Statement of Directors'
responsibilities in respect of the interim financial
statements
For the period ended 30 June 2024
Each of the Directors of Quilter plc confirms to the
best of their knowledge and belief that:
· The condensed
consolidated interim financial statements, which comprise the
consolidated statement of comprehensive income, the consolidated
statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows and the
related explanatory notes, have been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the United Kingdom
and give a true and fair view of the assets, liabilities, financial
position and profits of the Group for the period ended 30 June
2024. These interim financials have been prepared and published in
compliance with the acceptable accounting frameworks of the London
Stock Exchange ("LSE"), where the Company has its primary
listing.
· The interim management
report includes a fair review of the information required by:
a) DTR 4.2.7R of the
Disclosure Guidance and Transparency Rules, being an indication of
important events that have occurred during the first six months of
the financial year and their impact on the condensed consolidated
interim financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the
Disclosure Guidance and Transparency Rules, being related party
transactions that have taken place in the first six months of the
financial year and that have materially affected the financial
position or performance of the Group during that period, and any
changes in the related party transactions described in the Group's
2023 Annual Report that could do so.
Consistent with principle N of the UK Corporate
Governance Code, the results for the six months ended 30 June 2024
taken as a whole, present a fair, balanced and understandable
assessment of the Company's position and prospects.
Quilter plc is listed with a primary listing on the
LSE and a secondary listing on the Johannesburg Stock Exchange
("JSE").
A list of the current Directors is maintained on the
Group's website:
https://plc.quilter.com/about-us/quilter-leadership/.
Signed on behalf of the Board
Steven Levin
Mark Satchel
Chief Executive Officer
Chief Financial Officer
6 August
2024
6 August 2024
Independent review report to
Quilter plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Quilter plc's
condensed consolidated interim financial statements (the "interim
financial statements") in the interim results of Quilter plc for
the 6 month period ended 30 June 2024 (the "period").
Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements
comprise:
· the
Condensed consolidated statement of financial position as at 30
June 2024;
· the
Condensed consolidated statement of comprehensive income for the
period then ended;
· the
Condensed consolidated statement of cash flows for the period then
ended;
· the
Condensed consolidated statement of changes in equity for the
period then ended; and
· the
explanatory notes to the interim financial statements.
The interim financial statements
included in the interim results of Quilter plc have been prepared
in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Financial
Reporting Council for use in the United Kingdom ("ISRE (UK) 2410").
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in
scope than an audit conducted in accordance with International
Standards on Auditing (UK) and, consequently, does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
We have read the other information
contained in the interim results and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors
have inappropriately adopted the going concern basis of accounting
or that the Directors have identified material uncertainties
relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the
Directors
The interim results, including the
interim financial statements, are the responsibility of, and have
been approved by the Directors. The Directors are responsible for
preparing the interim results in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the interim results,
including the interim financial statements, the Directors are
responsible for assessing the Group'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 to cease
operations, or have no realistic alternative but to do
so.
Our responsibility is to express a
conclusion on the interim financial statements in the interim
results based on our review. Our conclusion, including our
Conclusions relating to going concern, is based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report. This report, including the
conclusion, has been prepared for and only for the Company for the
purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
PricewaterhouseCoopers
LLP
Chartered Accountants
London
6 August 2024
Condensed consolidated statement
of comprehensive income
|
For the period ended 30 June
2024
|
|
|
|
|
|
|
£m
|
|
Notes
|
Six months
2024
|
Six
months
2023
|
Income
|
|
|
|
Fee income and other income from
service activities
|
6(b)
|
286
|
277
|
Investment return
|
|
3,085
|
1,302
|
Other income
|
|
14
|
2
|
Total income
|
|
3,385
|
1,581
|
Expenses
|
|
|
|
Change in investment contract
liabilities
|
|
(2,606)
|
(1,018)
|
Fee and commission expenses and
other acquisition costs
|
|
(25)
|
(25)
|
Change in third-party interests in
consolidated funds
|
|
(371)
|
(202)
|
Other operating and administrative
expenses
|
|
(296)
|
(297)
|
Finance costs
|
|
(10)
|
(11)
|
Total expenses
|
|
(3,308)
|
(1,553)
|
Profit before tax
|
|
77
|
28
|
Income tax expense attributable to
policyholder returns
|
7
|
(59)
|
(21)
|
Profit before tax attributable to shareholder
returns
|
|
18
|
7
|
Income tax
expense
|
7
|
(64)
|
(23)
|
Less: income tax expense
attributable to policyholder returns
|
|
59
|
21
|
Income tax expense attributable to
shareholder returns
|
7
|
(5)
|
(2)
|
Profit after tax attributable to the owners of the
Company
|
|
13
|
5
|
|
|
|
|
Total comprehensive income
|
|
13
|
5
|
|
|
|
|
Earnings per Ordinary Share
|
|
|
|
Basic earnings per Ordinary Share (pence)
|
8
|
1.0
|
0.4
|
Diluted earnings per Ordinary Share (pence)
|
8
|
0.9
|
0.4
|
All income and expenses relate to
continuing operations.
Condensed consolidated statement
of financial position
|
At 30 June 2024
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Notes
|
30 June
2024
|
31
December
2023
|
Assets
|
|
|
|
Goodwill and intangible
assets
|
10
|
352
|
372
|
Property, plant and
equipment
|
|
87
|
91
|
Investment property
|
|
9
|
10
|
Investments in
associates
|
|
3
|
2
|
Contract costs
|
|
20
|
16
|
Loans and advances
|
|
50
|
38
|
Financial investments
|
11
|
54,962
|
50,329
|
Deferred tax assets
|
|
84
|
91
|
Current tax receivable
|
|
33
|
33
|
Trade, other receivables and other
assets
|
|
555
|
447
|
Derivative assets
|
|
24
|
57
|
Cash and cash
equivalents
|
14
|
1,899
|
1,859
|
Total assets
|
|
58,078
|
53,345
|
|
|
|
|
Equity and liabilities
|
|
|
|
Equity
|
|
|
|
Ordinary Share capital
|
15
|
115
|
115
|
Ordinary Share premium
reserve
|
|
58
|
58
|
Capital redemption
reserve
|
|
346
|
346
|
Share-based payments
reserve
|
|
32
|
42
|
Retained earnings
|
|
931
|
958
|
Total equity
|
|
1,482
|
1,519
|
Liabilities
|
|
|
|
Investment contract
liabilities
|
|
47,797
|
43,396
|
Third-party interests in
consolidated funds
|
|
7,704
|
7,444
|
Provisions
|
16
|
39
|
46
|
Deferred tax
liabilities
|
|
92
|
64
|
Current tax payable
|
|
2
|
2
|
Borrowings and lease
liabilities
|
|
277
|
279
|
Trade, other payables and other
liabilities
|
|
666
|
570
|
Derivative liabilities
|
|
19
|
25
|
Total liabilities
|
|
56,596
|
51,826
|
Total equity and liabilities
|
|
58,078
|
53,345
|
The financial statements were approved by the Board
of Directors on 6 August 2024.
Steven
Levin
Mark Satchel
Chief Executive
Officer Chief
Financial Officer
Condensed consolidated statement
of changes in equity
|
For the period ended 30 June
2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Notes
|
Ordinary
Share
capital
|
Ordinary
Share
premium
reserve
|
Capital redemption
reserve
|
Share-based payments
reserve
|
Other
reserves
|
Retained
earnings
|
Total
shareholders'
equity
|
Balance at 1 January 2023
|
|
115
|
58
|
346
|
41
|
(1)
|
989
|
1,548
|
Profit after tax
|
|
-
|
-
|
-
|
-
|
-
|
5
|
5
|
Total comprehensive income
|
|
-
|
-
|
-
|
-
|
-
|
5
|
5
|
Dividends
|
9
|
-
|
-
|
-
|
-
|
-
|
(45)
|
(45)
|
Exchange rate movement
(ZAR/GBP)1
|
|
-
|
-
|
-
|
-
|
-
|
2
|
2
|
Movement in own shares
|
|
-
|
-
|
-
|
-
|
-
|
(13)
|
(13)
|
Equity share-based payment
transactions
|
|
-
|
-
|
-
|
(9)
|
-
|
17
|
8
|
Total transactions with the owners of the
Company
|
-
|
-
|
-
|
(9)
|
-
|
(39)
|
(48)
|
Transfer to retained
earnings
|
|
-
|
-
|
-
|
-
|
1
|
(1)
|
-
|
Balance at 30 June 2023
|
|
115
|
58
|
346
|
32
|
-
|
954
|
1,505
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2024
|
|
115
|
58
|
346
|
42
|
-
|
958
|
1,519
|
Profit after tax
|
|
-
|
-
|
-
|
-
|
-
|
13
|
13
|
Total comprehensive income
|
|
-
|
-
|
-
|
-
|
-
|
13
|
13
|
Dividends
|
9
|
-
|
-
|
-
|
-
|
-
|
(50)
|
(50)
|
Exchange rate movement
(ZAR/GBP)1
|
|
-
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
Movement in own shares
|
|
-
|
-
|
-
|
-
|
-
|
(6)
|
(6)
|
Equity share-based payment
transactions
|
|
-
|
-
|
-
|
(11)
|
-
|
17
|
6
|
Aggregate tax effects of items
recognised directly in equity
|
|
-
|
-
|
-
|
1
|
-
|
-
|
1
|
Total transactions with the owners of the
Company
|
-
|
-
|
-
|
(10)
|
-
|
(40)
|
(50)
|
Balance at 30 June 2024
|
|
115
|
58
|
346
|
32
|
-
|
931
|
1,482
|
1The impact of exchange rate movements between the
announcement dates of dividends payable and the payment dates on
the pound sterling equivalent of payments to JSE shareholders in
South African Rand are recognised directly in equity. The Group
held cash in South African Rand equal to the expected cash outflows
and therefore was economically hedged for the outflows.
Condensed consolidated statement
of cash flows
For the period ended 30 June
2024
The cash flows presented in this
statement cover all the Group's activities and include flows from
both policyholder and shareholder activities. All cash and cash
equivalents are available for general use by the Group for the
purposes of the disclosures required under IAS 7 Statement of Cash
Flows except for cash and cash equivalents in consolidated funds
(as shown in note 14).
|
|
|
£m
|
|
Notes
|
Six months
2024
|
Six
months
2023
|
Cash flows from operating activities
|
|
|
|
Cash flows from operating
activities
|
|
1,984
|
941
|
Taxation paid
|
|
(26)
|
(8)
|
Total net cash flows from operating
activities
|
|
1,958
|
933
|
Cash flows from investing activities
|
|
|
|
Net purchases and sales of
financial investments
|
|
(1,847)
|
(837)
|
Purchase of property, plant and
equipment
|
|
-
|
(1)
|
Proceeds from sale of property,
plant and equipment held for sale
|
|
-
|
1
|
Increase in investment in
associate
|
|
(1)
|
(1)
|
Total net cash flows from investing
activities
|
|
(1,848)
|
(838)
|
Cash flows from financing activities
|
|
|
|
Dividends paid to the owners of
the Company
|
9
|
(50)
|
(45)
|
Exchange rate movements passed to
shareholders1
|
|
(1)
|
2
|
Finance costs on
borrowings
|
|
(9)
|
(10)
|
Payment of interest on lease
liabilities
|
|
(2)
|
(1)
|
Payment of principal of lease
liabilities
|
|
(3)
|
(4)
|
Quilter plc shares acquired for
use within the Group's employee share scheme
|
|
(6)
|
(15)
|
Proceeds from the issue of
subordinated debt
|
|
-
|
199
|
Subordinated debt
repaid
|
|
-
|
(200)
|
Total net cash flows from financing
activities
|
|
(71)
|
(74)
|
Net increase in cash and cash
equivalents
|
|
39
|
21
|
Cash and cash equivalents at the
beginning of the year
|
|
1,859
|
1,782
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
1
|
(3)
|
Cash and cash equivalents at the end of the
period
|
14(a)
|
1,899
|
1,800
|
1The exchange rate movements passed to shareholders relate to
foreign exchange gains or losses that have arisen on dividend
payments to JSE shareholders. Further details are included within
the condensed consolidated statement of changes in
equity.
Notes to the condensed consolidated interim
financial statements
For the period ended 30 June
2024
General information
Quilter plc (the "Company"), a
public limited company incorporated in England and Wales and
domiciled in the United Kingdom ("UK"), together with its
subsidiaries (collectively, the "Group") offers investment and
wealth management services, long-term savings and financial advice
primarily in the UK. Quilter plc is listed with a primary listing
on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange ("JSE").
The Company's registration number
is 06404270. The address of the registered office is Senator House,
85 Queen Victoria Street, London, EC4V 4AB.
1: Basis of preparation
The results for the six months
ended 30 June 2024 have been prepared in accordance with the
UK-adopted IAS 34 Interim Financial Reporting and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. Although unaudited, the results have
been reviewed by the Company's Auditor, PricewaterhouseCoopers LLP,
and their report is included earlier in this document. These
condensed consolidated interim financial statements (the "interim
financial statements") of Quilter plc for the six months ended 30
June 2024 do not constitute statutory accounts as defined by
section 434 of the Companies Act 2006. Comparative financial
information for the full year 2023 has been presented from the
Group's 2023 Annual Report, which has been filed with the Registrar
of Companies and was prepared in accordance with the UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards. The auditor's report on those financial statements was
not qualified, did not include a reference to any matters to which
the auditor drew attention by way of emphasis without qualifying
the report and did not contain statements under section 498(2) or
(3) of the Companies Act 2006. Copies of the Group's 2023 Annual
Report are available online at plc.quilter.com.
These interim financial statements
do not include all of the information required for a complete set
of IFRS compliant financial statements. Selected notes are included
to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the publication of the Group's 2023 Annual
Report. The Board considers that the alternative performance
measures provided, such as adjusted profit, are also useful for
both management and investors. Any seasonal or cyclical factors, to
the extent that they materially impact the Group's results, are
described in the Financial review.
There have been no changes in the
Group's material accounting policies during the period. All
accounting policies for recognition, measurement, consolidation and
presentation are as outlined in the Group's 2023 Annual Report.
These interim financial statements have been prepared on a
historical cost basis, except for the revaluation of certain
financial instruments, and are presented in pounds sterling, which
is the currency of the primary economic environment in which the
Group operates.
Going concern
The Directors have considered the
resilience of the Group, its current financial position, the
principal risks facing the business and the effectiveness of any
mitigating strategies which are or could be applied.
This included an assessment of capital and
liquidity over a three-year business planning period covering 2024
to 2026. This assessment incorporated a number of stress tests
covering a broad range of scenarios, including economic and market
shocks of up to 40% falls in equity markets, mass lapse events, new
business growth scenarios and severe business interruptions,
equivalent to 1-in-50 and 1-in-200 year events. The assessment also
considered the potential implications of the Skilled Person review
which could include the payment of remediation and associated
administrative costs (see note 17). As part of the going concern
assessment, the Group took into consideration the current position
of the UK and global economy including the impact of inflation and
increases in the cost of living. The Group also considered how
climate-related risks and opportunities affect operations,
investments, advice and distribution, and their impact on specific
projects and initiatives, estimates and judgements. Based on the
assessment, the Directors believe that,
both the Group and Quilter plc have sufficient financial resources
to continue in business for a period of at least 12 months from the
date of approval of these interim financial statements and continue
to adopt the going concern basis in preparing the interim financial
statements.
Critical accounting estimates and
judgements
The preparation of financial
statements requires management to exercise judgement in applying
the Group's material accounting policies and in making assumptions
and estimates that affect the reported amounts of assets and
liabilities at the date of the financial statements. The Board
Audit Committee reviews these assumptions, estimates and judgements
and the appropriateness of material accounting policies adopted in
the preparation of these financial statements.
The Group's critical accounting
estimates and judgements are detailed below:
Critical accounting
judgements
The Group's critical accounting
judgements are those that management makes when applying its
material accounting policies and that have the greatest effect on
the net profit and net assets recognised in the Group's financial
statements.
Ongoing Advice Evidence
A Skilled Person was appointed in
June 2024 to assess and provide a view to the FCA on whether, based
on the available evidence, the delivery of ongoing advice services
by Appointed Representative firms in the Quilter Financial Planning
network has been compliant with applicable regulatory requirements
during the period from 1 January 2017 to 31 December 2023. Given
the early stage of the review at the reporting date, it has been
determined that a present obligation for any potential customer
remediation does not exist, and therefore no liability in respect
of remediation associated with this process and the associated
administrative costs has been recognised in the accounts. See
note 17 for further details of the contingent liability.
Critical accounting
estimates
The Group's critical accounting
estimates involve the most complex or subjective assessments and
assumptions, which have a significant risk of resulting in material
adjustment to the carrying amounts of assets and liabilities until
those amounts are settled. Management uses its knowledge of current
facts and circumstances and applies estimation and assumption
setting techniques, that are aligned with relevant actuarial and
accounting standards and guidance, to make predictions about future
actions and events. Actual results may differ from those
estimates.
Measurement of deferred tax
The annual business planning
process estimates future taxable profits based on estimated levels
of assets under management and administration ("AuMA"), which are
subject to a large number of factors including global stock market
movements, related movements in foreign exchange rates, net client
cash flows and estimates of expenses and other charges. The
Business Plan, adjusted for known and estimated tax adjusting
items, is used to determine the extent to which deferred tax assets
are recognised. The Group assesses the recoverability of
shareholder deferred tax assets based on estimated taxable profits
over a five-year horizon and assesses policyholder deferred tax
assets based on estimated investment growth over the medium term.
To the extent that profit estimates extend beyond the normal
three-year planning cycle, average profits over the final two years
of the plan are used. This approach is considered reasonable based
on historical profitability. Future profit projections show the
majority of deferred tax assets being utilised over the next three
years. Management has reassessed the sensitivity of the
recoverability of deferred tax assets based on the latest forecast
cash flows.
2: New standards, amendments to standards, and
interpretations adopted by the Group
The amendments to accounting
standards in the table below became applicable for the current
reporting period, with no material impact on the Group's
consolidated results, financial position or disclosures.
Adopted by the Group
from
|
Amendments to standards
|
1 January 2024
|
Amendments to IAS 1 Presentation
of Financial Statements - classification of liabilities as current
and non-current
|
1 January 2024
|
Amendments to IFRS 16 Leases -
Sale and leaseback transactions
|
1 January 2024
|
Amendments to IAS 7 Statement of
Cash Flows and IFRS 7 Financial Instruments: Disclosures - Supplier
Finance Arrangements
|
3: Significant changes in the current reporting
period
Except for the matters disclosed
in the notes to these financial statements there are no significant
changes in the current reporting period to be disclosed.
We continually review the
principal risks and uncertainties facing the Group which could pose
a threat to the delivery of our strategic objectives. The Group
considers that the nature of the principal risks and uncertainties
that may have a material effect on the Group's performance over the
remainder of the financial year remains unchanged from those
presented within the 2023 Annual Report and Accounts.
4: Discontinued operations, acquisitions and
disposals
There have been no material
acquisitions of businesses during the six months to 30 June 2024 or
during 2023.
There have been no material
disposals of businesses during the period ended 30 June 2024 or
during 2023 and there were no profit or loss impacts relating to
past business disposals in either period.
The Group made the final payment
of £4 million during the six months to 30 June 2023 in respect of
the closure of the warranty relating to the sale of the Single
Strategy business. There were no inflows or outflows of cash
relating to discontinued operations during the period ended 30 June
2024 or during 2023 other than described above.
5: Alternative performance measures
5(a): Adjusted profit before tax and reconciliation to profit
after
tax
Basis of preparation of adjusted profit before
tax
Adjusted profit before tax is one
of the Group's alternative performance measures ("APMs") and
represents the Group's IFRS profit, adjusted for specific items
that management considers to be outside of the Group's normal
operations or one-off in nature, as detailed in note 5(b). Adjusted
profit before tax does not provide a complete picture of the
Group's financial performance, which is disclosed in the statement
of comprehensive income, but is instead intended to provide
additional comparability and understanding of the financial
results.
|
|
|
£m
|
|
Notes
|
Six months
2024
|
Six
months
2023
|
Affluent
|
|
72
|
54
|
High Net Worth
|
|
25
|
23
|
Head Office
|
|
-
|
(1)
|
Adjusted profit before tax
|
6(b)
|
97
|
76
|
Adjusting items:
|
|
|
|
Impact of acquisition and
disposal-related accounting
|
5(b)(i)
|
(19)
|
(21)
|
Business transformation
costs
|
5(b)(ii)
|
(12)
|
(16)
|
Customer remediation
|
5(b)(iii)
|
-
|
(3)
|
Ongoing Advice Evidence
|
5(b)(iv)
|
(2)
|
-
|
Exchange rate movement
(ZAR/GBP)
|
5(b)(v)
|
1
|
(2)
|
Policyholder tax
adjustments
|
5(b)(vi)
|
(38)
|
(18)
|
Other adjusting items
|
5(b)(vii)
|
-
|
1
|
Finance costs
|
5(b)(viii)
|
(9)
|
(10)
|
Total adjusting items before tax
|
|
(79)
|
(69)
|
Profit before tax attributable to shareholder
returns
|
|
18
|
7
|
Income tax attributable to
policyholder returns
|
7
|
59
|
21
|
Income tax expense
|
7
|
(64)
|
(23)
|
IFRS profit after tax
|
|
13
|
5
|
5(b): Adjusting items
In determining adjusted profit
before tax, the Group's IFRS profit before tax is adjusted for
specific items that management considers to be outside of the
Group's normal operations or one-off in nature. These are detailed
below.
5(b)(i): Impact of acquisition and
disposal-related accounting
The Group excludes
any impairment of goodwill from adjusted profit as well as the
amortisation and impairment of acquired intangible assets, any
acquisition costs, finance costs related to the discounting of
contingent consideration and incidental items relating to past
disposals.
The effect of these
adjustments to determine adjusted profit are summarised
below.
|
|
|
£m
|
|
|
Six months
2024
|
Six
months
2023
|
Amortisation of acquired
intangible assets
|
|
19
|
20
|
Impairment of acquired intangible
assets1
|
|
-
|
1
|
Total impact of acquisition and disposal-related
accounting
|
19
|
21
|
1The impairment of acquired intangible assets resulted from
the impairment of specific client books held within the Affluent
operating segment in the six months to 30 June 2023 as the Group
could no longer support the carrying value.
5(b)(ii): Business transformation
costs
For the six months to 30 June
2024, business transformation costs totalled £12 million (30 June
2023: £16 million), the principal components of which are described
below:
Business Simplification costs - 30 June 2024: £11 million, 30
June 2023: £14 million
During the six months to 30 June 2024, the
Group spent £11 million on delivering Simplification initiatives
(30 June 2023: £14 million). The implementation costs to deliver
the remaining £24 million of annualised run-rate savings for the
programme are estimated to be £67 million.
Investment in business costs - 30 June 2024: £1 million, 30
June 2023: £1 million
Investment in business costs of £1
million (30 June 2023: £1 million) were incurred as Group continues
to enable and support advisers and clients and improve productivity
through better utilisation of technology.
Business separation costs following the sale of Quilter
International - 30 June 2024: £nil, 30 June 2023: £1
million
The Group sold Quilter
International to Utmost Group in 2021 and entered into a
Transitional Service Agreement with the acquirer. The cost to the
Group of running the Transitional Service Agreement which ended in
November 2023 was £nil for the period to 30 June 2024 (30 June
2023: £1 million).
5(b)(iii): Customer
remediation
Lighthouse pension transfer advice provision - 30 June 2024:
£nil, 30 June 2023: £3 million
For the period ended 30 June 2023,
the customer remediation expense of £3 million reflected £1 million
of legal, consulting and other costs and a £2 million provision
increase related to non-British Steel Pension Scheme redress
payments. This was the result of the Group-managed past business
review of DB to DC pension transfer advice suitability by an
independent expert. At 30 June 2024, the provision for potential
redress and associated professional fees decreased from the 2023
year end by £1 million as a result of professional fees paid during
2024 to £5 million. Further details of the provision are provided
in note 16.
5(b)(iv): Ongoing Advice
Evidence
Ongoing Advice Evidence costs of
£2 million (30 June 2023: £nil) include the estimated external cost
to support and perform the Skilled Person review of historical data
and practices across the Quilter Financial Planning network of
Appointed Representative firms (see note 17). This cost is excluded
from adjusted profit as management considers it to be outside of
the Group's normal operations and one-off in nature.
5(b)(v): Exchange rate movements
(ZAR/GBP)
For the period ended 30 June 2024,
income of £1 million was recognised (30 June 2023: £2 million
expense) due to foreign exchange movements on cash held in South
African Rand in preparation for payments of dividends to
shareholders. Cash was converted to South African Rand upon
announcement of the dividend payments to provide an economic hedge
for the Group. The foreign exchange movements are fully offset by
an equal amount taken directly to retained earnings.
5(b)(vi): Policyholder tax
adjustments
For the period ended 30 June 2024,
the total amount of policyholder tax adjustments to adjusted profit
is a credit of £38 million (30 June 2023: £18 million credit).
Adjustments to policyholder tax are made to remove distortions
arising from market volatility that can, in turn, lead to
volatility in the policyholder tax adjustments between periods. The
recognition of the income received from policyholders (which is
included within the Group's income) to fund the policyholder tax
liability can vary in timing to the recognition of the
corresponding tax expense, creating volatility in the Group's IFRS
profit or loss before tax. Note 7 provides further information on
the impact of markets on the policyholder tax adjustment.
Adjustments are also made to remove policyholder tax distortions
from other non-operating adjusting items.
5(b)(vii): Other adjusting
items
For the period ended 30 June 2024
these costs were £nil. For the period ended 30 June 2023, £1
million income was received in relation to the settlement offer for
the indemnification asset that was impaired in
2022.
5(b)(viii): Finance
costs
The nature of much of the Group's
operations means that, for management's decision-making and
internal performance management, the effects of interest costs on
external borrowings are removed when calculating adjusted
profit. For the period ended 30 June 2024,
finance costs were £9 million (30 June 2023: £10
million).
5(c): Reconciliation of IFRS income and expenses to "Total
net revenue" and "Operating expenses" within adjusted
profit
This reconciliation shows how each
line of the Group's IFRS income and expenses are allocated to the
Group's APMs: Net management fees, Other revenue, Investment
revenue, Total net revenue and Operating expenses, and form the
Group's adjusted profit before tax. The total column in the table
below, down to "Profit before tax attributable to shareholder
returns", reconciles to each line of the condensed consolidated
statement of comprehensive income. Allocations are determined by
management and aim to show the Group's sources of profit (net of
relevant directly attributable expenses). These allocations remain
consistent from period to period to ensure comparability, unless
otherwise stated.
|
|
|
|
|
|
|
|
£m
|
Six months 2024
|
Net mgmt.
fees1
|
Other
revenue1
|
Investment
revenue1
|
Total net
revenue1
|
Operating
expenses1
|
Adjusted profit before
tax
|
Consol. of
funds2
|
Total
|
Income
|
|
|
|
|
|
|
|
|
Fee income and other income from
service activities
|
281
|
44
|
-
|
325
|
-
|
325
|
(39)
|
286
|
Investment
return3
|
30
|
2,590
|
40
|
2,660
|
-
|
2,660
|
425
|
3,085
|
Other income
|
-
|
3
|
-
|
3
|
10
|
13
|
1
|
14
|
Total income
|
311
|
2,637
|
40
|
2,988
|
10
|
2,998
|
387
|
3,385
|
Expenses
|
|
|
|
|
|
|
|
|
Change in investment contract
liabilities3
|
(14)
|
(2,589)
|
(3)
|
(2,606)
|
-
|
(2,606)
|
-
|
(2,606)
|
Fee and commission expenses and
other acquisition costs
|
(24)
|
-
|
-
|
(24)
|
-
|
(24)
|
(1)
|
(25)
|
Change in third-party interests in
consolidated funds
|
-
|
-
|
-
|
-
|
-
|
-
|
(371)
|
(371)
|
Other operating and administrative
expenses
|
(7)
|
-
|
-
|
(7)
|
(274)
|
(281)
|
(15)
|
(296)
|
Finance costs
|
-
|
-
|
-
|
-
|
(10)
|
(10)
|
-
|
(10)
|
Total expenses
|
(45)
|
(2,589)
|
(3)
|
(2,637)
|
(284)
|
(2,921)
|
(387)
|
(3,308)
|
Income tax expense attributable to
policyholder returns
|
(59)
|
-
|
-
|
(59)
|
-
|
(59)
|
-
|
(59)
|
Profit before tax attributable to shareholder
returns
|
207
|
48
|
37
|
292
|
(274)
|
18
|
-
|
18
|
Adjusting items:
|
|
|
|
|
|
|
|
|
Impact of acquisition and
disposal-related accounting
|
-
|
-
|
-
|
-
|
19
|
19
|
|
|
Business transformation
costs
|
-
|
-
|
-
|
-
|
12
|
12
|
|
|
Ongoing Advice Evidence
|
-
|
-
|
-
|
-
|
2
|
2
|
|
|
Exchange rate movements
(ZAR/GBP)
|
-
|
(1)
|
-
|
(1)
|
-
|
(1)
|
|
|
Policyholder tax
adjustments
|
38
|
-
|
-
|
38
|
-
|
38
|
|
|
Finance costs
|
-
|
-
|
-
|
-
|
9
|
9
|
|
|
Adjusting items
|
38
|
(1)
|
-
|
37
|
42
|
79
|
|
|
Adjusted profit before tax
|
245
|
47
|
37
|
329
|
(232)
|
97
|
|
|
1The APMs "Net
management fees", "Other revenue", "Investment revenue", "Total net
revenue" and "Operating expenses" are commented on within the
Financial review.
2Consolidation of funds shows the grossing up impact to the
Group's income and expenses as a result of the consolidation of
funds requirements, as described within note 5(a) to the Group's
2023 Annual Report. This grossing up is excluded from the Group's
adjusted profit.
3Reported within net management fees, investment return of £30
million represents £19 million interest income on investments held
for the benefit of policyholders and £11 million net interest
income on client money balances. Change in investment contract
liabilities of £14 million represents the amount of interest income
paid to policyholders. The net balance of £16 million of interest
income on customer balances was retained by the Group for the six
months to 30 June 2024. The £40 million investment return less £3
million change in investment contract liabilities paid to customers
on transactional cash balances, as reported within investment
revenue, represents £37 million of interest income on shareholder
cash and cash equivalents.
|
|
|
|
|
|
|
|
£m
|
Six months 2023
|
Net mgmt.
fees1
|
Other
revenue1
|
Investment
revenue1
|
Total net
revenue1
|
Operating
expenses1
|
Adjusted profit before
tax
|
Consol. of
funds2
|
Total
|
Income
|
|
|
|
|
|
|
|
|
Fee income and other income from
service activities
|
268
|
41
|
-
|
309
|
-
|
309
|
(32)
|
277
|
Investment
return3
|
19
|
1,007
|
28
|
1,054
|
-
|
1,054
|
248
|
1,302
|
Other income
|
-
|
(2)
|
-
|
(2)
|
4
|
2
|
-
|
2
|
Total income
|
287
|
1,046
|
28
|
1,361
|
4
|
1,365
|
216
|
1,581
|
Expenses
|
|
|
|
|
|
|
|
|
Change in investment contract
liabilities3
|
(12)
|
(1,006)
|
-
|
(1,018)
|
-
|
(1,018)
|
-
|
(1,018)
|
Fee and commission expenses and
other acquisition costs
|
(23)
|
-
|
-
|
(23)
|
-
|
(23)
|
(2)
|
(25)
|
Change in third-party interests in
consolidated funds
|
-
|
-
|
-
|
-
|
-
|
-
|
(202)
|
(202)
|
Other operating and administrative
expenses
|
(7)
|
-
|
-
|
(7)
|
(278)
|
(285)
|
(12)
|
(297)
|
Finance costs
|
-
|
-
|
-
|
-
|
(11)
|
(11)
|
-
|
(11)
|
Total expenses
|
(42)
|
(1,006)
|
-
|
(1,048)
|
(289)
|
(1,337)
|
(216)
|
(1,553)
|
Income tax expense attributable to
policyholder returns
|
(21)
|
-
|
-
|
(21)
|
-
|
(21)
|
-
|
(21)
|
Profit before tax attributable to shareholder
returns
|
224
|
40
|
28
|
292
|
(285)
|
7
|
-
|
7
|
Adjusting items:
|
|
|
|
|
|
|
|
|
Impact of acquisition and
disposal-related accounting
|
-
|
-
|
-
|
-
|
21
|
21
|
|
|
Business transformation
costs
|
-
|
-
|
-
|
-
|
16
|
16
|
|
|
Customer remediation
|
-
|
-
|
-
|
-
|
3
|
3
|
|
|
Exchange rate movement
(ZAR/GBP)
|
-
|
2
|
-
|
2
|
-
|
2
|
|
|
Policyholder tax
adjustments
|
18
|
-
|
-
|
18
|
-
|
18
|
|
|
Other adjusting items
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
|
|
Finance costs
|
-
|
-
|
-
|
-
|
10
|
10
|
|
|
Adjusting items
|
18
|
2
|
-
|
20
|
49
|
69
|
|
|
Adjusted profit before tax
|
242
|
42
|
28
|
312
|
(236)
|
76
|
|
|
1The APMs "Net management fees", "Other revenue", "Investment
revenue", "Total net revenue" and "Operating expenses" are
commented on within the Financial review.
2Consolidation of funds shows the grossing up impact to the
Group's income and expenses as a result of the consolidation of
funds requirements, as described within note 5(a) to the Group's
2023 Annual Report. This grossing up is excluded from the Group's
adjusted profit.
3Reported within net management fees, investment return of £19
million represents £12 million interest income on investments held
for the benefit of policyholders and £7 million net interest income
on client money balances. Change in investment contract liabilities
of £12 million represents the amount of interest income paid to
policyholders. The net balance of £7 million of interest income on
customer balances was retained by the Group for the six months to
30 June 2023. The £28 million investment return, as reported within
investment revenue, represents interest income on shareholder cash
and cash equivalents.
6:
Segment information
6(a): Segment
presentation
The Group has two operating
segments: High Net Worth and Affluent. The segments used for
reporting purposes are consistent with the structure and management
of the Group. Head Office includes certain revenues and central
costs that are not allocated to the segments.
Adjusted profit before tax is an
APM reported to the Group's management and Board. The segment
information in this note reflects the adjusted and IFRS profit
measures for each operating segment as provided to management and
the Board. Management and the Board use additional performance
indicators to assess the performance of each of the segments,
including net client cash flows, assets under management and
administration, total net revenue and operating margin. Income is
analysed in further detail for each operating segment in note
6(b).
Consistent with internal
reporting, income and expenses that are not directly attributable
to a particular segment are allocated between segments where
appropriate. The Group accounts for inter-segment income and
transfers as if the transactions were with third parties at current
market prices.
High Net Worth
This segment comprises Quilter
Cheviot and Quilter Cheviot Financial Planning.
Quilter Cheviot provides
discretionary investment management, predominantly in the United
Kingdom, with bespoke investment portfolios tailored to the
individual needs of high net worth clients, charities, companies
and institutions through a network of branches in London and the
regions. Investment management services are also provided by
operations in the Channel Islands and Ireland.
Quilter Cheviot Financial Planning
provides financial advice for protection, mortgages, savings,
investments and pensions predominantly to high net worth
clients.
Affluent
This segment comprises Quilter
Investment Platform, Quilter Investors and Quilter Financial
Planning.
Quilter Investment Platform is a
leading investment platform provider of advice-based wealth
management products and services in the UK, which serves an
affluent client base through advised multi-channel
distribution.
Quilter Investors is a leading
provider of investment solutions in the UK multi-asset market. It
develops and manages investment solutions in the form of funds for
the Group and third-party clients. It has several fund ranges which
vary in breadth of underlying asset class.
Quilter Financial Planning is a
restricted and independent financial adviser network providing
mortgage and financial planning advice and financial solutions for
both individuals and businesses through a network of
intermediaries. It operates across all markets, from wealth
management and retirement planning advice through to dealing with
property wealth and personal and business protection
needs.
Head Office
In addition to the Group's two
operating segments, Head Office comprises the investment return on
centrally held assets, central support function expenses, central
core structural borrowings and certain tax balances.
6(b): Adjusted profit statement - segment
information
The table below presents the
Group's operations split by operating segment, reconciling IFRS
profit (or loss) to adjusted profit before tax. The Total column reconciles to the consolidated statement of
comprehensive income.
|
|
|
|
|
|
£m
|
|
|
Operating
segments
|
|
|
|
Six months 2024
|
Notes
|
Affluent
|
High
Net
Worth
|
Head
Office
|
Consolidation
adjustments1
|
Total
|
Income
|
|
|
|
|
|
|
Premium-based fees
|
|
35
|
9
|
-
|
-
|
44
|
Fund-based fees
|
|
167
|
91
|
-
|
(39)
|
219
|
Fixed fees
|
|
1
|
-
|
-
|
-
|
1
|
Other fee and commission
income
|
|
22
|
-
|
-
|
-
|
22
|
Fee income and other income from
service activities
|
|
225
|
100
|
-
|
(39)
|
286
|
Investment
return2
|
|
2,638
|
11
|
16
|
420
|
3,085
|
Other income
|
|
48
|
1
|
1
|
(36)
|
14
|
Segment income
|
|
2,911
|
112
|
17
|
345
|
3,385
|
Expenses
|
|
|
|
|
|
|
Change in investment contract
liabilities2
|
|
(2,606)
|
-
|
-
|
-
|
(2,606)
|
Fee and commission expenses and
other acquisition costs
|
|
(25)
|
-
|
-
|
-
|
(25)
|
Change in third-party interests in
consolidated funds
|
|
-
|
-
|
-
|
(371)
|
(371)
|
Other operating and administrative
expenses
|
|
(195)
|
(106)
|
(17)
|
22
|
(296)
|
Finance costs
|
|
(1)
|
-
|
(13)
|
4
|
(10)
|
Segment expenses
|
|
(2,827)
|
(106)
|
(30)
|
(345)
|
(3,308)
|
Profit/(loss) before tax
|
|
84
|
6
|
(13)
|
-
|
77
|
Income tax expense attributable to
policyholder returns
|
|
(59)
|
-
|
-
|
-
|
(59)
|
Profit/(loss) before tax attributable to shareholder
returns
|
|
25
|
6
|
(13)
|
-
|
18
|
Adjusting items:
|
|
|
|
|
|
|
Impact of acquisition and
disposal-related accounting
|
5(b)(i)
|
3
|
16
|
-
|
-
|
19
|
Business transformation
costs
|
5(b)(ii)
|
4
|
3
|
5
|
-
|
12
|
Ongoing Advice Evidence
|
5(b)(iv)
|
2
|
-
|
-
|
-
|
2
|
Exchange rate movement
(ZAR/GBP)
|
5(b)(v)
|
-
|
-
|
(1)
|
-
|
(1)
|
Policyholder tax
adjustments
|
5(b)(vi)
|
38
|
-
|
-
|
-
|
38
|
Finance costs
|
5(b)(viii)
|
-
|
-
|
9
|
-
|
9
|
Adjusting items before
tax
|
|
47
|
19
|
13
|
-
|
79
|
Adjusted profit before tax
|
|
72
|
25
|
-
|
-
|
97
|
1Consolidation adjustments comprise the elimination of
inter-segment transactions and the consolidation of investment
funds.
2Investment return and change in investment contract
liabilities includes net £16 million of interest income on customer
cash and cash equivalents retained by the Group.
Investment return total also includes £37
million of interest income on shareholder cash and cash
equivalents.
|
|
|
|
|
|
£m
|
|
|
Operating
segments
|
|
|
|
Six months 2023
|
Notes
|
Affluent
|
High
Net
Worth
|
Head
Office
|
Consolidation
adjustments1
|
Total
|
Income
|
|
|
|
|
|
|
Premium-based fees
|
|
32
|
10
|
-
|
-
|
42
|
Fund-based fees
|
|
172
|
89
|
-
|
(32)
|
229
|
Fixed fees
|
|
1
|
-
|
-
|
-
|
1
|
Other fee and commission
income
|
|
5
|
-
|
-
|
-
|
5
|
Fee income and other income from
service activities
|
|
210
|
99
|
-
|
(32)
|
277
|
Investment
return2
|
|
1,036
|
9
|
12
|
245
|
1,302
|
Other income
|
|
49
|
-
|
(2)
|
(45)
|
2
|
Segment income
|
|
1,295
|
108
|
10
|
168
|
1,581
|
Expenses
|
|
|
|
|
|
|
Change in investment contract
liabilities2
|
|
(1,018)
|
-
|
-
|
-
|
(1,018)
|
Fee and commission expenses and
other acquisition costs
|
|
(24)
|
-
|
-
|
(1)
|
(25)
|
Change in third-party interests in
consolidated funds
|
|
-
|
-
|
-
|
(202)
|
(202)
|
Other operating and administrative
expenses
|
|
(202)
|
(102)
|
(25)
|
32
|
(297)
|
Finance costs
|
|
(1)
|
-
|
(13)
|
3
|
(11)
|
Segment expenses
|
|
(1,245)
|
(102)
|
(38)
|
(168)
|
(1,553)
|
Profit/(loss) before tax
|
|
50
|
6
|
(28)
|
-
|
28
|
Income tax expense attributable to
policyholder returns
|
|
(21)
|
-
|
-
|
-
|
(21)
|
Profit/(loss) before tax attributable to shareholder
returns
|
|
29
|
6
|
(28)
|
-
|
7
|
Adjusting items:
|
|
|
|
|
|
|
Impact of acquisition and
disposal-related accounting
|
5(b)(i)
|
4
|
17
|
-
|
-
|
21
|
Business transformation
costs
|
5(b)(ii)
|
-
|
1
|
15
|
-
|
16
|
Customer remediation
|
5(b)(iii)
|
3
|
-
|
-
|
-
|
3
|
Exchange rate movements
(ZAR/GBP)
|
5(b)(v)
|
-
|
-
|
2
|
-
|
2
|
Policyholder tax
adjustments
|
5(b)(vi)
|
18
|
-
|
-
|
-
|
18
|
Other adjusting items
|
5(b)(vii)
|
-
|
(1)
|
-
|
-
|
(1)
|
Finance costs
|
5(b)(viii)
|
-
|
-
|
10
|
-
|
10
|
Adjusting items before
tax
|
|
25
|
17
|
27
|
-
|
69
|
Adjusted profit before tax
|
|
54
|
23
|
(1)
|
-
|
76
|
1Consolidation adjustments comprise
the elimination of inter-segment transactions and the consolidation
of investment funds.
2Investment return and change in investment contract
liabilities includes net £7 million interest income on customer
cash and cash equivalents retained by the Group.
Investment return total also includes £28
million interest income on shareholder cash and cash
equivalents.
7: Tax
|
|
|
£m
|
|
|
Six months
2024
|
Six
months
2023
|
Current tax
|
|
|
|
United Kingdom
|
|
28
|
-
|
Total current tax charge
|
|
28
|
-
|
Deferred tax
|
|
|
|
Origination and reversal of
temporary differences
|
|
37
|
23
|
Effect on deferred tax of changes
in tax rates
|
|
-
|
1
|
Adjustments to deferred tax in
respect of prior periods
|
|
(1)
|
(1)
|
Total deferred tax charge
|
|
36
|
23
|
Total tax charged
|
|
64
|
23
|
|
|
|
|
Attributable to policyholder
returns
|
|
59
|
21
|
Attributable to shareholder
returns
|
|
5
|
2
|
Total tax charged
|
|
64
|
23
|
Policyholder tax
Certain products are subject to
tax on policyholders' investment returns. This "policyholder tax"
is an element of total tax expense. To make the tax expense more
meaningful, tax attributable to policyholder returns and tax
attributable to shareholder returns are shown separately in the
condensed consolidated statement of comprehensive
income.
The tax attributable to
policyholder returns is the amount payable in the period plus the
movement of amounts expected to be payable in future periods. The
remainder of the tax expense is attributed to shareholder
returns.
The Group's income tax charge was
£64 million for the six months to 30 June 2024 (30 June 2023: £23
million). The income tax charge can vary significantly
period-on-period as a result of market volatility and the impact
this has on policyholder tax. The recognition of the income
received from policyholders to fund the policyholder tax liability
(which is included within the Group's income) can vary in timing to
the recognition of the corresponding policyholder tax expense,
creating volatility in the Group's IFRS profit before tax. An
adjustment is made to adjusted profit to remove these distortions,
as explained further in note 5(b)(vi).
Market movements for the six
months to 30 June 2024 resulted in investment gains of £242 million
on products subject to policyholder tax. The gain is a component of
the total "investment return" gain of £3,085 million shown in the
condensed consolidated statement of comprehensive income. The tax
impact of the £242 million investment return gain is the primary
reason for the £59 million tax charge attributable to policyholder
returns for the six months to 30 June 2024 (30 June 2023: £21
million charge).
Pillar II taxes
Pillar II legislation has been
substantively enacted in the UK, introducing a Pillar II minimum
effective tax rate of 15%. The legislation implements a
Multinational Top-up Tax ("MTT") and a Domestic Top-up Tax ("DTT"),
effective for the Group's financial year beginning 1 January 2024.
The Group has applied the exemption under IAS 12.4A and accordingly
will not recognise or disclose information about deferred tax
assets and liabilities related to Pillar II income
taxes.
The assessment of the exposure to
Pillar II income taxes has shown that the majority of the Group's
profits arise in countries with tax rates above 15%. The position
in respect of these rules in each of the Group's main territories
is summarised below.
UK
The Group has assessed that its
Pillar II UK effective tax rate exceeds the 15% minimum rate and
therefore there is no additional liability in relation to the
UK.
The scope of the MTT means that a
top-up tax charge may also arise in the UK on profits earned in
countries with lower tax rates in which the Group operates, subject
to a local qualifying domestic minimum tax. The Group's main non-UK
operations are in Jersey and Ireland. Ireland has enacted a
qualifying domestic minimum tax (see below), so no additional tax
charge is due in the UK on Irish operations. Jersey is expected to
introduce a qualifying domestic minimum tax in 2025. The Group's
effective tax rate in Jersey is 8% and therefore a MTT liability of
£83 thousand in relation to Jersey profits arises in the UK during
2024. This does not have a material impact on the Group's tax
charge.
Jersey, Guernsey and the Isle of Man
The three Crown Dependencies
issued a joint statement in May 2023 stating their intention to
introduce a domestic minimum tax in 2025. The Group does not
therefore expect to pay additional local tax in these countries
during 2024. The Group will continue to monitor the developments in
these countries. Until such time as a qualifying domestic minimum
tax is introduced, the Group expects to pay a MTT in the UK in
respect of any taxable profits arising in these countries (see
above).
Ireland
Ireland has introduced a
qualifying domestic minimum tax. This has been substantively
enacted, effective for the Group's financial year beginning 1
January 2024. The Group's effective tax rate in Ireland is 10% and
therefore an additional minimum tax charge of £43 thousand arises
in Ireland in 2024. This does not have a material impact on the
Group's tax charge.
Other
The Group has assessed there are
no material Pillar II tax charge in any other countries in which it
has a presence in 2024.
8: Earnings per share
The Group calculates earnings per
share ("EPS") on a number of different bases. IFRS requires the
calculation of basic and diluted EPS. Adjusted EPS reflects
earnings that are consistent with the Group's adjusted profit
measure and Headline earnings per share ("HEPS") is a requirement
of the Johannesburg Stock Exchange.
8(a): Weighted average number of
Ordinary Shares
The table below summarises the
calculation of the weighted average number of Ordinary Shares for
the purposes of calculating basic and diluted earnings per share
for each profit measure (IFRS, adjusted profit and Headline
earnings).
The bases for the calculation of
the Group's EPS are disclosed in note 5(u) of the Group's 2023
Annual Report.
|
|
|
Million
|
|
|
Six months
2024
|
Six
months
2023
|
Weighted average number of
Ordinary Shares
|
|
1,404
|
1,404
|
Own shares including those held in
consolidated funds and employee benefit trusts
|
|
(63)
|
(51)
|
Basic weighted average number of Ordinary
Shares
|
|
1,341
|
1,353
|
Adjustment for dilutive share
awards and options1
|
|
41
|
11
|
Diluted weighted average number of Ordinary
Shares
|
|
1,382
|
1,364
|
1The adjustment for dilutive share awards and options includes
dividend equivalent shares in line with the requirements of IAS 33.
Previously, these shares were not included in the figures presented
in the condensed consolidated interim financial statements for the
period ended 30 June 2023. The June 2023 adjustment for dilutive
share awards and options presented above was increased by 8 million
shares to ensure comparability.
8(b): Basic and diluted EPS (IFRS
and adjusted profit)
|
|
|
£m
|
|
Note
|
Six months
2024
|
Six
months
2023
|
Profit after tax
|
|
13
|
5
|
Total adjusting items before
tax
|
5(a)
|
79
|
69
|
Tax on adjusting items
|
|
18
|
2
|
Less: policyholder tax
adjustments
|
|
(38)
|
(18)
|
Adjusted profit after tax
|
|
72
|
58
|
|
|
|
Pence
|
|
Post-tax
profit
measure
used
|
Six months
2024
|
Six
months
2023
|
Basic EPS
|
IFRS
profit
|
1.0
|
0.4
|
Diluted EPS
|
IFRS
profit
|
0.9
|
0.4
|
Adjusted basic EPS
|
Adjusted
profit
|
5.4
|
4.3
|
Adjusted diluted EPS
|
Adjusted
profit
|
5.2
|
4.3
|
8(c): Headline earnings per share
|
+
|
+
|
|
£m
|
|
|
Six months
2024
|
|
Six
months
2023
|
|
Gross
|
Net of tax
|
Gross
|
Net of
tax
|
Profit
|
|
13
|
|
5
|
Adjusted for:
|
|
|
|
|
- add back of impairment
loss on intangible assets
|
-
|
-
|
1
|
1
|
Headline earnings
|
|
13
|
|
6
|
Headline basic EPS (pence)
|
|
1.0
|
|
0.4
|
Headline diluted EPS (pence)
|
|
0.9
|
|
0.4
|
9: Dividends
|
|
|
|
|
|
|
£m
|
|
Payment
date
|
Six months
2024
|
Six
months
2023
|
2022 Final Dividend paid - 3.3p
per Ordinary Share
|
22 May
2023
|
-
|
45
|
2023 Final Dividend paid - 3.7p
per Ordinary Share
|
28 May
2024
|
50
|
-
|
Dividends paid to Ordinary Shareholders
|
|
50
|
45
|
Final and Interim
Dividends paid to Ordinary Shareholders are calculated using the
number of shares in issue at the record date less own shares held
in employee benefit trusts.
10: Goodwill
10(a): Allocation of goodwill to cash-generating units
("CGUs") and consideration of the need for an impairment
review
Goodwill is monitored by
management at the level of the Group's two operating segments:
Affluent and High Net Worth. Both operating segments represent a
group of CGUs.
|
|
£m
|
|
30 June
2024
|
31
December
2023
|
Goodwill (net carrying amount)
|
|
|
Affluent
|
223
|
223
|
High Net Worth
|
83
|
83
|
Total goodwill
|
306
|
306
|
Consideration of the need for an impairment
review
Goodwill in both the Affluent and
High Net Worth CGU groups is tested for impairment annually, or
earlier if an indicator of impairment exists, by comparing the
carrying value of the CGU group to which the goodwill relates to
the recoverable value of that CGU group, being the higher of that
CGU group's value-in-use or fair value less costs to sell. If
applicable, an impairment charge is recognised when the recoverable
amount is less than the carrying value. Goodwill impairment
indicators include sudden stock market falls, the absence of
positive Net Client Cash Flows ("NCCF"), significant falls in
profits and significant increases in the discount rate.
During the six months to 30 June
2024, management considers there to be no indicators of impairment
for the Affluent and High Net Worth CGU groups. The positive
movements in equity markets and resulting increase in AuMA have
contributed to higher revenues and this, together with continued
cost discipline, has led to adjusted profit before tax of £97
million, which is a 28% increase from the prior period to 30 June
2023 of £76 million. NCCF has also been stronger compared to the
prior period due to higher gross sales.
11: Financial investments
The table below analyses the
investments and securities that the Group invests in, either on its
own proprietary behalf (shareholder funds) or on behalf of third
parties (policyholder funds).
|
|
£m
|
|
30 June
2024
|
31
December
2023
|
Government and
government-guaranteed securities
|
209
|
202
|
Other debt securities, preference
shares and debentures
|
2,130
|
2,175
|
Equity securities
|
9,153
|
8,488
|
Pooled investments
|
43,468
|
39,462
|
Short-term funds and securities
treated as investments
|
1
|
1
|
Other
|
1
|
1
|
Total financial investments
|
54,962
|
50,329
|
|
|
|
Recoverable within 12
months
|
54,962
|
50,329
|
Total financial investments
|
54,962
|
50,329
|
The financial investments
recoverability profile is based on the intention with which the
financial assets are held. These assets
are held to cover the liabilities for linked investment contracts,
all of which can be withdrawn by policyholders on
demand.
12: Categories of financial instruments
The analysis of
financial assets and liabilities into categories as defined in IFRS
9 Financial Instruments is set out in the following tables. Assets
and liabilities of a non-financial nature, or financial assets and
liabilities that are specifically excluded from the scope of IFRS
9, are reflected in the non-financial assets and liabilities
category.
For information about
the methods and assumptions used in determining fair value, refer
to note 13. The Group's exposure to various risks associated with
financial instruments is discussed in note 37 to the Group's 2023
Annual Report. During the period, there have been no material
changes in the Groups exposure to those risks.
30 June 2024
|
|
|
|
|
|
|
|
|
|
|
£m
|
Measurement basis
|
Fair value
|
|
|
|
|
Mandatorily at
FVTPL
|
Designated at
FVTPL
|
Amortised
cost
|
Non-financial assets and
liabilities
|
Total
|
Assets
|
|
|
|
|
|
Loans and advances
|
-
|
-
|
50
|
-
|
50
|
Financial investments
|
54,962
|
-
|
-
|
-
|
54,962
|
Trade, other receivables and other
assets
|
-
|
-
|
511
|
44
|
555
|
Derivative assets
|
24
|
-
|
-
|
-
|
24
|
Cash and cash
equivalents
|
1,194
|
-
|
705
|
-
|
1,899
|
Total assets that include
financial instruments
|
56,180
|
-
|
1,266
|
44
|
57,490
|
Total other non-financial
assets
|
-
|
-
|
-
|
588
|
588
|
Total assets
|
56,180
|
-
|
1,266
|
632
|
58,078
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Investment contract
liabilities
|
-
|
47,797
|
-
|
-
|
47,797
|
Third-party interests in
consolidated funds
|
7,704
|
-
|
-
|
-
|
7,704
|
Borrowings and lease
liabilities
|
-
|
-
|
277
|
-
|
277
|
Trade, other payables and other
liabilities
|
-
|
-
|
597
|
69
|
666
|
Derivative liabilities
|
19
|
-
|
-
|
-
|
19
|
Total liabilities that include
financial instruments
|
7,723
|
47,797
|
874
|
69
|
56,463
|
Total other non-financial
liabilities
|
-
|
-
|
-
|
133
|
133
|
Total liabilities
|
7,723
|
47,797
|
874
|
202
|
56,596
|
31 December 2023
|
|
|
|
|
|
|
|
|
|
|
£m
|
Measurement basis
|
Fair
value
|
|
|
|
|
Mandatorily at FVTPL
|
Designated at FVTPL
|
Amortised cost
(Restated)
|
Non-financial assets and liabilities
(Restated)
|
Total
|
Assets
|
|
|
|
|
|
Loans and advances
|
-
|
-
|
38
|
-
|
38
|
Financial investments
|
50,329
|
-
|
-
|
-
|
50,329
|
Trade, other receivables and other
assets
|
-
|
-
|
404
|
43
|
447
|
Derivative assets
|
57
|
-
|
-
|
-
|
57
|
Cash and cash
equivalents
|
1,091
|
-
|
768
|
-
|
1,859
|
Total assets that include
financial instruments
|
51,477
|
-
|
1,210
|
43
|
52,730
|
Total other non-financial
assets
|
-
|
-
|
-
|
615
|
615
|
Total assets
|
51,477
|
-
|
1,210
|
658
|
53,345
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Investment contract
liabilities
|
-
|
43,396
|
-
|
-
|
43,396
|
Third-party interests in
consolidated funds
|
7,444
|
-
|
-
|
-
|
7,444
|
Borrowings and lease
liabilities
|
-
|
-
|
279
|
-
|
279
|
Trade, other payables and other
liabilities1
|
1
|
-
|
476
|
93
|
570
|
Derivative liabilities
|
25
|
-
|
-
|
-
|
25
|
Total liabilities that include
financial instruments
|
7,470
|
43,396
|
755
|
93
|
51,714
|
Total other non-financial
liabilities
|
-
|
-
|
-
|
112
|
112
|
Total liabilities
|
7,470
|
43,396
|
755
|
205
|
51,826
|
1The disclosures for 2023 have been restated to reclassify £8
million of Trade, other payables and other liabilities from the
amortised cost category to the non-financial liabilities category.
The relevant balances which were presented in the amortised cost
category in the Group's 2023 financial statements arose in
connection with the Group's statutory and constructive obligations
as opposed to arising in connection with the Group's contractual
obligations.
13: Fair value
methodology
This
section explains the judgements and estimates made in determining
the fair values of financial instruments that are recognised and
measured at fair value in the financial statements. Classifying
financial instruments into the three levels of the fair value
hierarchy (see note 13(b)) provides an indication of the reliability
of inputs used in determining fair value.
13(a):
Determination of fair value
The fair
value of financial instruments that are actively traded in
organised financial markets is determined by reference to quoted
market exit prices for assets and offer prices for liabilities, at
the close of business on the reporting date, without any deduction
for transaction costs:
· for
units in unit trusts and shares in open-ended investment companies,
fair value is determined by reference to published quoted prices
representing exit values in an active market;
· for
equity and debt securities not actively traded in organised markets
and where the price cannot be retrieved, the fair value is
determined by reference to similar instruments for which market
observable prices exist;
· for
assets that have been suspended from trading on an active market,
the last published price is used. Many suspended assets are still
regularly priced. At the reporting date, all suspended assets are
assessed for impairment; and
· where
the assets are private equity investments or within consolidated
investment funds, the valuation is based on the latest available
set of audited financial statements, or if more recent is
available, reports from investment managers or professional
valuation experts on the value of the underlying assets of the
private equity investment or fund.
During the six months to 30 June
2024, there have been no significant changes in the valuation
techniques applied when valuing financial instruments. Where
assets are valued by the Group, the
general principles applied to those instruments measured at fair
value are outlined below:
Financial
investments
Financial investments
include government and government-guaranteed securities, listed and
unlisted debt securities, preference shares and debentures, listed
and unlisted equity securities, listed and unlisted pooled
investments (see below), short-term funds and securities treated as
investments and certain other securities.
Pooled investments
represent the Group's holdings of shares/units in open-ended
investment companies, unit trusts, mutual funds and similar
investment vehicles. Pooled investments are recognised at fair
value. The fair values of pooled investments are based on widely
published prices that are regularly updated.
Other financial
investments that are measured at fair value use observable market
prices where available. In the absence of observable market prices,
these investments and securities are fair valued using various
approaches including valuations based on discounted cash flows and
earnings before interest, tax, depreciation and amortisation
multiples.
Derivatives
The fair
value of derivatives is determined with reference to the
exchange-traded prices of the specific instruments. The fair value
of over-the-counter forward foreign exchange contracts is
determined by reference to the relevant exchange rates.
Investment
contract liabilities
The fair value of the
investment contract liabilities is determined with reference to the
underlying funds that are held by the Group.
Third-party interests in consolidated
funds
Third-party interests
in consolidated funds are measured at the attributable net asset
value of each fund.
13(b): Fair value
hierarchy
Fair values are
determined according to the following hierarchy:
Description of
hierarchy
|
Types of instruments
classified in the respective levels
|
Level 1 -
quoted market prices: financial assets and liabilities with quoted
prices for identical instruments in active markets.
|
Listed equity securities, government securities and
other listed debt securities and similar instruments that are
actively traded, actively traded pooled investments, certain quoted
derivative assets and liabilities and investment contract
liabilities directly linked to other Level 1 financial assets.
|
Level 2 -
valuation techniques using observable inputs: financial assets and
liabilities with quoted prices for similar instruments in active
markets or quoted prices for identical or similar instruments in
inactive markets and financial assets and liabilities valued using
models where all significant inputs are observable.
|
Unlisted equity and debt securities where the
valuation is based on models involving no significant unobservable
data.
Over-the-counter derivatives, certain privately
placed debt instruments and third-party interests in consolidated
funds which meet the definition of Level 2 financial
instruments.
|
Level 3 -
valuation techniques using significant unobservable inputs:
financial assets and liabilities valued using valuation techniques
where one or more significant inputs are unobservable.
|
Unlisted equity and securities with significant
unobservable inputs, securities where the market is not considered
sufficiently active, including certain inactive pooled
investments.
|
The judgement as to
whether a market is active may include, for example, consideration
of factors such as the magnitude and frequency of trading activity,
the availability of prices and the size of bid/offer spreads. In
inactive markets, obtaining assurance that the transaction price
provides evidence of fair value or determining the adjustments to
transaction prices that are necessary to measure the fair value of
the asset or liability requires additional work during the
valuation process.
The majority of
valuation techniques employ only observable data and so the
reliability of the fair value measurement is high. Certain
financial assets and liabilities are valued on the basis of
valuation techniques that feature one or more significant inputs
that are unobservable and, for them, the derivation of fair value
is more judgemental. A financial asset or liability in its entirety
is classified as valued using significant unobservable inputs if a
significant proportion of that asset or liability's carrying amount
is driven by unobservable inputs.
In this context,
'unobservable' means that there is little or no current market data
available from which to determine the price at which an arm's
length transaction would be likely to occur. It generally does not
mean that there is no market data available at all upon which to
base a determination of fair value. Furthermore, in some cases the
majority of the fair value derived from a valuation technique with
significant unobservable data may be attributable to observable
inputs.
13(c):
Transfer between fair value hierarchies
The Group deems a
transfer to have occurred between Level 1 and Level 2 or Level 3
when an actively traded primary market ceases to exist for that
financial instrument. A transfer between Level 2 and Level 3 occurs
when one or more of the significant inputs used to determine the
fair value of the instrument become unobservable. Transfers from
Levels 3 or 2 to Level 1 are also possible when assets become
actively priced.
There were no
transfers of financial investments between Level 1 and Level 2
during the six months to 30 June 2024 (31 December 2023: £nil). In
addition, there were no transfers of financial investments from
Level 2 to Level 1 during the period (31 December 2023:
£nil).
See note 13(e) for
the reconciliation of Level 3 financial instruments.
13(d): Financial assets and
liabilities measured at fair value, classified according to the
fair value hierarchy
The majority of the Group's
financial assets are measured using quoted market prices for
identical instruments in active markets (Level 1) and there have
been no significant changes during the period.
The linked assets are held to
cover the liabilities for linked investment contracts. The
difference between the value of linked assets and that of linked
liabilities is mainly due to short-term timing differences between
policyholder premiums being received and invested in advance of
policies being issued, and tax liabilities within funds which are
reflected within the Group's tax liabilities.
Differences between assets and
liabilities within the respective levels of the fair value
hierarchy also arise due to the mix of underlying assets and
liabilities within consolidated funds. In addition, third-party
interests in consolidated funds are classified as Level
2.
The tables below analyse the
Group's financial assets and liabilities measured at fair value by
the fair value hierarchy described in note 13(b). All items are
recognised mandatorily at fair value through profit or loss, apart
from Investment contract liabilities which are designated at fair
value through profit or loss.
|
|
|
|
£m
|
30 June 2024
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial investments
|
45,901
|
9,041
|
20
|
54,962
|
Cash and cash
equivalents
|
1,194
|
-
|
-
|
1,194
|
Derivative assets
|
-
|
24
|
-
|
24
|
Total financial assets measured at fair value through profit
or loss
|
47,095
|
9,065
|
20
|
56,180
|
|
|
|
|
|
Third-party interests in
consolidated funds
|
-
|
7,704
|
-
|
7,704
|
Derivative liabilities
|
-
|
19
|
-
|
19
|
Investment contract
liabilities
|
47,780
|
-
|
17
|
47,797
|
Total financial liabilities measured at fair value through
profit or loss
|
47,780
|
7,723
|
17
|
55,520
|
|
|
|
|
|
|
|
|
|
£m
|
31 December 2023
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Financial investments
|
41,691
|
8,605
|
33
|
50,329
|
Cash and cash
equivalents
|
1,091
|
-
|
-
|
1,091
|
Derivative assets
|
-
|
57
|
-
|
57
|
Total financial assets measured at fair value through profit
or loss
|
42,782
|
8,662
|
33
|
51,477
|
|
|
|
|
|
Third-party interests in
consolidated funds
|
-
|
7,444
|
-
|
7,444
|
Other liabilities
|
-
|
1
|
-
|
1
|
Derivative liabilities
|
-
|
25
|
-
|
25
|
Investment contract
liabilities
|
43,372
|
-
|
24
|
43,396
|
Total financial liabilities measured at fair value through
profit or loss
|
43,372
|
7,470
|
24
|
50,866
|
13(e): Level 3 fair value hierarchy
disclosure
The majority of the
assets classified as Level 3 are held within linked policyholder
funds. Where this is the case, all of the investment risk
associated with these assets is borne by policyholders and the
value of these assets is exactly matched by a corresponding
liability due to policyholders. The Group bears no risk from a
change in the market value of these assets except to the extent
that it has an impact on management fees earned.
Level 3 assets also include
investments within consolidated funds. The Group bears no risk from
a change in the market value of these assets except to the extent
that it has an impact on management fees earned. Any changes in
market value are matched by a corresponding Level 2 liability
within third-party interests in
consolidated funds.
The table below reconciles the
opening balance of Level 3 financial assets to the closing balance
at each period end:
|
|
£m
|
|
30 June
2024
|
31
December
2023
|
At beginning of the
year
|
33
|
29
|
Fair value gains/(losses)
credited/(charged) to profit or loss1
|
5
|
(1)
|
Sales
|
(17)
|
(1)
|
Transfers in
|
8
|
27
|
Transfers out
|
(9)
|
(21)
|
Total Level 3 financial assets at the end of the
period
|
20
|
33
|
Unrealised fair value
(losses)/gains recognised in profit or loss relating to assets held
at the period end
|
(2)
|
2
|
1Included in Investment
return.
All of the assets that are
classified as Level 3 are suspended funds for each of the periods
presented.
Transfers into Level 3 assets in
the current period total £8 million (31
December 2023: £27 million). This is mainly
due to suspended funds previously shown within Level 1. Suspended
funds are valued based on external valuation reports received from
fund managers. Transfers out of Level 3 assets in the current
period of £9 million, (31 December 2023:
£21 million) result from a transfer to Level 1 assets relating to
assets that are now being actively repriced (that were previously
stale) and where fund suspensions have been
lifted.
The table below
reconciles the opening balance of Level 3 financial liabilities to
the closing balance at each period end:
|
|
£m
|
|
30 June
2024
|
31
December
2023
|
At beginning of the
year
|
24
|
25
|
Fair value losses charged to
profit or loss1
|
(2)
|
-
|
Transfers in
|
-
|
20
|
Transfers out
|
(5)
|
(21)
|
Total Level 3 financial liabilities at the end of the
period
|
17
|
24
|
Unrealised fair value losses
recognised in profit or loss relating to liabilities at the period
end
|
2
|
-
|
1Included in Investment
return.
13(f): Effect of changes in significant
unobservable assumptions to reasonable
alternatives
Details
of the valuation techniques applied to the different categories of
financial instruments can be found in note 13(a) above, including the valuation techniques
applied when significant unobservable assumptions are used to value
Level 3 assets.
For Level 3 assets
and liabilities, no reasonable alternative assumptions are
applicable and the Group therefore performs a sensitivity test of
an aggregate 10% change in the value of the financial asset or
liability (31
December 2023: 10%), representing a reasonable alternative
judgement in the context of the current macroeconomic environment
in which the Group operates. It is therefore considered that the
impact of this sensitivity will be in the range of £2 million to
the reported fair value of Level 3 assets, both favourable and
unfavourable (31 December 2023: £3 million).
13(g):
Fair value hierarchy for assets and liabilities not measured at
fair value
Certain financial
instruments of the Group are not carried at fair value. The
carrying values of these are considered reasonable approximations
of their respective fair values as they are either short term in
nature or are repriced to current market rates at frequent
intervals.
14: Cash and cash equivalents
14(a): Analysis of cash and cash
equivalents
|
|
|
£m
|
|
|
30 June
2024
|
31
December
2023
|
Cash at bank
|
|
337
|
444
|
Money market funds
|
|
1,194
|
1,091
|
Cash and cash equivalents in
consolidated funds
|
|
368
|
324
|
Total cash and cash equivalents per statement of cash
flows
|
|
1,899
|
1,859
|
The Group's management does not
consider that the cash and cash equivalents balance arising due to
consolidation of funds of £368 million (31 December 2023: £324
million) is available for use in the Group's day-to-day operations.
The remainder of the Group's cash and cash equivalents balance of
£1,531 million (31 December 2023: £1,535 million) is considered to
be available for general use by the Group for the purposes of the
disclosures required under IAS 7 Statement of Cash Flows. This
balance includes policyholder cash as well as cash and cash
equivalents held by regulated subsidiaries to meet their capital
and liquidity requirements.
15: Ordinary Share capital
At 30 June 2024, the Company's
equity capital comprises 1,404,105,498 Ordinary Shares of 8 1/6
pence each with an aggregated nominal value of £114,668,616
(31 December 2023: 1,404,105,498 Ordinary
Shares of 8 1/6 pence each with an aggregated nominal value of
£114,668,616). All Ordinary Shares have been called up and fully
paid.
16: Provisions
|
|
|
|
|
£m
|
30 June 2024
|
Compensation
provisions
|
Sale of subsidiaries
provision
|
Property
provisions
|
Clawback and other
provisions
|
Total
|
Balance at beginning of the
year
|
17
|
3
|
10
|
16
|
46
|
Charge to profit or
loss
|
4
|
-
|
-
|
5
|
9
|
Used during the period
|
(2)
|
(2)
|
(1)
|
(6)
|
(11)
|
Unused amounts reversed
|
(4)
|
-
|
-
|
(1)
|
(5)
|
Balance at 30 June 2024
|
15
|
1
|
9
|
14
|
39
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
31 December 2023
|
Compensation
provisions
|
Sale of
subsidiaries provision
|
Property
provisions
|
Clawback
and other provisions
|
Total
|
Balance at beginning of the
year
|
23
|
15
|
12
|
19
|
69
|
Charge to profit or
loss
|
17
|
-
|
-
|
6
|
23
|
Used during the year
|
(14)
|
(12)
|
(2)
|
(8)
|
(36)
|
Unused amounts reversed
|
(9)
|
-
|
-
|
(1)
|
(10)
|
Balance at 31 December
2023
|
17
|
3
|
10
|
16
|
46
|
Compensation provisions
At 30 June 2024, compensation
provisions total £15 million (31 December 2023: £17 million). The
net reduction of £2 million during the period consists of
additional charges to profit or loss of £4 million, compensation
and professional fees payments of £2 million and £4 million release
of unused amounts following further review work completed during
the period. Compensation provisions comprise the
following:
Lighthouse pension transfer advice
provision of £5 million (31 December 2023: £6 million)
A further review of a sample of
Lighthouse DB to DC pension transfer advice cases not relating to
the British Steel Pension Scheme is being conducted by an
independent expert to identify any cases of unsuitable DB to DC
pension transfer advice. The review is being conducted under a
Group-managed past business review process, and the sample has been
selected on a risk-based approach. The review of this sample has
identified some additional cases where customer redress is
required. Until the review of the relevant sample has been
completed, uncertainty exists as to the number of cases where this
will be required and the value of total redress which may be
payable. A provision for redress relating to the review of this
further sample of cases was increased at 31 December 2023, based
upon the suitability review of cases, and the anticipated number of
cases required to be reviewed. Payments of £1 million were made to
customers during 2023. Anticipated costs
associated with the redress activity of £2 million were included
within the provision at 31 December 2023. Payments of £1 million of professional fees were made during
2024.
The Group estimates a reasonably
possible change of +/- £4 million from the £5 million balance,
based upon an increase or decrease of five percentage points in
redress as a percentage of transfer value.
Compensation provisions (other) of
£10 million (31 December 2023: £11 million)
Other compensation provisions of
£10 million include amounts relating to the cost of correcting
deficiencies in policy administration systems, including redress,
any associated litigation costs and the related costs to compensate
previous or existing policyholders and customers. This provision
represents management's best estimate of expected outcomes based
upon past experience, and a review of the details of each case. Due
to the nature of the provision, the timing of the expected cash
outflows is uncertain. The best estimate of the timing of outflows
is that the majority of the balance is expected to be settled
within 12 months.
A provision of £2 million,
included within the balance, has been recognised at 30 June 2024
(31 December 2023: £3 million) relating to potentially unsuitable
DB to DC pension transfer advice provided by adviser businesses
other than Lighthouse. The estimate of the provision has been
updated for the current status of the past business reviews and
redress estimated based upon the Group's experience of past
business reviews. Customer redress is expected to be calculated and
paid to relevant customers during the second half of
2024.
The Group estimates a reasonably
possible change of +/- £3 million from the £10 million balance,
based upon a review of the cases and the range of potential
outcomes for the customer redress payments.
Sale of subsidiaries provision
The sale of subsidiaries provision
totals £1 million at 30 June 2024 (31 December 2023: £3 million),
and includes the following:
Provisions arising on the sale of
Quilter International of £nil (31 December 2023: £2
million)
Quilter International was sold in
November 2021, resulting in provisions totalling £17 million being
established in respect of costs related to the disposal including
the costs of business separation and data migration
activities.
The costs
of business separation arise from the process required to separate
Quilter International's infrastructure, which was complex and
covered a wide range of areas including people, IT systems, data,
contracts and facilities. A programme team was established to
ensure the transition of these areas to the acquirer. These
provisions were based on external quotations and estimates,
together with estimates of the incremental time and resource costs
required to achieve the separation, which was expected to occur
over a two-to-three-year period from the date of the
sale.
The most significant element of
the provision was the cost of migration of IT systems and data to
the acquirer. Calculation of the provision was based on
management's best estimate of the work required, the time it is
expected to take, the number and skills of the staff required and
their cost, and the cost of related external IT services to support
the work. In reaching these judgements and estimates, management
made use of its past experience of previous IT migrations following
business disposals.
During the period, £2 million (31
December 2023: £9 million) of the provision related to decommissioning works has
been used, and the project is materially complete.
Property provisions
Property provisions total £9
million (31 December 2023: £10 million). Property provisions
represent the discounted value of expected future costs of
reinstating leased property to its original condition at the end of
the lease term, and any onerous commitments which may arise in
cases where a leased property is no longer fully used by the Group.
The estimate is based upon property location, size of property and
an estimate of the cost per square foot. Property provisions are
used or released when the reinstatement obligations are satisfied.
The associated asset for the property provisions relating to the
cost of reinstating property is included within Property, plant and
equipment.
Of the £9 million provision
outstanding, £2 million (31 December 2023: £3 million) is estimated
to be payable within one year. The majority of the balance relates
to leased properties which have a lease term maturity of more than
five years.
Clawback and other provisions
Clawback and other provisions
total £14 million (31 December 2023: £16 million) and include
amounts for the resolution of legal uncertainties and the
settlement of other claims raised by contracting parties and
indemnity commission provisions. Where the impact of discounting is
material, provisions are discounted at discount rates specific to
the risks inherent in the liability. The timing and final amounts
of payments, particularly those in respect of litigation claims and
similar actions against the Group, are uncertain and could result
in adjustments to the amounts recorded.
Included within the balance at 30
June 2024 is £10 million (31 December 2023: £12 million) of
clawback provisions in respect of potential refunds due to product
providers on indemnity commission within the Quilter Financial
Planning business. This provision, which is estimated and charged
as a reduction of revenue at the point of sale of each policy, is
based upon assumptions determined from historical experience of the
proportion of policyholders cancelling their policies, which
requires Quilter to refund a portion of commission previously
received. Reductions to the provision result from the payment of
cash to product providers as refunds or the recognition of revenue
where a portion is assessed as no longer payable. The provision has
been assessed at the reporting date and adjusted for the latest
cancellation information available. At 30 June 2024, an associated
balance of £8 million recoverable from brokers is included within
Trade, other receivables and other assets (31 December 2023: £8
million).
The Group estimates a reasonably
possible change of +/- £3 million, based upon the potential range
of outcomes for the proportion of cancelled policies within the
clawback provision, and a detailed review of the other
provisions.
Of the total £14 million provision
outstanding, £7 million is estimated to be payable within one year
(31 December 2023: £7 million).
17: Contingent liabilities
The Group, in the
ordinary course of business, enters into transactions that expose
it to tax, legal, regulatory and business risks. The Group
recognises a provision when it has a present obligation as a result
of past events, it is probable that a transfer of economic benefits
will be required to settle the obligation and a reliable estimate
of the amount can be made (see note 16). Possible obligations and
known liabilities where no reliable estimate can be made or it is
considered improbable that an outflow would result are reported as
contingent liabilities.
The Group routinely
monitors and assesses contingent liabilities arising from matters
such as business reviews, litigation, warranties and indemnities
relating to past acquisitions and disposals.
Tax
The Group is
committed to conducting its tax affairs in accordance with the tax
legislation of the countries in which it operates and this includes
compliance with legislation related to levies, sales taxes and
payroll deductions.
The tax authorities
in the countries in which the Group operates routinely review
historical transactions undertaken and tax law interpretations made
by the Group. All interpretations made by the Group are made with
reference to the specific facts and circumstances of the
transaction and the relevant legislation.
There are occasions
where the Group's interpretation of tax law may be challenged by
the tax authorities. The condensed consolidated financial
statements include provisions that reflect the Group's assessment
of liabilities which might reasonably be expected to materialise as
part of their review. The Group is satisfied that adequate
provisions have been made to allow for the resolution of tax
uncertainties.
Due to the level of
estimation required in determining tax provisions, amounts
eventually payable may differ from the provision
recognised.
DB to DC pension transfer advice
redress
As set out in note 16, a sample of
Lighthouse DB to DC pension transfer advice cases not relating to
the British Steel Pension Scheme is being reviewed under a
Group-managed past business review process. Until the review has
finalised, uncertainty exists as to the number of cases where
further review will be required and the value of total redress that
will be payable.
Customers have the legal right to
challenge the outcome of the review and the BSPS Redress Scheme in
respect of their case via a complaint to the Financial Ombudsman
Service. The review is being undertaken by a party who is
independent from the Group and has run a robust process overseen by
the FCA. The Financial Ombudsman Service may uphold further
challenges, which may lead to further redress payable by the
Group.
It is possible that
further material costs of redress may be incurred in relation to
past business reviews. Further customer redress costs may also be
incurred for other potential unsuitable DB to DC pension transfer
advice provided across the Group.
Any further redress
costs, and any differences between the provision and the final
payment to be made for any unsuitable DB to DC pension transfer
cases, will be recognised as an expense or credit in profit or
loss.
Complaints, disputes and regulations
The Group is
committed to treating customers fairly and remains focussed on
delivering good outcomes for customers to support them in meeting
their lifetime goals. During the normal course of business, from
time to time, the Group receives complaints and claims from
customers including, but not limited to, complaints to the
Financial Ombudsman Service and legal proceedings, enters into
commercial disputes with service providers and other parties, and
is subject to discussions and reviews with regulators. The costs,
including legal costs, of these issues as they arise can be
significant and, where appropriate, provisions have been
established.
Ongoing
Advice Evidence
In the preliminary
results announcement on 6 March 2024, the Group committed to
undertake a review of historical data and practices across the
Appointed Representative firms in the Quilter Financial Planning
network. Following discussion with the FCA, the review is being
conducted by a Skilled Person, and the Skilled Person was appointed
in June 2024 (see note 1).
Uncertainty exists as
to the results of the Skilled Person review, and what
recommendation, if any, the Skilled Person may make as to the
nature and form of any potential future remediation exercise and
the outcome of any related discussions with the FCA. As the Skilled
Person review is not sufficiently advanced, a present obligation
for any potential liability does not exist, and therefore no
liability in respect of remediation associated with this process
and the associated administrative costs of any potential future
remediation exercise is recognised in the interim financial
statements. The related critical accounting judgement is disclosed
in note 1. By early 2025, the Group expects to be able to provide
an update on the Skilled Person review.
Where the Group's
regular adviser oversight controls have determined, based on the
available evidence, that a customer may not have received the
servicing that they have paid for, or where the Group has received
complaints from customers regarding ongoing servicing, this has
been investigated, and, where appropriate, remediation has been
undertaken and recognised as a normal business as usual
expense.
The Group has
considered the potential implications of the Skilled Person review
and Ongoing Advice Evidence as part of its going concern assessment
(see note 1).
18:
Related party transactions
In the normal course
of business, the Group enters into transactions with related
parties. Loans to related parties are conducted on an arm's length
basis and are not material to the Group's results. There were no
transactions with related parties during the current period or
during 2023 which had a material effect on the results or financial
position of the Group.
19: Events after the reporting
date
Interim Dividend
On 6 August 2024, the Board
declared an Interim Dividend of 1.7 pence per Ordinary Share
amounting to £23 million in total. The Interim Dividend will be
paid on 23 September 2024 to shareholders on the UK and South
African share registers. These condensed consolidated interim
financial statements do not reflect this dividend
payable.