£m
£m
Loan payable to subsidiary
7.0
8.0
To be settled within 12 months
1.0
1.0
To be settled after 12 months
6.0
7.0
Total loan payable
7.0
8.0
The loans payable are initially recognised at fair value.
Subsequent measurement is at amortised cost using the
effective interest method. The interest charge is recognised
on the statement of comprehensive income.
Interest on the loan is paid quarterly, whilst the remaining
capital repayments are annual over the next 7 years.
217
17. Investments held for the benefit of policyholders
2023
2023
2022
2022
COST
FAIR VALUE
COST
FAIR VALUE
£m
£m
£m
£m
ILInt
Investments held for the benefit of
policyholders
2,155.5
2,310.3
1,988.9
2,057.2
2,155.5
2,310.3
1,998.9
2,057.2
ILUK
Investments held for the benefit of
policyholders
19,249.9
20,711.4
19,215.4
18,658.6
19,249.9
20,711.4
19,215.4
18,658.6
Total
21,405.4
23,021.7
21,214.3
20,715.8
All amounts are current as customers are able to make
same-day withdrawal of available funds and transfers to
third-party providers are generally performed within a
month.
These assets are held to cover the liabilities for unit linked
investment contracts. All contracts with customers are
deemed to be investment contracts and, accordingly, assets
are 100% matched to corresponding liabilities.
218
18. Liabilities for linked investment contracts
2023
2022
FAIR VALUE
FAIR VALUE
£m
£m
ILInt
Unit linked liabilities
2,481.5
2,201.4
2,481.5
2,201.4
ILUK
Unit linked liabilities
21,959.4
19,973.0
21,959.4
19,973.0
Total
24,440.9
22,174.4
Analysis of change in liabilities for linked investment contracts
2023
2022
£m
£m
Opening balance
22,174.4
23,053.4
Investment inflows
2,670.3
3,113.9
Investment outflows
(1,400.5)
(1,163.1)
Changes in fair value of underlying assets
1,024.1
(2,729.0)
Investment income
225.1
151.5
Other fees and charges - Transact
(59.2)
(59.7)
Other fees and charges – third parties
(193.3)
(192.6)
Closing balance
24,440.9
22,174.4
The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the
return on their selected collective fund investments, whose underlying investments include equities, debt securities, property
and derivatives. This investment mix is unique to individual policyholders. When the diversified portfolio of all policyholder
investments is considered, there is a clear correlation with the FTSE 100 index and other major world indices, providing a
meaningful comparison with the return on the investments.
The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There
will be no difference between the carrying amount and the maturity amount at maturity date.
19. Cash and cash equivalents
2023
2022
£m
£m
Bank balances – instant access
165.9
173.5
Bank balances – notice accounts
12.0
9.5
Total
177.9
183.0
Bank balances held in instant access accounts are current and available for use by the Group.
All of the bank balances held in notice accounts require less than 35 days’ notice before they are available for use
by the Group.
219
20. Cash held for the benefit of policyholders
2023
2022
£m
£m
Cash and cash equivalents held for the benefit of the policyholders
– instant access - ILUK
1,248.0
1,314.3
Cash and cash equivalents held for the benefit of the policyholders
– instant access - ILInt
171.2
144.2
Total
1,419.2
1,458.5
Cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to corresponding liabilities.
21. Investments
GROUP
GROUP
2023
2022
£m
£m
Fair value through profit or loss
Listed shares and securities
0.1
0.1
Gilts
-
3.0
Total
0.1
3.1
Amortised cost
Gilts
22.3
-
Total
22.3
-
22.4
3.1
In July 2023, the previously held gilt of £3.0 million matured, and new gilts of £22.3 million were purchased in August 2023.
These gilts are interest-bearing and the associated income is referenced in note 9 as “interest on financial investments”.
22. Prepayments and accrued income
GROUP
COMPANY
GROUP
COMPANY
2023
2023
2022
2022
£m
£m
£m
£m
Accrued income
13.5
-
13.1
-
Less: expected credit losses
(1.0)
-
(1.0)
-
Accrued income - net
12.5
-
12.1
-
Prepayments
4.7
-
5.1
0.1
Total
17.2
-
17.2
0.1
Movement in the
expected credit losses
(for accrued income, loans receivable and trade and other receivables) is as follows:
2023
2022
£m
£m
Opening expected credit losses
(1.0)
(0.8)
Increase during the year
-
(0.2)
Balance at 30 September
(1.0)
(1.0)
220
23. Trade and other receivables
GROUP
COMPANY
GROUP
COMPANY
2023
2023
2022
2022
£m
£m
£m
£m
Other receivables
3.2
-
2.1
-
Less: expected credit losses
(0.1)
-
(0.1)
-
Other receivables net
3.1
-
2.0
-
Amounts owed by Group undertakings
-
0.1
-
0.2
Repayment interest due from HMRC
0.4
-
-
-
Total
3.6
0.1
2.0
0.2
Amount due from HMRC is in respect of tax claimed on behalf of policyholders for tax deducted at source.
24. Trade and other payables
GROUP
COMPANY
GROUP
COMPANY
2023
2023
2022
2022
£m
£m
£m
£m
Trade payables
0.7
-
1.6
-
PAYE and other taxation
2.6
0.1
2.2
0.1
Other payables
6.8
0.4
7.7
0.3
Accruals
7.8
0.4
8.3
0.3
Deferred consideration
1.6
1.6
1.7
1.7
Total
19.5
2.5
21.5
2.4
Other payables mainly comprises £5.3 million (FY22: £4.8 million) in relation to bonds awaiting approval.
25. Lease liabilities
2023
2022
£m
£m
Opening balance
2.8
5.1
Additions
0.2
-
Lease payments
(2.0)
(2.4)
Interest expense
0.1
0.1
Balance at 30 September
1.1
2.8
Amounts falling due within one year
0.3
1.9
Amounts falling due after one year
0.8
0.9
The Group has various leases in respect of property as a lessee. Lease terms are negotiated on an individual basis and run
for a period of one to five years.
As per note 14, the lease for the Group’s Clement’s Lane office ended in June 2023.
221
26. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (FY22: 20%)
on policyholder assets and liabilities and 25% (FY22: 25%) on non-policyholder items. The increase in the UK corporation
tax rate from the current rate of 19% to 25% was substantively enacted in May 2021. This new rate has been applied to
deferred tax balances which are expected to reverse after 1 April 2023, the date on which that new rate becomes effective.
Deferred Tax Asset
ACCELERATED
CAPITAL
ALLOWANCES
SHARE
BASED
PAYMENTS
POLICYHOLDER
UNREALISED
LOSSES/
(UNREALISED
GAINS)
POLICYHOLDER
EXCESS
MANAGEMENT
EXPENSES AND
DEFERRED
ACQUISITION
COSTS
POLICYHOLDER
UNREALISED
LOSSES ON
INVESTMENT
TRUSTS
OTHER
DEDUCTIBLE
TEMPORARY
DIFFERENCES
TOTAL
£m
£m
£m
£m
£m
£m
£m
At 1 October 2021
-
0.6
-
-
-
0.1
0.7
Excess tax relief
charged to equity
(0.3)
(0.3)
Charge to income
0.1
0.2
8.1
2.2
0.2
-
10.8
Offset Deferred
Tax Liability
(5.2)
(5.2)
At 30 September
2022
0.1
0.5
2.9
2.2
0.2
0.1
6.0
Excess tax relief
charged to equity
-
0.2
-
-
-
-
0.2
Charge to income
-
(0.2)
(2.9)
0.3
0.4
0.1
(2.3)
Offset Deferred
Tax Liability
-
-
-
(2.5)
(0.6)
(0.1)
(3.2)
At 30 September
2023
0.1
0.5
-
-
-
0.1
0.7
Deferred Tax Liability
ACCELERATED
CAPITAL
ALLOWANCES
POLICYHOLDER TAX
ON UNREALISED
GAINS
OTHER TAXABLE
DIFFERENCES
TOTAL
£m
£m
£m
£m
At 1 October 2021
0.1
28.4
1.0
29.5
Charge to income
(0.1)
(23.2)
(0.1)
(23.4)
Offset against Deferred Tax asset
-
(5.2)
(5.2)
At 30 September 2022
-
-
0.9
0.9
Charge to income
-
9.6
(0.1)
9.5
Offset against Deferred Tax asset
(3.1)
(0.1)
(3.2)
At 30 September 2023
-
6.5
0.7
7.2
The Company has no deferred tax assets or liabilities.
222
27. Provisions - Group
2023
2022
£m
£m
Balance brought forward
56.8
17.8
(Decrease)/increase in dilapidations provision
-
(0.3)
Decrease in ILInt non-linked unit provision
-
(0.1)
(Decrease)/increase in ILUK policyholder reserves
(9.7)
45.0
Increase/(decrease) in other provisions
1.1
(5.6)
Balance carried forward
48.2
56.8
Amounts falling due within one year
7.7
10.7
Amounts falling due after one year
40.5
46.1
Dilapidations provisions
0.2
0.2
Other provisions
1.1
-
ILUK policyholder reserves
46.9
56.6
Total
48.2
56.8
ILUK policyholder reserve comprises claims received
from HMRC that are yet to be returned to policyholders,
charges taken from unit-linked funds and claims received
from HMRC to meet current and future policyholder
tax obligations. These are expected to be paid to
policyholders over the course of the next seven years.
28. Contingent consideration – Group and company
2023
2022
£m
£m
Contingent consideration
-
1.7
The T4A acquisition cost included additional consideration
between £0 and £8.6 million, which was payable in January
2025 and contingent on T4A meeting certain highly
stretching performance targets over the next four years.
During the year, it was determined that T4A is not expected
to meet these targets, and therefore, the contingent
consideration recognised to date has been released.
223
29. Share-based payments
Share-based payment reserve
GROUP
COMPANY
GROUP
COMPANY
2023
2023
2022
2022
£m
£m
£m
£m
Balance brought forward
2.6
2.2
2.4
1.7
Movement in the year
0.8
0.5
0.2
0.5
Balance carried forward
3.4
2.7
2.6
2.2
Share schemes
(i) SIP 2005
IFAL implemented a SIP trust scheme for its staff in
October 2005. The SIP is an approved scheme under
Schedule 2 of the Income Tax (Earnings & Pensions) Act
2003.
This scheme entitled all the staff who were employed in
October 2005 to Class C shares in IFAL, subject to their
remaining in employment with the Company until certain
future dates.
The Trustee for this scheme is IntegraFin Limited, a wholly
owned non-trading subsidiary of IFAL.
Shares issued under the SIP may not be sold until
the earlier of three years after issue or cessation of
employment by the Group. If the shares are held for five
years they may be sold free of income tax or capital gains
tax. There are no other vesting conditions.
The cost to the Group in the financial year to 30 September
2023 was £nil (FY22: £nil). There have been no new share
options granted.
(ii) SIP 2018
The Company implemented an annual SIP awards scheme
in January 2019. This is an approved scheme under
Schedule 2 of the Income Tax (Earnings & Pensions) Act
2003, and entitles all eligible employees to ordinary shares
in the Company. The shares are held in a UK Trust.
The scheme includes the following awards:
Free Shares
The Company may give Free Shares up to a maximum
value, calculated at the date of the award of such Free
Shares, of £3,600 per employee in a tax year.
The share awards are made by the Company each
year, dependent on 12 months continuous service at 30
September. The cost to the Group in the financial year to
30 September 2023 was £0.8m (FY22: £0.6m).
Partnership and Matching Shares
The Company provides employees with the opportunity to
enter into an agreement with the Company to enable such
employees to use part of their pre-tax salary to acquire
Partnership Shares. If employees acquire Partnership
Shares, the board grants relevant Matching Shares at a ratio
of 2:1.
The cost to the Group in the financial year to 30 September
2023 was £0.5m (FY22: £0.5m).
(iii) Performance Share Plan
The Company implemented an annual PSP scheme in
December 2018. Awards granted under the PSP take
the form of options to acquire Ordinary Shares for nil
consideration. These are awarded to Executive Directors,
Senior Managers and other employees of any Group
Company, as determined by the Remuneration Committee.
The exercise of the PSP awards is conditional upon the
achievement of a performance condition set at the time of
grant and measured over a three-year performance period.
The cost to the Group in the financial year to 30 September
2023 was £0.9m (FY22: £0.8m). This is based on the fair
value of the share options at grant date, rather than on the
purchase cost of shares held in the Employee Benefit Trust
reserve, in line with IFRS 2 Share-based Payment.
224
29. Share-based payments (continued)
Details of the share awards outstanding are as follows:
2023
2022
SHARES
SHARES
(NUMBER)
(NUMBER)
SIP 2018
Shares in the plan at start of the year
854,247
692,683
Granted
504,113
292,318
Shares withdrawn from the plan
(152,748)
(130,754)
Shares in the plan at end of year
1,205,612
854,247
Available to withdraw from the plan at end of year
557,544
314,161
Details of the movements in the share scheme during the
year are as follows:
2023
2023
2022
2022
WEIGHTED
AVERAGE
EXERCISE PRICE
SHARES
WEIGHTED
AVERAGE
EXERCISE PRICE
SHARES
(PENCE)
(NUMBER)
(PENCE)
(NUMBER)
SIP 2005
Outstanding at start of the year
0.00
805,509
0.00
872,709
Shares withdrawn from the plan
0.00
(42,804)
0.00
(67,200)
Shares in the plan at end of year
0.00
762,705
0.00
805,509
Available to withdraw from the plan
at end of year
0.00
762,705
0.00
805,509
The weighted average share price at the date of withdrawal
for shares withdrawn from the plan during the year was
273.1 pence (FY22: 425.5 pence).
At 30 September 2023 the exercise price was £nil as they
were all nil cost options.
2023
2023
2022
2022
WEIGHTED
AVERAGE
EXERCISE PRICE
SHARES
WEIGHTED
AVERAGE
EXERCISE PRICE
SHARES
(PENCE)
(NUMBER)
(PENCE)
(NUMBER)
PSP
Outstanding at start of the year
0.00
675,307
0.00
576,088
Granted
0.00
293,376
0.00
184,772
Forfeited
0.00
-
0.00
-
Exercised
0.00
(69,019)
0.00
(85,553)
Outstanding at end of year
0.00
899,664
0.00
675,307
Exercisable at end of year
0.00
249,985
0.00
183,958
225
29. Share-based payments (continued)
The fair value of options granted during the year has been
estimated using the Black-Scholes model. The principal
assumptions used in the calculation were as follows:
2023
2022
PSP
Share price at date of grant
287.8
522.5p
Exercise price
Nil
Nil
Expected life
3 years
3 years
Risk free rate
3.5%
0.7%
Dividend yield
3.5%
1.9%
Weighted average fair value per option
258.8p
493.3p
30. Employee Benefit Trust reserve
Group:
2023
2022
£m
£m
Balance brought forward
(2.4)
(2.1)
Purchase of own shares
(0.2)
(0.3)
Balance carried forward
(2.6)
(2.4)
Company:
2023
2022
£m
£m
Balance brought forward
(2.1)
(1.8)
Purchase of own shares
(0.3)
(0.3)
Balance carried forward
(2.4)
(2.1)
The Employee Benefit Trust (“EBT”) was settled by the
Company pursuant to a trust deed entered into between
the Company and Intertrust Employee Benefit Trustee
Limited (“Trustee”). The Company has the power to
remove the Trustee and appoint a new trustee. The EBT is a
discretionary settlement and is used to satisfy awards made
under the PSP.
The Trustee purchases existing Ordinary Shares in the
market, and the amount held in the EBT reserve represents
the purchase cost of IHP shares held to satisfy options
awarded under the PSP scheme. IHP is considered to be the
sponsoring entity of the EBT, and the assets and liabilities
of the EBT are therefore recognised as those of IHP. Shares
held in the trust are treated as own shares and shown as a
deduction from equity.
226
31. Other reserves – Group
2023
2022
£m
£m
Foreign exchange reserves
(0.1)
-
Non-distributable merger reserve
5.7
5.7
Foreign exchange reserves are gains/losses arising on
retranslating the net assets of IAD Pty into sterling.
Non-distributable reserves relate to the non-distributable
merger reserve held by one of the Company’s subsidiaries,
IFAL, which is classified within other reserves on a Group level.
32. Related parties
During the year the Company did not render nor receive
any services with related parties within the Group, and at
the year end the Company had the following intra-Group
receivables:
AMOUNTS OWED BY RELATED PARTIES
Company
2023
2022
£m
£m
Integrated Financial Arrangements Ltd
-
0.1
A loan of £10 million was issued to the Company by
IntegraLife UK Limited in FY21. This is an arm’s length
transaction as interest is charged at a commercial rate. IHP
is paying the loan off over ten years and made the second
payment of £1 million, plus accrued interest, during the
year. The current loan balance is £7 million.
The Group has not recognised any expected credit losses in
respect of related party receivables, nor has it been given
or received any guarantee during 2023 or 2022 regarding
related party transactions.
Payments to key management personnel, defined as
members of the board, are shown in the Remuneration
Report. Directors of the Company received a total of £3.6
million (FY22: £3.6 million) in dividends during the year and
benefitted from staff discounts for using the platform of £4k
(FY22: £2k). The number of IHP shares held at the end of
the year by key management personnel was 35,321,348, an
increase of 132,224 from last year.
Schrodinger Pty Ltd, the company which leases office space
to IAD Pty in Melbourne, Australia, is considered a related
party of the Company, as Michael Howard has control or
227
32. Related parties (continued)
joint control of Schrodinger and is a member of the key
management personnel (as a director) of the Company.
During the year IAD Pty paid Schrodinger £0.3 million
(FY22: £0.3 million) in relation to the lease. The lease has
been in place since April 2012 and was last renewed in
May 2021.
ObjectMastery Services Pty Ltd (OM) provides the service
of executive directors consultancy services to IAD Pty,
and IAD Pty provides consultancy and book-keeping
services to OM. OM is considered a related party of the
Company, as Michael Howard has control or joint control
of it. IAD Pty paid OM £71k (FY22: £72k) for services
received during the year, £44k (FY22: £44k) of which
related to Michael Howard’s services. IAD Pty received
£43k (FY22: £39k) from OM for services provided during
the year. IAD owed £2k to OM as at 30 September 2023
(30 September 2022: £1k).
The Schrodinger and OM related party transactions and
balances were not disclosed in the financial year 2022
related parties note, so the above has been restated to
include this.
All of the above transactions are commercial transactions
undertaken in the normal course of business.
33. Contingent liability
There are some assets in ILUK policyholder linked funds
which are under review. Our current best estimate of
possible future outflow, in the event of remediation, is
£1.2 million. A future outflow is possible but not probable
and the timing of any outflow is uncertain. Accordingly,
no provision for any liability has been made in these
financial statements.
34. Events after the reporting date
As per the Chair’s statement on page 3, a second interim
dividend of 7.0 pence per share was declared on 13
December 2023. This dividend has not been accrued in the
consolidated statement of financial position.
35. Dividends
During the year to 30 September 2023 the Company paid
interim dividends of £33.7 million (FY22: £33.8 million)
to shareholders. The Company received dividends from
subsidiaries of £33.4 million (FY22: £45.0 million).
36. Restatement of prior period
information
Certain changes have been made to the comparative
financial information included in these financial statements
in order to correct prior period errors and align it to the
current year presentation. These changes are noted in the
tables below.
No prior year opening balance sheet has been included in
these financial statements, given there is no impact to total
assets, total liabilities, profit or equity, and the nature of
the values impacted are such that they do not change from
year to year to an extent that would influence the decision
of a user.
Consolidated Statement of Cash Flows
The following changes have been made to the comparative
information in the Consolidated Statement of Cash Flows:
•
Profit on ordinary activities before taxation
attributable to policyholders and shareholders has
been used as the starting point of cash flows from
operating activities, rather than profit on ordinary
activities before taxation. Increase/(decrease) in
policyholder tax recoverable has subsequently been
adjusted to reflect the movement in tax attributable
to shareholder and policyholder returns
•
All other movements relate to reclassifications
between headings
228
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Cash flows from operating activities
Profit on ordinary activities before taxation
54.3
(54.3)
-
Profit on ordinary activities before taxation attributable to
policyholders and shareholders
-
15.8
15.8
Adjustments for non-cash movements (previously
income statement non-cash movements):
Release of actuarial provision
(0.5)
0.5
-
Interest charged on lease
-
0.1
0.1
Increase in contingent consideration
-
0.9
0.9
Increase in provisions
-
38.5
38.5
Adjustments for cash effecting investing and financing
activities:
Interest charged on lease
0.1
(0.1)
-
Decrease in current asset investments
2.0
(2.0)
-
Adjustments for statement of financial position
movements:
Increase in contingent consideration
0.9
(0.9)
-
Settlement of share-based payment reserve
(1.3)
1.3
-
Increase in provisions
39.0
(39.0)
-
Adjustments for policyholder balances:
Increase/(decrease) in policyholder tax recoverable
(44.5)
38.5
(6.0)
Cash generated from operations
251.0
(2.0)
249.0
Net cash flows (used in)/generated from operating
activities
237.5
(2.1)
235.4
Investing activities
Acquisition of property, plant and equipment (previously
tangible assets)
(0.4)
0.1
(0.3)
Purchase of financial instruments
-
(3.0)
(3.0)
Redemption of financial instruments
-
5.0
5.0
Net cash (used in)/generated from investing activities
(1.7)
2.1
0.4
Financing activities
Purchase of shares for share scheme awards
-
(1.3)
(1.3)
Net cash used in financing activities
(36.6)
(1.3)
(37.9)
Consolidated Statement of Cash Flows (continued)
229
Company Statement of Cash Flows
The following change has been made to the comparative
information in the Company Statement of Cash Flows, which
is a reclassification between headings:
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Adjustments for non-cash movements:
Settlement of share-based payment reserve
1.3
(1.3)
-
Net cash flows used in operating activities
(5.5)
(1.3)
(4.2)
Financing activities
Purchase of shares for share scheme awards
-
(1.3)
(1.3)
Net cash used in financing activities
(35.5)
(1.3)
(36.8)
Note 3 - Financial instruments – (ii) Financial
instruments by category
The following changes have been made to the comparative
information within the financial instruments note 3, to the
tables in (ii) Financial instruments by category table:
•
Assets and liabilities which are not financial
instruments have been presented in the note to allow
users to clearly reconcile back to other supporting
notes
•
Accruals, contingent consideration, deferred
consideration and balances due to HMRC have been
reclassified from financial liabilities, to liabilities which
are not financial instruments. Note that the bonus
accrual was already excluded from the table as it was
not classified as a financial instrument
•
Liabilities held for the policyholders have been split to
show the liabilities linked to cash holdings at amortised
cost, with those linked to investments remaining at fair
value through profit or loss
•
Trade and other receivables has been restated to
include the full balance, to correct an error in the note
•
Trade and other payables has been split out to show
trade payables and other payables separately, and has
been restated to correct an error in the note
230
Note 3 - Financial instruments – (ii) Financial instruments by category (continued)
FINANCIAL ASSETS:
FAIR VALUE THROUGH THE
PROFIT OR LOSS
AMORTISED COST
2022
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
£m
Trade and other receivables
-
0.6
1.4
2.0
Total financial assets
20,718.9
1,659.8
1,661.2
Assets which are not financial
instruments
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Prepayments
-
5.1
5.1
Current tax asset
-
15.0
15.0
-
20.1
FINANCIAL LIABILITIES:
FAIR VALUE THROUGH THE
PROFIT OR LOSS
AMORTISED COST
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED
2022
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED
2022
£m
£m
£m
£m
£m
£m
Trade payables (previously
trade and other payables)
-
-
-
7.4
(5.8)
1.6
Other payables
-
-
-
-
5.4
5.4
Accruals
-
-
-
3.0
(3.0)
-
Deferred consideration
-
-
-
1.7
(1.7)
-
Contingent consideration
1.7
(1.7)
-
-
-
-
Liabilities held for the
policyholders
20,714.4
(1,458.6)
20,715.8
-
1,458.6
1,458.6
Total Financial liabilities
22,176.1
20,715.8
14.9
1,468.4
Liabilities which are not financial
instruments
PER 2022
FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Accruals and deferred income
-
8.2
8.2
PAYE and other taxation
-
2.2
2.2
Other payables – due to HMRC
-
2.3
2.3
Deferred consideration
-
1.7
1.7
Contingent consideration
-
1.7
1.7
-
16.1
231
Note 3 - Financial instruments – (ii) Financial instruments by category (continued)
The following table show the carrying values of the liabilities for the Company:
AMORTISED COST
PER 2022 FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Trade payables (previously trade and other
payables)
0.4
(0.4)
-
Loans payable (previously loans)
8.0
-
8.0
Deferred consideration
1.7
(1.7)
-
Contingent consideration
-
-
-
Accruals
0.2
(0.2)
-
Other payables
-
0.3
0.3
Due to Group undertakings
-
0.1
0.1
Total financial liabilities
10.3
8.4
Liabilities which are not financial
instruments
PER 2022 FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Accruals and deferred income
-
0.3
0.3
PAYE and other taxation
-
0.1
0.1
Deferred consideration
-
1.7
1.7
Contingent consideration
-
1.7
1.7
-
3.8
Note 4 - Risk and risk management – (3) Liquidity
risk – Maturity schedule
The following changes have been made in the 2022 risk and
risk management note 4, to the tables in (3) liquidity risk,
maturity schedule:
•
Corrected an error in the investment balance, as the
amount was shown in thousands rather than millions
•
Trade and other receivables has been restated to
correct an error in the note
•
Removed accruals, VAT balances included within
other taxation, deferred consideration and contingent
consideration as these have been reclassified to
liabilities which are not financial instruments
•
Lease liabilities have been added to the maturity table
232
Note 4 - Risk and risk management – (3) Liquidity risk – Maturity schedule (continued)
FINANCIAL ASSETS:
PER 2022 FINANCIAL
STATEMENTS
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Investments
124.2
-
3.1
-
127.3
Trade and other receivables
2.0
0.2
-
-
2.2
Total
22,495.7
0.2
8.6
-
22,504.5
MOVEMENT
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Investments
(124.1)
-
(0.1)
-
(124.2)
Trade and other receivables
-
(0.2)
-
-
(0.2)
Total
(124.1)
(0.2)
(0.1)
-
(124.4)
RESTATED
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Investments
0.1
-
3.0
-
3.1
Trade and other receivables
2.0
-
-
-
2.0
Total
22,371.6
-
8.5
-
22,380.1
FINANCIAL LIABILITIES:
PER 2022 FINANCIAL
STATEMENTS
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Trade and other payables
11.8
3.7
-
-
15.5
Deferred consideration
-
1.5
0.2
-
1.7
Contingent consideration
-
-
1.7
-
1.7
Total
22,186.8
6.5
2.8
-
22,196.1
MOVEMENT
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Trade and other payables
(4.8)
(3.7)
-
-
(8.5)
Lease liabilities
0.6
1.3
0.9
-
2.8
Deferred consideration
-
(1.5)
(0.2)
-
(1.7)
Contingent consideration
-
-
(1.7)
-
(1.7)
Total
(4.8)
(5.2)
(1.9)
-
(11.9)
RESTATED
UP TO 3
MONTHS
3-12 MONTHS
1-5 YEARS
OVER 5 YEARS
TOTAL
2022
£m
£m
£m
£m
£m
Trade and other payables
7.0
-
-
-
7.0
Lease liabilities
0.6
1.3
0.9
-
2.8
Total
22,182.0
1.3
0.9
-
22,184.2
233
Note 6 – Segmental reporting – Statement of
financial position
The following changes have been made in the 2022
segmental reporting note 6, to the statement of financial
position:
•
Non-current assets and non-current liabilities have
been adjusted by an equal amount to correct a prior
year error in the note
INSURANCE AND LIFE ASSURANCE BUSINESS
PER 2022 FINANCIAL
STATEMENTS
MOVEMENT
RESTATED 2022
£m
£m
£m
Assets
Non-current assets
30.6
(5.2)
25.4
Total assets
175.3
170.1
Liabilities
Non-current liabilities
52.8
(5.2)
47.6
Total liabilities
75.3
70.1
234
OTHER
INFORMATION
OTHER
INFORMATION
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Alexander Scott
Michael Howard
Jonathan Gunby
Non-Executive Directors
Richard Cranfield
Christopher Munro
Rita Dhut
Caroline Banszky
Victoria Cochrane
Robert Lister
Company Secretary
Helen Wakeford
Independent Auditors
Ernst & Young LLP,
25 Churchill Place,
Canary Wharf,
London, E14 5EY
Solicitors
Eversheds Sutherland
(International) LLP,
One Wood Street,
London, EC2V 7WS
Corporate Advisers
Peel Hunt LLP,
7th Floor 100 Liverpool Street,
London, EC2M 2AT
Barclays Bank PLC,
1 Churchill Place,
Canary Wharf,
London, E14 5HP
Principal Bankers
National Westminster Bank Plc,
250 Bishopsgate,
London, EC2M 4AA
Registrars
Equiniti Group Ltd,
Sutherland House,
Russell Way,
Crawley, RH10 1UH
Registered Office
29 Clement’s Lane,
London, EC4N 7AE
Investor Relations
Luke Carrivick 020 7608 4900
Website
www.integrafin.co.uk
Company number
8860879
235
GLOSSARY OF TERMS
AGM
Annual General Meeting
APM
Alternative Performance Measure
ARC
Audit and Risk Committee
BEIS
Business Energy and Industrial Strategy
CASS
Client Assets Sourcebook
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CMP/CPP
Company Maternity/Paternity Pay
CMT
Crisis Management Team
COO
Chief Operating Officer
COSO
Committee of Sponsoring Organisation of
the Treadway Commission
CRO
Chief Risk Officer
CTO
Chief Technological Officer
DE&I
Diversity, Equity and Inclusion
DIM
Discretionary Investment Management
DNED
Designated Non-Executive Director
DTR
Disclosure Guidance and Transparency
Rulebook
EBT
Employee Benefit Trusts
ETF
Exchange-traded Fund
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
FUD
Funds Under Direction
GDPR
General Data Protection Regulation
GIA
General Investment Account
Gross inflow
Gross new business onto the platform
HMRC
His Majesty’s Revenue and Customs
IAD
Integrated Application Development
Pty Ltd
ICA
Individual Capital Assessment
ICARA
Internal Capital and Risk Assessment
IFAL
Integrated Financial Arrangements Ltd
IFPR
Investment Firm Prudential Regime
IFRS
International Financial
Reporting Standards
IHP
IntegraFin Holdings Plc
ILInt
IntegraLife International Limited
ILUK
IntegraLife UK Limited
ISA
Individual Savings Account
ISAs (UK)
International Standards on Auditing (UK)
ISL
IntegraFin Services LTD
IT
Investment Trust
MI
Management Information
MiFID II
Second Markets in Financial
Instruments Directive
MIFIDPRU
the Prudential sourcebook for MiFID
Investment Firms
MPS
Managed Portfolio Service
NED
Non-Executive Director
Net inflow
Net new business onto the platform
ORSA
Own Risk and Solvency Assessment
Outflow
Business leaving the platform
PRA
Prudential Regulation Authority
RMF/RMP
Risk Management Framework/Policy
SCR
Solvency Capital Requirement
SID
Senior Independent Director
SIP
Share Incentive Program
TCF
Treating Customers Fairly
TCFD
Task Force on Climate-Related
Financial Disclosures
The Company
IntegraFin Holdings plc
The Group
IntegraFin Holdings plc and
its subsidiaries
VCT
Venture Capital Trust
236
Glossary of Alternative Performance Measures (“APMs”)
Various alternative performance measures are referred to in the Annual Report, which are not defined by IFRS. They
are used in order to provide better insight into the performance of the Group. Further details are provided below.
APM
FINANCIAL DATA
PAGE REF
DEFINITION AND PURPOSE
Operational performance measures
Funds under
direction
(“FUD”)
Data sourced internally
Calculated as the total market value of all cash and assets on the platform,
valued as at the respective year end.
YEAR END
2023
£bn
2022
£bn
Cash
3.92
3.51
Assets
51.04
46.56
FUD
54.96
50.07
% change on the previous year
10%
(4%)
AVERAGE DAILY FUD
2023
£bn
2022
£bn
Cash
3.54
3.23
Assets
50.10
49.27
FUD
53.64
52.50
% change on the previous year
3%
11%
The measurement of FUD is the primary driver of the largest component of
the Group’s revenue. FUD is used to derive the annual commissions due to
the Group.
These values are not reported within the financial statements or the
accompanying notes.
Gross inflows
and Net
inflows
Data sourced internally
Calculated as gross inflows onto the platform less outflows leaving the
platform by clients during the respective financial year.
Inflows and outflows are measured as the total market value of assets and
cash joining or leaving the platform.
2023
£bn
2022
£bn
Gross inflows
6.41
7.28
Outflows
3.75
2.88
Net inflows
2.66
4.40
% change on the previous year
(40%)
(11%)
The measurement of net inflows onto the platform shows the net
movement of cash and assets on the platform during the year. This directly
contributes to FUD and therefore revenue.
These values are not reported within the financial statements or the
accompanying notes.
237
Adviser and
client
numbers
Data sourced internally
Calculated as the total number of advisers or clients as at the financial
year end.
Advisers are calculated as the number of advisers on the platform.
Clients are calculated as the total number of clients on the platform.
T4A licence users calculated as the total number of core licence users
active on the CURO platform.
2023
£’000
2022
£’000
Advisers
7.7
7.5
% increase
2%
5%
Clients
230.3
224.7
% increase
2%
8%
T4A licence users
2.8
2.3
% increase
22%
44%
This measurement is an indicator of our presence in the market.
These values are not reported within the financial statements or the
accompanying notes.
Client
retention
Data sourced internally
Calculated as the total number of clients with a non-zero valuation present
in the final month of both financial periods, as a percentage of total clients
in the current financial period.
2023
2022
Client retention
95%
97%
This is a measurement of client loyalty and an indicator of customer
satisfaction with our services provided.
These values are not reported within the financial statements or the
accompanying notes.
Income statement measures
Non-
underlying
expenses
Consolidated statement
of comprehensive income
Page 166
Calculated as costs which have been incurred outside of the ordinary
course of the business.
NON-UNDERLYING
EXPENSES
2023
£m
2022
£m
Backdated VAT
-
8.0
Interest on backdated VAT
-
0.8
Other
0.4
2.7
Non-underlying expenses
0.4
11.5
Our non-underlying expenses represent costs which do not relate to our
recurring business operations and hence should be separated from
operating expenses in the income statement.
238
Other costs consist of post-combination remuneration. Post-combination
remuneration relates to the payment to the original shareholders of T4A.
This is comprised of the deferred and additional consideration payable in
relation to the acquisition of T4A and is recognised as remuneration over
four years from January 2021 to December 2024.
T4A is not expected to meet the minimum threshold for highly stretching
targets to earn the additional consideration element of post combination
remuneration. Therefore, the post combination expense in respect of the
additional consideration element that was recognised in FY22 of £1.6 million
has been released, and we have not recognised any cost in FY23.
Moreover, the post combination consideration cost in respect of FY24 and
FY25 is expected to reduce to £2.1 million and £0.4 million respectively, as
only the deferred consideration element will now be recognised.
Underlying
earnings per
share
Financial review
Page 53
Calculated as profit after tax net of non-underlying expenses, divided by
called up equity share capital.
2023
£m
2022
£m
Profit after tax
49.9
44.0
Non-underlying expenses
0.4
11.5
Tax allowable element of costs
-
(1.4)
Underlying profit after tax
50.3
54.1
Divide by: Called up equity
share capital
3.3
3.3
Underlying earnings per share
15.2p
16.3p
Underlying
profit before
tax
Financial review
Page 53
Calculated as profit before tax net of non-underlying expenses.
2023
£m
2022
£m
Profit before tax
62.6
54.3
Add: Non-underlying expenses
0.4
11.5
Underlying profit before tax
63.0
65.8
239
Cash flow measures
Shareholder
returns
Consolidated statement
of comprehensive income
Page 166
Calculated as dividend per share paid to shareholders, which relate to the
respective financial years.
2023
2022
1st interim dividend
3.2 pence
3.2 pence
2nd interim dividend
7.0 pence
7.0 pence
Shareholder returns
10.2 pence
10.2 pence
% increase on previous
financial year
0.0%
2.0%
There are generally two dividend payments made relating to each financial
year. Shareholder returns is a measurement of the total cash dividend received
by each shareholder for each individual share held by them.
Dividend
policy
Consolidated statement
of comprehensive income
Page 166
Calculated as total cash dividends paid in relation to the respective financial
year, divided by the post-tax profit relating to that same financial year.
2023
£m
2022
£m
Total cash dividends paid
33.7
33.7
Profit for the financial year
49.9
44.0
Dividends as a % of profit
68%
77%
Our policy is to pay 60% to 65% of full year profit after tax as two interim
dividends.
Delivery on dividend policy is a measurement of our performance against
the policy and the businesses ability to generate distributable profits.
IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE
Tel: (020) 7608 4900 Fax: (020) 7608 5300
(Registered office: as above; Registered in England and Wales under number: 8860879)
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