IntegraFin Holdings PLC — Earnings Release 2021

Dec 16, 2021

National Storage Mechanism | Additional information RNS Number : 8202V IntegraFin Holdings plc 16 December 2021 IntegraFin Holdings plc - Full Year Results for the Year Ended 30 September 2021 IntegraFin Holdings plc is pleased to report its results for the year to 30 September 2021. Highlights �� Profit after tax of ��51.1m (+12%) �� Funds under direction ��52.11bn (+27%) �� Gross inflows of ��7.70bn in the year (+34%) Alexander Scott, Chief Executive Officer, commented: "Our investment platform, Transact, has had another very strong year, with gross inflows at a record ��7.70 billion. I am especially pleased with our client retention rate of 96%, which reflects our determination to maintain our delivery of high quality value for money services. This is also evidenced in exceptional annual net inflows of ��4.95 billion. Great customer service is front and centre in everything we do. To achieve this, we continue to develop our systems and processes and, most importantly, invest in our people. It is their commitment to living up to the values we set for ourselves, and the Group collectively, which keeps our service standards so high. I would like to extend my thanks to all colleagues for their continued hard work. In January, we extended the excellence of systems and staff in the Group with our acquisition of Time for Advice (T4A), a specialist software provider for financial planning and wealth management firms. We see a strong fit between our culture and values and those of T4A. We will support the ongoing development of their CURO system and further invest in their staff. With increased revenues from business growth, plus controlled expenses, I am pleased to report that profit before tax and non-underlying expenses increased by 20% to ��66.5 million. The directors have declared an interim dividend of 7.0 pence per ordinary share, taking the total dividend for the year to 10.0 pence per share (2020: 8.3 pence per ordinary share). The dividend is payable on 21 January 2022 to ordinary shareholders on the register on 24 December 2021. The ex-dividend date will be 23 December 2021." Financial Highlights Year ended 30 September 2021 Year ended 30 September 2020 ��m ��m Funds under direction 52,112 41,093 Revenue 123.7 107.3 Profit before tax attributable to shareholder returns 63.1 55.3 Operating profit attributable to shareholder returns 63.2 55.3 Operating margin 51.1% 51.5% Basic and diluted earnings per share 15.4p 13.7p Contacts Media - Lansons Tony Langham +44 (0)7979 692287 Maddy Morgan-Williams +44 (0)7947 364578 Investors Jane Isaac +44 (0)20 7608 4937 Analyst Presentation IntegraFin Holdings plc will be hosting an analyst presentation on Thursday 16 December 2021 following the release of these results for the year ended 30 September 2021. Attendance is by invitation only. Slides accompanying the analyst presentation will be available on the IntegraFin Holdings plc website. Annual General Meeting The Annual General Meeting 2021 is scheduled to be held at 4pm on 24 February 2022 at 29 Clement's Lane, London EC4N 7AE and by telephone. Cautionary Statement These results have been prepared in accordance with the requirements of English Company Law and the liabilities of the directors in connection with these results shall be subject to the limitations and restrictions provided by such law. These results are prepared for and addressed only to the company's shareholders as a whole and to no other person. The company, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom these results are shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. These results contain forward looking statements, which are unavoidably subject to risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen. All statements in these results are based upon information known to the company at the date of this report. Except as required by law, the company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. CEO Review It has been another year of significant macro volatility. Our first quarter was one of increased optimism, as lockdowns started to ease and efficacious COVID-19 vaccines began to emerge. Then, less than a fortnight after the first UK vaccination was administered on 8 December 2020, the UK was forced back into full lockdown, the Brexit transition period ended, with many loose ends, and the US Capitol building was stormed. It has been a little calmer since, but many things remain far from normal. The time taken to administer vaccines across all age groups has meant our staff have continued to predominantly work from home, delivering our services remotely as effectively and efficiently as they can, and I thank them sincerely for their resilience, hard work and good humour throughout these trying times. Understandably, the confidence of our people about returning to office working remains low, with concerns about travelling on crowded public transport being the major anxiety. As long as the threat of another UK lockdown remains a serious possibility, we will retain our voluntary office attendance policy. We have engaged with our staff when considering options for returning to the office and we will continue to take account of their concerns and remain agile, as we look to determine the appropriate shape of new office environments and establish working patterns that not only support the success of the business, but also deliver positive outcomes for our people. Headlines The investment platform market has proven resilient throughout recent uncertainty and Transact has grown strongly over the course of the last financial year. We have continued to bring new clients on board, increasing clients on the investment platform by 9% over the year. This has been achieved through maintaining the number of advisers that use Transact and adding a further 5% through the period. At the end of the year our clients exceeded 208k, with more than 6.5k advisers actively using Transact. Gross inflows were 34% up on last year at ��7.70 billion, reflecting strong growth not just from the prior year, but also from pre COVID-19 levels. In the early stages of the first release from lockdown, outflows spiked slightly, but this did not last and they quickly reverted to expected levels, resulting in very strong net inflows of ��4.95 billion, up 38% year-on-year. The combination of very strong net inflows and positive market movements helped increase FUD at the year-end to ��52.11 billion, an increase of 27% over the year. Revenue in the year has increased to ��123.7 million, (+15%). This is predominantly generated by Transact, although the purchase of Time for Advice (T4A) has made a contribution since January. Core expenses across the Group have been sensibly managed throughout the year. T4A is loss making at this time, due to the costs of system development and an expansion in the number of sales and support staff. Additionally, non-underlying expenses resulting from acquisition processes have also been absorbed. After these costs, the Group's profit before tax has increased by 14% to ��63.1 million. Market background Equity market performance was strong through the first half of our financial year, with markets responding well to the US election result and the approval for multiple versions of COVID-19 vaccinations. This positivity was reflected in the advised platform market, with strong growth of gross inflows, which first returned to pre-COVID-19 levels and then, from early 2021, exceeded them. The timing of this recovery led to strong tax year end performance. The second half of the year continued in a similar vein, as a relatively successful vaccine rollout programme in the UK brought hope of a return to normality. The Christmas lockdown gradually began to ease and businesses started to return to more usual working practices. There has also been considerable activity in the investment platform market throughout the year, resulting in several changes of platform ownership. It is too early yet to be clear how much of this activity will result in true consolidation and a reduction in the number of platforms, and how much will be rebranding and ownership consolidation. Even with this activity, over the full year, the retail advised platform market FUD grew by 20% from ��460.52 billion (September 2020) to ��553.28 billion (September 2021). Our activity In January, we took the opportunity to broaden the services we offer to advisers by completing the acquisition of T4A, a specialist software provider for financial planning and wealth management firms based in Norwich. This expands the Group's offering of adviser services through T4A's CURO software, an adviser back office system. The acquisition gives access to T4A's existing base of adviser users, their system development expertise and service support. Like Transact, T4A is focused on the delivery of function rich systems, with high quality support and we believe CURO will be complementary to Transact. We also considered an opportunity for the non-organic growth of the investment platform business, engaging in the acquisition process for the Nucleus platform. Ultimately, due to the high hurdles we set in order to proceed with any acquisition not being satisfactorily cleared, we decided to withdraw from this process. Focusing on organic growth, we have continued delivering incremental additions to the functionality of our investment platform. Continuing states of lockdown have added to the impetus to deliver increased online optionality. We have been able to achieve this through changes to our development schedule, refocussing our software developers on providing tools to remove the need for paper documents and wet signatures. Successful delivery of these developments has resulted in NextWealth revising our rating upwards to Digital Process Champion in April 2021. Whilst we will continue to extend the capability of our online systems, we will also continue to provide support to those users who are not yet ready to embrace these developments. With significantly increased flows over the year, this has increased pressure on our service teams to maintain the service standards we set ourselves. Recruitment of experienced staff has proven more difficult in recent months, as COVID-19 has led many people to consider their priorities for the future and, globally, many are opting to make permanent changes to their lifestyles. We have, and will continue to, engage with our colleagues, asking for their views on the shape of future office working. We have again reduced the cost of Transact to clients, following our process of responsible pricing. Reductions were made to both ad valorem and buy transaction charges. Transact has seen further small growth in market share of FUD. As well as consistently ranking in the top three firms for gross inflows each quarter, and also retaining top spot in annual independent research studies, Investment Trends and CoreData. We are a generally low-carbon business, but we are mindful of our environmental responsibilities and we are developing our climate strategy. To this end, we engaged Willis Towers Watson to assess and help us enhance our alignment to the Task Force on Climate-related Financial Disclosure (TCFD) recommendations, in preparation for disclosure and to help boost our Environmental Social and Governance (ESG) considerations. We were also keen to gain insights into our current sustainability positioning. The outputs from this work are being used to develop our ESG strategy, and are expected to be finalised by June 2022. Implementation of the strategy will commence after the strategy is finalised. The outlook The positivity from the last three months of the 2021 financial year have continued in to the start of the new financial year. However, much uncertainty persists, with COVID-19 and impacts of the end of the Brexit transition still emerging. From 1 January 2022, the new Investment Firms Prudential Regime, setting out post-Brexit regulations for investment firms, will come in to force. Among other impacts, these rules will result in higher capital requirements for our investment firm. This has been planned for, with sufficient capital having been built up and retained. The advised platform market is expected to continue to grow 18% in 2022. We aim to continue to grow our share, as we refine our systems and processes, further developing and expanding the financial infrastructure and associated services we offer. We will help drive the development of CURO and grow the adviser service team at T4A, ensuring that increasing sales volumes are properly supported. However, we expect T4A to continue to be loss-making next year, as it builds its capability to support a larger adviser base. Additionally, the acquisition of T4A will result in an increase in non-underlying expenses for the next three years, but we believe this acquisition and the development of the CURO system will then deliver an independent profit stream, as well as future strategic benefits derived from closer integration between the Transact system, Transact Online and CURO. We will continue investing in our staff. We will support them and seek to ensure we arrive at an optimum work-life balance that still achieves our strategic objectives. We realise our people are front and centre of our success. We will improve our working environment, as our main office lease draws to an end and we consider new premises. We aim to use this opportunity to improve the well-being of staff and to assist with managing our environmental impact, a full plan for which is being developed and acted on. We will do this whilst managing our cost base prudently, and continue to deliver fair returns for all of our stakeholders. Alexander Scott Chief Executive Officer 15 December 2021 FINANCIAL REVIEW Strength in numbers Our financial year 2020 was marked by global market turbulence and worried investors, due to the speed at which the pandemic ground the world to a locked down halt. Despite this, we produced a resilient set of results. Financial year 2021 started off in a similar vein, but then news broke that an effective vaccine had been developed, followed by the successful roll out of the British vaccination programmes. As positive news emerged, pre-pandemic life began to slowly resume and financial markets recovered, with the FTSE 100 growing 21% year-on-year, to end September 2021 at 7,086 points (September 2020: 5,866 points). However, future impacts of Brexit on the British economy remain on the horizon and the potential disruption, as the pandemic ebbs and flows, is also an economic risk, possibly for years to come. FUD started the financial year at ��41.09 billion and grew an impressive 27%, to end the year at ��52.11 billion. The increase in FUD is not solely attributable to the financial markets and is also due to record net flows onto the platform for the financial year. The first quarter of the year was impacted heavily by continuing lockdowns and COVID-19 cases spiking, as the Delta variant took hold, resulting in net flows for the quarter remaining subdued at ��840 million. However, from the second quarter of our financial year onwards, and as the positive impact of the vaccine programme emerged, net flows increased dramatically, with each quarter exceeding ��1.3 billion in net flows. The market recovery and strong net flows has resulted in increased revenue and increased profits. FUD, inflows and outflows For the financial year ended 30 September 2021 ��m 2020 ��m Opening FUD 41,093 37,799 Inflows 7,695 5,750 Outflows (2,744) (2,160) Net flows 4,951 3,590 Market movements 6,297 (224) Other movements1 (229) (72) Closing FUD 52,112 41,093 1 Other movements includes dividends, interest, fees and tax charges and rebates. The year's gross inflows were ��7.70 billion (2020: ��5.75 billion) and outflows remained within tolerance at ��2.74 billion (2020: ��2.16 billion), resulting in increased net inflows of ��4.95 billion (2020 ��3.59 billion), up 38% year-on-year. The increase in net flows is one that we have focused on, as it demonstrates the resilience of the platform and our impressive retention rates, as our people have strived to maintain service levels throughout a year of, for the most part, working remotely. This performance was achieved through continuing focus on doing what we do well, and continuing to make it better and more efficient for the future. We continued to develop the delivery of our high quality service by investing in our people and our proprietary technology. These developments allowed us to benefit from ongoing process efficiencies, which are reflected in our increased operating margin. Strategic developments On 11 January 2021, IntegraFin Holdings plc (IHP) completed the acquisition of T4A, a specialist software provider for financial planning and wealth management. The acquisition supports IHP's strategy to provide platform and associated services to clients and their advisers. The acquisition provides IHP with ownership of T4A's CURO software, which supports advisers through their advice process, plus access to T4A's existing base of adviser users, their system development expertise and service support. Ongoing support and development of CURO will aid T4A in achieving profitability. Over time, IHP's Transact platform will integrate with CURO in selected areas, and this will further enhance service to advisers and clients. The acquisition cost comprised an up-front cash payment of ��8.6 million, plus ��8.6 million of deferred consideration, payable in tranches over the next four years. Additional consideration of up to ��8.6 million may also be payable in January 2025, although this is contingent on T4A meeting certain performance targets over each of the next four years. The cash payments, plus ��0.4 million of the deferred and additional consideration, were considered part of the purchase cost, whilst the remaining fair value of ��12.5 million deferred and additional consideration is required, under IFRS 3 - Business Combinations, to be treated as post-combination remuneration over the four years from January 2021 to December 2024. The expense recognised by IHP in respect of the deferred and additional consideration and included in staff costs, from January to September 2021, was ��2.2 million, this will rise to ��3 million in financial year 2022. On acquisition, the Group recognised intangible assets of ��4.3m, relating to T4A's CURO software, the CURO brand and T4A's customer relationships. These assets are being amortised over their respective useful lives, resulting in ��0.3m amortisation expenses in this financial year. Further details can be found in note 13. The fair value of identifiable assets and liabilities acquired, including the intangibles recognised on acquisition and the deferred tax liability arising upon recognition of the intangible assets, was ��3.6 million, leading to the recognition of ��5.3 million goodwill. The main reason the goodwill has arisen is due to the further potential value of the T4A software, CURO, after further development, which is a complementary offering to Transact and is expected to enhance the overall service that can be offered to advisers and clients. With effect from the date of acquisition on 11 January, T4A's accounts have been consolidated into IHP's results, resulting in the inclusion of ��2.4m of revenue achieved from 11 January to 30 September 2021, and losses after tax of ��1.0 million in the same period. T4A will require enhanced investment for the next two years, due to the business investing in its software development through recruitment of developers, and also through growing the sales and support teams to ensure the growing customer base is fully supported. T4A's loss in financial year 2021 was expected. T4A is also expected to be loss-making throughout financial year 2022, and is expected to start making a monthly profit towards the end of financial year 2023. Financial performance Financial year 2021 saw the Group benefitting from the financial markets recovering and the return of investor confidence, with new highs generated in revenue and operating profit. Strong positive net inflows of ��4.95 billion, achieved through our ability to attract new inflows and also retain business already on the platform, coupled with market recovery adding ��6.30 billion to the platform, resulted in a year-on-year increase in FUD of ��11.02 billion. This drove revenue growth and, together with to a measured approach to our expense base, resulted in increased profits. For the financial year ended 30 September 2021 2020 ��m ��m Revenue 123.7 107.3 Cost of sales (1.5) (0.8) Gross profit 122.2 106.5 Expenses (55.5) (51.0) Non-underlying expenses (3.3) - Total administrative expenses (58.8) (51.0) Credit loss allowance on financial assets (0.2) (0.2) Operating profit attributable to shareholder returns 63.2 55.3 Change in investment contract liabilities (2,736.1) 82.9 Fee and commission expenses (204.1) (137.6) Investment returns 2,940.2 54.7 Interest expense (0.2) (0.2) Interest income 0.1 0.2 Profit before tax attributable to shareholder returns 63.1 55.3 Net policyholder income/(loss) attributable to policyholder returns 31.5 (3.1) Policyholder tax (31.0) 3.1 Tax on ordinary activities (12.5) (9.8) Profit after tax 51.1 45.5 Revenue increased by 15% to ��123.7 million (2020: ��107.3 million), this includes ��2.4 million of T4A revenue for the period January to September 2021. Total gross profit in the financial year to 30 September 2021 increased by ��15.8 million, or 15%, to ��122.2 million from ��106.4 million. This increase was achieved after a reduction in the annual commission income charge and a reduction in the threshold at which we rebate buy commission, and reflects the increases in the value of FUD, number of clients and number of tax wrappers (on which we levy a quarterly charge) held on the platform. Components of revenue For the financial year ended 30 September 2021 2020 ��m ��m Investment platform - annual commission income 107.7 94.5 Investment platform - wrapper fee income 10.6 9.7 Investment platform - other income 3.0 3.1 Total investment platform revenue 121.3 107.3 T4A revenue 2.4 - Total Group revenue 123.7 107.3 The revenue from operating our award winning investment platform comprises three elements. Two of these elements, annual commission income (an annual, tiered fee on FUD) and wrapper fee income (quarterly wrapper fees for each of the tax wrapper types clients hold) constitute our recurring revenue. The third element is other income and includes buy commission charged on asset purchases. Annual commission income increased by ��13.2 million, or 14%, to ��107.7 million (2020: ��94.5 million). This growth was achieved through growth in net inflows of 38% and growth in average FUD of 27%, reflecting the uplift in financial markets from the start of calendar year 2021. Wrapper administration fee income increased by ��0.9 million, or 9%, to ��10.6 million (2020: ��9.7 million). This reflects the steady net increase in the number of open tax wrappers on the platform. Recurring revenue streams constituted 98% (2020: 97%) of total investment platform revenue. Other income, mainly buy commission and dealing charges, reduced by 3%, ��0.1 million, to ��3.0 million (2020: ��3.1 million). The primary reason for the decrease was a further annual reduction in the buy commission rebate threshold. The portfolio value required for clients to receive the rebate was reduced from ��0.4 million to ��0.3 million, with effect from March 2021. Administrative expenses Total administrative expenses increased by ��7.7 million, or 15%, to ��58.9 million (2020: ��51.0 million). The increase was mainly due to an increase in staff costs, as well as some non-underlying expenses. Administrative expenses For the financial year ended 30 September 2021 2020 ��m ��m Staff costs 41.6 36.9 Occupancy 1.4 2.0 Regulatory and professional fees 7.6 7.0 Other income - tax relief due to shareholders (2.2) (1.1) Non-underlying expenses 3.3 - Other costs 3.9 3.6 Total expenses 55.6 48.4 Depreciation and amortisation 3.1 2.6 Total operating expenses 58.7 51.0 Staff costs Staff costs increased by ��4.7 million, or 13%, to ��41.6 million (2020: ��36.9 million). The costs of T4A's staff of ��2.4 million are recognised for the first time, and relate to the period from acquisition on 11 January 2021 to 30 September 2021. If we exclude the impact of T4A's staff costs, in order to generate a more meaningful comparison with the prior year, staff costs have risen by ��2.3 million, or 6%. Average staff numbers increased from 494 to 543, an increase of 10%. However, this includes the average number of staff employed by T4A in the period from January to September 2021, which was 42. If we exclude the impact of T4A, the average number of staff increased from 492 to 501, an increase of 2%. This relatively modest rise in staff numbers, in light of such strong inflows, was aided by efficiency gains through software development. The rise in staff costs in the period, excluding T4A, was attributable to the net effects of general inflationary increases. We maintained our annual staff payrise in June and our FY21 discretionary bonus has been accrued for in the year. Staff share scheme costs, both the Share Incentive Plan (SIP) for all staff and the Performance Share Plan (PSP) for management, did not increase materially. We operate a defined contribution pension scheme for our staff. The Company-paid contribution has been 9% of annual salary since FY19. Occupancy Occupancy costs decreased by ��0.6 million, due to the receipt of a backdated rates rebate in FY21 for the head office at Clement's Lane. The rebate will be ongoing to the expiry of the lease in 2023. Regulatory and professional fees Regulatory and professional fees increased by ��0.6 million, or 9%, to ��7.6 million. The most significant increase was in professional fees and was mostly due to the inclusion of T4A's professional fees for the relevant period of ��0.4 million. Other income - tax relief due to shareholders Following the review of the tax provision methodology in FY20, excess tax provisions that arise, due to the deduction of corporate expenses in the policyholder tax calculation, are returned to shareholders annually. This amounted to ��2.2 million in FY21 (2020: ��1.1 million) of which ��1.1 million is not expected to be recurring. Non-underlying expenses Non-underlying expenses are those outside the normal course of business, they therefore do not reflect the underlying performance of IHP or the Group. The following non-underlying expenses were incurred throughout the year: �� ��1.1 million relating to the acquisition of T4A and consideration of the acquisition of Nucleus; and �� ��2.2 million post-combination remuneration paid 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. This non-underlying expense is expected to be ��3 million in financial years 2022 to 2024, before reducing to ��0.8 million in financial year 2025. Depreciation and amortisation Depreciation and amortisation charges increased by ��0.5 million year-on-year and ��0.3 million of this is attributable to the amortisation of the intangible assets that have arisen due to the acquisition of T4A. The other ��0.2 million is due to additional depreciation on property, plant, and equipment acquired throughout the year. Total capitalised expenditure for the financial year was ��0.7 million compared with ��0.9 million in the prior year. The main reason for the fall in FY21 was the purchase of equipment in FY20 to facilitate the move to home working, as lockdowns were introduced due to the pandemic. Net income attributable to policyholder returns, and policyholder tax Net income attributable to policyholder returns increased by ��34.6 million, from an expense of ��3.1 million in FY20 to income of ��31.5 million in FY21. Correspondingly, policyholder tax increased by ��34.6 million, from a tax credit of ��3.1m in FY20 to a tax charge of ��31.5 million in FY21. Both of these increases were due to large gains on investments held for the benefit of policyholders, as a result of the recovery in financial markets during FY21. Profit before tax attributable to shareholder returns In the financial year to 30 September 2021, our operating margin decreased from 52% to 51%. The reduction was due to the non-underlying expenses incurred in FY21. If these expenses are excluded, the operating margin has increased year-on-year to 54%. After including interest income on corporate cash, the interest expense arising from the implementation of IFRS 16, and returns on corporate gilt holdings, profit before tax in the financial year to 30 September 2021 was ��63.1 million, an increase of 14% on the prior year. Tax The Group has operations in three tax jurisdictions, being UK, Australia and Isle of Man, resulting in profits being subject to tax at three different rates. However, the vast majority of the Group's income, 96%, is earned in the UK. Tax on ordinary activities described below solely comprises the Group's 'shareholder corporation tax', which is distinguished from the 'policyholder tax' that the Group collects and remits to HMRC in respect of ILUK, which is taxed under the 'I minus E' tax regime. Tax on ordinary activities for the year increased by ��2.8 million, or 29%, to ��12.5 million (2020: ��9.8 million) due to increased profits. Our effective rate of tax over the period increased to 20% (2020: 18%). The increase in effective rates compared to FY20 was due to the non-underlying expenses incurred in FY21, which were disallowable for tax purposes. Our tax strategy can be found at: https://www.integrafin.co.uk/legal-and-regulatory-information/ Earnings per share 2021 2020 ��m ��m Profit after tax for the period 51.1 45.5 Average number of shares - basic EPS 331.0m 331.2m Average number of shares - diluted EPS 331.3m 331.3m Earnings per share - basic and diluted 15.4p 13.7p Earnings per share, both basic and diluted, increased by 12.4% on prior year. Consolidated statement of financial position In the consolidated statement of financial position, the material items that merit comment include the following: Intangible assets (note 13) The Group's intangible assets as at 30 September 2021 have increased by ��9.3 million, or 72%, to end the financial year at ��22.3 million (2020: ��13.0 million). The intangible assets comprise goodwill of ��13.0 million arising from the purchase of Integrated Application Development Pty Ltd (IAD) in July 2016, plus goodwill of ��5.3 million and intangible assets of ��4.0 million, both arising from the acquisition of T4A in January 2021. Goodwill is tested for impairment annually. Right-of-use asset and corresponding lease liability (notes 15 and 26) The right-of-use assets have been depreciated through the year and end the year at ��3.6 million (2020: ��4.0 million). The lease liabilities have also reduced from the net effect of rent payments under the terms of the respective lease agreements and interest charges, and end the year at ��5.0 million (2020: ��6.1 million). An additional right-of-use asset and lease liability was recognised in FY21, as the lease on the office building in Australia was renewed. Deferred acquisition costs and deferred income liability (note 17) Following a review of the terms of the agreements relating to establishment charges paid to ILUK and ILInt policyholders' financial advisers, management has concluded that the Group is acting in an agency capacity between the policyholders and their financial advisers, rather than as a principal. It therefore should not recognise the deferred acquisition costs as contract costs, nor does it have future service obligations in respect of the deferred fees to justify the recognition of the corresponding deferred income liability. The deferred acquisition costs and deferred income liabilities have therefore been derecognised in the financial year ended 30 September 2021, to bring accounts in line with the accounting standards. The impact is a reduction in both assets and liabilities of ��53.5m. The treatment has had no impact on the profit or loss or net assets of the Group. Investments and cash held for the benefit of policyholders and liabilities for linked investment contracts (notes 19, 20 and 21) ILUK and ILInt write only unit-linked insurance policies. They match the assets and liabilities of their linked policies such that, in their own individual statements of financial position, these items always net off exactly. These line items are required to be shown under IFRS in the consolidated statement of profit or loss, the consolidated statement of financial position and the consolidated statement of cash flows, but have zero net effect. Investments held for the benefit of ILUK policyholders have increased to ��19.68 billion (2020: ��15.19 billion) and to ��2.10 billion (2020: ��1.53 billion) for the benefit of ILInt policyholders. Cash held for the benefit of ILUK policyholders has decreased to ��1.17 billion (2020: ��1.28 billion) and cash held for the benefit of ILInt policyholders has decreased to ��97.5 million (2020: ��102.7 million). Liabilities for linked investment contracts increased to ��23.05 billion (2020: ��18.11 billion). This 27% year-on-year increase reflects the growth in the value of FUD held in life insurance wrappers, which was attributable to the net effect of growth in premiums, offset by claims, and the market recovery in 2021. Deferred tax liabilities (note 27) Deferred tax liabilities increased by ��20.5 million to ��29.5 million (2020: ��9.0 million). This increase was primarily due to market gains on the assets held in ILUK's life tax wrappers during the year. The unrealised gains are spread over the next seven years, leading to a deferred tax liability. Sufficient cash is held by ILUK to meet this liability. A deferred tax liability of ��0.8m has also been recognised in relation to the fair value adjustments upon the acquisition of T4A. See note 13 for further details. Provisions (note 29) Provisions have decreased in FY21 by ��7.4 million. This is largely due to tax charges deducted from ILUK policyholders being paid to HMRC in the period, due to the recovery in the financial markets through the year. Cash flows Shareholder cash and cash equivalents (note 21) Shareholder cash increased from ��154.1 million at 30 September 2020 to ��176.1 million at 30 September 2021. The increase of 14% reflects the cash-generative nature of the business and the continuing strength of liquidity within the Group. The main driver of the increase was operating profit, and the most significant cash outflows came in the form of our equity dividends paid in the year of ��27.7m (2020: ��26.2m) and our acquisition of T4A, which required a cash outflow of ��7.9m (2020: ��nil). Policyholder cash and cash equivalents (note 21) Cash held for the benefit of policyholders has decreased from ��1.39 billion to ��1.27 billion. This is a result of the improved market outlook in FY21, which has encouraged policyholders to move their cash holdings into other investments. Liquidity and capital management At 30 September 2021 the Group held shareholder cash and cash equivalents of ��176.1 million (2020: ��154.1 million). Cash generated through trading also covered dividend payments totaling ��28.5 million. This comprised ��18.6 million second interim dividend in respect of the financial year 2020 (2019: ��17.2 million), paid in January 2021 and ��9.9 million first interim dividend in respect of the first half of financial year 2021 (2020: ��8.9 million), paid in June 2021. To enable the Group to offer a wide range of tax wrappers there are three regulated entities within the Group; a UK investment firm, a UK life insurance company and an Isle of Man life insurance company. Each regulated entity maintains capital well above the minimum level of regulatory capital required, ensuring sufficient capital remains available to fund ongoing trading and future growth. Cash and investments in short-dated gilts are held to cover regulatory capital requirements and tax liabilities. The regulatory capital requirements and resources in ILUK and ILInt are calculated by reference to economic capital-based regimes, and therefore do not directly equate to IFAL's expense-based regulatory capital requirements. These bases are determined by the appropriate regulations that apply for each of the companies. Regulatory Capital For the financial year ended 30 September 2021 Regulatory Capital requirements Regulatory Capital resources Regulatory Cover ��m ��m % IFAL 25.4 37.2 146.7 ILUK 214.1 268.7 125.5 ILInt 23.9 43.4 181.1 For the financial year ended 30 September 2020 Regulatory Capital requirements Regulatory Capital resources Regulatory Cover ��m ��m % IFAL 24.0 34.1 141.8 ILUK 170.4 239.3 140.4 ILInt 18.5 33.4 180.7 The new investment firm capital regime will apply to IFAL from 1 January 2022. We have performed projections which indicate that from this point we will continue to maintain capital in excess of the new regulatory requirements. All of 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 staff. Capital For the financial year ended 30 September 2021 ��m Total equity 163.3 Loans and receivables, intangible assets and property, plant and equipment (31.2) Available capital pre dividend 132.1 Interim dividend declared (23.19) Available capital post dividend 108.91 Additional risk appetite capital (58.4) Surplus 50.51 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 is able to meet future risks to the business plan and future changes to regulatory capital requirements without recourse to additional capital. The board considers the impact of regulatory capital requirements and risk appetite levels on prospective dividends from all of its regulated subsidiaries. Our Group's Pillar 3 document contains further details and can be found on our website at: https://www.integrafin.co.uk/legal-and-regulatory-information/ Pillar 3 Disclosures. 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 10.0 pence per ordinary share (2020: 8.3 pence per ordinary share) Given the net cash, liquidity and capital coverage positions as set out above, the Group is well-positioned to fund the ��23.193 million dividend. 2021 2020 Dividend Type Share Class ��m ��m Ordinary All 33.1 27.5 Per share Ordinary - first interim All 3.0 pence 2.7 pence Ordinary - second interim All 7.0 pence 5.6 pence Given the net cash, liquidity and capital coverage positions as set out above, the Group is well positioned to fund the ��18.6 million dividend. 15 December 2021 Key risks There are factors within and outside our control that may affect the achievement of our strategic objectives. We aim to mitigate exposures that are outside our risk appetite where possible. The key risks associated with our strategic objectives are: 1. Stock market volatility: Financial year 2020 was characterised by financial markets plunging, followed by daily market swings, as the severity of the pandemic emerged. Financial year 2021, however, has largely been one of recovery, as COVID-19 vaccines have been developed and rolled out worldwide and investor confidence has returned. The real impact of Brexit and the UK's deal with the EU is yet to fully emerge and it has been masked by the economic shock of the pandemic. However, it is expected that Brexit will impact stock markets for the foreseeable future. Stock market volatility impacts the value of our investment platform FUD and, therefore, revenue. Risk management and control: The risk of stock market volatility, and the impact on revenue, is mitigated through a wide asset offering which ensures we are not wholly correlated with one market, and which enables clients to switch assets in times of uncertainty. In particular, clients are able to switch into cash assets, which remain on our investment platform. Our wrapper fees are not impacted by stock market volatility, as they are a fixed quarterly charge. Due to the acquisition of T4A, we also now have another revenue stream which is not affected by stock market movements. We closely monitor and control expenses across the Group, which assists in maintaining profit in turbulent times. 2. Service standards failure: Our high levels of client and adviser retention are dependent upon our consistent and reliable levels of service. Failure to maintain these service levels would affect our ability to attract and retain business. Risk management and control: We manage the risk of service standards failure by ensuring our service standards do not deteriorate. This is achieved by providing our client service teams with extensive initial and ongoing training, supported by experienced subject matter experts and managers. We strive to ensure staffing levels remain appropriate, through forecasting and tracking levels of business and analysing management information on team performance. We recruit high calibre staff as necessary. Service levels are monitored and quality checked and any deviation from expected service levels is addressed. We also conduct satisfaction surveys to ensure our service levels are still perceived as excellent by our clients and their advisers. Service standards are also dependent on resilient operations, both current and forward looking, ensuring that risk management is in place. 3. Increased competition: We operate in competitive markets. Increased levels of competition for adviser and their clients; improvements in offerings from other investment platforms; and consolidation in the adviser market may all make it more challenging to attract and retain business. Risk management and control: Competitor risk is mitigated by focusing on providing exceptionally high levels of service, developing new products and platform functionality and being responsive to client and financial adviser demands whilst maintaining an efficient expense base. This allows us to continue to increase the value for money of our service by reducing client charges, subject to profit and capital parameters, when deemed appropriate. 4. Diversion of 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, a change in the taxation regime, or other regulatory developments) may affect our competitive position. Risk management and control: The risk of reduced investment 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. 5. Uncontrolled expenses: Higher expenses than expected and budgeted for would adversely impact cash profits. The key constituent of expenses is salary costs, but other expenses are more likely to change unexpectedly, for example legal, compliance or regulatory costs and levies. Risk management and control: The most significant element of our expense base is staff costs. These are controlled through modelling staff requirements against forecast business volumes, factoring in efficiencies that it is expected will emerge through platform development. Any expenditure request that deviates from plan is rigorously challenged and must be approved before it is incurred. 6. Capital strain: Unexpected, additional capital requirements imposed by regulators may negatively impact our solvency coverage ratios. Risk management and control: We actively monitor the current and expected future regulatory environment and ensure that all regulatory obligations are or will be met. By doing so, we ensure we have a proactive control to mitigate the potential for capital strain. 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. 7. Staff retention: Inability to retain staff and attract new staff, due to changing cultural expectations, unrealistic salary expectations and competitor pressure. Risk management and control: We ask all leavers to complete a questionnaire which details their reasons for leaving the Group. We can then monitor and proactively seek to act should clear trends emerge. We perform salary benchmarking exercises to ensure we do not fall behind the prevailing market rate and we ensure our total compensation package is attractive. This is coupled with comprehensive training for new starters and opportunities for career development within the Group. We are also implementing a hybrid working model to accommodate shifting cultural expectations around office working. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Annual Report and the financial statements in accordance with the Companies Act 2006 and for being satisfied that the Annual Report and financial statements, taken as a whole, give a fair, balanced and understandable view which provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group and Company for that period. In preparing the financial statements, the directors are required to: �� select suitable accounting policies and then apply them consistently; �� make judgements and estimates that are reasonable and prudent; �� state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union,, subject to any material departures disclosed and explained in the financial statements; �� prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and Group will continue in business; and �� prepare a directors' report, a strategic report and directors' remuneration report which comply with the requirements of the Companies Act 2006. The directors are responsible for keeping adequate accounting records that show and explain the Group's transactions, disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. Directors' responsibilities pursuant to DTR4 The directors confirm to the best of their knowledge: �� The Group financial statements have been in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group. The annual report includes a fair review of the development and performance of the business and the financial position of the Group and the parent company, together with a description of the principal risks and uncertainties that they face. The current directors, at the date of approval of this report, confirm that: �� they have taken all of the steps that they ought to have taken as directors to make themselves aware of any information needed by the Company's auditor for the purposes of the audit, and to establish that the auditor is aware of that information; �� they are not aware of any relevant audit information of which the auditor is unaware; �� to the best of their knowledge, the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer and the undertakings included in the consolidation taken as a whole; �� the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and �� the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the performance, strategy and business model of the Company and Group. The directors consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements as they believe the Group will continue to be in business, and meet any liabilities as they fall due, for a period of at least twelve months from the date of approval of the financial statements. By order of the board, Helen Wakeford Company Secretary 15 December 2021 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Note 2021 2020 ��'000 ��'000 Revenue Fee income 5 123,670 107,320 Cost of sales (1,490) (865) Gross profit 122,180 106,455 Administrative expenses 8 (58,738) (51,016) Credit loss allowance on financial assets 23 (230) (176) Net income/(loss) attributable to policyholder returns 12 31,526 (3,066) Operating profit 94,738 52,197 Operating profit/(loss) attributable to policyholder returns 12 31,526 (3,066) Operating profit attributable to shareholder returns 63,212 55,263 Change in investment contract liabilities (2,736,063) 82,895 Fee and commission expenses 20 (204,123) (137,536) Investment returns 10 2,940,167 54,677 Interest expense 26 (167) (233) Interest income 9 94 256 Profit on ordinary activities before taxation 94,646 52,256 Profit/(loss) on ordinary activities before taxation attributable to policyholder returns 12 31,526 (3,066) Profit on ordinary activities before taxation attributable to shareholder returns 63,120 55,322 Policyholder tax 12 (31,015) 3,066 Tax on profit on ordinary activities 11 (12,525) (9,838) Profit for the financial year 51,106 45,484 Other comprehensive (loss)/income Exchange (losses)/gains arising on translation of foreign operations (72) 22 Total other comprehensive (losses)/income for the financial year (72) 22 Total comprehensive income for the financial year 51,034 45,506 Earnings per share Earnings per share - basic and diluted 7 15.4p 13.7p All activities of the Group are classed as continuing. Notes 1 to 37 form part of these Financial Statements. COMPANY STATEMENT OF COMPREHENSIVE INCOME Note 2021 2020 ��'000 ��'000 Revenue - - Cost of sales - - Gross profit - - Administrative expenses 8 (4,739) (1,208) Credit loss allowance on financial assets (32) (85) Operating loss (4,771) (1,293) Dividend income 37 42,103 32,326 Interest expense (235) - Interest income 9 76 91 Profit on ordinary activities before taxation 37,173 31,124 Tax on profit on ordinary activities 11 - - Profit for the financial year 37,173 31,124 Other comprehensive income - - Total comprehensive income for the financial year 37,173 31,124 All activities of the Company are classed as continuing. Notes 1 to 37 form part of these Financial Statements. CONSOLIDATED STATEMENT OF FINANCIAL POSITION Note 2021 2020 ��'000 ��'000 Non-current assets Loans 18 3,420 2,647 Intangible assets 13 22,286 12,951 Property, plant and equipment 14 1,827 2,313 Right-of-use assets 15 3,632 3,961 Deferred tax asset 27 716 489 Deferred acquisition costs 17 - 53,482 31,881 75,843 Current assets Financial assets at fair value through profit or loss 22 5,134 5,051 Other prepayments and accrued income 23 15,951 14,412 Trade and other receivables 24 3,719 3,556 Investments held for the benefit of policyholders 19 21,787,106 16,727,208 Cash and cash equivalents 21 1,442,362 1,539,843 Current tax asset 1,122 53 23,255,394 18,290,123 Current liabilities Trade and other payables 25 17,466 18,366 Provisions 29 11,624 - Lease liabilities 26 2,362 2,375 Liabilities for linked investment contracts 20 23,053,390 18,112,935 23,084,842 18,133,676 Non-current liabilities Provisions 29 6,180 25,208 Contingent consideration 30 791 - Lease liabilities 26 2,675 3,712 Deferred income liability 17 - 53,482 Deferred tax liabilities 27 29,518 8,968 39,164 91,370 Net assets 163,269 140,920 Capital and reserves Called up equity share capital 3,313 3,313 Capital redemption reserve 31 2 2 Share-based payment reserve 32 2,404 1,698 Employee Benefit Trust reserve 33 (2,055) (1,103) Foreign exchange reserve 34 (94) (22) Non-distributable reserves 34 5,722 5,722 Non-distributable insurance reserves 34 501 501 Profit or loss account 153,476 130,809 Total equity 163,269 140,920 These Financial Statements were approved by the Board of Directors on 15 December 2021 and are signed on their behalf by: Alexander Scott Director Company Registration Number: 08860879 Notes 1 to 37 form part of these Financial Statements. COMPANY STATEMENT OF FINANCIAL POSITION Note 2021 2020 ��'000 ��'000 Non-current assets Investment in subsidiaries 16 31,563 16,832 Loans receivable 18 3,420 2,647 34,983 19,479 Current assets Prepayments 23 45 56 Other receivables 24 133 342 Cash and cash equivalents 30,962 26,090 31,140 26,488 Current liabilities Trade and other payables 25 2,420 491 Loans payable 18 1,000 - 3,420 491 Non-current liabilities Contingent consideration 30 791 - Loans payable 18 8,000 - 8,791 - Net assets 53,912 45,476 Capital and reserves Called up equity share capital 3,313 3,313 Profit or loss account 50,673 41,962 Share-based payment reserve 32 1,715 1,070 Employee Benefit Trust reserve 33 (1,789) (869) Total equity 53,912 45,476 These Financial Statements were approved by the Board of Directors on 15 December 2021 and are signed on their behalf by: Alexander Scott Director Company Registration Number: 08860879 Notes 1 to 37 form part of these Financial Statements. CONSOLIDATED STATEMENT OF CASH FLOWS Note 2021 2020 ��'000 ��'000 Cash flows from operating activities Profit before tax 94,646 52,256 Adjustments for: Amortisation and depreciation 3,077 2,571 Share-based payment charge 1,879 1,776 Interest on cash held (94) (256) Interest charged on lease 167 234 Investment returns 18 (36) Decrease in policyholder tax recoverable (11,692) (1,515) (Increase)/decrease in current asset investments (83) 15 87,918 55,045 (Increase)/decrease in trade and other receivables (1,306) 2,305 (Decrease)/increase in trade and other payables (2,130) 3,858 (Decrease)/increase in provisions (7,405) 6,978 Increase in contingent consideration 676 - Decrease in share-based payment reserve (1,166) (1,126) Increase in investments held for the benefit of policyholders (5,059,898) (1,272,440) Increase in liabilities for linked investment contracts 4,940,454 1,447,887 Cash generated (used in)/generated from operations (42,857) 242,507 Income taxes paid (13,396) (13,803) Interest paid on lease liabilities (167) (234) Net cash flows (used in)/generated from operating activities (56,420) 228,470 Investing activities Acquisition of tangible assets (660) (859) Acquisition of subsidiary, net of cash acquired 13 (7,903) - Increase in loans (773) (1,462) Interest on cash held 94 256 Investment returns (18) 36 Net cash used in investing activities (9,260) (2,029) Financing activities Purchase of own shares in Employee Benefit Trust (951) (828) Equity dividends paid (28,452) (26,158) Repayment of lease liabilities (2,326) (2,244) Net cash used in financing activities (31,729) (29,230) Net (decrease)/increase in cash and cash equivalents (97,409) 197,211 Cash and cash equivalents at beginning of year 1,539,843 1,342,619 Exchange (losses)/gains on cash and cash equivalents (72) 13 Cash and cash equivalents at end of year 1,442,362 1,539,843 Notes 1 to 37 form part of these Financial Statements. COMPANY STATEMENT OF CASH FLOWS Note 2021 2020 ��'000 ��'000 Cash flows from operating activities Loss before interest and dividends (4,771) (1,293) Adjustments for: (4,771) (1,293) Decrease/(increase) in trade and other receivables 220 (306) Increase/(decrease) in trade and other payables 1,688 (4) Increase in contingent consideration 676 - Settlement of share-based payment reserve (1,131) - Net cash flows (used in)/generate from operating activities (3,318) (1,603) Investing activities Acquisition of subsidiary, net of cash acquired 13 (8,600) - Purchase of subsidiary share capital 13 (4,000) - Dividends received 42,103 32,326 Interest received 76 91 (Increase) in loans receivable (773) (1,462) Net cash generated from investing activities 28,806 30,955 Financing activities Purchase of own shares in Employee Benefit Trust (920) (594) Settlement of share-based payment reserve - (843) Increase in loans payable 10,000 - Repayment of loans (1,000) - Interest expense on loans (234) - Equity dividends paid (28,462) (26,167) Net cash used in financing activities (20,616) (27,604) Net increase in cash and cash equivalents 4,872 1,748 Cash and cash equivalents at beginning of year 26,090 24,342 Cash and cash equivalents at end of year 30,962 26,090 Notes 1 to 37 form part of these Financial Statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Non-distributable reserves Other reserves Share-based payment reserve Non-distributable insurance reserves Employee Benefit Trust Retained earnings Total equity ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 Balance at 1 October 2019 3,313 5,722 (42) 1,008 501 (275) 111,450 121,677 Comprehensive income for the year: Profit for the year - - - - - - 45,484 45,484 Movement in currency translation - - 22 - - - - 22 Total comprehensive income for the year - - 22 - - - 45,484 45,506 Distributions to owners: Share-based payment expense - - - 1,776 - - - 1,776 Settlement of share based payment - - - (1,126) - - - (1,126) Purchase of own shares in EBT - - - - - (828) - (828) Excess tax relief charged to equity - - - 73 - - - 73 Other movement - - - (33) - - 33 - Dividends paid - - - - - - (26,158) (26,158) Total distributions to owners - - - 690 - (828) (26,125) (26,263) Balance at 1 October 2020 3,313 5,722 (20) 1,698 501 (1,103) 130,809 140,920 Comprehensive income for the year: Profit for the year - - - - - - 51,106 51,106 Movement in currency translation - - (72) - - - - (72) Total comprehensive income for the year - - (72) - - - 51,106 51,034 Distributions to owners: Share-based payment expense - - - 1,878 - - - 1,878 Settlement of share based payment - - - (1,166) - - - (1,166) Purchase of own shares in EBT - - - - - (952) - (952) Excess tax relief charged to equity - - - 20 - - - 19 Other movement - - - (26) - - 26 - Dividends paid - - - - - - (28,465) (28,465) Total distributions to owners - - - 706 - (952) (28,439) (28,685) Balance at 30 September 2021 3,313 5,722 (92) 2,404 501 (2,055) 153,476 163,269 Notes 1 to 37 form part of these Financial Statements. COMPANY STATEMENT OF CHANGES IN EQUITY Share capital Share-based payment reserve Employee Benefit Trust Retained earnings Total equity ��'000 ��'000 ��'000 ��'000 ��'000 Balance at 1 October 2019 3,313 880 (275) 37,006 40,924 Comprehensive income for the year: Profit for the year - - - 31,124 31,124 Total comprehensive income for the year - - - 31,124 31,124 Distributions to owners: Dividends - - - (26,167) (26,167) Share-based payment expense - 1,032 - - 1,032 Settlement of share-based payments - (843) - - (843) Purchase of own shares in EBT - - (594) - (594) Total distributions to owners - 189 (594) (26,167) (26,572) Balance at 1 October 2020 3,313 1,069 (869) 41,963 45,476 Comprehensive income for the year: Profit for the year - - - 37,173 37,173 Total comprehensive income for the year - - - 37,173 37,173 Distributions to owners: Dividends - - - (28,463) (28,463) Share-based payment expense - - - - - Settlement of share-based payments - 646 - - 646 Purchase of own shares in EBT - - (920) - (920) Total distributions to owners - 646 (920) (28,463) (28,737) Balance at 30 September 2021 3,313 1,715 (1,789) 50,673 53,912 Notes 1 to 37 form part of these Financial Statements. NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation and significant accounting policies General information IntegraFin Holdings plc (the "Company"), a public limited Company incorporated and domiciled in the United Kingdom ("UK"), along with its subsidiaries (collectively the "Group"), offers a market leading investment platform which enables advisers to implement financial plans as simply and efficiently as possible. The registered office address, and principle place of business, is 29 Clement's Lane, London, EC4N 7AE. a) Basis of preparation The Financial Statements have been prepared and approved by the directors in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, which are stated at their fair value, have been prepared in pound sterling, which is the functional currency of the Company and are rounded to the nearest thousand. Going concern The financial statements have been prepared on a going concern basis, following an assessment by the board. Going concern is assessed over the 12 month period from when the Annual Report is approved, and the board has concluded that the Group has adequate resources to continue in operational existence for the next 12 months. This is supported by: �� the current financial position of the Group: o 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. o as at 30 September 2021, the Group had ��176 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, including the impact of COVID-19. When making this assessment, the board has taken into consideration both the Group's current performance and the future outlook, including the impact of the COVID-19 pandemic. Market volatility and uncertainty is expected to continue for some time, due to the pandemic and the effect of measures taken to combat it, but the Group's fundamentals remain strong. 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 external market shocks, internal system and security failures, and the worsening of the COVID-19 pandemic. Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and regulatory capital, taking account of the impact of the COVID-19 pandemic and further possible adverse changes in trading performance, the board is satisfied that the Group is well placed to manage its business risks. The board is also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle Man Financial Services Authority (IoM FSA). Accordingly, the board does not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the financial statements on a going concern basis. Basis of consolidation The consolidated Financial Statements incorporate the Financial Statements of the Company and its subsidiaries. Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are deconsolidated from the date that control ceases. Acquisitions are accounted for under the acquisition method. Intercompany transactions, balances, income and expenses, and profits and losses are eliminated. The Financial Statements of all of the wholly owned subsidiary companies are incorporated into the consolidated Financial Statements. Two of these subsidiaries, IntegraLife International LTD (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. Changes in accounting policies i) There have been no new standards, amendments to standards or interpretations adopted from 1 October 2020 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 the period beginning 1 October 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 a preliminary assessment regarding the impact of IFRS 17 on the Financial Statements and, due to the vast majority of contracts written by the business being investment contracts, it is expected such impact will be negligible. Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) In January 2020, the IASB issued amendments to IAS 1 regarding the presentation of liabilities in the statement of financial position. Presentation between current and non-current liabilities is to be based on rights in existence at year end to defer settlement. The standard now explains that settlement includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument, separate from the liability component the instrument. The surrounding wording is expected to reflect any right to defer the settlement by at least 12 months. Classifications are not expected to be impacted by expectations on whether the right to defer settlement will be exercised or not. The Group is assessing the impact of this amendment, however it does not anticipate any significant change to the current classifications of liabilities. 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 is assessing the impact of this amendment, however it does not anticipate any significant change to the current assessment of significant accounting policies. 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 is assessing the impact of this amendment, however it does not anticipate any significant change to the current assessment of accounting estimates and accounting policies. Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) In May 2021, the ISAB 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 is assessing the impact of this amendment, however it does not anticipate any significant impact. 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 in line with the provision of the services. Fee income comprises: Annual commission income Annual commission is charged for the administration of products on the Transact platform, and is levied monthly in arrears on the average value of assets and cash held on the platform in the month. Wrapper fee income Wrapper fees are charged for each of the tax wrappers held by clients, and are levied quarterly in arrears based on fixed fees for each wrapper type. Annual commission and wrapper fees relate to services provided on an on-going basis, and revenue is therefore recognised on an on-going basis to reflect the nature of the performance obligations being discharged. Accrued income on both annual commission and wrapper fees is recognised as a trade receivable on the statement of financial position, as the Group's right to consideration is conditional on nothing other than the passage of time. Other income This comprises buy commission and dealing charges. These are charges levied on the acquisition of assets, due upon completion of the transaction. Revenue is recorded on the date of completion of the transaction, as this is the date the services are provided to the customer. Deferred acquisition costs and deferred income liabilities In prior years, incremental costs directly attributable to securing investment contracts were deferred. These costs consist of fees paid to policyholders' financial advisers. The costs, relating to Pension, Onshore Life and Offshore Life contracts, were capitalised as deferred acquisition costs and amortised over the directors' best estimates of the lives of the contracts which were deemed to be fourteen, sixteen and eighteen years respectively (2020: fourteen, sixteen and eighteen years), over which the services are provided. A corresponding deferred income liability was recognised in respect of charges taken from customers of the Company at the contract's inception to meet obligations to financial advisers. Deferred income liabilities were also amortised over the directors' best estimates of the lives of the contract, which were again deemed to be fourteen, sixteen and eighteen years. Following a review of the terms of the agreements relating to establishment charges paid to policyholders' financial advisers, management has concluded that the Group is acting in an agency capacity between the policyholders and their financial advisers, rather than as a principal. It therefore should not recognise the deferred acquisition costs as contract costs, nor does it have future service obligations in respect of the deferred fees to justify the recognition of the corresponding deferred income liability. The deferred acquisition costs and deferred income liabilities have therefore been derecognised in the financial year ended 30 September 2021, to bring the accounts in line with the accounting standards. Further details of this change can be seen in note 17. Investment income Interest on cash and coupon on shareholder gilts are the two sources of investment income received. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that financial asset's carrying amount. 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 fixed interest securities backing insurance contracts or held as shareholder investments. These investments are mandatorily held at 'fair value through profit or loss' at initial recognition and are stated at quoted bid prices which equates to fair value, with any resultant gain or loss recognised in profit or loss. Purchases and sales of securities are recognised on the trade date. Investment contracts - investments held for the benefit of policyholders Investment contracts are comprised of unit-linked contracts in ILInt and ILUK. Investment contracts result in financial liabilities whose fair value is dependent on the fair value of underlying financial assets. They are designated at inception as financial liabilities at 'fair value through profit or loss' in order to reduce an accounting mismatch with the underlying financial assets. Valuation techniques are used to establish the fair value at inception and each reporting date. The Company's main valuation techniques incorporate all factors that market participants would consider and are based on observable market data. The financial liability is measured both initially and subsequently at fair value. The fair value of a unit-linked financial liability is determined using the fair value of the financial assets contained within the funds linked to the financial liability. Dividends Equity dividends are recognised in the accounting period in which the dividends are declared. Intangible non-current assets Intangible non-current assets, excluding goodwill, are stated at cost less accumulated amortisation and comprise intellectual property software rights. The software rights were amortised over seven years on a straight line basis, as it was estimated that the code would be replaced every seven years, and therefore have a finite useful life. The software rights are now fully amortised, but due to ongoing system development and coding updates no replacement is required. Goodwill is held at cost and, in accordance with IFRS, is not amortised but is subject to annual impairment reviews. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. Repairs and maintenance costs are charged to the profit and loss and other comprehensive income statement during the period in which they are incurred. The major categories of property, plant, equipment and motor vehicles are depreciated as follows: Asset class All UK and Isle of Man entities Australian entity Leasehold improvements Straight line over the life of the lease Straight line over 40 years Fixtures & Fittings Straight line over 10 years Reducing balance over 2 to 8 years Equipment Straight line over 3 to 10 years Reducing balance over 3 to 10 years Motor vehicles N/A Reducing balance over 2 to 8 years Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate. Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: �� fair values of the assets transferred; �� liabilities incurred to the former owners of the acquired business; �� equity interests issued by the Group; �� fair value of any asset or liability resulting from a contingent consideration arrangement; and �� fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in the statement of comprehensive income. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in the statement of comprehensive income. Contingent arrangements payable to selling shareholders that continue providing services are assessed to determine if there is an element of payment for post-combination services. The element that is determined to relate to post-combination services is recognised in in the statement of comprehensive income across the periods to which the services relate. 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 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 profit or loss 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 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 13. Pensions The Group makes defined contributions to the personal pension schemes of its employees. These are chargeable to profit or loss in the year in which they become payable. Foreign currencies Transactions in foreign currencies are translated into the functional currency at the exchange rate in effect at the date of the transaction. Foreign currency monetary assets and liabilities are translated to sterling at the year end closing rate. Non-monetary assets denominated in a foreign currency that are measured in terms of historical cost are translated using the exchange rate in effect at the date when the fair value was determined. Foreign exchange rate differences that arise are reported net in profit or loss as foreign exchange gains/losses. The assets and liabilities of foreign operations are translated to sterling using the year end closing exchange rate. The revenues and expenses of foreign operations are translated to sterling at rates approximating the foreign exchange rates ruling at the relevant month of the transactions. Foreign exchange differences arising on retranslation are recognised directly in the reserves. Taxation The taxation charge is based on the taxable result for the year. The taxable result for the year is determined in accordance with enacted legislation and taxation authority practice for calculating the amount of corporation tax payable. Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax assets/liabilities are recovered/settled. Policyholder Tax This is based on the "Income minus Expenses plus Gains" (I-E) tax regime and enables HMRC to collect basic rate income tax from ILUK on its life insurance policies without having to contact the policyholders. Policyholder profits are calculated as total I-E profits less shareholder profits multiplied by the current policyholder tax rate of 20% (2020: 20%). Policyholder tax is recorded as an expense in the statement of comprehensive income, with a corresponding liability recognised on the statement of financial position (under IAS12). Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the chief executive officer of the Company. For the year ended 30 September 2021, the business of ILUK and ILInt was the direct insurance of investment linked pensions business, written by single premium in the United Kingdom, single premium life assurance linked bonds and linked qualifying investment plans written in the United Kingdom. Insurance risk is minimal as all contracts have been classed as investment contracts. ILInt and ILUK policyholder assets and liabilities Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the statement of financial position. They are designated as financial assets at 'fair value through profit or loss' in order to reduce an accounting mismatch option with the equivalent financial liabilities. Gains and losses arising from changes in fair value are presented in the consolidated profit and loss and other comprehensive income statement within "investment returns". Investment inflows received from policyholders are invested in funds selected by the policyholders. The resulting liabilities for linked investment contracts are accounted for under the 'fair value through profit or loss' option, in line with the corresponding assets as permitted by IFRS 9. As all investments held for the benefit of policyholders are matched entirely by corresponding linked liabilities, any gain or loss on assets recognised through the consolidated profit and loss and other comprehensive income statement are offset entirely by the gains and losses on linked liabilities, which are recognised within the "change in investment contract liabilities" line. The overall net impact on profit is therefore ��nil. Client assets and client monies IFAL client assets and client monies are not recognised in the parent and consolidated statements of financial position (see note 28) as they are owned by the clients of IFAL. Lease assets and lease liabilities IFRS 16 leases accounting policy applied from 1 October 2019. 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 IAS16: Property, Plant and Equipment. Right-of-use assets are depreciated over the lease term. See note 14 and 15. 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 the incremental borrowing rate of 3.2% 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 26. 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 expenses 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. Financial instruments Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires. At initial recognition, the Company classifies its financial instruments in the following categories, based on the business model in which the assets are managed and their cash flow characteristics: (i) Financial assets and liabilities at fair value through profit or loss This category includes financial assets and liabilities acquired principally for the purpose of selling or repurchasing in the short-term, comprising of listed shares and securities and investments in quoted debt instruments. Financial instruments in this category are recognised on the trade settlement date, and subsequently, at fair value. Purchases and sales of securities are recognised on the trade date. Transaction costs are expensed in the consolidated profit and loss and other comprehensive income statement. Gains and losses arising from changes in fair value are presented in the consolidated profit and loss and other comprehensive income statement within "investment returns" for corporate assets and "net income attributable to policyholder returns" for policyholder assets in the period in which they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except for the portion expected to be realised or paid beyond twelve months of the balance sheet date, which are classified as long-term. (ii) Financial assets at amortised cost This category includes non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This is comprised of accrued fees, trade and other receivables, loans, and cash and cash equivalents. These are included in current assets due to their short-term nature, except for loans which are included in non-current assets. Assets held at amortised cost are initially recognised at fair value. Subsequent measurement is at amortised cost using the effective interest method less any expected credit losses. (iii) Financial liabilities at amortised cost Financial liabilities at amortised cost comprise trade and other payables and loans. 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 that do not constitute a financing transaction. For all other financial instruments, expected credit losses are measured at an amount equal to the 12-month expected credit losses. Impairment losses on financial assets carried at amortised cost are reversed in subsequent periods if the expected credit losses decrease. Provisions Provisions are recognised when the Company has an obligation, legal or constructive, as a result of a past event, and it is probable that the Company will be required to settle that obligation. Provisions are estimated at the directors' best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present values where the effect is material. The ILUK tax provision, which is 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. Trade and other payables Other payables are short-term, not interest-bearing and are stated at their amortised cost which is not materially different to cost and approximates to fair value. Share-based payments Equity-settled share-based payment awards granted to employees are measured at fair value at the date of grant. The awards are recognised as an expense, with a corresponding increase in equity, spread over the vesting period of the awards, which accords with the period for which related services are provided. The total amount expensed is determined by reference to the fair value of the awards as follows: (i) SIP shares The fair value is the market price on the grant date. There are no vesting conditions, as the employees receive the shares immediately upon grant. (ii) PSP share options The fair value of share options is determined by applying a valuation technique, usually an option pricing model, such as Black Scholes. This takes into account factors such as the exercise price, the share price, volatility, interest rates, and dividends. At each reporting date, the estimate of the number of share options expected to vest based on the non-market vesting conditions is assessed. Any change to original estimates is recognised in the statement of comprehensive income, with a corresponding adjustment to equity reserves. 2. Critical accounting estimates and judgements Critical accounting estimates are those where there is a significant risk of material adjustment in the next 12 months, and critical judgements are those that have the most significant effect on amounts recognised in the accounts. In preparing these Financial Statements, management has made judgements, estimates and assumptions about the future that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Management uses its knowledge of current facts and applies estimation and assumption techniques that are aligned with relevant accounting policies to make predictions about the future. Actual results may differ from these estimates. Estimates and judgements are reviewed on an ongoing basis and revisions are recognised in the period in which the estimate is revised. In the prior year financial statements the Group disclosed that the tax provision for its subsidiary, ILUK, was an area where judgements and estimates had the most significant effect. During the year the Group has obtained data which allows us to eliminate the need for material judgements and assumptions in our calculations of amounts payable to HMRC and policyholder. The tax provision is therefore no longer considered a critical accounting estimate. 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. 3. Financial instruments (i) Principal financial instruments The principal financial instruments, from which financial instrument risk arises, are as follows: �� Trade and other receivables �� Accrued fees �� Cash and cash equivalents �� Investments in quoted debt instruments �� Listed shares and securities �� Trade and other payables �� Loans (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 2021 2020 2021 2020 ��'000 ��'000 ��'000 ��'000 Cash and cash equivalents - - 1,442,362 1,539,843 Listed shares and securities 165 92 - - Loans - - 3,420 2,647 Investments in quoted debt instruments 4,969 4,959 - - Accrued income - - 12,030 10,244 Trade and other receivables - - 934 786 Investments held for the policyholders 21,787,106 16,727,208 - - Total financial assets 21,792,240 16,732,259 1,458,746 1,553,520 Financial liabilities: Fair value through profit or loss Amortised cost 2021 2020 2021 2020 ��'000 ��'000 ��'000 ��'000 Trade and other payables - - 7,056 8,660 Accruals - - 7,906 7,792 Lease liabilities - - 5,037 6,087 Deferred consideration - - 1,741 - Contingent consideration 791 - - - Liabilities for linked investments contracts 23,053,390 18,112,935 - - Total financial liabilities 23,054,181 18,112,935 21,740 22,539 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 2021 2020 2021 2020 ��'000 ��'000 ��'000 ��'000 Cash and cash equivalents - - 30,962 26,090 Loans - - 3,420 2,647 Total financial assets - - 34,382 28,737 Financial liabilities: Fair value through profit or loss Amortised cost 2021 2020 2021 2020 ��'000 ��'000 ��'000 ��'000 Trade and other payables - - 22 56 Loans - - 9,000 - Deferred consideration - - 2,533 - Contingent consideration 791 - - - Accruals - - 359 311 Total financial liabilities 791 - 11,914 367 (iii) Financial instruments not measured at fair value Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade and other receivables, and trade and other payables. Due to their short-term nature and/or expected credit losses recognised, the carrying value of these financial instruments approximates their fair value. (iv) Financial instruments measured at fair value - fair value hierarchy The table below classifies financial assets that are recognised on the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy are disclosed in the table below. Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the statement of financial position. The assets are classified using the 'fair value through profit or loss' option with any resultant gain or loss recognised through the statement of comprehensive income. Assets held at fair value also comprises investments held in gilts, and these are held at fair value through profit and loss. The following table shows the three levels of the fair value hierarchy: Fair value hierarchy Description of hierarchy Types of investments classified at each level Level 1 Quoted prices (unadjusted) in active markets for identical assets. Cash equivalents, listed equity securities, gilts, actively traded pooled investments such as OEICS and unit trusts. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices). Actively traded unlisted equity securities where there is no significant unobservable inputs, structured products and regularly priced but not actively traded instruments. Level 3 Inputs that are not based on observable market data (unobservable inputs). Unlisted equity securities with significant unobservable inputs, inactive pooled investments. For the purposes of identifying level 3 assets, unobservable inputs means that current observable market information is no longer available. Where these assets arise management will value them based on the last known observable market price. No other valuation techniques are applied. The following table shows the Group's assets measured at fair value and split into the three levels: 2021 Level 1 Level 2 Level 3 Total ��'000 ��'000 ��'000 ��'000 Investments and assets held for the benefit of policyholders Investments and securities 633,602 163,940 440 797,982 Bonds and other fixed-income securities 14,846 589 - 15,435 Holdings in collective investment schemes 20,858,948 113,265 1,476 20,973,689 21,507,396 277,794 1,916 21,787,106 Other investments 4,964 - - 4,964 Total 21,512,360 277,794 1,916 21,792,070 2020 Level 1 Level 2 Level 3 Total ��'000 ��'000 ��'000 ��'000 Investments and assets held for the benefit of policyholders Investments and securities 506,286 154,810 751 661,847 Bonds and other fixed-income securities 12,404 1,891 15 14,310 Holdings in collective investment schemes 15,930,106 120,026 910 16,051,042 16,448,796 276,727 1,676 16,727,199 Other investments 4,959 - - 4,959 Total 16,453,755 276,727 1,676 16,732,158 Level 1 valuation methodology Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. These financial assets are mainly collective investment schemes and listed equity instruments. Level 2 and Level 3 valuation methodology The Group regularly reviews whether a market is active, based on available market data and the specific circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices where available, and may in certain circumstances require the Group to exercise judgement to determine fair value. Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that have been assessed as not active enough to be included in Level 1. Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation methodology are not based on observable market data. The key unobservable input is the pre-tax operating margin needed to price asset holdings. Level 3 sensitivity to changes in unobservable measurements For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results. Changes to valuation methodology There have been no changes in valuation methodology during the year under review. Transfers between Levels The Company's policy is to assess each financial asset it holds at the current financial year end, based on the last known price and market information, and assign it to a Level. The Company recognises transfers between Levels of the fair value hierarchy at the end of the reporting period in which the changes have occurred. Changes occur due to the availability of (or lack thereof) quoted prices, whether a market is now active or not, and whether there are indications of impairment. Transfers between Levels between 30 September 2021 and 30 September 2020 are presented in the table below at their valuation at 30 September 2021: Transfers from Transfers to ��'000 Level 1 Level 2 524 Level 2 Level 1 7,613 The reconciliation between opening and closing balances of Level 3 assets are presented in the table below: 2021 2020 ��'000 ��'000 Opening balance 1,676 11,529 Unrealised gains or losses in the year ended 30 September 2021 (236) (57) Transfers in to Level 3 at 30 September 2021 valuation 1,114 224 Transfers out of Level 3 at 30 September 2021 valuation (578) (8,280) Purchases, sales, issues and settlement (60) (1,740) Closing balance 1,916 1,676 Any resultant gains or losses on financial assets held for the benefit of policyholders are offset by a reciprocal movement in the linked liability. The Group regularly assesses assets to ensure they are categorised correctly and FVH levels adjusted accordingly. The Group monitors situations that may impact liquidity such as suspensions and liquidations while also actively collecting observable market prices from relevant exchanges and asset managers. Should an asset price become observable following the resumption of trading the FVH level will be updated to reflect this. (v) Capital maintenance The regulated companies in IntegraFin Group are subject to capital requirements imposed by the relevant regulators. As detailed in the Financial Review, Group capital requirements for 2021 were ��263.4 million (2020: ��212.9 million). The Group has complied with the requirements set by the regulators during the year. The Group's policy for managing capital is to ensure each regulated entity maintains capital well above the minimum requirement. 4. Risk and risk management 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 Description of risk Market risk is the risk of loss arising either directly or indirectly from fluctuations in the level and in the volatility of market prices of assets, liabilities and other financial instruments. (a) Price risk Market price risk from reduced income The Company's dividend income from its regulated subsidiary IFAL is exposed to market risk. The Group's main source of income is derived from annual management fees and transaction fees which are linked to the value of the clients' portfolios, which are determined by the market prices of the underlying assets. The Group's revenue is therefore affected by the value of assets on the platform, and consequently it has exposure to equity market levels and economic conditions. The Group mitigates the second order market price risk by applying fixed charges per tax wrapper in addition to income derived from the charges based on clients' linked portfolio values. This approach of fixed and variable charging offers an element of diversification to its income stream. The risk of stock market volatility, and the impact on revenue, is also mitigated through a wide asset offering which ensures the Group is not wholly correlated with one market, and which enables clients to switch assets, including into cash on the platform, in times of uncertainty. 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 for the year 2021 2020 ��'000 ��'000 10% increase in asset values 7,869 6,931 10% decrease in asset values (7,869) (6,931) 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. (b) Interest rate risk The Group and the Company's balance sheet and capital requirements are relatively insensitive to first order impacts from movements in interest rates. (c) Currency risk The Company is not directly exposed to significant currency risk. The table below shows a breakdown of the material foreign currency exposures for the unit-linked policies within the Group: 2021 2021 2020 2020 Currency ��'000 % ��'000 % GBP 22,914,615 99.4 17,983,651 99.3 USD 111,003 0.5 106,532 0.6 EUR 18,074 0.1 13,862 0.1 Others 9,698 0.0 8,890 0.0 Total 23,053,390 100.0 18,112,935 100.0 99.4% of investments and cash held for the benefit of policyholders are denominated in GBP, its base currency. Remaining currency holdings greater than 0.1% of the total are shown separately in the table. A significant rise or fall in sterling exchange rates would not have a significant first order impact on its results since any adverse or favourable movement in policyholder assets is entirely offset by a corresponding movement in the linked liability. (2) Credit (counterparty default) risk Credit risk is the risk that the Group or Company is exposed to a loss if another party fails to meet its financial obligations. For the Company, the exposure to counterparty default risk arises primarily from loans directly held by the Company. Assets held at amortised cost (a) Accrued income This comprises fees owed by clients. These are held at amortised cost, less expected credit losses ("ECLs"). Under IFRS 9, a forward-looking approach is required to assess ECLs, so that losses are recognised before the occurrence of any credit event. The Group estimates that pending fees three months or more past due are unlikely to be collected and are written off. Based on management's experience, pending fees one or two months past due are generally expected to be collected. However, consideration is also given to potential losses on these fees. Historical loss rates have been used to estimate expected future losses, while consideration is also given to underlying economic conditions, in order to ensure that expected losses are recognised on a forward-looking basis. This has led to the additional recognition of an immaterial amount of ECLs. Details of the ECLs recognised in relation to accrued income can be seen in note 23. (b) Loans Loans subject to the 12 month ECL are ��3.6million (2020: ��2.7million). 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 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 ��7.8m in undrawn loans. Details of the ECLs recognised in relation to loans can be seen in note 18. No ECLs have been recognised on the undrawn loan commitments, as they not considered to be material. (c) Cash and equivalents The Group has a low risk appetite for credit risk, which is limited to exposures to credit institutions for its bank deposits. A range of major regulated UK high street banks is used. A rigorous annual due diligence exercise is undertaken to assess the financial strength of these banks with those used having a minimum credit rating of A (Fitch). In order to actively manage the credit and concentration risks, the board has agreed risk appetite limits for the regulated entities of the amount of corporate and client funds that may be deposited with any one bank; which is represented by a set percentage of the respective bank's total customer deposits. Monthly monitoring of these positions along with movements in Fitch ratings is undertaken, with reports presented to the directors for review. Collectively these measures ensure that the Group diligently manages the exposures and 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 ��3.4million (2020: ��2.6million). 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 ��130k (2020: ��342k) from other Group companies. Counterparty default risk exposure to other receivables The Company has no other receivables arising, due to the nature of its business, and the structure of the Group. Across the Group, there is exposure to counterparty default risk arising primarily from: �� corporate assets directly held by the Group; �� exposure to clients; and �� exposure to other receivables. The other exposures to counterparty default risk include a credit default event which affects funds held on behalf of clients and occurs at one or more of the following entities: �� a bank where cash is held on behalf of clients; �� a custodian where the assets are held on behalf of clients; and �� Transact Nominees Limited (TNL), which is the legal owner of the assets held on behalf of clients. There is no first order impact on the Group from one of the events in the preceding paragraph. This is because any credit default event in respect of these holdings will be borne by clients, both in terms of loss of value and loss of liquidity. Terms and conditions have been reviewed by external lawyers to ensure that these have been drafted appropriately. However, there is a second order impact where future profits for the Group are reduced in the event of a credit default which affects funds held on behalf of clients. There are robust controls in place to mitigate credit risk, for example, holding corporate and client cash across a range of banks in order to minimise the risk of a single point of counterparty default failure. Additionally, maximum counterparty limits and minimum credit quality steps are set for banks. 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 ��12.0 million (2020: ��10.2 million) fee income, owed by clients. Impact of credit risk on fair value Due to the limited direct exposure that the Group and the Company have to credit risk, credit risk does not have a material impact on the fair value movement of financial instruments for the year under review. The fair value movements on these instruments are predominantly due to changes in market conditions. (3) Liquidity risk Liquidity risk is the risk that funds are not accessible such that the Company, although solvent, does not have sufficient liquid financial resources to meet obligations as they fall due, or can secure such resources only at excessive cost. As a holding Company, the Company's main liquidity risk is related to paying out shareholder dividends and operating expenses it may incur. Additionally, the Company has made short-term commitments, in the form of a capped facility arrangement, to Vertus Capital SPV1 Limited ('Vertus') (as one of Vertus' sources of funding) to assist Vertus in developing its business, which is to provide tailored niche debt facilities to adviser firms to fund acquisitions, management buy-outs and other similar transactions. This does not represent a financial liability for the Company, but an increase in the amount of the loan that is drawn down would lead to a reduction in the cash available to meet the Company's financial liabilities. 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 four 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 entity 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 equal instalments over the next four years 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 Company has set out two key liquidity requirements: first, to ensure that clients maintain a percentage of liquidity in their funds at all times, and second, to maintain access to cash through a spread of cash holdings in bank accounts. There are robust controls in place to mitigate liquidity risk, for example, through regular monitoring of expenditure, closely managing expenses in line with the business plan, and, in the case of the Vertus facility, capping the value of loans. Additionally, the Group holds corporate and client cash across a range of banks in order to mitigate the risk of a single point of counterparty default failure. Maturity schedule The following tables show an analysis of the financial assets and financial liabilities by remaining expected maturities as at 30 September 2020 and 30 September 2021. In addition to the financial assets and financial liabilities shown in the tables below, the Company committed a further ��7.8m in undrawn loans. These are available to be drawn down immediately. Financial assets: 2020 Up to 3 months 3-12 months 1-5 years Over 5 years Total ��'000 ��'000 ��'000 ��'000 ��'000 Investments held for the policyholders 16,727,208 - - - 16,727,208 Investments 92 - 4,959 - 5,051 Accrued income 10,244 - - - 10,244 Trade and other receivables 614 165 7 - 786 Loans - - 2,647 - 2,647 Cash 1,539,843 - - - 1,539,843 Total 18,278,001 165 7,613 - 18,285,779 2021 Up to 3 months 3-12 months 1-5 years Over 5 years Total ��'000 ��'000 ��'000 ��'000 ��'000 Investments held for the policyholders 21,787,106 - - - 21,787,106 Investments 165 - 4,969 - 5,134 Accrued income 12,030 - - - 12,030 Trade and other receivables 762 165 7 - 934 Loans - - 3,420 - 3,420 Cash 1,442,362 - - - 1,442,362 Total 23,242,425 165 8,396 - 23,250,986 Financial liabilities: 2020 Up to 3 months 3-12 months 1-5 years Over 5 years Total ��'000 ��'000 ��'000 ��'000 ��'000 Liabilities for linked investment contracts 18,112,935 - - - 18,112,935 Trade and other payables 16,257 195 - - 16,452 Lease liabilities 614 1,761 3,712 - 6,087 Total 18,129,806 1,956 3,712 - 18,135,474 2021 Up to 3 months 3-12 months 1-5 years Over 5 years Total ��'000 ��'000 ��'000 ��'000 ��'000 Liabilities for linked investment contracts 23,053,389 - - - 23,053,389 Trade and other payables 9,871 5,090 - - 14,961 Lease liabilities 622 1,867 2,766 - 5,255 Deferred consideration - 1,568 193 - 1,761 Contingent consideration - - 791 - 791 Total 23,063,882 8,525 3,750 - 23,076,157 (4) Outflow risk Outflows occur when funds are withdrawn from the platform for any reason. Outflows typically occur where clients' circumstances and requirements change. However, these outflows can also be triggered by operational failure, competitor actions or external events such as regulatory or economic changes. Outflow risk is mitigated by focusing on providing exceptionally high levels of service. Outflow rates are closely monitored and unexpected experience is investigated. Despite the current challenging and uncertain economic and geopolitical environment, outflow rates remain stable and within historical norms. (5) Expense risk Expense risk arises where costs increase faster than expected or from one-off expense "shocks". The Group and the Company has exposure related to expense inflation risk, where actual inflation deviates from expectations. As a significant percentage of the Group's expenses are staff related the key inflationary risk arises from salary inflation. The Group and the Company have no exposures to defined benefit staff pension schemes or client related index linked liabilities. The Group's expenses are governed at a high level by the Group's Expense Policy. The monthly management accounts are reviewed against projected future expenses by the board and by senior management and action is taken where appropriate. 5. Disaggregation of revenue The Group has disaggregated revenue into the four categories below to enable the users to better understand the relationship with the segmental information provided in note 6. For the financial year ended 30 September 2021 2020 ��'000 ��'000 Annual commission income 107,658 94,468 Wrapper fee income 10,626 9,743 Other income 3,015 3,109 Adviser back-office technology 2,371 - Total fee income 123,670 107,320 Total fee income relates to both classes of business (see note 6 for details). 6. Segmental reporting The revenue and profit before tax are attributable to activities carried out in the UK. The Group have three classes of business as follows: - provision of investment administration services; - transaction of ordinary long-term insurance and underwriting life assurance; and - Adviser back-office technology. Adviser back-office technology relates to the acquisition of T4A during the financial period. Analysis by class of business is given below. Statement of comprehensive income - segmental information for the year ended 30 September 2021: Investment administration services Insurance and life assurance business Adviser back-office technology Consolidation adjustments Total ��'000 ��'000 ��'000 ��'000 ��'000 Revenue Annual commission income 58,896 48,762 - - 107,658 Wrapper fee income 2,571 8,055 - - 10,626 Adviser back-office technology - - 2,371 - 2,371 Other income 1,757 1,258 - - 3,015 Total fee income 63,224 58,075 2,371 - 123,670 Cost of sales (708) (480) (302) - (1,490) Expenses Admin expenses (64,776) (49,616) (4,502) 60,156 (58,738) Impairment losses (200) (30) - - (230) Net income attributable to policyholders - 31,526 - - 31,526 Change in investment contract liabilities - (2,736,063) - - (2,736,063) Fee and commission expenses - (204,123) - - (204,123) Investment returns - 2,940,167 - - 2,940,167 Interest expense (209) (193) - 235 (167) Interest income 45 283 - (235) 94 Profit/(loss) before tax (3,219) 39,001 (1,293) 60,157 94,646 Policyholder tax - (31,015) - - (31,015) Tax on profit on ordinary activities (5,776) (7,061) 312 - (12,525) Profit/(loss) for the financial year 44,089 49,605 (164) (42,424) 51,106 Statement of comprehensive income - segmental information for the year ended 30 September 2020: Investment administration services Insurance and life assurance business Other income Consolidated adjustments Total ��'000 ��'000 ��'000 ��'000 ��'000 Revenue Annual commission income 51,873 42,595 - - 94,468 Wrapper fee income 2,337 7,406 - - 9,743 Other income 1,713 1,354 42 - 3,109 Total fee income 55,923 51,355 42 - 107,320 Cost of sales (543) (323) - - (865) Expenses Admin expenses (61,170) (55,760) - 65,914 (51,016) Amortisation of deferred acquisition costs - (7,576) - - (7,576) Impairment losses (109) (67) - - (176) Net income attributable to policyholders - (3,066) - - (3,066) Change in investment contract liabilities - 82,895 - - 82,895 Fee and commission expenses - (137,536) - - (137,536) Investment returns - 54,677 - - 54,677 Interest expense (120) (113) - - (233) Interest income 121 135 - - 256 Profit before tax 41,402 43,180 - (32,326) 52,256 Policyholder tax - 3,066 - - 3,066 Tax on profit on ordinary activities (4,641) (5,197) - - (9,838) Profit for the financial year 36,761 41,048 - (32,326) 45,484 The figures above comprise the results of the companies that fall directly into each segment, as well as a proportion of the results from the other Group companies that only provide services to the revenue-generating companies. This therefore has no effect on revenue, but has an effect on the profit before tax. Statement of financial position - segmental information for the year ended 30 September 2021: Investment administration services Insurance and life assurance business Adviser back-office technology Total ��'000 ��'000 ��'000 ��'000 Assets Non-current assets 11,884 19,967 30 31,881 Current assets 67,309 23,184,219 3,866 23,255,394 Total assets 79,193 23,204,186 3,896 23,287,275 Liabilities Current liabilities 8,163 23,075,931 748 23,084,842 Non-current liabilities 2,616 36,548 - 39,164 Total liabilities 10,779 23,112,479 748 23,124,006 Net assets 68,414 91,707 3,148 163,269 Non-current assets additions 329 304 26 660 Statement of financial position - segmental information for the year ended 30 September 2020: Investment administration services Insurance and life assurance business Total ��'000 ��'000 ��'000 Assets Non-current assets 11,611 64,232 75,843 Current assets 60,597 18,229,525 18,290,123 Total assets 72,209 18,293,757 18,365,966 Liabilities Current liabilities 7,763 18,125,913 18,133,676 Non-current liabilities 2,208 89,162 91,370 Total liabilities 9,971 18,215,075 18,225,046 Net assets 62,237 78,682 140,920 Non-current assets additions 438 421 859 Segmental information: Split by geographical location 2021 2020 ��'000 ��'000 Revenue United Kingdom 118,893 103,089 Isle of Man 4,763 4,231 Australia 14 - Total 123,670 107,320 2021 2020 ��'000 ��'000 Non-current assets United Kingdom 26,873 19,128 Isle of Man 51 97 Total 26,924 19,225 The non-current assets excludes the deferred acquisition costs, loans and deferred tax assets. 7. Earnings per share 2021 2020 Profit Profit for the year and earnings used in basic and diluted earnings per share ��51.1m ��45.5m 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 (0.3m) (0.1m) Weighted average number of Ordinary Shares for the purposes of basic EPS 331.0m 331.2m Adjustment for dilutive share option awards 0.3m 0.1m Weighted average number of Ordinary Shares for the purposes of diluted EPS 331.3m 331.3m Earnings per share Earnings per share - basic and diluted 15.4p 13.7p 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. 8. Expenses by nature The following expenses are included within administrative expenses: Group 2021 2020 ��'000 ��'000 Depreciation 2,755 2,561 Amortisation 321 - Wages and employee benefits expense 41,018 36,732 Other staff costs 2,840 200 Auditor's remuneration: - auditing of the Financial Statements of the Company pursuant to the legislation 164 78 - auditing of the Financial Statements of subsidiaries 202 99 - other assurance services 149 118 Other Auditor's remuneration: - auditing of the Financial Statements of subsidiaries 184 154 - other assurance services 138 97 Other professional fees 4,326 2,808 Regulatory fees 3,531 3,643 Short-term lease payments: - land and buildings 141 4 - equipment 2 3 Other occupancy costs 1,234 2,001 Other costs 3,980 3,589 Other income - tax relief due to shareholders (2,208) (1,071) Total administrative expenses 58,738 51,016 "Other income - tax relief due to shareholders" relates to the release of policyholder tax provisions to the statement of comprehensive income. Company 2021 2020 ��'000 ��'000 Wages and employee benefits expense 424 475 Other staff costs 2,227 24 Auditor's remuneration: - auditing of the Financial Statements of the Company pursuant to the legislation 319 78 - other assurance services 18 18 Other professional fees 1,228 422 Regulatory fees 34 30 Other costs 489 161 Total administrative expenses 4,739 1,208 Wages and employee benefits expense The average number of staff (including executive directors) employed by the Group during the financial year amounted to: 2021 2020 No. No. CEO 2 1 Client services staff 231 213 Finance staff 61 60 Legal and compliance staff 33 31 Sales, marketing and product development staff 45 40 Software development staff 122 104 Technical and support staff 49 45 543 494 The Company has no employees (2020: nil). Wages and employee (including executive directors) benefits expenses during the year, included within administrative expenses, were as follows: 2021 2020 ��'000 ��'000 Wages and salaries 32,908 29,307 Social security costs 3,400 3,085 Other pension costs 2,815 2,714 Share-based payment costs 1,895 1,626 41,018 36,732 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. 2021 2020 ��'000 ��'000 Short-term employee benefits 2,880 2,622 Post employment benefits 139 40 Share based payment 414 522 Other benefits 4 33 Social security costs 447 211 3,884 3,428 Highest paid director: Short-term employee benefits 555 491 Other benefits 143 140 Post employment benefits 4 7 Number of directors for whom pension contributions are paid 2 2 Short-term employee benefits comprise salary and cash bonus. 9. Interest income Group Company Group Company 2021 2021 2020 2020 ��'000 ��'000 ��'000 ��'000 Interest income on bank deposits 19 2 194 29 Interest income on loans 75 74 62 62 94 76 256 91 10. Investment returns 2021 2020 ��'000 ��'000 Interest on fixed-interest securities 16 80 Realised losses on fixed-interest securities (7) - Unrealised losses on fixed-interest securities (27) (44) Change in fair value of underlying assets 2,810,061 (73,093) Investment income 130,124 127,734 Total investment returns 2,940,167 54,677 11. Tax on profit on ordinary activities Group a) Analysis of charge in year The income tax expense comprises: 2021 2020 ��'000 ��'000 Corporation tax Current year - corporation tax 12,185 9,879 Adjustment in respect of prior years 418 125 12,603 10,004 Deferred tax Current year (232) (38) Adjustment in respect of prior years (113) Change in deferred tax charge/(credit) as a result of higher tax rate 154 (15) Total tax charge for the year 12,525 9,838 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: 2021 2020 ��'000 ��'000 Profit on ordinary activities before tax 94,646 52,256 Policyholder tax (31,015) 3,066 63,631 55,322 Profit on ordinary activities multiplied by effective rate of Corporation Tax 19% (2020: 19%) 12,090 10,511 Effects of: Non-taxable dividends (76) (187) Income / expenses not taxable / deductible for tax purposes multiplied by effective rate of corporation tax 691 (17) Adjustments in respect of prior years (92) (356) Effect of change in tax rate 155 (15) Rate differences (38) 30 Other adjustments (205) (128) 12,525 9,838 Company a) Analysis of charge in year 2021 2020 ��'000 ��'000 Deferred tax charge/(credit) (see note 27) - - Total - - b) Factors affecting tax charge for the year 2021 2020 ��'000 ��'000 Profit on ordinary activities before tax 37,173 31,124 Profit on ordinary activities multiplied by effective rate of Corporation Tax 19% (2020: 19%) 7,063 5,914 Effects of: Non-taxable dividends (8,000) (6,142) Income / expenses not taxable / deductible for tax purposes multiplied by effective rate of Corporation Tax 614 9 Group loss relief to ISL 323 219 - - 12. Policyholder income and expenses - Group 2021 2020 ��'000 ��'000 Net income attributable to policyholder returns 31,526 (3,066) Policyholder tax (31,015) 3,066 This relates to income and expenses, and the associated tax charges, on policyholder assets and liabilities. 13. Intangible assets - Group Software and IP rights Goodwill Customer relationships Software Brand Total Cost ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 At 1 October 2020 12,505 12,951 - - - 25,456 Acquisitions through business combinations - 5,335 2,086 1,975 260 9,656 At 30 September 2021 12,505 18,286 2,086 1,975 260 35,112 Amortisation At 1 October 2020 12,505 - - - - 12,505 Charge for the year - - 100 203 18 321 At 30 September 2021 12,505 - 100 203 18 12,826 Net Book Value At 30 September 2020 - 12,951 - - - 12,951 At 30 September 2021 - 18,286 1,986 1,772 242 22,286 Cost ��'000 ��'000 ��'000 ��'000 ��'000 ��'000 At 1 October 2019 12,505 12,951 - - - 25,456 At 30 September 2020 12,505 12,951 - - - 25,456 Amortisation At 1 October 2019 12,505 - - - - 12,505 Charge for the year - - - - - - At 30 September 2020 12,505 - - - - 12,505 Net Book Value At 30 September 2019 - 12,951 - - - 12,951 At 30 September 2020 - 12,951 - - - 12,951 Business combinations - acquisition of Time for Advice Limited (T4A) On 11 January 2021, the Company acquired 100% of the voting equity instruments of T4A, a specialist software provider for financial planning and wealth management. The principal reason for the acquisition was to support IHP's strategy of providing platform and associated services to clients and their advisers. With effect from the date of acquisition, T4A's accounts have been consolidated into the Group's consolidated results, resulting in the inclusion of ��2,371k of revenue achieved from that date to 30 September 2021, and losses after tax of ��968k in the same period. Had the acquisition of T4A taken place at the beginning of the reporting period, the consolidated revenue of the Group for the year to 30 September 2021 would have been ��124.7 million, and the consolidated profit after tax would have been ��49.9 million. T4A generates cash inflows that are independent of the cash inflows from the rest of the Group, and it is therefore considered to be a separate cash generating unit. Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: Book value Fair value adjustments Fair value ��'000 ��'000 ��'000 Cash and cash equivalents 697 - 697 Trade and other receivables 391 - 391 Property, plant and equipment 22 - 22 Current liabilities (990) - (990) Customer relationships - 2,086 2,086 Software - 1,975 1,975 Brand - 260 260 Deferred tax liability - (821) (821) Total net assets 120 3,500 3,620 Fair value of consideration 8,955 Goodwill 5,335 All contractual cash flows are expected to be received, and the gross contractual amounts receivable therefore equal the fair value of receivables shown above. The intangibles assets recognised relate to T4A's CURO software, the CURO brand and T4A's customer relationships obtained through the acquisition, all of which meet the requirement to be separately identifiable under IFRS 3. A deferred tax liability of ��821k has been recognised in relation to these fair value adjustments. The acquisition cost comprised up-front cash payments of ��8.6 million, plus ��8.6 million of deferred consideration, payable in phases over the next four years. Additional consideration between ��0 and ��8.6 million is also payable in January 2025. The amount is contingent on T4A meeting certain performance targets over the next four years, and management have estimated the fair value as ��3,882k. The allocation of the above costs between consideration and post-combination remuneration can be seen below: Consideration Remuneration ��'000 ��'000 Up-front cash consideration 8,600 - Deferred consideration 239 8,342 Additional consideration 116 3,766 Total 8,955 12,108 An assessment has been performed by management regarding the deferred and contingent arrangements payable to selling shareholders that continue providing services, and it has been determined that these relate to payment for post-combination services and should therefore be treated as remuneration across the four year period to which the services relate, from January 2021 to December 2024. The deferred and additional arrangements that have been treated as consideration relate to amounts payable to a selling shareholder who does not provide services to T4A. The overall cash outflow upon acquisition of T4A can be seen below: ��'000 Up-front cash consideration 8,600 T4A cash and cash equivalents at acquisition date (697) Total cash outflow 7,903 The main factors leading to the recognition of goodwill are: �� The presence of certain intangible assets, such as the assembled workforce of T4A, which do not qualify for separate recognition. �� The fact that the investment supports the Group's strategy of delivering the highest quality financial services infrastructure and associated services to advisers and clients. Management sees the T4A offering, CURO, as complementary to Transact. Whilst still undergoing further development CURO has already proven to be highly capable and, with the Company's support, providing the necessary investment and direction, it is believed that T4A will be a great long-term fit that will deliver positive outcomes for all. The goodwill will be tested for impairment annually going forward. 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 goodwill is allocated to the two cash generating units ("CGUs") that are benefitting from the acquisition as follows: IAD Pty 2021 2020 ��'000 ��'000 Investment administration services 7,217 7,256 Insurance and life assurance business 5,734 5,695 Total 12,951 12,951 T4A 2021 2020 ��'000 ��'000 Adviser back-office technology 5,335 - Other assumptions are as follows: 2021 2020 Discount rate 10.0% 8.8% Period on which detailed forecasts are based 5 years 5 years Long-term growth rate 1.0% 1.0% 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 2026. Post the five year business plan, the growth rate used to determine the terminal value of the cash generating units was based on a long-term growth rate of 1.0%. Based on management's experience, the key assumptions on which management has calculated its projections are net inflows, market growth and expense inflation. The annual impairment 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. A sensitivity analysis has been performed, which showed that there were no reasonable foreseeable changes in the assumptions which would result in the recoverable amount falling below the carrying amount. 14. Property, plant and equipment - Group Leasehold improvements Equipment Fixtures and Fittings Motor Vehicles Total Cost ��'000 ��'000 ��'000 ��'000 ��'000 At 1 October 2020 1,732 3,314 186 103 5,335 Acquisition of subsidiary - 12 6 - 18 Additions - 642 - 18 660 Disposals - (325) (12) (38) (375) Foreign exchange (12) (19) - (4) (35) At 30 September 2021 1,720 3,624 180 79 5,603 Depreciation At 1 October 2020 1,157 1,634 145 86 3,022 Reclassification 2 32 - (34) - Charge in the year 146 960 16 14 1,136 Disposals - (325) (12) (26) (363) Foreign exchange (2) (12) - (5) (19) At 30 September 2021 1,303 2,289 149 35 3,776 Net Book Value At 30 September 2020 575 1,680 41 17 2,313 At 30 September 2021 417 1,335 31 44 1,827 Cost ��'000 ��'000 ��'000 ��'000 ��'000 At 1 October 2019 1,728 2,607 186 111 4,632 Additions - 852 - - 852 Disposals - (152) - (9) (161) Foreign exchange 4 7 - 1 12 At 30 September 2020 1,732 3,314 186 103 5,335 Depreciation At 1 October 2019 1,008 1,020 127 72 2,227 Charge in the year 148 758 18 22 946 Disposals - (149) - (9) (158) Foreign exchange 1 5 - 1 7 At 30 September 2020 1,157 1,634 145 86 3,022 Net Book Value At 30 September 2019 720 1,587 59 39 2,405 At 30 September 2020 575 1,680 41 17 2,313 The Company holds no property, plant and equipment. 15. Right-of-use assets - Property - Group Cost ��'000 Additions on adoption of IFRS 16 - 1 October 2019 5,581 Australian dollar foreign exchange adjustment 5 At 30 September 2020 5,586 Depreciation Charge in the year 1,615 Foreign exchange adjustment 10 At 30 September 2020 1,625 Net Book Value At 30 September 2019 - At 30 September 2020 3,961 Cost ��'000 At 1 October 2020 5,586 Additions 1,301 Disposals (412) Foreign exchange (15) At 30 September 2021 6,460 Depreciation ��'000 At 1 October 2020 1,625 Charge in the year 1,623 Disposals (412) Foreign exchange (8) At 30 September 2021 2,828 Net Book Value At 30 September 2020 3,961 At 30 September 2021 3,632 Depreciation is calculated on a straight line basis over the term of the lease. 16. Investment in subsidiaries 2021 2020 ��'000 ��'000 Carrying value at 1 October 16,832 15,799 Additions 12,955 - Share-based payments 1,776 1,033 Carrying value at 30 September 31,563 16,832 The Company has investments in the ordinary share capital of the following subsidiaries at 30 September 2021: 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 Objective Asset Management Limited Ordinary Shares 100% United Kingdom Dormant Indirect holdings IntegraFin Limited Ordinary Shares 100% United Kingdom Non-trading Transact Nominees Limited Ordinary Shares 100% United Kingdom Non-trading IntegraLife UK Limited Ordinary Shares 100% United Kingdom Life Insurance IntegraLife International Limited Ordinary Shares 100% Isle of Man Life Assurance ObjectMastery (UK) Limited Ordinary Shares 100% United Kingdom Consultancy Objective Funds Limited Ordinary Shares 100% United Kingdom Dormant Objective Wealth Management Limited Ordinary Shares 100% United Kingdom Dormant IntegraFin (Australia) Pty Limited Ordinary Shares 100% Australia Non-trading Transact Trustees Limited Ordinary Shares 100% United Kingdom Non-trading Time For Advice Limited Ordinary Shares 100% United Kingdom Financial planning software The Group has 100% voting rights on shares held in each of the subsidiary undertakings. All the UK subsidiaries have their registered office address at 29 Clement's Lane, London, EC4N 7AE. ILInt's registered office address is at 18-20 North Quay, Douglas, Isle of Man, IM1 4LE. IntegraFin (Australia) Pty's registered office address is at Level 4, 854 Glenferrie Road, Hawthorn, Victoria, Australia 3122. Integrated Application Development Pty Ltd's registered office address is 19-25 Camberwell Road, Melbourne, Australia. The above subsidiaries have all been included in the consolidated Financial Statements. The results of ILInt and ILUK are included as described in the basis of consolidation accounting policy in note 1. Integrated Financial Arrangements Ltd is authorised and regulated by the Financial Conduct Authority. The principal activity of the Company and its subsidiaries is the provision of 'Transact', a wrap service that arranges and executes transactions between clients, their financial advisers and financial product providers including investment managers and stockbrokers. IntegraFin Services Limited (ISL), is the Group services company. All intra-group service contracts are held by this services company. Integrated Application Development Pty Ltd (IAD Pty) provides software maintenance services to the Group. IntegraFin Limited is the trustee of the IntegraSIP Share Incentive Plan, which was set up to allocate Class C Shares in the capital of the Company to staff. IntegraFin Limited undertakes no other activities. 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. 17. Deferred acquisition costs and deferred income liability 2021 2020 ��'000 ��'000 Opening balance 53,482 50,443 Capitalisation of deferred acquisition costs and deferred income liabilities - 10,615 Amortisation of deferred acquisition costs and deferred income liabilities - (7,576) Derecognition of deferred acquisition costs and deferred income liabilities (53,482) - Change in deferred acquisition costs and deferred income liabilities (53,482) 3,039 Closing balance - 53,482 Following a review of the terms of the agreements relating to establishment charges paid to ILUK and ILInt policyholders' financial advisers, management has concluded that the Group is acting in an agency capacity between the policyholders and their financial advisers, rather than as a principal. It therefore should not recognise the deferred acquisition costs as contract costs, nor does it have future service obligations in respect of the deferred fees to justify the recognition of the corresponding deferred income liability. The deferred acquisition costs and deferred income liabilities have therefore been derecognised in the financial year ended 30 September 2021, to bring the accounts in line with the accounting standards. The impact is a reduction in both assets and liabilities of ��53.5million. The treatment has had no impact on the profit or loss or net assets of the Group. Management has considered the qualitative and quantitative impact of the above change, and has concluded that this does not have a material effect on the prior year financial statements, and a prior year adjustment is therefore not required. This is due to the fact that: �� The net impact on the statement of comprehensive income and on net assets is nil; �� all balances being derecognised on the statement of financial position are equal and opposite; �� the total balances are not material in the context of total policyholder assets and linked liabilities; and �� the users would not reasonably have any expectations regarding the measurement or disclosure of these items, as it fundamentally does not relate to them. 18. Loans This note analyses the loans payable by and receivable to the Company. The carrying amounts of loans are as follows: Loans receivable 2021 2020 ��'000 ��'000 Loans receivable from third parties 3,540 2,716 Interest receivable on loans 21 16 Total gross loans 3,561 2,732 Credit loss allowance (141) (85) Total net loans 3,420 2,647 The loans receivable are measured at amortised cost with the credit loss allowance charged straight to the statement of comprehensive income. The total movement in the credit loss allowance can be seen in note 23. Loans payable 2021 2020 ��'000 ��'000 Loan payable to subsidiary 9,000 - To be settled within 12 months 1,000 - To be settled after 12 months 8,000 - Total loan payable 9,000 - 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 9 years. 19. Investments held for the benefit of policyholders 2021 2021 2020 2020 Cost Fair value Cost Fair value ILInt ��'000 ��'000 ��'000 ��'000 Investments held for the benefit of policyholders 1,737,512 2,102,209 1,346,990 1,534,080 1,737,512 2,102,209 1,346,990 1,534,080 ILUK Investments held for the benefit of policyholders 16,146,376 19,684,897 13,482,294 15,193,128 16,146,376 19,684,897 13,482,294 15,193,128 Total 21,787,106 16,727,208 All amounts are current as customers are able to make same-day withdrawal of available funds and transfers to third-party providers are generally performed within a month. These assets are held to cover the liabilities for unit linked investment contracts. All contracts with customers are deemed to be investment contracts and, accordingly, assets are 100% matched to corresponding liabilities. 20. Liabilities for linked investment contracts 2021 2020 Fair value Fair value ILInt ��'000 ��'000 Unit linked liabilities 2,199,700 1,636,781 2,199,700 1,636,781 ILUK Unit linked liabilities 20,853,690 16,476,154 20,853,690 16,476,154 Total 23,053,390 18,112,935 Analysis of change in liabilities for linked investment contracts 2021 2020 ��'000 ��'000 Opening balance 18,112,935 16,665,048 Investment inflows 3,391,318 2,415,445 Investment outflows (1,130,468) (834,454) Compensation 163 47 Changes in fair value of underlying assets 2,940,185 (72,990) Investment income - 127,735 Other fees and charges - Transact (56,620) (50,360) Other fees and charges - third parties (204,123) (137,536) Closing balance 23,053,390 18,112,935 The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected collective fund investments, whose underlying investments include equities, debt securities, property and derivatives. This investment mix is unique to individual policyholders. When the diversified portfolio of all policyholder investments is considered, there is a clear correlation with the FTSE 100 index and other major world indices, providing a meaningful comparison with the return on the investments. The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date. 21. Cash and cash equivalents 2021 2020 ��'000 ��'000 Bank balances - Instant access 169,578 148,617 Bank balances - Notice accounts 6,502 5,500 Cash and cash equivalents held for the benefit of the policyholders - instant access - ILUK 1,131,567 1,231,043 Cash and cash equivalents held for the benefit of the policyholders - term deposits - ILUK 37,225 51,982 Cash and cash equivalents held for the benefit of the policyholders - instant access - ILINT 96,458 100,716 Cash and cash equivalents held for the benefit of the policyholders - term deposits - ILINT 1,032 1,985 Total 1,442,362 1,539,843 Bank balances held in instant access accounts are current and available for use by the Group. All of the bank balances held in notice accounts require less than 35 days' notice before they are available for use by the Group. The cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked investment contracts. These amounts are 100% matched to corresponding liabilities. 22. Financial assets at fair value through profit or loss Group Group 2021 2020 ��'000 ��'000 Listed shares and securities 165 92 Gilts 4,969 4,959 Total 5,134 5,051 Investments are all UK and sterling based and held at fair value. 23. Other prepayments and accrued income Group Company Group Company 2021 2021 2020 2020 ��'000 ��'000 ��'000 ��'000 Accrued income 12,819 - 10,956 - Less: credit loss allowance (789) - (712) - Accrued income - net 12,030 - 10,244 - Prepayments 3,921 45 4,168 56 Total 15,951 45 14,412 56 Movement in the credit loss allowance (for accrued income, loans receivable and trade and other receivables) is as follows: 2021 2020 ��'000 ��'000 Opening credit loss allowance (822) (646) Reduction in credit loss allowance - - (Increase) during the year (230) (176) Balance at 30 September (1,052) (822) 24. Trade and other receivables Group Company Group Company 2021 2021 2020 2020 ��'000 ��'000 ��'000 ��'000 Other receivables 935 3 1,329 - Less: credit loss allowance (123) - - - Other receivables net 812 3 1,329 - Amounts owed by Group undertakings - 130 - 342 Amounts due from HMRC 1,800 - 2,227 - Amount due from policyholders to meet current tax liability 1,107 - - - Total 3,719 133 3,556 342 Amount due from HMRC is in respect of tax claimed on behalf of policyholders for tax deducted at source. 25. Trade and other payables Group Company Group Company 2021 2021 2020 2020 ��'000 ��'000 ��'000 ��'000 Trade payables 437 27 1,716 7 PAYE and other taxation 1,610 61 1,420 67 Due to Group undertakings - 22 - 56 Other payables 5,460 210 7,436 49 Accruals and deferred income 8,216 359 7,794 312 Deferred consideration 1,741 1,741 - - Total 17,466 2,420 18,366 491 Other payables mainly comprises ��4.2million (2020: ��6.2million) in relation to bonds awaiting approval. 26. Lease liabilities Lease liabilities - Property: 2021 2020 ��'000 ��'000 Opening balance 6,087 8,336 Additions 1,283 - Lease payments (2,491) (2,477) Interest expense 167 233 Foreign exchange adjustment (9) (5) Balance at 30 September 5,037 6,087 Amounts falling due within one year 2,362 2,375 Amounts falling due after one year 2,675 3,712 The above table provides a reconciliation of the financial liabilities arising from financing activities. 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. 27. Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25% (2020: 19%). The increase in the UK corporation tax rate 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 Share based payments Other deductible temporary differences Total ��'000 ��'000 ��'000 At 1 October 2019 110 47 157 Adjustment in respect of prior year 108 18 126 Adjustment to opening balances - 32 32 Excess tax relief charged to equity 60 - 60 Charge to income 124 (10) 114 At 30 September 2020 402 87 489 Charge to income 192 16 208 Excess tax relief charged to equity 19 - 19 Charge to income 192 16 208 At 30 September 2021 613 103 716 Deferred Tax Liability Accelerated capital allowances Policyholder tax Other deductible differences Total ��'000 ��'000 ��'000 ��'000 At 1 October 2019 60 13,188 - 13,248 Charge to income 61 (4,341) - (4,280) At 30 September 2020 121 8,847 - 8,968 Charge to income (49) 19,599 179 19,729 Deferred tax acquired through business combination - - 821 821 At 30 September 2021 72 28,446 1,000 29,518 The Company has no deferred tax assets or liabilities. 28. Client monies and client assets 2021 ��'000 ��'000 Client monies 2,901,487 Amounts due to clients 2,901,487 Client assets 49,210,125 Corresponding liability 49,210,125 2020 ��'000 ��'000 Client monies 3,106,978 Amounts due to clients 3,106,978 Client assets 37,985,921 Corresponding liability 37,985,921 The above client monies are held separately (off balance sheet) in client bank and the above client assets are held on behalf of Integrated Financial Arrangements Ltd by Transact Nominees Limited. 29. Provisions - Group 2021 2020 ��'000 ��'000 Balance brought forward 25,208 18,230 Increase in dilapidations provision 52 52 Increase in ILInt non-linked unit provision 13 2 (Decrease)/increase in ILUK tax provision (7,469) 6,924 Balance carried forward 17,804 25,208 Amounts falling due within one year 11,624 - Amounts falling due after one year 6,180 25,208 Dilapidations provisions 516 464 ILInt non-linked unit provision 54 41 Current ILUK tax provision 11,626 - Non-current ILUK tax provision 5,608 24,703 Total 17,804 25,208 The dilapidation provisions relate to the current leasehold premises at 29 Clement's Lane, and the current ILInt leasehold premises at 18/20 North Quay, on the Isle of Man. The Group is committed to restoring the premises to their original state at the end of the lease term. Whilst it is probable that payments will be required for dilapidations, uncertainty exists with regard to the amount and timing of these payments, and the amounts provided represent management's best estimate of the Group's liability. ILUK tax provision comprises claims received from HMRC that are yet to be returned to policyholders, charges taken from unit-linked funds and claims received from HMRC to meet current and future policyholder tax obligations. These are expected to be paid to policyholders over the course of the next seven years. 30. Contingent consideration - Group and company 2021 2020 ��'000 ��'000 Contingent consideration 791 - As explained in note 13, the T4A acquisition cost included additional consideration between ��0 and ��8.6 million, which is payable in January 2025 and contingent on T4A meeting certain performance targets over the next four years. Management have estimated the fair value as ��3.9 million, and this is being recognised across the four year period from January 2021 to December 2024. The contingent consideration balance relates to the element of the additional consideration that has been recognised up to 30 September 2021. 31. Capital redemption reserve - Group 2021 2020 ��'000 ��'000 Balance brought forward 2 2 Balance carried forward 2 2 On 12 December 2013 IFAL was granted authority by shareholders to repurchase ��4,500,000 worth of ordinary shares from shareholders. IFAL purchased 45,917 shares, and they were then cancelled, giving rise to a capital redemption reserve of ��2,271. 32. Share-based payments Share-based payment reserve Group Company Group Company 2021 2021 2020 2020 ��'000 ��'000 ��'000 ��'000 Balance brought forward 1,698 1,070 1,008 880 Movement in the year 732 645 723 190 Transfer to profit and loss reserve (26) - (33) - Balance carried forward 2,404 1,715 1,698 1,070 The reduction in reserves of ��26k (2020: ��33k) is due to former members of staff leaving the SIP 2005 scheme. 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 2021 was ��nil (2020: ��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 2021 was ��669k (2020: ��649k). 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 2021 was ��539k (2020: ��555k). (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 2021 was ��687k (2020: ��423k). 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. Details of the share awards outstanding are as follows: 2021 2020 Shares Shares (number) (number) SIP 2018 Shares in the plan at start of the year 473,683 251,541 Granted 295,210 275,249 Shares withdrawn from the plan (76,210) (53,107) Shares in the plan at end of year 692,683 473,683 Available to withdraw from the plan at end of year 148,543 83,569 Details of the movements in the share scheme during the year are as follows: 2021 2021 2020 2020 Weighted average exercise price Shares Weighted average exercise price Shares (pence) (number) (pence) (number) SIP 2005 Outstanding at start of the year 0.00 1,201,223 0.00 1,630,190 Shares withdrawn from the plan 0.00 (328,514) 0.00 (428,967) Shares in the plan at end of year 0.00 872,709 0.00 1,201,223 Available to withdraw from the plan at end of year 0.00 872,709 0.00 1,201,223 The weighted average share price at the date of withdrawal for shares withdrawn from the plan during the year was 507.35pence (2020: 487.76pence). At 30 September 2021 the exercise price was ��nil as they were all nil cost options. 2021 2021 2020 2020 Weighted average exercise price Share options Weighted average exercise price Share options (pence) (number) (pence) (number) PSP Outstanding at start of the year 0.00 434,643 0.00 269,511 Granted 0.00 141,445 0.00 165,132 Forfeited 0.00 - 0.00 - Outstanding at end of year 0.00 576,088 0.00 434,643 Exercisable at end of year 0.00 - 0.00 - 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: 2021 2020 PSP Share price at date of grant 555.0 454.5 Exercise price Nil Nil Expected life 3 years 3 years Risk free rate 0.00% 0.52% Dividend yield 1.50% 1.7% Weighted average fair value per option 530.7p 431.7 p 33. Employee Benefit Trust reserve Group: 2021 2020 ��'000 ��'000 Balance brought forward (1,103) (275) Purchase of own shares (952) (828) Balance carried forward (2,055) (1,103) Company: 2021 2020 ��'000 ��'000 Balance brought forward (869) (275) Purchase of own shares (920) (594) Balance carried forward (1,789) (869) 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. 34. Other reserves - Group 2021 2020 ��'000 ��'000 Foreign exchange reserves (94) (22) Non-distributable reserves 5,722 5,722 Non-distributable insurance reserves 501 501 Foreign exchange reserves are gains/losses arising on retranslating the net assets of IAD Pty into sterling. Non-distributable reserves relate to share premium held by one of the Company's subsidiaries, IFAL, which is classified within other reserves on a Group level. Non-distributable insurance reserves arose due to the transition from UK GAAP to IFRS in financial year 2015, whereupon actuarial reserving required under the old standards became impermissible under new standards. 35. Related parties During the year the Company did not render nor receive any services with related parties within the Group, and at the year end the Company had the following intra-Group receivables: Amounts owed by/ (to) related parties Company 2021 2020 ��'000 ��'000 Integrated Financial Arrangements Ltd 95 8 IntegraFin Services Limited 17 277 IntegraFin Limited (9) (9) IntegraLife UK Limited 4 4 Integrated Application Development Pty Limited 1 6 During the year, a loan of ��10million was issued to the Company by IntegraLife UK Limited. This is an arm's length transaction as interest is charged at a commercial rate. IHP will pay the loan off over ten years and made the first payment of ��1 million, plus accrued interest, prior to 30 September 2021. The current loan balance is ��9 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 2021 or 2020 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 ��3.3million (2020: ��4.3million) in dividends during the year and benefitted from staff discounts for using the platform of ��2k (2020: ��2k). The number of IHP shares held at the end of the year by key management personnel was 35,206,751, a decrease of 16,050,145 from last year. All of the above transactions are commercial transactions undertaken in the normal course of business. 36. Contingent liabilities In January 2020 the Group received notice from HMRC that the inclusion of Integrated Application Development Pty Ltd (IAD) in the UK VAT Group was terminated with effect from 16 July 2016. The Group included IAD in the UK VAT Group having taken specialist advice to ensure its actions were in accordance with the relevant laws. The consequence of the exclusion of IAD from the UK VAT Group is that the services provided from Australia would now be subject to reverse-charge VAT. The Group has challenged this notification and opened a discussion with HMRC about its intention to exclude IAD from the UK VAT Group, therefore the financial implications of this notice, including the timing of any potential payment, remain uncertain, pending the outcome of the reconsideration of the exclusion. HMRC's notice states that the VAT due since July 2016 until October 2019 will be approximately ��4.3m and that going forward there would be an additional annual VAT charge of approximately ��1.4m. The Group does not yet know whether HMRC will charge interest and/or a penalty if the appeal to the notification is unsuccessful. Due to the ongoing uncertainty around the additional VAT charges, pending the outcome of the dialogue with HMRC, the directors do not believe it would be appropriate to recognise a provision in these financial statements. Payment of the additional VAT charges is considered to be less than probable and this is supported by both the original VAT advice received from specialists when the VAT Group was created, and subsequent specialist advice following HMRC's challenge in January 2020. 37. Events after the reporting date A second interim dividend of 7.0 pence per share was declared on 15 December 2021. This dividend has not been accrued in the consolidated statement of financial position. 38. Dividends During the year to 30 September 2021 the Company paid interim dividends of ��28.5million (2020: ��26.2million) to shareholders. The Company received dividends from subsidiaries of ��42.1million (2020: ��32.3million). DIRECTORS, COMPANY DETAILS, ADVISERS Executive Directors Ian Taylor (resigned 26 February 2021) Michael Howard Alexander Scott Jonathan Gunby Non-Executive Directors Richard Cranfield Christopher Munro Neil Holden (resigned on 1 September 2021) Caroline Banszky Victoria Cochrane Robert Lister Rita Dhut (appointed 22 September 2021) Company Secretary Helen Wakeford Independent Auditors BDO LLP, 55 Baker Street, London, W1U 7EU Solicitors Eversheds Sutherland, One Wood Street, London, EC2V 7WS Corporate Advisers Peel Hunt LLP, 7th Floor 100 Liverpool Street, London, England, EC2M 2AT Barclays Bank PLC, 5 The North Colonnade, Canary Wharf, London, E14 4BB Principal Bankers NatWest Bank Plc, 135 Bishopsgate, London, EC2M 3UR Registrars Equiniti Group plc, Sutherland House, Russell Way, Crawley, RH10 1UH Registered Office 29 Clement's Lane, London, EC4N 7AE Investor Relations Jane Isaac 020 7608 4900 Website www.integrafin.co.uk Company number 8860879 LEI number 213800CYIZKXK9PQYE87 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) The holding company of the Integrated Financial Arrangements Ltd group of companies. 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