Sanne Group plc
Annual Report and Accounts 2021
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“A year of record new business
wins, good organic growth
momentum and execution of
strategic acquisitions.”
Contents
Strategic Report
2 Financial and operational highlights of the year
3 Chairman’s and CEO’s Statement
6 Strategy Review
7 Key Performance Indicators
10 Segmental and Operational Review
12 Financial Review
16 Alternative Performance Measure definitions
18 Our Stakeholders
21 Climate-Related Financial Disclosures
27 Risk Management
29 Viability Statement
Governance
31 Corporate Governance Report
32 Board of Directors
34 Leadership
35 Board Effectiveness
38 Directors’ Report
41 Nomination and Governance Committee
Report
44 Audit Committee Report
47 Risk Committee Report
48 Remuneration Committee Report
53 Directors’ Responsibilities Statement
Financial Statements
54 Independent Auditors' Report
64 Consolidated Income Statement
65 Consolidated Statement of Comprehensive
Income
66 Consolidated Balance Sheet
67 Consolidated Statement of Changes in Equity
68 Consolidated Cash Flow Statement
70 Notes to the Consolidated Financial
Statements
122 Glossary of Terms
124 Shareholder and Corporate Information
Sanne Group plc Annual Report and Accounts 2021
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Constant
currency
2021 2020 Change change
3
Underlying
1
Net revenue
2
£194.2m £169.7m 14.4% 19.0%
Operating profit £54.2m £48.0m 12.9% 21.0%
Profit before tax £50.6m £44.9m 12.7% 20.5%
Diluted earnings per share 26.6p 25.4p 4.8% 13.4%
Free cash flow attributable to equity holders
4
£39.6m £33.6m 18.0% n.a.
Operating profit margin 27.9% 28.3% (37bps) 48bps
Statutory
Turnover
2
£203.7m £174.9m 16.5% 21.1%
Operating profit £3.5m £23.9m (85.5%) (82.2%)
(Loss)/profit before tax (£2.2m) £20.5m n.a. n.a.
Diluted earnings per share (4.4p) 11.1p n.a. n.a.
Final dividend per share – 14.7p n.a. n.a.
See below for notes
Governance Financial StatementsStrategic Report
Highlights:
Record year for new business wins and
increasing organic growth has led to a strong
financial performance:
• Net revenue growth of 19.0%
3
, resulting
from strong growth across all regions and
organic growth of 8.6%
3
• Underlying operating profit growth of
21.0%
3
• Continued underlying operating profit
margin improvement of 48bps at constant
currency
• Strong cash generation with underlying
cash conversion of 99.7% and free cash
flow attributable to equity holders up
18.0% on the prior year
• Record new business wins, up 48.4% with
annualised new business revenue of
approximately £33.4 million secured in
2021 (2020: £22.5 million)
• Apex
7
offer for Sanne has resulted in
material non-underlying transaction fees
and accelerated share-based payments
accruals resulting in a statutory loss
before tax and diluted earnings per share
Continued strategic activity:
• Three successful acquisitions in the year
• Acquisitions of PEA
5
and Strait
6
in the first
half added new presence in the important
Scandinavian markets of Sweden and
Denmark as well as expanding the Group’s
North American presence to Dallas
• Both acquisitions have performed well
through the year
• Acquisition of the fund administration
business of PraxisIFM Group plc
augmented the Group’s presence and
capability in Guernsey, UK, Malta, Jersey
and Luxembourg
• Continued progress with the roll out of the
Group’s new technology strategy and
growing success with the Group’s new
technology-led offerings to clients
including the client portal and data
services
• Sale of the Group’s investment in Colmore
AG realising net proceeds of $25.2m
(£18.1m), a return of 2.3 times our original
investment after two years, with continued
commitment to the strategic partnership
with Sanne under its new ownership
Recommended all cash offer for
Sanne:
• On 5 October 2021, the Company
announced that its shareholders had
voted overwhelmingly in support of an
all–cash offer of 920 pence per share
made by Apex
7
• The all-cash offer remains subject to the
satisfaction or waiver of conditions
relating to a small number of regulatory
change of control clearances which are
progressing well
Outlook
• Continued high demand for alternative
asset investments driving strong market
recovery in Sanne’s addressable markets
• The significant new business momentum
seen in the second half of 2021 has
continued in 2022 positioning Sanne well
to deliver a strong financial performance
for 2022
• The combination of Sanne with the Apex
business will create one of the largest
platforms in the sector allowing the
enlarged group to be even better
positioned to thrive and creating even
better opportunities for our people and
clients
• The acquisition of the Group by Apex is
now expected to complete either late in
the second quarter or early in the third
quarter of 2022
Sanne Group plc Annual Report and Accounts 2021
2
Financial and Operational Highlights of the Year
Notes:
1. Underlying results for the year have been presented after the exclusion of non-underlying items (including costs arising directly as a result of the takeover offer for Sanne) and third-party fund
management fees. Further details of non-underlying items can be found in note 7 of the consolidated financial statements. Further detail of alternative performance measures is provided in the
Alternative Performance Measures definitions section.
2. Net revenue comprises turnover less third-party fund management fees. More detail is provided in the Financial Review.
3. Constant currency changes represent the 2021 performance based on applicable 2020 currency rates to eliminate movements due to FX.
4. Free cash flow attributable to equity holders is the total cash generated in the year before acquisitions, capital expenditure, financing activities and cash non-underlying costs.
5. Private Equity Administrators Group
6. Strait Capital Company Ltd
7. Apex Acquisition Company Limited, a subsidiary of Apex Group Limited
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Chairman’s and CEO’s Statement
Despite the material distractions arising from well-publicised offers for the Company during the year, 2021 has seen a strong financial
performance from the Group, with impressive double-digit growth and maintenance of healthy profit margins and cash conversion. We have begun
to see good returns from our investment over the last three years in our business development and product specialist teams, as well as benefitting
from the continued market recovery in the alternative assets space. As a result, we have successfully delivered net revenue growth of 19.0% and
underlying operating profit growth of 21.0%, both at constant currency. It is particularly pleasing to see this result given that the Group was the
subject of takeover speculation and a formal offer period for the majority of the year.
The Group’s growth has been underpinned by continued improvement in our organic growth performance. Client activity rebounded well as the
year progressed and our well invested platform and market proposition has allowed us to capture significant new business activity. The annualised
value of new business wins in the year was £33.4 million, representing a 48.4% increase from the prior year. This record level of new business in
the year has not only driven an increase in the constant currency organic growth rate for 2021 but underpins further growth momentum into 2022
and beyond.
We have also successfully completed three acquisitions in the year to both drive growth and expand the Group’s geographic footprint and
augment our capabilities in our target end markets.
Financial Performance
Constant
currency
Underlying Group Income Statement 2021 (£'000) 2020 (£'000) % Change % change
Net revenue 194,158 169,688 14.4% 19.0%
Gross profit 111,380 100,550 10.8% 15.8%
– Gross profit margin 57.4% 59.3% (189bps) (162bps)
Overhead costs (57,141) (52,514)
Underlying operating profi t 54,239 48,036 12.9% 21.0%
– Underlying operating profit margin 27.9% 28.3% (37bps) 48bps
Note: the above table includes Alternative Performance Measures. See the Alternative Performance Measures section for their calculation methodology.
The Group’s constant currency net revenue growth in 2021 was 19.0%. Despite the relative strengthening of sterling against the Group’s other
predominant currencies, reported net revenue growth was also double digit at 14.4%.
2021’s strong revenue growth has been underpinned by the continued increase in the Group’s organic growth rates since the period of significant
client activity slowdown in 2020 that resulted from the COVID 19 pandemic. Full year constant currency organic net revenue growth was 8.6%, up
from 5.8% in the prior year. Our continued investment in our Product Development team and business development activities has helped ensure
Sanne has captured a significant proportion of our addressable market opportunity.
Gross profit has also seen double digit year on year growth, both on a constant and reported currency basis. However, the Group’s gross profit
margin has seen a slight decline year on year by 162 basis points, at constant currency. This has partly been a result of mix effect from recent
acquisitions that joined the Group on lower profit margins as well as the strong pick-up in new business activity which requires some short-term
scaling-up of client service teams ahead of full revenue being recognised. However, the Group has also experienced some margin pressure from
inefficiencies and increased costs arising from higher levels of staff turnover, particularly in the second half of the year. This has been driven, in
part, by the prolonged period of uncertainty arising from the takeover process engulfing the Group for much of 2021.
Group overheads continue to be well managed and we continue to benefit from operational leverage over many of these central functions as we
grow. This has meant that, in 2021, we have again reduced overhead spend as a proportion of Group revenues at the same time as, within
overhead spend, significantly increasing investment in our technology infrastructure, capability and functionality.
Underlying operating profit has increased 21.0% at constant currency with the underlying operating profit margin also improving 48 basis points at
constant currency. However, on a reported currency basis, the underlying operating profit margin has reduced slightly, by 37 basis points, due to a
greater proportion of overhead costs compared with revenues being incurred in sterling. This means that the strengthening of the UK currency has
created a year-on-year headwind in revenue that does not get reflected to the same degree across the Group’s cost base.
The Group’s cash performance has once again been strong with underlying operating cash conversion in line with the Group’s guidance at 99.7%.
Underlying free cash flow attributable to equity holders was also up 18.0% versus 2020 to £39.6 million. This has been driven by our continued
working capital discipline as well as the resilient nature of our business model.
Continued strategic delivery
During 2021, we have focused on enhancing and innovating our client service proposition, as well as driving technology enhancements throughout
our business. This has delivered a multitude of successes across our Group, such as the launch of loan agency services in New York and Japan,
depositary services in Ireland and compliance and ESG services across more of our locations. Our client technology strategy also continues to
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Governance Financial StatementsStrategic Report
gather revenue momentum as demonstrable
differentiators in our proposition such as the
Sanne Live portal, the Sanne Rio ESG reporting
tool and our Sanne Spotlight data analytics
service have been rolled out to clients. These
differentiators have not just sold well as
standalone offerings, but have opened up ever
larger mandate opportunities from some of
the world’s largest asset management firms.
Our strategic partnership with Alternative
Assets Accounting Software Inc. is also
progressing well, with innovative, new
reporting tools for both General Partner and
Limited Partner clients launching late in the
year across our first set of clients.
We have also benefited in the year from a
growing trend amongst the largest asset
management groups to look to consolidate
their service providers and focus on truly
integrated, global platforms that can offer the
full suite of core services across all key
regions. We have heavily invested in recent
years to be able to deliver on this opportunity
and, in 2021, have also sought to improve our
processes and focus on targeting these
mandates. As a result, we have seen and
successfully won an increasing number of
these very large, multi-jurisdiction and
multi-product offering mandates, particularly
in the second half of the year, with a strong
pipeline going into 2022.
The year has also seen significant additional
progress in rolling out our internal technology
strategy and investing in strategic initiatives to
drive improved efficiency. In the year we
successfully migrated the Group to the Cloud,
whilst completing the design and build of new
data management and data architecture
platforms. These should allow us to improve
our processes and drive efficiency across all
functions, in turn freeing up resources both
internally and within client service teams to
focus on driving the highest quality output
whilst improving profit margins.
Our inorganic strategy has also kept up strong
momentum despite on-going travel
restrictions and the distraction of the takeover
process for most of the year. We completed
two acquisitions in the first half of the year
that each enhanced the Group’s geographic
footprint as well as a third acquisition that
completed towards the end of the year
expanding our capability in existing locations.
In March, we completed the acquisition of
PEA, a leading independent private equity
administration business, which adds two new
locations to the Group, in Sweden and
Denmark, as well as doubling the size of our
existing Guernsey operation. We have
benefitted from a number of early revenue
synergies across the PEA client base as we
seek to service these clients across other,
existing Sanne offices. In April, we acquired
Strait, a fund administrator, largely focused on
private equity clients based in Dallas, Texas.
As well as expanding our strategically
important North American platform, Strait has
brought with it a strong management team
who will be critical in helping the Group
expand more rapidly across the world’s largest
alternatives market. Both acquisitions have
performed well since acquisition and
integration remains on track.
In December, we completed the acquisition of
the fund administration business from
PraxisIFM Group plc, a c.80 person fund
administration business across Guernsey, the
UK, Malta, Luxembourg and Jersey. The
acquisition positions Sanne as one of the
leading players in the European listed funds
administration sector, as well as augmenting
our presence in Guernsey, a significant
domicile for UK and European private equity
funds, and increasing our ability to service
open-ended fund structures in Europe.
As discussed in our results for the six months
to 30 June 2021, we disposed of our minority
equity stake in Colmore AG for total net
proceeds of $25.2 million (£18.1m) as a result
of its sale to Prequin. This represents a very
attractive financial return for the Group, but
more importantly, our investment allowed us
to build a strong strategic partnership with
Colmore that enabled the rapid development
and rollout of Sanne Spotlight which we
believe to be industry-leading in its data
proposition to clients. Despite the disposal of
our strategic investment, we continue to have
an exclusive development arrangement with
Colmore that should continue to benefit the
Group going forward.
People
Sanne has always been, first and foremost, a
people business. Our employees are our most
valuable asset and 2021 has been another
year of prioritising their health and safety. We
have continued to manage the business
despite the pressures put on our workforce by
the continuing COVID-19 Pandemic. It has
been great to see the strength and resilience
of our workforce through extremely tough
times. Their commitment and drive to deliver
for our clients despite the challenges of the
pandemic and the significant uncertainty that
a takeover process for the Company inevitably
creates has been remarkable. For this, we
wish to thank all of them for their considerable
efforts this year.
As a Group, we have continued to invest in
supporting our workforce as well as trying to
safeguard their physical and mental wellbeing.
In the second half of the year, we began to trial
changes to the structure and ways of working.
This has been aimed at trying to find
sustainable practices that maintain many of
the benefits Sanne, its employees and clients
have enjoyed during this exceptional period,
whilst also trying to address the inevitable
longer-term challenges that arise with high
levels of remote working. This work will
continue into 2022 as we try to find the best
balance for all our employees and clients.
We have also continued to focus on employee
engagement following the establishment of
the workforce advisory panel in 2019. Through
the Panel and our existing D&I and CSR
committees around the Group, we have
sought to bring our teams closer together
through increased communications and
various initiatives. These initiatives have
involved rolling out new mental wellness
support and training, a new wider suite of
training and development packages and a
plethora of CSR and charitable activities.
Takeover process and dividend
On 25 August 2021 the Company announced
that the Board had reached an agreement with
Apex on the terms of a recommended all cash
offer of 920p per share to be made by Apex (the
Acquisition) which is intended to be effected by
means of a scheme of arrangement under
Article 125 of the Jersey Companies Law
(Scheme). Further, on 5October 2021, the
Board announced that at the Court Meeting and
General Meeting, each held in connection with
the Scheme, the requisite majority of Scheme
and Sanne Shareholders had voted in favour of
the offer by Apex.
Good progress has been made working
towards satisfying the outstanding conditions
of the Scheme with regulatory approvals now
received in respect of all jurisdictions other
than Luxembourg. However, further to the
announcement made on 22 February 2022,
Apex has recently reported to Sanne that
whilst it remains hopeful that all the remaining
conditions will be satisfied and that the
Scheme will become effective by the end of
Q2, it is possible that this may now occur in
early Q3. Consequently, Sanne is in
discussions with Apex and the Takeover Panel
about an appropriate extension to the Long
Stop Date, should one be required.
Whilst the Acquisition represents a good
outcome for Sanne shareholders, it has
resulted in a significant amount of additional
transaction related costs in 2021. These have
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Sanne Group plc Annual Report and Accounts 2021
5
principally been related to transaction advisory
fees and the cost of accelerating the Group’s
share-based payments as required under the
terms of the relevant schemes. Whilst these
costs have been treated as non-underlying,
their acceleration in the year, following the
result of the Court Meeting and General
Meeting in October has resulted in a reported
loss after tax.
As a result of the terms of the Acquisition, the
Company did not declare an interim dividend
in 2021 and will not be paying shareholders a
final dividend for 2021.
Looking ahead
The demand for alternative asset investments
is as high today as we have ever seen it whilst
increasing regulatory requirements and
complexity and the propensity for asset
managers to seek an outsourced solution for
administration are powerful long-term drivers
for our market. That, in addition to the strong
growth trends that we have seen, particularly
in the second half of 2021 and continuing into
2022, means there remains a compelling
opportunity for Sanne going forward.
More recently, we have been watching with
concern the increasing geopolitical
uncertainties and humanitarian crises arising
from the conflict in the Ukraine. Whilst our
thoughts are with all those affected by the
crisis, the Group does not operate in either
Russia or the Ukraine and has very limited
exposure to the region. In addition, the Group’s
income is not expected to be materially
impacted by the wider economic market
volatility and asset price fluctuations. As such,
we do not expect the political and economic
implications of the conflict to have any
material impact on the Group’s performance.
As a standalone business, the accelerating
organic growth and continued investment in
the platform positions Sanne well to continue
taking advantage of the market opportunity.
The combination of Sanne with the Apex
business once the Acquisition completes will
create one of the largest platforms in the
sector allowing the enlarged Group to be even
better positioned to thrive creating even better
opportunities for our people and clients.
Rupert Robson
Chairman
Martin Schnaier
Chief Executive Officer
Chairman’s and CEO’s Statement continued
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Strategy Review
The vision of the Group is to be one of the world’s leading providers of outsourced
alternative asset and corporate administration services.
The Group looks to partner with top tier alternative asset managers, financial institutions
and global corporates, who require a high-touch professional service due to the bespoke
nature of their investment products and activities. These products and activities have
become increasingly complex and cross-jurisdictional, requiring co-ordinated support
across a global platform supported by industry experts in private equity, private debt,
capital markets and real assets.
Client-driven
Sanne executes this strategy by offering “local
excellence on a global platform”. It has built a
platform spanning 23 locations with over
2,200 employees that is preeminent in its core
markets and is relied upon by over
1,950clients with AuA totalling in excess of
£500 billion. Clients choose Sanne not only
because of its depth of resource, but also
because of its client-centric approach, which
focuses relentlessly on delivering quality
support.
This client-centric approach is predicated on a
professional services philosophy and is
backed up by the assurance of its listing on
the London Stock Exchange, which provides a
credible governance framework for a business
with over £500 billion in assets under
administration, Sanne also takes a long-term
approach with clients to ensure stability of
service over 10-year-plus cycles in an industry
where the competitive landscape is
dominated by short-term propositions.
Structural market growth
Sanne’s continuing growth has stemmed from
the combined effects of investor demand for
alternative investment strategies, ever
increasing regulatory complexity and the rise
in outsourcing by asset managers increasing
the size of our addressable markets. The trend
towards outsourcing services to a firm such
as Sanne is a result of increasing
sophistication among clients in relation to
outsourcing together with a desire to
rationalise supply chains by using fewer, larger
and more capable administrators. In this
environment, we believe that Sanne is uniquely
placed to meet growing industry needs and is
determined to develop a sustainable product
that helps facilitate global investment in a
responsible manner.
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Key Performance Indicators
Net revenue
£194.2m
Definition
The value of services sold to clients in the
year, excluding third-party fund management
fees.
2021 performance
Another year of delivering both organic and
inorganic revenue growth.
Strategic significance
Net revenue measures how well the Group has
expanded its business.
Constant currency
organic net
revenue growth
8.6%
Definition
Constant currency organic net revenue growth
compares the revenue in the year with the
prior year, applying the same FX rates in both
periods. Revenue from any acquisition made
in the year is excluded. Where an acquisition
was made part way through the prior year, the
current year contribution will be reduced to
include only the same period as had been
included in the prior year. A reconciliation is
included in the Financial Review of this Annual
Report.
2021 performance
Constant currency organic net revenue growth
of 8.6% reflects positive organic growth
momentum versus the prior year following the
sharp slowdown in new fund activity in 2020.
Strategic significance
Constant currency organic net revenue growth
provides a measure of how well the Group is
expanding ignoring the impact of acquired
revenue streams and currency.
Underlying
operating profit
£54.2m
Definition
Group operating profit adjusted for non-
underlying items and excluding operating
profit from discontinued activities. Further
details of non-underlying items can be found
in note 7 to the financial statements and
further details of discontinued activities can
be found in note 11 to the financial
statements.
2021 performance
In 2021 we delivered another strong year of
underlying profitability.
Strategic significance
Underlying operating profit is a key measure of
the profitability of the Group’s core operations.
Key performance indicators (KPIs) are used to monitor the Group’s performance and to
measure the financial impact of the Group’s strategy. Some KPIs are Alternative
Performance Measures, further detail of which is provided in the Financial Review.
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Underlying operating
profit margin
27.9%
Definition
Group operating profit adjusted for non-
underlying items and excluding discontinued
operations as a percentage of net revenue.
2021 performance
The Group has seen some FX headwinds in
the 2021 underlying operating profit margin,
excluding which, the business has driven
improvement.
Strategic significance
Underlying operating profit margin is a key
measure of the Group’s profitability and
efficiency.
Underlying diluted EPS
26.6 pence
Definition
Underlying diluted earnings per share
represents underlying profit before tax less the
underlying effective tax charge for the period
divided by the weighted average number of
shares in issue for the period.
2021 performance
Underlying diluted EPS showed a strong
increase in the year due to the impact of both
organic and inorganic revenue growth, and
despite FX headwinds.
Strategic significance
This remains a key measure of value creation
for the Board and shareholders.
Annualised new
business wins
£33.4 million
Definition
Annualised new business wins reflects the
total expected annualised revenue, excluding
one-off onboarding and start-up fees, from
new client engagements entered into within
the year where Sanne has either already
started to invoice the client or expects to
commence invoicing the client within
12months of signing.
2021 performance
2021 has seen a record year for new business
wins.
Strategic significance
The annualised revenue of new business wins
are used to gauge growth and performance.
Governance Financial StatementsStrategic Report
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Underlying operating cash
conversion
99.7%
Definition
Underlying operating cash flow conversion
represents the cash generated by continuing
and discontinued operations, adding back the
cash charges within non-underlying items and
removing the total cash out flow in relation to
the Group’s IFRS 16 leases, as a percentage of
underlying operating profit from continuing
and discontinued operations.
2021 performance
Sanne has seen another strong year of
underlying operating cash conversion in 2021.
Strategic significance
This measures the Group’s cash-generative
characteristics from its underlying operations
and is used to evaluate the Group’s
management of working capital.
Underlying free cash
flow attributable to
equity holders
£39.6 million
Definition
Free cash flow attributable to equity holders
represents our underlying free cash flow prior
to any acquisitions, capital expenditure,
refinancing or share capital cash flows.
2021 performance
Sanne has seen another year of strong cash
generation.
Strategic significance
It is a key measure of cash earned for the
shareholders of the Group that can be used to
generate cash returns to be invested in the
future growth of the business.
Number of locations
23
Definition
Represents the number of physical locations
Sanne operates from.
2021 performance
Sanne has established a number of new
locations in recent years with three added via
acquisition in 2021.
Strategic significance
This remains a key measure of the Group’s
geographic reach.
Sanne Group plc Annual Report and Accounts 2021
9
Key Performance Indicators continued
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Segmental and Operational Review
Europe, Middle East and Africa (EMEA)
Constant
2021 2020 currency
(£’000) (£’000) Growth growth
Net revenue 72,559 63,588 14.1% 17.4%
Alternatives 71,193 61,669
CPC 1,366 1,919
Gross profit 40,181 35,758 12.4% 16.1%
Margin 55.4% 56.2%
Sanne’s EMEA segment operates across Luxembourg, Ireland, the United Kingdom, Spain, France, the Netherlands, Malta, Denmark, Sweden and
South Africa. This division provides services across all our closed-ended investment strategies (Private Debt & Capital Markets, Real Estate, Private
Equity and Loan Agency, including Depositary) as well as the Group’s open-ended Hedge and corporate clients.
EMEA has seen a return to strong net revenue growth of 17.4% in 2021 versus 7.6% in 2020. The region has benefited from acquisitive growth with
the addition of the Danish and Swedish operations of PEA acquired in the year as well as some of the operations of the PraxisIFM funds business.
Good growth has been seen across almost all jurisdictions in the region. Most jurisdictions saw high single digit or low double-digit growth with
South Africa delivering a stronger result as it rebounded from a difficult 2020 and gained good momentum across closed-ended client structures,
helping to diversify away from its traditional reliance on open-ended clients. In Spain we saw continued good growth in the dominant loan agency
offering, as well as good traction with new wins within Real Estate. Despite being impacted by continued new fund delays in H1, Luxembourg
enjoyed a strong recovery in the second half of 2021 benefitting from a very strong new business performance and the catch up of delayed fund
launches. Ireland saw growth due to the full year impact of the prior year Inbhear acquisition, but organically suffered from some delays from
material new client mandates expected to now commence in 2022. The Netherlands office, whilst small, also saw one of its larger clients wind up
some legacy structures which dampened performance. The new Denmark and Sweden offices saw very strong results in the year as well opening
up a significant number of additional opportunities for other areas of the Group across their client base.
The segment’s margin reduced to 55.4% at reported currency. Excluding the mix effect from the newly acquired Denmark and Sweden offices
which joined the Group with lower gross margins, the gross from margin increased slightly to 56.6%. Whilst we have seen our Luxembourg
business rebuild margins as expected, EMEA’s margin for 2021, excluding the newly acquired businesses, remains lower than its historical average
reflecting the increased costs seen in the year arising from the return to growth and takeover process, as discussed in the Chairman’s and Chief
Executive Officers Report.
Channel Islands (CI)
Constant
2021 2020 currency
(£’000) (£’000) Growth growth
Net revenue 43,931 40,322 9.0% 9.8%
Alternatives 33,529 29,535
CPC 10,402 10,787
Gross profit 25,472 23,967 6.3% 8.4%
Margin 58.0% 59.4%
Note: The table above does not include results for discontinued activities in the prior period
Sanne’s CI segment operates in both Jersey and Guernsey. The segment provides services across all our closed-ended investment strategies
(Private Debt, Capital Markets, Real Estate and Private Equity). The segment also includes the majority of the Group’s services to corporate clients.
The results for 2020 exclude the contribution from the Group’s Jersey Private Client business that was disposed of on 1 July 2020.
The Group’s four reporting segments are structured geographically as: Europe, Middle
East and Africa (EMEA); Channel Islands (CI); North America (NA); and Asia-Pacific &
Mauritius (APM). The Group provides its core offerings of fund administration services to
alternative assets funds and corporate administration across all of its segments.
Unless otherwise stated, all growth rates discussed in the segmental and operational
reviews are on a constant currency basis.
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Revenues from the CI segment saw growth in the period of 9.8%. This benefits from contributions from the PEA Guernsey business and a month’s
contribution from the largest part of the PraxisIFM funds business in Guernsey. Organic net revenue growth in the period was 3.7%. The organic
result reflected good growth across the region’s closed-ended product strategies of Private Equity, Debt and Real Estate. However, a broadly flat
result from the Corporate and Capital Markets businesses depressed the overall outturn. Within this result, the Group’s Guernsey office saw a
strong return to growth, despite being a small office. This followed significant effort and investment in the Group’s presence and capability in the
local market which has since been augmented by the PraxisIFM funds business.
The period has seen a small decline in gross profit margin driven largely by the Group-wide dynamics discussed in the Chairman’s and Chief
Executive Officers Report.
Asia Pacific and Mauritius (APM)
Constant
2021 2020 currency
(£’000) (£’000) Growth growth
Net revenue 39,729 36,214 9.7% 17.3%
Gross profit 26,789 25,328 5.8% 13.2%
Margin 67.4% 69.9%
Sanne’s APM segment operates across Hong Kong, Singapore, Shanghai, Tokyo, Mumbai and Mauritius. This segment provides services across all
core products areas.
The segment delivered strong net revenue growth of 17.3% in 2021. This benefited from the full year impact of the acquisition in Japan of the
Deutsche Bank Trust Company. However, even excluding that effect, organic net revenue growth was 13.8%.
The APAC offices delivered net revenue growth of 35.7% as a result of strong growth across three of the four offices. Japan has continued to win a
large number of new mandates, scaling up quickly and successfully taking advantage of significant local opportunity. Singapore and Shanghai
have also seen strong progress from delivering new-new wins, increased activity from existing clients and new revenues from business wins from
2020 as they start to scale up their investing activity. Hong Kong saw a slower period, as clients favoured Singapore as a new fund destination.
Mauritius saw revenue growth of 6.8%, which was a good result given the region’s largest end market of India has continued to be badly impacted
by the COVID-19 pandemic.
The segment’s gross profit margins decreased in the period to 67.4%. This was largely a continued function of mix effect between the fast-growing
APAC region and the lower growth but higher margin Mauritian region, albeit that the region is starting to see the same challenges in relation to
staff turnover as seen already elsewhere in the Group.
North America (NA)
Constant
2021 2020 currency
(£’000) (£’000) Growth growth
Net revenue 37,939 29,564 28.3% 37.0%
Gross profit 18,938 15,497 22.2% 30.8%
Margin 49.9% 52.4%
Sanne’s NA segment primarily services closed ended alternative fund clients in North America and Cayman.
North America saw exceptional growth of 37.0% in 2021 due to the full year impact of the Avalon business in Cayman and the inclusion of Strait
from 1 April. Organically the segment saw growth of 9.5% despite a heavy slowdown in activity across existing clients for the first half of the year.
The Group’s legacy business has seen a healthy increase in new business momentum in the second half of the year. The Strait and Avalon
acquisitions are performing well with Strait seeing a significant increase in its growth since joining the larger Sanne platform.
Margins have declined on the prior year due to short term investment in additional heads as well as a result of mix effect following the acquisition
of Strait.
Segmental and Operational Review continued
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Income statement
The Group reports key items in the income statement such as turnover, operating profit and diluted earnings per share as well as presenting
certain alternative performance measures (APMs) such as net revenue, organic net revenue growth rates and underlying profit measures to allow
an additional understanding of the results for the year. In order to provide a clear reconciliation of performance, the Group’s statutory results and
APMs are presented below and an explanation of each of the APMs used is provided at the end of the Financial Review.
Constant
2021 2020 currency
(£’000) (£’000) % Change % change
Turnover 203,726 174,874 16.5% 21.1%
Less: Third-party fund management fees (9,568) (5,186)
Net revenue 194,158 169,688 14.4% 19.0%
Gross profit 111,380 100,550 10.8% 15.8%
Margin 57.4% 59.3%
Overheads and other operating income (57,141) (52,514)
Underlying operating profi t 54,239 48,036 12.9% 21.0%
Margin 27.9% 28.3%
Non-underlying items (50,775) (24,095)
Operating profi t 3,464 23,941 (85.5%) (82.2%)
Other gains and losses (259) 804
Net underlying finance cost (3,425) (3,963)
Non-underlying finance cost and share of net loss of investment (2,019) (253)
Profit/(loss) before tax (2,239) 20,529
Taxation for the period (4,855) (4,362)
Profit/(loss) after tax (7,094) 16,167
Discontinued operations – 8,679
Total group profit/(loss) after tax (7,094) 24,846
Underlying diluted EPS 26.6p 25.4p
Reported diluted EPS (4.4p) 11.1p
Financial Review
Unless otherwise stated, all results discussed in the Financial Review refer to continuing
operations.
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Financial Review continued
Turnover and net revenue
Net revenue in the year increased by 19.0% on a constant currency basis and 14.4% on an actual basis to £194.2 million (2020: £169.7m). Organic
net revenue growth in the period was 8.6% on a constant currency basis.
Turnover for the year grew by 21.1% on a constant currency basis and 16.5% on an actual basis when the third-party asset manager fees are
included.
Constant
2021 2020 currency
(£’000) (£’000) % Growth % growth
Net revenue 194,158 169,688 14.4% 19.0%
Inbhear - 4 month adjustment (843) –
DB Trust Company - 9 month adjustment (1,250) –
Avalon H1 revenues - 9 month adjustment (1,231) –
PEA (6,222) –
Strait (6,378) –
PraxisIFM funds business (1,232) –
Organic net revenue 177,002 169,688 4.3% 8.6%
Note: See the Alternative Performance Measures section for further explanation of this organic growth calculation methodology.
Gross profit
Gross profit for the year was £111.4 million (2020: £100.6m). The gross profit margin was 57.4%, down on the prior year result of 59.3%. The key
drivers to this slight year on year reduction in margin is discussed in the Chairman’s and Chief Executive Officer’s Review.
Overheads
The Group’s operating model involves client-focused service teams being supported by centralised and integrated Group Services functions
including information technology, risk and compliance, human resources, premises, finance and head office. All costs for these functions are
included in the Group’s overheads. The table below provides a reconciliation of overheads and further details on the definition is provided in the
alternative performance measures section.
Overhead costs in 2021 were £57.4 million (2020: £52.7m), which represented 29.6% of net revenue for the year compared with 31.0% in 2020. The
year-on-year improvement has been driven by continued tight cost management and the Group benefitting from operating leverage over some
centralised Group functions as the business grows.
2021 2020
(£’000) (£’000)
Operating expenses 108,154 76,760
Non-underlying items within operating profit from continuing operations (50,775) (24,095)
Overheads 57,379 52,665
Non-underlying costs and gains
Non-underlying items within profit measures include share-based payments where they relate to acquisitions; acquisition and integration costs;
amortisation and impairment of intangible assets; gains on disposal of non-core business units; transaction costs related to all aspects of the
takeover process for Sanne in 2021; accelerated share-based payment accruals resulting from the acquisition of Sanne by Apex; and other costs
outside the ordinary operations of the Group. For further detail on non-underlying items, please see note 7 in the financial statements.
Non-underlying items increased significantly in 2021 to £50.8m (2020: £24.1m). This increase is the result of both significant transaction fees
relating to the successful acquisition by Apex as well as increased share-based payment costs relating to the acceleration of the accruals for these
remuneration schemes under the terms of the Acquisition. Items within non-underlying costs that arise directly as a result of the takeover process
for the Group and acquisition by Apex total £25.5m. Ignoring these items, non-underlying costs would have been broadly flat on the prior year.
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Operating profit
Underlying operating profit is a key measure of the Group’s performance. Underlying operating profit in 2021 was up 21.0% in constant currency on
the prior year at £54.2 million (2020: £48.0m). This reflected a 48bps underlying operating profit margin improvement in the year at constant
currency. Statutory operating profit fell significantly to £3.5 million (2020: £23.9 million) as a result of the cost recognised as a direct result of the
takeover process for the Group and the successful acquisition by Apex.
Finance cost
The Group’s finance costs increased 25.6% on the prior year to £5.4m. This reflected the write-off of loan fees in the year related to the refinancing
of the Group’s debt facilities in the first half of the year, balanced by lower average indebtedness for most of 2021. The write-off of these loan fees
has been treated as non-underlying.
Taxation
The Group’s underlying effective tax rate for the year was 16.8% (2020: 17.4%). The most significant contributor to the year-on-year decrease has
been the recognition of taxable losses in Japan. As with prior years there has been significant non-underlying expenditure impacting the statutory
effective tax rate. When adjusted for the large non-underlying items, the statutory effective rate for the year for the total Group was -216.8% due to
the statutory loss in the year (2020: 21.2%).
Diluted underlying earnings per share
Underlying diluted earnings per share was up 13.4% at constant currency to 26.6 pence (2020: 25.4 pence) in the year or 4.8% at reported currency.
Reported diluted earnings per share showed a loss of 4.4 pence (2020: 11.1 pence profit) as a result of the large exceptional items related to the
takeover process and successful acquisition by Apex.
Dividend
In light of the terms of the Acquisition, the Board is not recommending the payment of any dividends for 2021.
Cash flow and working capital
Underlying operating cash conversion was 99.7% (2020: 99.5%) for the full year. Underlying free cash flow attributable to equity holders also
increased to £39.6 million in the year. This is up 18.0% on the prior year owing to the strong organic and acquisitive growth delivered in the year.
The main movements in the cash flow are summarised in the table below.
Capital expenditure in the year comprised equipment and software purchases, office fit-out costs and software development costs.
2021 2020
(£’000) (£’000)
Underlying operating profit 54,239 49,071
Depreciation (equipment and IFRS16) 9,283 8,664
Other (includes share based payments and movements in provisions) 7,109 (488)
Change in working capital (10,350) (2,720)
IFRS16 lease cost adjustment (7,364) (6,536)
Non-underlying movement in accruals 1,147 845
Underlying operating cash flows 54,064 48,836
Underlying operating cash conversion 99.7% 99.5%
Capital Exp. (Equipment and Software) (3,782) (4,276)
Income taxes paid (8,525) (7,557)
Loan to minority investments – (820)
Net finance cost (2,178) (2,632)
Underlying free cash flow attributable to equity holders 39,579 33,551
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Capital management and financing
At 31 December 2021, the Group’s gross debt was £99.4 million (2020: £133.5m) and the Group had gross cash balances of £48.1 million (2020:
£57.1 million). At 31 December 2021, the cash ring-fenced for regulatory liquidity requirements (“trapped cash”) was £12.6 million (2020: £13.4m).
As a result, the year-end net debt, excluding trapped cash, was £64.0 million (2020: £89.8m). This reflected the strong operating cash generation
seen in the year and comes after the funding the PEA, Strait and PraxisIFM acquisitions as well as raising £79.5 million in April 2021 by way of an
equity placing.
The Group considers its relevant leverage ratio to be the Group’s net debt divided by underlying earnings before interest, taxation, depreciation and
amortisation but after deducting the depreciation from finance leases under IFRS 16 (EBITDA after lease depreciation). This ratio seeks to use
comparable metrics ignoring lease liabilities. This leverage ratio was 1.3x at the period end (2020: 1.8x).
The net debt to EBITDA ratio is calculated on a pre-IFRS 16 basis for the purposes of the Group’s banking covenants and also allows the Group to
include a full, last twelve months contribution for acquisitions even when they have not been owned by Sanne for the whole of the period. It also
removes trapped cash from the available cash balances. Calculating the net debt to EBITDA ratio on the same basis as the Group’s banking
covenant results in a leverage ratio of 1.1x at 31 December 2021.
Foreign exchange
The Group’s results are exposed to translation risk from the movement in currencies. Overall, the average movement from currencies has
decreased net revenue and underlying operating profit by £4.8 million and £2.2 million respectively. During the year ended 31 December 2021 the
key individual exchange rates have moved, as shown in the table below.
At 31 December Annual average
Per £ Sterling 2021 2020 % 2021 2020 %
Euro 1.1889 1.1166 6.5% 1.1614 1.1266 3.1%
US Dollar 1.3535 1.3651 (0.8%) 1.3732 1.2914 6.3%
Post balance sheet events
In preparing the financial statements for the year ended 31 December 2021, the expense relating to share based payments was calculated using
an estimated date for the Acquisition by Apex to complete at the end of March 2022. Since the year end however, there have been some delays in
regulatory approvals which mean the Acquisition is now not expected to complete until either late in the second quarter or early in the third quarter
of 2022. Further detail of the impact on the financials is covered in note 41 of the financial statements.
James Ireland
Chief Financial Officer
Financial Review continued
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Alternative Performance Measure definitions
The Group uses alternative performance measures (APMs) to provide additional
information on the underlying performance of the business. Management use these key
measures to assess the underlying performance of the Group’s business and the adjusted
performance enables further comparability between reporting periods.
Changes since 2020
In 2021 the Group was subject to a takeover process for most of the year. This process resulted in the Company announcing that the Board had
reached an agreement with Apex on the terms of a recommended all cash offer of 920p per share to be made by Apex. Further, on 5 October 2021,
the Board announced that at the Court Meeting and General Meeting, each held in connection with the Scheme, the requisite majority of Scheme
and Sanne Shareholders had voted in favour of the offer by Apex.
As a result of the work undertaken during the process and Acquisition contingent fees now more likely than not to be payable following the
5October Court and General Meetings, the Group has recognised significant, one-off costs arising purely due to the transaction. These costs have
been treated as non-underlying for the purposes of assessing alternative performance measures.
The Group has ceased looking at underlying operating profit from continuing and discontinued operations as an APM as it is no longer considered
an important metric given there were no discontinued operations in 2021. In addition, underlying free cash flow attributable to equity holders
considers only continuing operations for the same reason. No other changes have been made since 2020.
The APMs used to manage the Group are as follows:
APM Definition Rational Reconciliation
A reconciliation of this APM is
shown on the face of the income
statement.
Organic net revenue growth is
calculated by excluding revenue
from any acquisition made in the
year. Where an acquisition was
made part way through the prior
year, the current year contribution
will be reduced on a pro-rata basis to
include only the same number of
months as had been included in the
prior year. A reconciliation is
included in the Financial Review.
Net Revenue Net revenue comprises turnover less
third-party fund management fees.
These third-party fund management fees
relate to asset management fees for a
small number of funds that are clients of
the Group’s AIFM Management Company in
Luxembourg. These revenues are the
management fees for the asset manager in
each funds case, but contractually are paid
by the fund entity to Sanne’s management
company before being disbursed to the
relevant asset manager. Sanne has started
recognising these third-party fees as
turnover under IFRS 15 because of new
engagement structures through the
management company. Given these
revenues are not economically Sanne’s we
have sought to separate these out and
believe that net revenues are a more
accurate reflection of the income that
Sanne earns for its services to the relevant
fund entity.
Organic net revenue growth measures are a
key performance indicator for the growth of
the business excluding the impacts of any
acquisitions undertaken. This provides an
indication on how well the business is
expanding without the deployment of
further capital.
Organic net revenue growth is net
revenue growth excluding any benefit
from acquisitions.
Organic Net
Revenue
Growth
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Alternative Performance Measure definitions continued
Sanne Group plc Annual Report and Accounts 2021
17
APM Definition Rational Reconciliation
Overall, the average movement from
currencies has increased net
revenue and underlying operating
profit by £4.8 million and £2.2million
respectively. Therefore constant
currency metrics can be arrived at
by removing these amounts.
The Group’s overheads are the
difference between operating profit
and gross profit, less non-underlying
items included within operating
profit from continuing operations
and less other operating income.
These are arrived at by adjusting
reported profit measures for non-
underlying items as disclosed in
note 7 of these financial statements.
Underlying operating profit margin is
arrived at by dividing underlying
operation profit from continuing
operations by net revenue.
A reconciliation is included in the
Financial Review.
A reconciliation is included in the
Financial Review.
A reconciliation is included in the
CFO's Review.
A reconciliation is provided in note
10 to these financial statements for
the underlying effective tax rate.
A reconciliation of net debt is
provided in note 26 of the financial
statements.
Constant
Currency
Growth
The year on year percentage change
excluding the effects of change in
foreign exchange rates.
Constant currency metrics give a better
reflection of the period on period
performance of the business by ignoring the
impact of currency movements that are
outside the Group's control.
Overheads These costs measure the cost of
supporting the delivery of client-service,
revenue-generating teams.
The Group's cost for all functions and
operations that support the client-
focused service teams.
Underlying
Profit
Measures
Underlying profit measures are used
to present the period on period
performance of the Group excluding
one-off or non-trading related income
and costs.
Underlying profit measures include
underlying operating profit from
continuing operations, underlying
profit before tax from continuing
operations, underlying diluted
earnings per share and underlying
operating profit margin.
Underlying profit measures provide an
important period-on-period comparison of
profits arising from the Group’s core
activities, undisturbed by exceptional or one
off incomes and costs.
Underlying operating cash flow provides an
important measure of how much cash has
been created by the operations of the
business in the period, excluding the cash
flows associated with non-underlying items,
financing activities and investing activities.
Underlying operating cash flow
represents the cash generated by
total operations in the year, adding
back the cash charges within non-
underlying items and reducing for the
total cash out flow in relation to the
Group’s leases that have been
accounted for under IFRS 16.
Underlying
Operating Cash
Flow
This measures the Group's cash-generative
characteristics from its operations and is
used to evaluate the Group's management
of working capital.
Underlying operating cash conversion
is the underlying operating cash flow
as a percentage of underlying
operating profit from continuing and
discontinued operations.
Underlying
Operating Cash
Conversion
Underlying
Free Cash Flow
Attributable to
Equity Holders
Free cash flow attributable to equity
holders represents our underlying free
cash flow prior to any acquisitions,
refinancing or share capital cash
flows.
It is a key measure of cash earned for the
shareholders of the Group that can be used
to provide cash returns or be invested in the
future growth of the business.
Underlying
Effective Tax
Rate
The underlying effective tax rate is
determined as the reported tax rate
for the Group adjusted for the tax
effects of non-underlying costs.
The underlying effective tax rate best
reflects the applicable tax payable in
relation to the underlying performance of
the Group.
Net Debt Net debt acts as an important benchmark
for the level of third party funding the Group
utilises after netting off cash gross cash
balances held on the balance sheet.
This refers to the Group’s net
indebtedness that is calculated by
taking the Group’s gross debt balance
and reducing it by gross cash
balances.
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Governance Financial StatementsStrategic Report
Our Stakeholders
Engaging with our stakeholders
As a global provider of alternative asset and
corporate services, our business decisions
impact, and are affected by, a number of key
stakeholders.
In 2021 the Group was subject to a takeover
process for most of the year. This process
resulted in the Company announcing that the
Board had reached an agreement with Apex
on the terms of a recommended all cash offer
of 920p per share to be made by Apex.
Further, on 5 October 2021, the Board
announced that at the Court Meeting and
General Meeting, each held in connection with
the Scheme, over 99.9% of Scheme and Sanne
Shareholders had voted in favour of the offer
by Apex. This process formed a significant
portion of engagement activities during the
year and the Board is satisfied that the
outcome is in the best interests of the
Company’s stakeholders.
Employees
Sanne is a people business. The success and
wellbeing of our people is integral to our
clients’ success and therefore our business
success. We have a number of initiatives to
actively engage our people, to ensure that we
remain an employer of choice able to attract
and retain top talent. The Workforce Advisory
Panel ensures that the thoughts and concerns
of the workforce are heard by the Board and
the Diversity and Inclusion Committee
promotes diversity and encourages inclusivity
which allows better decision-making and
innovative thinking. Martin Schnaier also hosts
a monthly ‘Ask the CEO’ vlog series in which
he responds to questions submitted by the
workforce, and each office holds monthly
town hall meetings.
People and culture
As a service business, our success is
dependent on our people. Sharing in our
success is something we value highly, and we
have implemented a number of specific
initiatives that help to reward and recognise
personal contribution and thereby deepen
engagement with the Company, brand and
culture. We have been successful in attracting
and retaining talented people during our
growth journey: at year end our headcount
was over 2,200, an increase from 1,800 in
2020 and 270 when we listed in 2015.
A comprehensive internal communications
programme is in place to keep colleagues
informed of the activities of the business and
the progress being made to deliver our
strategy and vision. Additionally, a number of
employee-led forums and initiatives are in
place to engage our people, gather workforce
views and inform management decision-
making, including the Workforce Advisory
Panel, the Diversity and Inclusion Committee,
and twelve regional CSR committees.
In addition to ensuring our employees are
appropriately rewarded for their efforts, the
promotion of training and management
ambition is a key area of focus for Sanne. We
encourage and support employees to pursue
professional qualifications in their line of work,
improve their technical skills and improve
softer skills as a high performing member of a
team. During the reporting period, the
Company introduced Sanne Advance, its new
brand for learning and development initiatives
which supports employees in gaining the skills
and knowledge required to progress at each
stage of their career. This included partnering
with SeedL, a digital instructor-led training
solution, which offers a varied suite of learning
topics available to all staff. Additionally, Sanne
is partnered with a number of professional
bodies and is currently supporting over 300
employees studying for professional
qualifications.
Sanne operates under its defined culture
statement: “We are a diverse team of
professional, knowledgeable and client-
focused people, who care about delivering
tailored solutions with integrity, in increasingly
complex and evolving markets.” This corporate
culture is supported by our values and
behaviours which sit at the heart of our
culture, our business, and our brand, which are
supported by a set of behaviours for each
other, our clients, communities and partners:
1. We are professional
• Deliver exceptional quality and service
• We do what we say we will – operating
with integrity and honesty
• Get things done, with momentum
• Share our expertise, knowledge and
experience
• Be curious, take a fresh look
2. We are connected
• In tune with our clients’ needs
• Collaborate as teams, sharing ideas
• Seek partnership
• Flexible and adaptable
• Connect people and processes with
technology
3. We care
• Include and support everyone within the
Sanne family
• Respect diversity
• Deliver service with a personal touch
• Do the right thing
• Care for our communities and the
environment
The Board and senior management are
ultimately responsible for establishing culture
and leading by example. The CEO presents a
culture dashboard to the Board on a semi-
annual basis to present non-financial KPIs,
gathered from a number of business functions
including Human Resources and Risk, to
assist in the measurement and monitoring of
culture. In defining the set of metrics, Sanne’s
culture statement, values and behaviours were
all taken into account. Management also
seeks to identify, measure and track culture
across the organisation by obtaining feedback
from the business on a regular basis.
Clients
As a professional financial services provider,
Sanne puts a client-focused approach at the
heart of its ethos and growth strategy. We
actively monitor client service levels and
product offerings and maintain open
communication with our clients, advising
them of our market strategy and product
developments. Each client has a team who
understands their expectations and we
maintain client care plans to ensure each
clients’ specific requirements are anticipated
and met. We learn from client feedback and
use this to improve service offerings and drive
geographic, product and technology growth
strategies.
During 2021 we conducted a client insight
project with the view of getting greater
understanding of our clients’ changing needs
and views of the industry as well as expected
changes in their landscape. The project was
conducted in two stages, initially a quantitative
online survey aimed at our entire client base
and then followed up with one-to-one
qualitative insight interviews with our most
significant relationships across the business,
both of which conducted by Emperor, an
outside agency. The results of this survey
have enabled our leadership team to support
and refine our strategic focus across a
number of functions such as Product
Development, Strategic CRM, and Technology
& Innovation.
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Our Stakeholders continued
Sanne Group plc Annual Report and Accounts 2021
19
Shareholders
Active dialogue with key stakeholders,
including institutional investors, is very
important to Sanne to discuss issues relating
to the performance of the Group including
strategy and new developments. The
Chairman and Non-executive Directors are
available to discuss matters raised by
shareholders, and they attend meetings with
investors and analysts as required.
During 2021, the Executive Directors, supported
by members of the senior management team,
met with representatives from over 60 investor
and potential investor institutions. In addition to
the investor roadshows conducted following
the release of financial results, the executive
team held one-to-one meetings at the request
of investors and attended investor events
organised by our joint brokers and other
partners, to discuss topics including capital
raising exercise conducted in April and the
corporate takeover. In addition to the usual
AGM, the Board held an extraordinary general
meeting on 5 October 2021 at which the
requisite majority of shareholders voted in
favour of the offer by Apex.
Our investors are kept up to date with
regulatory news releases through our
regulatory news service (RNS) and press
releases. Copies of the past RNS
announcements can be found on the Group’s
website at www.sannegroup.com.
Intermediary network
We seek mutually beneficial, long-term
relationships with our external advisers and
intermediary partners and are dedicated to
dealing with these parties in a fair and
transparent way. Our network of high-quality
intermediary partners is a key driver of our
business development and organic growth
strategies. This network enables Sanne to
connect with potential clients and to provide
our existing client base with access to the
best providers for complementary services.
Suppliers
Our suppliers provide us with technology,
human resources, facilities management,
travel and professional services. We oversee
and take reasonable steps to ensure our
suppliers comply with our standards, such as
those relating to modern slavery, data
protection, human rights, ethics and
environmental concerns.
Regulators
As a professional financial services provider,
we foster open and transparent
communications with our regulators. We
achieve this by providing our regulators with
ongoing information in relation to our
business, notifying them of issues as they
arise, and responding to requests for
information in a timely manner. Additionally,
where appropriate, we input into regulatory
consultations to influence the direction of
regulation. Sanne’s Group Head of Compliance
prepares a report outlining all regulatory
interactions and developments which is
presented at each Risk Committee meeting
and is in regular contact with the Chair of the
Risk Committee.
Section 172 Statement
Sanne Group plc is a Jersey-incorporated company and as such operates under the Companies (Jersey) Law 1991 (as amended). Section 172 of
the Companies Act 2006 applies only to companies incorporated in the UK; nevertheless, under provision 5 of the UK Corporate Governance Code
2018 (the Code), the Board ensures that it understands the views of all of Sanne’s key stakeholders and considers their interests and the matters
set out in section 172 in Board discussions and decision-making.
The Board considers that they have acted in good faith and in a manner which they believe is likely to promote the continued success of the
Company, for the benefit of its shareholders as a whole. In doing so, they have regard to the likely long-term consequences of their decisions, and
the impact these may have on the Company’s key stakeholders. Further information on how these duties have been applied can be found
throughout the 2021 Annual Report and Accounts:
Section 172 duty Key examples Page(s)
Likely consequences of any decision in the long term Strategy Review 6
Risk Management 27-28
Going Concern 40
Viability Statement 29-30
The interests of Sanne’s employees Chairman’s and CEO’s Statement 4
People and Culture 18
Diversity and inclusion 42-43
The need to foster Sanne’s business relationships with suppliers, customers and others Chairman’s and CEO’s Statement 3-5
Our Stakeholders 18-20
The impact of Sanne’s operations on the community and environment Climate-Related Financial Disclosures 21-26
The desirability of Sanne maintaining a reputation for high standards of business conduct Risk Management 27-28
People and Culture 18
The need to act fairly as between members of Sanne Board Effectiveness 35-37
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Case study: Acquisition of Strait Capital Company Ltd
A clear example of the Board complying with the duties of section 172 was the approval to enter into an agreement to purchase Strait which
completed on 7 April 2021. In line with Sanne’s inorganic growth strategy, this transaction was one of three acquisitions undertaken during the
reporting period.
This project required Board approval, and in making its decisions the Board considered the matters set out in section 172 as described in the table
below.
Section 172 duty Key Board considerations
Sanne’s acquisition of Strait will:
- generate long term value for Sanne’s shareholders through expanding its presence in the
strategically important US market and building out Sanne’s capability into the US Mid-West;
- expand Sanne’s closed-ended administration capability in Dallas and the Mid-West as well as a
near-shore lower cost office;
- generate potential cost synergies through a combination of the support functions of both
businesses.
• The Strait acquisition will lead to the introduction of new employment opportunities within Sanne
through the introduction of a new office in Dallas, Texas and increased product capability in the
strategically important US market.
• It will also provide increased employment opportunities for employees coming from Strait and the
ability to leverage Sanne’s global network.
• The Strait acquisition will allow Sanne to strengthen and expand existing client relationships
through the increased service capability in a time zone closer to the US West Coast.
• It will also provide greater connectivity with key suppliers which are used by both Sanne and
Strait.
• Sanne’s acquisition of Strait will bring increased investment into the local Dallas community with
the prospect of an acceleration of Strait’s own inorganic growth strategy.
• Strait’s local community will also benefit from Sanne’s group wide CSR and ESG initiatives which
were not previously offered by Strait given its size and single founder shareholder ownership
structure.
• Strait is a well-respected administration business with a high profile in the strategically important
Texan market which will enhance Sanne’s wider USmarket presence and profile.
• Through a combination with Sanne, Strait will benefit from the professionalised approach which
Sanne brings from its global presence across Risk, Compliance, HR, Technology, and other
support functions.
The completion of the acquisition of Strait represents Sanne’s second acquisition in the strategic
USmarket, and the first for four years, and will be seen as a statement of intent for further
USexpansion benefitting all members of the company. The acquisition is therefore fully aligned with
the interest of our shareholders.
Likely consequences of any decision in
the long term
The interests of Sanne’s employees
The need to foster Sanne’s business
relationships with suppliers, customers
and others
The impact of Sanne’s operations on
the community and environment
The desirability of Sanne maintaining a
reputation for high standards of
business conduct
The need to act fairly as between
members of Sanne
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Climate-Related Financial Disclosures
TCFD Structure
Overview
Climate change presents financial risk to the
global economy. Financial markets need clear,
comprehensive, high-quality information on
the impacts of climate change. This includes
the risks and opportunities presented by rising
temperatures, climate-related policy, and
emerging technologies in our changing world.
The Financial Stability Board created the Task
Force on Climate-related Financial Disclosures
(TCFD) to improve and increase reporting of
climate-related financial information.
The TCFD has developed a framework to help
public companies and other organisations
more effectively disclose climate-related risks
and opportunities through their existing
reporting processes. The TCFD framework
recommends 11 disclosures across the four
pillars of governance, strategy, risk
management and metrics and targets. Sanne
has made disclosures consistent with the
recommendations of the TCFD in the annual
report and will continue to progress meaningful
development in this area in the coming years.
Governance
The board’s oversight of climate-
related risks and opportunities:
The Board takes overall accountability for the
management of ESG risks and opportunities,
including climate change related risks, with
support from the appointed Global Head of ESG.
During 2020, the remuneration and incentive
plans of the CEO and CFO were reviewed to
include performance objectives on climate
change and sustainability effective from 2021.
Governance structure:
The Board signs off on the overall
sustainability and ESG strategy. The CFO is
the ESG sponsor with ultimate responsibility
for managing sustainability and climate
change strategy. He delegates operational
oversight to the Global Head of ESG. The
remuneration and incentive plans of the CEO
and CFO include performance objectives on
climate change and sustainability.
Sanne has appointed a Global Head of ESG to
keep the Board abreast of ESG globally. The
establishment of an ESG committee is to be
considered, including where it will fit in under
the Governance structure. In the meantime,
ESG developments and initiatives are
considered by the Board as and when
appropriate. In 2021, the Board received a
detailed briefing from the Global Head of ESG,
approved Sanne’s inaugural ESG Policy, and
agreed the approach to making disclosures in
line with the TCFD framework.
Management’s role in assessing and
managing climate-related risks and
opportunities:
Sanne has assigned climate-related
responsibilities to the Global Head of ESG who
then reports to the CFO. ESG risk management
is performed within Sanne’s Risk management
Framework (RMF). Once risks are identified,
the Global Head of ESG accesses the expertise
of external sustainability consultants, Rio ESG
Ltd (Rio ESG), to ensure ESG strategy and
processes remain best-practice and their ESG
reporting platform is used to manage climate-
specific risks as part of the implementation of
the TCFD recommendations. The Global Head
of ESG and the Head of Risk communicate the
risks and ESG strategy back to other teams
such as Facilities, Technology, Human
Resources, Product Development, Compliance,
Finance and Legal to ensures climate-related
risks are appropriately managed.
To ensure the sustainable, long-term growth
of Sanne we have embedded ESG
performance objectives within the
remuneration review process of employees at
all levels of the business. Progress reviews
take place at least every 6 months, however
team managers are recommended to engage
with their teams more regularly. As part of
this, professional development is encouraged
and several senior staff members have
completed various ESG related qualifications
including the Fundamentals of Sustainability
(FSA) Credential and PRI Academy
Foundations in Responsible Investment.
Sanne actively participates in various ESG
forums including:
• Principles for Responsible Investment
(PRI)
• ALFI Responsible Investment Committee
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• LPEA ESG working group
• Luxembourg Finance Labelling Agency
(LuxFlag)
• Jersey Funds Association ESG sub-
committee
• APREA Sustainability Committee
• Green Team Network
• Guernsey Green Alliance
Sanne is also regular panellist on ESG
conferences and webinars, for example: the
Global Head of Strategic Growth and Business
Development was a panellist at the Private
Equity International Women in Private markets
Summit; the Global Head of Private Equity was
a panellist at the Preqin ESG in Alternatives
event; the Global Head of ESG was a panellist
at the Preqin Alternatives in Europe: Trends
and opportunities event; and the Head of
Sanne LIS was a panellist at the ALFI Trends
and opportunities event, to name a few
webinars where ESG was the key topic.
Strategy
Climate-related risks and
opportunities the organization has
identified over the short, medium,
and long term:
Sanne has conducted a high-level risk
assessment to identify the physical and
transition risks and opportunities likely to
affect the business in the short, medium and
long term. Physical risks relate to extreme
weather events affecting each of Sanne’s
office, business operations as well as clients.
Transition risks are largely related to
government policy and technological changes
and translate into some risks but also
opportunities. For example, the move to low-
carbon options, such as renewable energy, will
make it easier for our different offices to
reduce their carbon footprints.
Sanne recognise that it is crucial to establish
appropriate time horizons within which to
identify, analyse and manage climate-related
risks and opportunities, linking to our business
and ESG strategy goals. As such, the following
timeframes have been defined:
- Short-term: risks and opportunities that
may impact near-term financial results,
including those that may materialise over
a 0-2 year time frame.
- Medium-term: risks and opportunities that
may materially impact financial results
due to longer-term manifestation of
climate-related impacts that may require
significant adjustments to strategy
including those that may materialise over
a 2-5 year timeframe.
- Longer-term: risks and opportunities that
may fundamentally impact the viability of
long-term strategy and business models
including those that may materialise over
a 5-10 year time frame.
In order to establish a timeframe for climate-
related scenario analysis that is appropriate
for Sanne, we considered the commitments
made by governments as well as other
financial institutions. Many governments
within the European Union (EU), United
Kingdom (UK) and United States (US), have
committed to reducing carbon emissions by
at least 50% by 2030 and achieve net-zero
emissions by 2050, given the catastrophic
consequences of uncontrolled global warming
and wider climate change events. Many
recognised financial institutions have made
commitments to be carbon neutral or net-zero
by 2030. We have thus determined that 2030
should be our long-term timeframe.
Sanne also recognises the need to
differentiate between risks and opportunities
to our own operations and that of our
products. Overall, physical risks have been
identified as most likely to affect Sanne's own
operations whereas transition risks are
expected to most likely impact portfolios and
supply chain. Reasoning behind this stems
from new regulations being published for
investment funds requiring various changes to
their processes and reporting.
To identify the climate-related risks and
opportunities likely to impact our operations,
Sanne prepared a materiality matrix which
considered the probability that these risks and
opportunities materialise in the next 10 years,
at the operational level:
Mandates on and
regulation of
existing products
and services
Costs to transition to lower
emissions technology
Changing customer
behavior
Shift in consumer
preferences (stigmatisation
of sector)
Changing weather
patterns cause damage
to facilities
Increased severity of
extreme weather events
Inefficient buildings
see increased operation
costs
Enhanced emissions -
reporting obligations
Successful investment in
new technologies
Reduced co
sts to transition
to lower emissions
technology
Increased cost of fossil
fuels
Shift in consumer
preferences for lower
emissions options
Increased stakeholder
concern for climate -related
issues
Use of lower -emission
sources of energy
Development of new
products or services
through R&D and
innovation
Access to new markets
Adoption of energy -
efficiency measures
1
6
ytilibaborp detamitsE
Estimated impact
Materiality Analysis
HIGH
VERY HIGH
MODERATE
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Climate-Related Financial Disclosures continued
Sanne Group plc Annual Report and Accounts 2021
23
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Sanne recognises that all the jurisdictions we operate in have some element of climate-related risk, with some more than others. Our most
material climate-related physical risks are where our operations and staff are in areas at higher risk of extreme weather events, both in terms of
frequency and intensity and where longer-term rising sea levels will impact land mass. We have highlighted the jurisdictions and timeframes which
will be considered during climate-related risk management processes below:
Climate related threat to operations and Climate related threat to operations and
staff – short/mid term (extreme weather events) staff – long term (rising sea levels)
• Denmark
• Hong Kong
• Mauritius
• Shanghai
• Singapore
• Cayman Islands
• Hong Kong
• Japan
• Luxembourg
• Mauritius
• Netherlands
• New York
• Shanghai
• South Africa
The Global Head of ESG, group Risk, CFO and
external sustainability consultant, Rio ESG,
agreed on the appropriateness of the
approach taken and relevance of the outcome.
The impact of climate-related risks
and opportunities on the
organization’s businesses, strategy,
and financial planning:
Sanne recognises that the Facilities team is
impacted by the physical climate risks in each
jurisdiction, impacting each office. The
Technology team is also impacted by having to
solve for certain physical risks to facilities.
Sanne has incorporated climate-related risks
and carbon reduction targets within the
budgets of the Facilities, Technology and
Human Resources teams. Indirectly we are
impacted through our product lines being
Private Equity, Private Debt, Hedge, Real Assets,
Capital Markets, and Corporate Services.
As a guide, financial impacts of climate
change might include:
- asset impairment;
- changes in the useful life of assets;
- changes in the fair valuation of assets due
to climate-related and emerging risks;
- increased costs and/or reduced demand
for products and services affecting
impairment calculations and/or requiring
recognition of provisions for onerous
contracts;
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Governance Financial StatementsStrategic Report
- potential provisions and contingent
liabilities arising from fines and penalties;
- changes in expected credit losses for
loans and other financial assets.
There are several notable opportunities which
provide a positive outlook, including:
- Savings in operating costs, e.g. energy
efficiency savings.
- Access to new and emerging markets,
evolving and increasing green products
and services offerings, driving an increase
in revenue through our strategic
partnership with Rio ESG.
- Competitive advantage of adapting
business model to reflect changing
consumer preferences.
- Increase in responsible investors looking
to invest in companies that have
integrated climate change.
- Effective management of climate-related
impacts may be seen as a proxy for good
governance.
- Access to government incentives.
- Greater transparency resulting in
increased investment opportunities.
- Certainty and streamlined reporting.
The table below intends to highlight any
specific elevated climate risks and
opportunities directly related to our service
offerings:
Product ESG Risks ESG Opportunities
• Access to new markets.
• Value-add emissions-reporting services.
• ESG advisory services.
• Attracting products that offer lower
emissions options and benefit from
growing demand for low carbon products.
• Enhanced emissions-reporting obligations
• Mandates on and regulation of existing
products and services.
• Exposure to litigation, fine and penalties.
• Changing customer behaviour and
preferences.
• Increased severity of extreme weather
events (floods, heavy snowfall, whirlwinds,
droughts).
Capital Markets
• ESG advisory.• Changes to regulation of existing products
and services.
Corporate Services
• Access to new markets.
• Value-add emissions-reporting services.
• ESG advisory services.
• Attracting products that offer lower
emissions options and benefit from
growing demand for low carbon products.
• Offer carbon pricing and carbon trading
services.
• Greater transparency resulting in
increased investment opportunities.
• Shorting driving change by identifying
ESG risks.
• Differentiate through investment strategy
and company credentials.
• Enhanced emissions-reporting obligations
• Mandates on and regulation of existing
products and services
• Exposure to litigation, fine and penalties
• Costs to transition to lower emissions
technology
• Changing customer behaviour and
preferences
• Increased severity of extreme weather
events (floods, heavy snowfall, whirlwinds,
droughts)
• Changes in the fair valuation of assets due
to climate-related and emerging risks
• Failure to incorporate carbon pricing and
carbon trading in portfolios.
• Ethical and reputation impacts of shorting
assets exposed to climate-risk.
Hedge
• Greater transparency resulting in
increased investment opportunities.
• Green bond issuance.
• Green loan verification services.
• Differentiate through investment strategy
and company credentials.
• Enhanced emissions-reporting obligations
• Mandates on and regulation of existing
products and services
• Exposure to litigation, fine and penalties
• Costs to transition to lower emissions
technology
• Changing customer behaviour and
preferences
• Increased severity of extreme weather
events (floods, heavy snowfall, whirlwinds,
droughts).
Private Debt
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Climate-Related Financial Disclosures continued
Sanne Group plc Annual Report and Accounts 2021
25
The resilience of the organization’s strategy,
taking into consideration different climate-
related scenarios, including a 2°C or lower
global warming scenario.
Climate specific scenarios are to be developed
during 2022 by the Global Head of ESG,
considering short-, medium- and long-term
timeframes and 1.5°C, 2°C and 3°C
trajectories of global warming. These
scenarios will then be overlaid with the risk
and opportunities identified to determine the
resilience of Sanne’s business operations.
Establishing and modelling resilience in these
climate-related scenarios will require input and
approval from Global Head of ESG, CEO, CFO
and CRO – this would include assumptions,
data, and impacts to operations, clients, staff,
suppliers, and stakeholders.
Risk Management
The organization’s processes for
identifying and assessing climate-
related risks:
ESG risk management is performed within
Sanne’s Risk Management Framework (RMF).
Sanne’s RMF follows the core risk
management principles and governance
arrangements of the 3 Lines of Defence model
with Risk, Compliance and Legal functions, led
by the CRO, the Global Head of Compliance
and the Chief Legal Officer, supporting
management. RMF provides Sanne with the
basis and tools to identify, assess, mitigate,
monitor and report its risk and control
exposures. When completing an assessment
at an operational business level (jurisdiction)
and product level, all risks within the Sanne
Risk Taxonomy are considered, which includes
ESG risk. Jurisdictional and product
assessments included ESG for the first time in
2021 to determine exposures, controls and
mitigants.
The organization’s processes for
managing climate-related risks:
The Risk, Compliance and Legal functions, led
by the CRO, the Global Head of Compliance
and the Chief Legal Officer, are each
centralized functions at Group level where all
risks are consolidated followed by an
overarching mitigation and controls
environment. Sanne uses an ESG Reporting
solution, Rio, to manage climate-related risks
including populating a climate change risk
register, capturing climate-related data,
reporting at various levels and focus actions
on areas for improvement such as setting
targets. Processes for engagements with
investee companies are still in development –
most investee companies needing ESG
advisory and solutions for their ESG regulatory
requirements still need to be identified.
Currently any ESG related engagement is high
level and on an ad-hoc basis. Our ambition is
to engage on a regular monthly basis with
current clients in scope of ESG and climate-
related reporting requirements and
regulations.
Sanne recognise that climate-related scenario
analysis will be a crucial exercise to be
undertaken, to assess the plausibility of
climate-related events driven by global
warming having high impacts on Sanne’s
operations. The outcome of this exercise will
complement the existing risk assessment
outcomes.
The Global Head of ESG will facilitate the
modelling of ESG/Climate-related scenarios,
following the TCFD recommendations and as
agreed by the Board and the Executive
Committee. The outcome of the exercise will
be a robust process for analysing climate-
Product ESG Risks ESG Opportunities
• Access to new markets
• Value-add emissions-reporting services
• ESG advisory services
• Attracting products that offer lower
emissions options and benefit from
growing demand for low carbon products
• Offer carbon pricing and carbon trading
services.
• Differentiate through investment strategy
and company credentials.
• Enhanced emissions-reporting obligations
• Mandates on and regulation of existing
products and services
• Exposure to litigation, fine and penalties
• Costs to transition to lower emissions
technology
• Changing customer behaviour and
preferences
• Increased severity of extreme weather
events (floods, heavy snowfall, whirlwinds,
droughts)
Private Equity
• Enhanced emissions-reporting obligations
• Mandates on and regulation of existing
products and services
• Exposure to litigation, fine and penalties
• Costs to transition to lower emissions
technology
• Changing customer behaviour and
preferences
• Increased severity of extreme weather
events (floods, heavy snowfall, whirlwinds,
droughts)
• Real estate portfolio is in flood prone
areas.
• Real estate insurance not sufficient to
cover for natural disasters or terror
attacks.
Real Assets • Real estate portfolio is positioned to
benefit from demand shifting from flood
prone areas to higher land.
• Greater transparency resulting in
increased investment opportunities.
• Real estate portfolio resistant to natural
disasters and can attract more capital.
• ESG advisory services.
• ESG reporting services such as GRESB.
• Differentiate through investment strategy
and company credentials.
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related risks and opportunities which can be
integrated into existing risk management
processes. Sanne have the ambition to
monitor more climate-related risks and
opportunities more closely on a local level
where applicable, to better understand overall
exposure and changes over time.
The organization’s processes for
integrating climate-related risks into
the overall risk management:
The Board members are kept up to date on the
latest ESG and climate-related market
knowledge. Any material risks identified are
formally included within ESG risk assessments.
ESG risks (which include climate-related risks)
are included on Sanne’s Risk Taxonomy and
forms part of the standard risk assessments
and risk management. A stand-alone climate
related risk register using TCFD typology as a
basis is to be considered.
Metrics and Targets
The metrics used by the
organization to assess climate-
related risks and opportunities in
line with its strategy and risk
management process:
Having identified at a high level the main risks
and opportunities which climate change
presents to Sanne’s business operations and
that of our products, the metrics we feel are
best aligned with our ambitions and strategy
to be resilient against these risks and
capitalise on opportunities are:
- Year-on-Year reduction in carbon
emissions related to Scope 1, Scope 2 and
Scope 3 sources
- Year-on-Year reduction in energy intensity
(kWh / FTE)
- Year-on-Year reduction in business travel
(km travelled)
- Year-on-Year reduction in our water
footprint in water stressed areas.
- % exposure* to carbon intensive
companies*
- % exposure* to companies whose main
purpose is climate change mitigation and
adaptation
- % invested in climate change mitigation
and adaptation
*The exact definitions of ‘exposure’ and ‘carbon intensive
companies’ are still to be determined and will be developed
making use of external references where possible and what is
practical.
Intensity metrics are normalised using the
number of full-time employees (FTE) in the
business as well as turnover. This is to make
room for the growth in number of employees
and turnover over time, as a low-carbon future
allows for job creation and increased revenue
opportunities.
The carbon footprint broken down
into Scope 1, Scope 2 and Scope 3
greenhouse gas (GHG) emissions:
The total carbon emitted in 2021 was 1,121
tCO2e, resulting in a 22% increase in
emissions. In 2021 more offices were included
in the calculation, including Texas. Offices with
less than 30 employees were excluded from
calculations. The metric best suited for
calculating an intensity ratio for Sanne was
employee numbers (FTE), giving a total carbon
intensity of 0.6tCO
2
e/FTE in 2021, which
marked a 14% decline compared to the 2020.
To calculate this intensity ratio, the number of
employees associated with the offices in
scope was used (2021: 2,038). Given
restrictions in travel globally, air travel was
limited across the company and therefore
emission data has been omitted from
reporting this year.
The Board takes overall accountability for the
management of climate change risks and
opportunities with support from the Global
Head of ESG. In 2021, a detailed Risk
Assessment, in line with the TCFD guidelines,
was undertaken focusing specifically on
climate-related risks and opportunities to
understand the impact that climate change
could have on Sanne’s business. Together with
narrative from key stakeholders in the
business, areas for focusing prevention and
mitigation efforts were identified in the short,
medium and long term. In 2022 we will look to
develop an ambitious carbon reduction target
which is supported by a defined pathway for
achieving carbon neutrality.
The targets used by the
organization to manage climate-
related risks and opportunities and
performance against targets.
While our carbon emissions are lower than
some sectors, we take our environmental and
community level responsibility very seriously.
This is why we are committed to continue
reducing our impact on the environment.
During 2021 and early 2022, Sanne was in the
midst of a large corporate takeover that would
materially impact various metrics such as the
carbon footprint and other metrics that would
need to be recalculated and thus setting
targets was deemed not to be appropriate at
that stage. This is to be commenced post the
corporate takeover.
Sanne’s carbon emissions by scope
CARBON EMISSIONS Units 2019 2020 2021 Progress
Total emissions Tonnes CO
2
e 2,500 916 1,121 +22.0%
Scope 1
1
Tonnes CO
2
e 11 7 8 +14.2%
Scope 2
2
Tonnes CO
2
e 749 760
3
952 +25.3%
Scope 3
4
Tonnes CO
2
e 1,740 149 161 +8.1%
Total emissions intensity Tonnes CO
2
e/FTE 1.7 0.7
5
0.6
6
-14.3%
BUSINESS TRAVEL Units 2020 2021 Progress
Total distance travelled KM 50,559 7,208 -85.74%
Company cars KM 39,819.1 7,208
7
-81.90%
Company cars L N/A 2,630
8
N/A
Flights KM 10,740 N/A N/A
Business travel emissions TONNES CO
2
e 11 9 -18.18%
Business travel intensity TONNES CO
2
e/FTE 0.008 0.004 -50.00%
1. Includes scope 1 emissions from fuels associated with
energy use and business travel from company cars.
2. Electricity emissions have been calculated under the GHG
protocol ‘Market Based’ approach. Emissions per
‘Location Based’ approach for 2021: 953 tonnes CO2e.
3. Updated to include accurate data received for
Luxembourg for 2020.
4. Includes scope 3 (well-to-tank, transmission and
distribution losses) emissions from energy consumption
in offices and fuel consumption in offices and company
cars.
5. 2020 FTE associated with offices in scope: 1,339.
6. 2021 FTE associated with offices in scope: 2,038.
7. Business travel data captured in kms rather than fuel
consumption (litres) included in this figure.
8. Business travel data captured in litres rather than
distance (km) included in this figure.
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27
Risk Management
Chief Risk Officer Statement
As a regulated provider of administration,
reporting and fiduciary services, Sanne has
always placed risk management and
regulatory compliance at the centre of its
strategy, business model and day-to-day
operations. Despite external uncertainty, a
strong risk management culture and the
continued application of a robust and nimble
Risk Management Framework has enabled a
strong 2021 performance with no material risk
impacts on our people, operations, regulatory
compliance or client service deliverables.
Of note, in 2021 Sanne has:
• Maintained a proactive risk culture that
promotes accountability, integrity and
transparency.
• Continued to support the Board and senior
management in making well-informed,
risk-based commercial decisions through
accurate and concise risk reporting.
• Refined our risk methodologies and
application of the Risk Management
Framework to ensure they remain industry
leading, whilst proportionate to Sanne’s
risk profile.
• Ensured an effective operational control
environment, through continued
optimisation of the Group Policy
Framework and embedding operational
excellence.
• Efficiently applied its core principals and
agile risk management tools to support
integration of acquired businesses.
The acquisition of Sanne will naturally create a
period of uncertainty, resulting in elevated risk
exposures.
This section of the report provides an
overview of Sanne’s approach to Risk
Management, including details of the Group’s
principal and emerging risks.
Risk Management at Sanne
The Risk Management Framework at Sanne is
bespoke and appropriate for the nature of its
operations, scale, geography and complexity of
the business. As a regulated business, the Risk
Management Framework supports Sanne’s
commitment to ensuring compliance with all
applicable regulations. The Three Lines of
Defence (3LOD) Model is embedded; risk and
compliance functions are independent of
business units whilst maintaining close
dialogue and involvement to ensure accurate
and timely risk analysis and oversight.
The Risk Management Framework provides:
• a set of tools to enable the timely
identification, escalation and mitigation of
risks;
• a suitable basis upon which the Board can
validate the effectiveness of the Group’s
risk management and internal controls;
• clearly defined risk responsibilities and
accountabilities, promoting well-informed
risk-taking behaviour; and
• a strong risk awareness culture where the
tone is set from the top.
Governance
Effective risk management and informed,
commercial risk-taking is enabled through
robust risk and compliance governance.
The Board has overall accountability for
setting Sanne’s risk appetite and ensuring any
risks that could impact on strategic delivery
are identified, mitigated and monitored. To do
this, the Board delegates oversight and
monitoring of risk exposures, against the
defined risk appetite, to the Risk Committee.
In addition to the PLC Risk Committee,
assigned Executive accountable risk owners
oversee the operational implementation of
effective risk and control environments across
the organisation.
Risk Assessment
Sanne’s Risk Management Framework
continues to include a systematic approach to
identifying, assessing, mitigating and
monitoring risk through a programme of
Enterprise Business Risk Assessments.
Completed across Sanne’s jurisdictions as
well as globally, the Risk Assessment
programme considers both principal and
emerging risks and incorporates Financial
Crime Risk Assessments in accordance with
local regulatory requirements.
Principal Risks
The principal risks are the key risks to Sanne
that could result in events or circumstances
that might threaten Sanne’s business model,
future performance, solvency, liquidity or
reputation; they include the exposures that
present the highest level of inherent risk to the
organisation.
The principal risks are formally assessed at
least annually through the Risk Assessment
Programme, alongside a mid-year review and
are monitored regularly through the Group
Business Risk Committee and subject to
continual oversight from the Board through
the PLC Risk Committee.
The Board and Executive have completed a
robust Group risk assessment and agreed that
the most material risks will be presented in the
Annual Report and Accounts as the principal
risks.
It is acknowledged that the acquisition of
Sanne by Apex may result in increased risk
exposures globally, during transition and
post-acquisition. Execution and integration
risk will be elevated for a period of time whilst
significant change will be prominent over a
period of months. Oversight and monitoring
during this period will take on critical
importance.
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• Acquisition Risk: The risk that
acquisitions present unidentified liabilities
or fail to achieve business objectives and
potential value. During 2021, Sanne
acquired 100% of the issued share capital
of PEA on 1 March 2021 and of Strait on
7April 2021. Sanne has also negotiated
the acquisition of the fund administration
business of the PraxisIFM Group, which
completed in December. The PraxisIFM
acquisition represented one of the most
complicated transactions undertaken by
Sanne in the last few years due to it being
a carve-out of a business from another
listed company across five jurisdictions
during the COVID pandemic.
• Compliance Risk: Failure to comply with
regulatory requirements or failing to
anticipate and / or respond to regulatory
changes/themes. During the period
Financial Action Task Force (FATF) added
Cayman Islands and Malta to its ‘grey’ list,
those under increased monitoring due to
strategic deficiencies. This will likely result
in increased supervision, increased
regulatory requirements and strict
enforcement where breaches exist.
• Competitor & Client Demand Risk: The
failure to anticipate and respond to
competitor’s activity, client demands,
innovation, economic, regulatory and
political changes in the markets we
operate in. There continues to be rapid
and ongoing consolidation of the service
provider market. It is likely this will lead to
a ‘big four/five’ in the mid to long-term
future resulting in a changed landscape.
• Fiduciary Risk: Failure to clearly define
Sanne’s role in providing management
services to a client structure / service
vehicle or a failure to fulfil the role
expertly. Typically, where Sanne appoints
a director to the Board, acts as trustee or
as investment manager. Regulatory
scrutiny and supervision of fund
administrators continues to show an
increasing trend though the legal
environment is relatively stable.
• Financial Crime
1
Risk: Inadequate
systems, procedures and controls to
prevent Sanne being exposed to or
facilitating financial crime. Changes to
financial crime regulation continues,
especially where there is increase
oversight from international bodies, such
as FATF.
• Financial Performance Risk: Failure to
manage and monitor the financial
performance of the Group on an ongoing
and forecast basis.
• Process Risk: Lack of relevant process or
incorrect, inconsistent, or untimely
execution of processes.
• Staff Resources Risk: The risk of failing to
attract, retain and develop sufficient
qualified and capable resources could
have an adverse impact on Sanne’s
operations and clients. The risk and
control environment continues to be
volatile and, due to several contributing
factors, present exceptional, unstable and
unpredictable circumstances, many of
which are outside of direct influence and
control.
• Strategy Risk: Inadequate strategic
business decisions or failure to execute
the defined strategy.
• Technology
2
Risk: The risk of failure to
ensure that Sanne’s technology meets
business and client requirements,
including being both stable and resilient.
Emerging Risks
Environment, Social and Governance
(ESG) Risk
Environment, social and governance (ESG)
risks relate to climate change, environmental
management practices, duties of care,
working conditions and compliance to the
relevant laws. There is an increased focus
globally on ESG risks from governments,
regulators and stakeholders. Sanne continues
to act both ethically and transparency whilst
conducting business. Defined strategic ESG
goals have been set both globally and
jurisdictionally across the organisation. Sanne
has completed a full ESG Risk Assessment in
2021 with oversight from PLC Risk
Committee.
Operational Resilience
The pandemic has accelerated regulatory
expectations with regards to ensuring
companies have identified, are monitoring and
are reporting against its Important Business
Services, with some aspects requiring
compliance by 2022. Sanne’s Mission Critical
Activity outputs provide a solid foundation to
ensure risks are understood and compliance
is achieved.
1 Financial Crime Risk is the collective term that includes money laundering, terrorist financing, sanctions, fraud, bribery & corruption and tax evasion risks.
2 Technology Risk is the collective term that includes Cyber & Data, Resilience & Stability and Design.
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29
Viability Statement
1) Assessment of prospects
Sanne benefits from a high proportion of
recurring revenues from long-term customer
contracts. The Group also benefits from
attractive levels of growth as well as strong
margins and high levels of cash conversion
demonstrated by past performance. The
Group also has limited exposure to long-term
financial commitments. The Group’s financial
performance during the year ended
31December 2021 also demonstrates how
resilient Sanne is despite the impact we’ve
seen the COVID-19 pandemic have on our
business and end markets and the
management distraction and uncertainty for
employees and clients caused by the takeover
offer process for the Company that was
on-going for most of the year.
A period of three years from the balance sheet
date has been chosen to base the viability
statement on because despite most client
contracts typically running for significantly
longer periods, there is inevitably more
uncertainty associated with a longer
time-frame and this time period is more
closely aligned to the Group’s focus on
strategic planning and Directors have a
reasonable confidence over this time horizon.
The viability assessment reflects financial
stress placed on the business arising from the
scenarios identified below which have been
designed to reflect the principal risks facing
the Group. These are identified in the Principal
Risks and Uncertainties section of the Annual
Report and Accounts.
The Group’s strategy remains unchanged from
prior years as follows:
• Drive differentiated, best in class client
offering across high touch and technology
enabled services
• Increase our share of wallet within
existing as well as targeting new asset
manager client groups
• Roll out our services and product offerings
at scale across the entire global footprint
• Add new geographic markets to the
Group’s footprint in line with client
requirements
• Invest in resilient and scalable operating
platforms and technology to support our
client service offering
• Deploy the Group’s capital to acquire or
invest in companies to augment or
accelerate the Group’s growth strategy
The key factors that support the Group’s
future prospects as well as its resilience are:
• Long-term client relationships and
engagements with high quality
institutional clients;
• Scale and depth of resources;
• Diversification of income by client
investment strategy, client asset class
(also described as Product, such as
Private Credit, Real Estate, Private Equity
etc.) and geography;
• High quality employee base made up of a
significant number of employees either
holding or training for professional
qualifications; and
• Strong acquisition track record of
integrating businesses that build the
Group’s geographic footprint and
capabilities. Since 2016, we have
completed 14 transactions.
2) The assessment process and
key assumptions
The viability assessment of the Group, over a
three-year period, is undertaken primarily based
on its strategic and financial direction from the
CEO, CFO and Executive Committee on the
basis that Sanne remains an independent
Group. The process involves detailed review
and analysis of current and historic trading,
particularly the impact of the global COVID-19
pandemic in 2020 and 2021 and on-going into
2022. It also involves strategy sessions and
business unit review sessions for the Board
and results in detailed financial forecasts being
prepared. The first year of these financial
forecasts are based on the Group’s operating
budget and all subsequent years are
extrapolated based on the Group’s overall
strategic plan. Performance against the
financial and strategic plans are assessed on a
regular basis by both the Executive Committee
and the Board.
This viability assessment takes into account
all the committed expenditure of the Group
together with earn-out costs in relation to
historic acquisitions.
The key assumptions within the Group’s
financial forecasts include:
• Low double digit per annum organic
revenue growth, reducing each year to
mid-single digit revenue growth in the final
year of the three year period being
assessed;
• An underlying operating profit margin over
the forecast period within management’s
guided range of 28% to 30% reflecting the
recovery in the Group’s underlying
operating profit margin in the forecast
period as well as other small margin
improvement factors such as operating
leverage and right shoring of headcount
being offset in further investments in
growth initiatives;
• A marginal annual increase in the Group’s
effective tax rate to reflect stronger profit
growth in higher tax jurisdictions;
• That the Group recommences its
progressive dividend policy starting with
the 2022 interim dividend;
• No material change in capital structure;
• The current committed revolving credit
facility available to the Group is refinanced
on materially similar terms ahead of the
current maturity date of 18 March 2024;
and
• Current business model and balance
sheet structure remain unchanged.
3) Assessment of Viability
Whilst the output of the Group’s strategic and
financial planning process reflects the
Directors’ best estimate of the future
prospects of the business, the Group has also
assessed the financial impact of a range of
alternative scenarios. These scenarios are
based on the Group’s current position and the
potential impact of the principal risks
documented in the strategic report, on
pages27 to 28. These scenarios represent
stresses which include:
• Loss of one of the Group’s largest clients
or a product line equivalent to a loss of 4%
of Group revenues and associated costs
taking an additional six month period to
remove (Scenario 1);
• A sustained low growth environment,
involving a zero organic growth for all
areas of the business for the entire
forecast period (Scenario 2);
• A failed acquisition of a size similar to the
recent acquisitions of PEA and Strait
where half the revenues acquired are lost
during the first year of ownership
(Scenario 3);
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• Adverse foreign exchange movement where pound sterling appreciates by 5% compared with other Group currencies (Scenario 4);
• Adverse trading conditions impacting margins and cash collection, reducing underlying operating profit margins to between 20% and 25% and
reducing operating cash conversion to c.70% for the entire forecast period in both cases (Scenario 5); and
• A regulatory, fiduciary or cyber incident resulting in a large one-off cost and a structural reduction in profit margins moving forward
(Scenario6).
Principal risks Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6
Acquisition
Competitor and client demand
Strategic
Business change
Fiduciary
Process
Technology
Staff resources
Compliance
Financial Crime
Financial performance
In addition to the above specific scenarios, further analysis was also undertaken looking at a combination of scenarios occurring at the same time.
This severe but plausible downside case looked at the combined impact of scenarios 1, 2, 4, 5 and 6 occurring together. The modelled stressed
scenarios above continue in all cases to include dividends being paid at a similar pay-out ratio to Sanne’s dividend payments prior to 2021. There
are a number of mitigating actions that would be available to the Board in the event of any of these scenarios materialising, such as reducing the
recommended dividend payments or reducing discretionary spend on marketing, business development, technology development and employee
incentives, which have not been included in the modelling exercise but would be available to the Board to further increase headroom.
The results of the stress testing, including the combination scenario, demonstrated that, due to the Group’s high cash generation and access to
additional funds from its committed debt facilities, the Group would be able to remain viable and maintain liquidity and headroom against all
financial covenants over the whole of the assessment period.
4) Viability Statement
The current directors cannot predict what new owners might do post completion of any acquisition of the Group as that would be outside the
control of current directors. However, based on the results of this assessment, the Directors have a reasonable expectation that the Group will be
able to continue in operation and meet all its liabilities as they fall due over the three-year period to 31 December 2024 on the basis that the Group
remains independent.
Approval of Strategic Report
This Strategic Report was approved by the Board and signed on its behalf by:
Martin Schnaier
Chief Executive Officer
31 March 2022
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31
Corporate Governance Report
Governance framework and Group committees
The work of the Board is supported by its committees, and this financial year these
consisted of the Nomination and Governance Committee, the Audit Committee, the Risk
Committee, and the Remuneration Committee.
The terms of reference for each of the committees can be found on our website, www.sannegroup.com, and reports from each committee are
found on pages 41 to 52. Each committee meets separately, and at regular intervals throughout the year.
Day-to-day management has been delegated by the Board: development of the Group and its strategic direction is led by the CEO and approved by
the Board; and the Group’s Executive Committee manages the day-to-day operations of the Group.
Governance structure at a glance
The structure chart below sets out the composition of the Board and its committees shown as at 28 February 2022, being the last practicable date
prior to publication of the Report. The Board of Directors’ have their profiles set out on pages 32 to 33 and further information about the Board
committee can be found in their reports on pages 41 to 52.
Workforce
Advisory
Panel
Sanne Group plc – Board
Remuneration
Committee
Executive Committee
Nomination and
Governance
Committee
Business
Development
Committee
Growth People
Product
Committee
Disclosure
Committee
Group
Business Risk
Committee
Diversity and
Inclusion
Committee
Audit Committee Risk Committee
Governance and the delivery of strategy
The Board’s role is to determine and review the Group’s strategy to promote the long-term success of the Company for the benefit of its shareholders. It
also oversees management and is responsible for the governance, controls, risk management, direction and performance of the Group. The CEO is
responsible for the day-to-day management of the business in line with the strategy and long-term objectives approved by the Board.
The Executive Committee, chaired by the CEO, oversees a governance strategy focussed on operational excellence. This strategy separates the
management of the Group’s platform and products. The management of the platform falls under the control of the business which is tasked with
aligning activities in the different jurisdictions under a common framework based on best-in-class service models. This is intended to achieve
much greater operational consistency and resilience, along with an adapted compliance framework. The management of products within the key
alternative industries falls under the control of specialist cross-jurisdictional teams that are responsible for creating a leading commercial
proposition in each asset class. This dual focus on operational and commercial excellence is intended to position Sanne as one of the world’s
leading providers of alternative asset and corporate business services.
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Board of Directors
Rupert Robson
Independent Non-executive Chairman
Rupert was appointed as the Independent Non-executive Chairman of Sanne on 26 March 2015, is Chair of the Nomination and Governance
Committee and a member of the Remuneration Committee.
Rupert has held a number of senior roles in financial institutions, most recently Non-executive Chairman of TP ICAP plc, EMF Capital Partners and
Charles Taylor plc, and Non-executive Director of Savills plc, London Metal Exchange Holdings Ltd, Tenet Group Ltd and OJSC Nomos Bank. Prior
to that he was Global Head, Financial Institutions Group, Corporate Investment Banking and Markets at HSBC and Head of European Insurance,
Investment Banking at Citigroup Global Markets.
Martin Schnaier
Chief Executive Officer
Martin joined Sanne in 2011 and was appointed as CEO on 16 May 2019.
Martin has more than 20 years’ experience working in the financial services industry. Prior to being appointed CEO, Martin was Chief Commercial
Officer for Sanne, with responsibility for the firm’s global service offering and its continued commercial development. Martin joined Sanne from
Babson Capital (now Barings), the global asset manager, where he was a finance director, responsible for the firm’s private debt and private equity
businesses. Before this, Martin worked for Advent Venture Partners as a financial controller and originally qualified as a chartered accountant with
KPMG.
James Ireland
Chief Financial Officer
James was appointed CFO of Sanne on 1 July 2018.
Prior to joining Sanne, James spent more than ten years at Investec plc, where he most recently led the investment banking division’s Support
Services Sector team. Before Investec, James worked within the corporate tax division at Grant Thornton and also spent time mobilised with the
British Army.
James has extensive experience in financial services organisations and is a skilled practitioner in the areas of business transformation,
acquisitions and investor relations.
Mel Carvill
Senior Independent Director
Mel was appointed as an Independent Non-executive Director of Sanne on 1 January 2018 and as Senior Independent Director on 19 May 2021.
Mel is also Chair of the Risk Committee and a member of the Audit, and Nomination and Governance Committees.
Mel is also Chair of the Bank of Georgia Group PLC and a member of the Board of Directors of Home Credit N.V. He brings significant financial
services industry experience having served as a member of the top management team of Home Credits parent company, PPF Group, from 2009.
Previously, Mel worked across a range of sectors. Notably, Mel was at Generali from 1985 until 2009 where he held a number of senior positions
including Head of Western Europe, Americas and the Middle East, Head of M&A and Head of International Regulatory Affairs, Head of Risk
Management and Head of Corporate Finance.
Fernando Fanton
Independent Non-executive Director
Fernando was appointed as an Independent Non-executive Director of Sanne on 5 January 2021 and is a member of the Remuneration, and
Nomination and Governance Committees.
Fernando also serves as an Independent Non-executive Director at Kroo.com and was a former Chief Product and Technology Officer at Just Eat.
Previously, he had various senior technology roles at Elsevier, Mendeley.com, McKinsey & Co and the Microsoft Corporation.
Fernando has an MBA in Finance and a Bachelor of Engineering Computer Science degree.
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Board of Directors continued
Sanne Group plc Annual Report and Accounts 2021
33
Julia Chapman
Independent Non-executive Director
Julia was appointed as an Independent Non-executive Director of Sanne on 1 July 2018. Julia is also a member of the Remuneration, and
Nomination and Governance Committees, and was appointed as a Designated NED on 29 January 2019.
Julia serves on the board of three other main market listed companies: Henderson Far East Income Limited, GCP Infrastructure Investments
Limited, and BH Macro Limited.
Julia is a solicitor qualified in England & Wales and Jersey with more than 30 years’ experience in the investment fund and capital markets sector.
Having trained with Simmons & Simmons in London, she moved to Jersey to work for Mourant du Feu & Jeune (now Mourant). She became a
partner in 1999 and was responsible for legal, risk and compliance oversight of third-party administration services to alternative investment funds.
Up until 2012, Julia also worked at State Street where she was responsible for the internal legal affairs and governance in their European
alternative investment services division. She left State Street to focus on the provision of independent directorship and governance services to a
small number of alternative investment fund vehicles.
Nicola Palios
Independent Non-executive Director
Nicola was appointed as an Independent Non-executive Director of Sanne on 26 March 2015. Nicola is also Chair of the Remuneration Committee,
and a member of the Audit, and Nomination and Governance Committees.
Nicola is an English Barrister and a Jersey Advocate. Having joined the Mourant Group in 1988 she became Mourant’s youngest ever partner and
went on to hold the position of Chief Executive from 2003 until the sale of the group companies in 2010. More recently, Nicola held the position of
Chairman of the States of Jersey Development Company until December 2020. She now runs her own consultancy business offering a variety of
services to the private equity industry and holds a number of Non-executive Directorships in private limited companies.
Sophie O’Connor
Independent Non-executive Director
Sophie was appointed as an Independent Non-executive Director of Sanne on 16 November 2020. Sophie is also Chair of the Audit Committee,
amember of the Risk, and Nomination and Governance Committees, and was appointed as a Designated NED on 19 May 2021.
Sophie also serves as an Independent Non-executive Director for Lloyds Banking Group Insurance (including Scottish Widows), Bupa Insurance,
and BNY Mellon (International) Ltd. Her responsibilities include being the Chair of Scottish Widows Unit Trust Managers and HBOS Investment
Fund Managers and the Chair of the Audit Committee of the Lloyds Banking Group Insurance and BNY Mellon (International).
Sophie is a qualified accountant and started her career at Ernst & Young. She then worked for 15 years at Merrill Lynch (now Bank of America
Merrill Lynch), where she had various roles including Chief Finance Officer and Chief Operating Officer of divisions both in the UK and the USA.
Previous Non-executive Director roles include Mineworkers’ Pension Scheme and Reliance Mutual Insurance Society.
Yves Stein
Independent Non-executive Director
Yves was appointed as an Independent Non-executive Director of Sanne on 1 October 2018. Yves is also a member of the Risk, and Nomination
and Governance Committees, and was appointed as a Designated NED on 29 January 2019.
Yves has more than 30 years’ of experience in the banking industry through various senior positions in corporate banking, fund services and wealth
management. Yves currently serves as Chief Executive Officer of Banque Edmond de Rothschild (Europe) SA in Luxembourg.
He most recently served as Group Chief Executive of KBL European Private Bankers headquartered in Luxembourg. Prior to that he was Chief
Executive Officer of Union Bancaire Privée (Europe) SA and Chief Executive Officer of Wealth Management of BNP Paribas in Switzerland.
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Leadership
Board
The Board comprises the Independent
Non-executive Chairman, two Executive
Directors and six Independent Non-executive
Directors.
Chairman
The Chairman, Rupert Robson, leads the
Board, provides direction and ensures that
there is a clear structure in place for the
effective operation of the Board and its
committees. He sets the agenda for Board
meetings and promotes effective and
constructive discussion at meetings. He is
responsible for ensuring that the Directors
receive timely and accurate information.
In addition, the Chairman works with the CEO
to ensure strategies agreed by the Board are
implemented. He provides support to the CEO
whilst respecting the CEO’s responsibility for
managing the Group. There is a clear division
of responsibilities between the Chairman and
CEO, which has been defined and was
established when Sanne was listed.
Non-executive Directors
Non-executive Directors bring a strong
independent element and a breadth of skills
and experience to the Board. The
Non-executive Directors bring constructive
challenge and are responsible for the effective
running of the Board’s committees. They need
to satisfy themselves that the Group’s
financial controls and risk management are
robust and effective.
Senior Independent Director
Mel Carvill is the Senior Independent Director
(SID). The SID’s role is to act as a sounding
board for the Chairman, serve as an
intermediary for the other Directors when
necessary, and bring independent judgement
to the Board.
The SID is also available to shareholders if
they have issues or concerns that have not
been resolved through the normal channels of
Chairman, CEO or CFO, or for which such
contact is inappropriate.
Company Secretary
Becky Moore is the Company Secretary and
supports the Chairman in the delivery of Board
and governance procedures. The role of the
Company Secretary is to assist with the
induction of new Directors and the annual
cycle of Board and committee meetings,
support the smooth operation of governance
by working with the Chairman, and the chair of
each of the Board committees, and ensure
compliance with relevant legal and regulatory
requirements.
Conflicts of interest
In accordance with the Companies (Jersey)
Law 1991, as amended, all Directors disclose to
the Company the nature and extent of any
interest of the Director (whether direct or
indirect) of which the Director is aware in any
transaction entered into, or proposed to be
entered into, by the Group or any of its
subsidiaries, which conflicts, or may conflict, to
a material extent with the interests of the
Group. The Directors’ Register of Conflicts of
Interest is maintained by the Company
Secretary and is reviewed by the Directors as a
standing agenda item at every Board and
committee meeting.
Board committees
As part of the governance framework the
Board has authorised its committees to
ensure that there is a focus on accountability.
The committees meet separately and regularly
throughout the year. A detailed list of the
duties of each committee can be found in their
terms of reference, which are available on our
website at www.sannegroup.com. Further
information on the work of the Board
committees during the year can be found in
the separate reports of each committee on
pages 41 to 52.
Executive Committee
The Executive Committee operates to support
the CEO in the running of the Group. The
Committee’s composition ensures that there
is representation from all functions of the
business covering both client and support
services. The following people sit on the
Executive Committee:
• Martin Schnaier, Chief Executive Officer
• James Ireland, Chief Financial Officer
• Andrew Jones, Chief Risk Officer
• Cindy Peters, Chief Human Resources
Officer
• James Bermingham, Chief Legal Officer
• Jason Bingham, Chief Strategy Officer
• Kevin Lazeris, Group Head of Compliance
• Marie Measures, Chief Technology Officer
The biographies of each Executive Committee
member can be found on the Company’s
website at www.sannegroup.com.
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Sanne Group plc Annual Report and Accounts 2021
35
Board Effectiveness
Role of the Board
The Board is ultimately responsible for approving and overseeing the implementation of
Sanne’s strategy and ensuring appropriate systems of internal controls and risk
management are in place. The Board also reviews performance management, and
ensures the business has the right resources in place throughout the Group, to deliver
long-term value to shareholders and to ensure the business thrives.
Decisions on material acquisitions are also reserved for the Board. Other matters for the Board include the approval of the Annual Report and
Accounts and shareholder circulars, announcements and approval of share and other capitalisation issues and the approval of recommendations
for a dividend.
How the Board spent its time in 2021
During the year the Board considered a wide range of matters that included:
Topics discussed January March May July September October December
Chief Executive Officer’s Report ✓ ✓ ✓ ✓ ✓ ✓ ✓
Chief Financial Officer’s Report ✓ ✓ ✓ ✓ ✓ ✓ ✓
Committee Reports ✓ ✓ ✓ ✓ ✓ ✓
Strategy ✓ ✓ ✓ ✓ ✓ ✓ ✓
Disposals, Acquisitions and Integration ✓ ✓ ✓ ✓ ✓ ✓ ✓
External or In-house Briefings ✓ ✓ ✓ ✓ ✓ ✓
Risk Management and Internal Controls ✓ ✓ ✓ ✓ ✓
Compliance ✓ ✓ ✓ ✓ ✓
Legal and Governance Updates ✓ ✓ ✓ ✓ ✓ ✓ ✓
Technology ✓ ✓ ✓ ✓ ✓ ✓
Budget ✓ ✓
Annual/Interim Report and Accounts ✓ ✓
Dividend ✓
Going Concern and Viability ✓ ✓
AGM Preparation ✓ ✓
Environmental, Social and Governance ✓ ✓ ✓
People Matters, Culture and Diversity ✓ ✓ ✓ ✓ ✓ ✓ ✓
Development and Succession ✓ ✓ ✓
Board Evaluation ✓
Investor Relations/Shareholder Updates ✓ ✓ ✓ ✓ ✓ ✓ ✓
Client Relationships and Service Levels ✓ ✓ ✓ ✓ ✓ ✓ ✓
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Sanne Group plc Annual Report and Accounts 2021
36
Governance Financial StatementsStrategic Report
Activities concerning the corporate takeover
On 25 August 2021, the Board announced they had reached an agreement on the terms and conditions of a recommended all cash acquisition for
the entire issued ordinary share capital of the Company by Apex. This was approved by the Company's shareholders at a general meeting on
5October 2021 and is expected to complete either late in the second quarter or early in the third quarter of 2022. During the year, Sanne also
received multiple unsolicited, non-binding cash offers from Cinven Partner LLP, a private equity firm, which were ultimately rejected.
The Board, or a sub-committee of the Board, convened on thirteen occasions to discuss matters relating to the corporate takeover. In addition, a
further three ad hoc meetings were held by the Remuneration Committee to discuss business relevant to the Apex transaction. Board activities
concerned with the corporate takeover included:
• receiving advice on directors’ obligations under the Takeover Code from legal advisers;
• considering a valuation report on the Company from the financial advisers;
• establishing a sub-committee of the Board to manage certain matters relating to the corporate takeover;
• agreeing the timetable and process for the Acquisition;
• recommending a cash offer for the Company, by way of a Scheme of Arrangement, from Apex to the shareholders;
• providing irrevocable undertakings for the Acquisition;
• reviewing and approved various regulatory announcements and transaction documents relating to the Acquisition, including approval of the
Scheme Document
• approving the employee and shareholder communications following the Rule 2.4 and Rule 2.7 announcements; and
• convening a general meeting and scheme court meeting to obtain shareholder approval for the Acquisition.
Board composition and
meeting attendance
The Board held seven scheduled
1
meetings
during the year:
Eligible to
attend Attended
Rupert Robson 7 7
Martin Schnaier 7 7
James Ireland 7 7
Andy Pomfret
2
3 3
Fernando Fanton 7 7
Julia Chapman 7 7
Mel Carvill 7 7
Nicola Palios 7 7
Sophie O’Connor
3
7 5
Yves Stein 7 7
1. In addition to the seven scheduled meetings, the Board
met a further thirteen times to discuss ad hoc items and
a sub-committee of the Board met on ten occasions.
Thirteen of these additional meetings were held to
discuss the Apex Acquisition and/ or the attempted
takeover by Cinven.
2. Andy Pomfret stepped down from the Board on
19May2021.
3. Sophie O’Connor was unable to attend two scheduled
meetings due to a pre-existing engagement.
The Directors’ attendance at committee
meetings is disclosed in the separate reports
of each committee on pages 41 to 52.
In addition to the scheduled meetings
described above, Non-executive Directors
communicate directly and have had informal
meetings with Executive Directors and senior
management between formal Board
meetings. Directors are expected to attend all
meetings of the Board, and the committees on
which they sit, and to devote sufficient time to
the Group to enable them to fulfil their duties
as Directors. Non-executive Directors’ letters
of appointment confirm the minimum number
of days each should be prepared to devote to
the Group.
Board changes during the year
Fernando Fanton was appointed to the Board
on 5 January 2021 as a Non-executive
Director and as a member of the
Remuneration, and Nomination and
Governance Committees. Andy Pomfret
stepped down from the Board at the
conclusion of the 2021 AGM. Mel Carvill and
Sophie O’Connor succeeded Andy as the
Senior Independent Director and Chair of the
Audit Committee, respectively, following his
retirement.
Further information on these Board changes
can be found in the Nomination and
Governance Committee Report on pages 41
to43.
Directors’ induction and training
To ensure that Directors are able to participate
fully in discussions, and influence and
challenge as appropriate, all Directors receive
a tailored personal induction on appointment,
together with guidance and training
appropriate to their role and level of previous
experience.
Sanne’s induction programme is based on the
guidance provided by the Corporate
Governance Institute and tailored to the
specific requirements of our organisation and
Directors. Induction is based primarily on one-
to-one meetings with the Board, members of
the Executive Committee, senior management
and external advisers as appropriate. On
appointment, Directors are provided with an
induction pack which includes information on
key policies and procedures, Group structure,
articles of association, matters reserved for
the Board, committee terms of reference,
Board calendar, director duties, and the Code.
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Board Effectiveness continued
Sanne Group plc Annual Report and Accounts 2021
37
A typical induction programme includes the
following elements, as appropriate to the
individual’s position:
• Strategy
• Overview of each business area
• Financial and operational performance
• Market analysis
• Budget review
• Audit report and findings
• Risk management and internal controls
• Regulatory updates
• Shareholder base and investor perception
• Key persons, succession and talent
management
• Governance framework overview and
obligations
• Directors’ duties and responsibilities
Further training is provided as needs are
identified and members of the Board are
provided with regular updates to keep them up
to date with industry, regulatory and
governance developments. In-house briefings
from various areas of the business are
provided at each meeting to deepen the
Directors’ understanding of the organisation
whilst professional advisers also deliver
technical updates. All Directors are free to
attend seminars and briefings, at Sanne’s
expense, in areas considered to be appropriate
for their own professional development
including governance and issues relevant to
the committees on which they sit.
During 2021, the Board received briefings and
training on:
• Organic Growth
• Group operations in APAC
• Group operations in North America
• Group operations in the Channel Islands
• Corporate Services
• Private Debt & Loan Agency
• Real Assets
• Environmental, Social and Governance
• Technology
• The City Code on Takeovers and Mergers
Accountability
Risk management and
internal controls
The Board is responsible for the review and
assurance over the Group’s systems of risk
management and internal controls and for
reviewing their effectiveness. The Executive
Directors and senior management are
responsible for the implementation and
maintenance of an effective system of internal
controls. The Board is also responsible for risk
assessment and management.
In line with provisions 28 and 29 of the Code,
the Board has completed a robust
assessment of the effectiveness of the
Group’s risk management and internal control
systems including a review of the principal
and emerging risks. The Board during the year
delegated the responsibility for the review of
this to the Audit Committee, which then
reported back to the Board.
The review covered all material controls
including financial, operational and
compliance controls as required by the Code,
and focused on four key components:
corporate strategy, risk management, internal
controls, and the operation of the Board and
Risk Committee. The review considered the
key risk assessment, processes and controls
in place across the Group to manage the
principal risks including escalating exceptions
to the risk management processes through
the risk reporting cycle. The Group’s risk
management and internal controls systems
are in accordance with the best practice
outlined in the FRC guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting, and have
been in place for the reporting period up to
and including the approval of these Annual
Report and Accounts.
The overall conclusion was that Sanne’s risk
management and internal control systems are
satisfactory. Control improvements made
during the year were identified through the
effective implementation of the risk
management framework. The extent and
reach of the framework covers all material
controls, including financial, operational and
compliance controls. Further information on
risk management can be found in the
Strategic Report on pages 27-28 and in the
Risk Committee Report on page 47 including a
description of the principal and newly
identified emerging risks and how they are
managed or mitigated.
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Sanne Group plc Annual Report and Accounts 2021
38
Governance Financial StatementsStrategic Report
Directors’ Report
The Directors present their report and audited financial statements for the
Groupfortheyear ended 31 December 2021 (the Financial Statements).
Compliance with the UK Corporate
Governance Code
As a premium listed company on the London
Stock Exchange, we are required to comply in
full, or explain why, and to what extent, we do
not comply with the Code, which is available
on the FRC website at www.frc.org.uk.
The Code is subdivided into five sections, and
the details of how Sanne has complied with
the provisions of the Code can be found in the
following pages of the Annual Report and
Accounts.
1. Board Leadership and Company Purpose
Board of Directors 32
Board effectiveness 35
2. Division of Responsibilities
Leadership 34
3. Composition, Succession and Evaluation
Diversity and inclusion 41
Nomination and Governance
Committee Report 42
4. Audit, Risk and Internal Control
Audit Committee Report 44
Risk Committee Report 47
5. Remuneration
Directors’ Remuneration Report 48
During the year, the Group has complied with
all of the provisions of the Code, with the
exception of provision 21 which recommends
a formal and rigorous annual evaluation of the
performance of the Board, its committees, the
Chairman, and each individual director.
In light of the Acquisition, which will result in
the Chairman and the Non-executive Directors
stepping down from the Board on completion,
it was decided that it was not appropriate to
conduct a formal Board evaluation process for
the year ended 31 December 2021. Further
information can be found in the Nomination
and Governance Committee Report on
page41.
Political donations
Sanne has not made any donations to any
political party.
Directors’ Responsibilities
Statement
Our Directors’ Responsibilities Statement has
been provided on page 53 of the Annual
Report and Accounts.
Material interest in shares
Up to 8 March 2022, being the latest
practicable date before the publication of the
report, the disclosures of major holdings in
voting rights that have been made to the
Group pursuant to DTR 5 are listed below. As a
Jersey incorporated company, Sanne is a non-
UK issuer for the purposes of DTR 5 and
accordingly the notifiable thresholds are 5%,
10%, 15%, 20%, 25%, 30%, 50% and 75%.
% interest in voting rights
As at As at
8 March 31 December
Shareholder 2022 2021
JPMorgan Chase 8.68 9.49
Citigroup 8.14 8.32
Societe Generale 5.94 5.94
TIG Advisors 5.06 5.06
HBK Investments 5.05 5.05
Other statutory information
Directors’ and officers’ insurance
The Company maintains appropriate levels of
Directors’ and officers’ insurance as well as
professional indemnity cover for all its
operational businesses and engagements.
Material contracts
As at year end, the Company is not party to
significant agreements which take effect, alter
or terminate on a change of control following
a takeover bid apart from credit facilities with
banks. On 18 March 2021, the group
refinanced the loan facility and repaid the
existing loan in full by drawing down on the
new facility. Full details of the total amount
drawn down is shown in note 29 to the
Financial Statements.
Information set out in the
StrategicReport
The following information has been included
in the Strategic Report:
• an indication of likely future developments
in the business of the Company (page 5);
• information about our people and
employee engagement (page 18);
• information about our stakeholders and
our section 172 Statement (pages 19 to
20); and
• risk management (pages 27 to 28).
Dividend
As a result of the terms of the Acquisition, an
interim dividend was not paid for 2021 and the
Board is not recommending the payment of a
final dividend for 2021.
Share capital
The issued share capital of the Group and the
details of movements in share capital during
the year are shown in note 27 to the Financial
Statements.
The holders of the shares are entitled to
receive dividends when declared, to receive a
copy of the Annual Report and Accounts, to
attend and speak at general meetings of the
Company, to appoint proxies and to exercise
voting rights.
A waiver of dividend exists in respect of
588,693 unallocated shares held by Sanne
Fiduciary Services Ltd as the trustee of the
Sanne Group Employees Share Trust as at
31December 2021.
The rights attached to the shares are provided
by the Company’s Articles of Association,
which may be amended or replaced by means
of a special resolution of the Company in a
general meeting. The Directors’ powers are
conferred on them by Jersey Company law
and by the Articles of Association.
Shares are admitted to trading on the London
Stock Exchange and may be traded through
the CREST system.
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Directors’ Report continued
Sanne Group plc Annual Report and Accounts 2021
39
Allotment of shares
At the AGM in 2021, the shareholders
generally and unconditionally authorised the
Directors to allot relevant securities up to two
thirds of the nominal authorised share capital.
At the AGM in 2021, the Directors were also
empowered by the shareholders to allot equity
securities of up to 5% of the Company’s issued
share capital for a transaction, which the
Board determines to be an acquisition or other
capital investment as defined by the Pre-
emption Group’s Statement of Principles.
As part of the acquisition of Private Equity
Administrators Group (PEA), which completed
on 1 March 2021, Sanne agreed to pay part of
the consideration in shares. Sanne issued and
allotted the first tranche of 1,288,502
consideration shares on 1 March 2021. A final
tranche of 35,792 consideration shares was
issued and allotted on 9 April 2021.
As part of the acquisition of Strait Capital
Company Limited, which completed on 7 April
2021, Sanne agreed to pay part of the
consideration in shares. Sanne issued and
allotted 1,135,095 consideration shares on
9April 2021. The terms of the acquisition
included an earn-out mechanism that would
settle, subject to performance conditions, at
some point in the second quarter of 2022. Any
earn-out settlement amount would be settled
half in new Sanne shares. As a result, up to a
further 747,284 Sanne shares may be issued
and allotted during the second quarter.
Sanne undertook a capital raising exercise, by
way of an accelerated bookbuilding process,
in which 12,429,021 shares were issued and
allotted to eligible existing institutional
shareholders and new institutional investors
on 12 April 2021.
Following the Court Sanction Date for the
Acquisition, Sanne will issue up to a maximum
of 2,431,099 new shares in order to satisfy
various outstanding share awards and the
earn-out component of the acquisition of
Inbhear Fund Service Limited and Inbhear
Management Services Limited.
Further detail of the movements in share
capital are set out on note 27 to the Financial
Statements.
Purchase of own shares
At the AGM in 2021, the shareholders
approved the authority for the Company to buy
back up to 10% of its own ordinary shares by
market purchase until the conclusion of the
2022 AGM. Sanne did not purchase any of its
own ordinary shares during 2021.
Articles of Association
The Company’s Articles of Association set out
its internal regulations and cover the rights of
shareholders, the appointment of Directors
and the conduct of Board and general
meetings. Copies of the Articles of
Association are available upon request from
the Company Secretary.
Subsidiaries
Sanne operates through various subsidiaries
in a number of different countries. The
subsidiaries list is available on page 96.
Listing rule compliance
For the purposes of DTR 4.1.5 R(2) and
DTR4.1.8 R, the required content of the
management report is included in the
Strategic Report and this Report.
The information required to be disclosed by LR 9.8.4 R listing can be found in the following locations.
Section Location
1 Amount of Interest Capitalised Not applicable
2 Publication of unaudited information (LR 9.2.18 R) Not applicable
3 N/A (Section removed by the FCA handbook) Not applicable
4 Details of long-term incentive schemes (LR 9.4.3 R) Not applicable
5 Waiver of emoluments by a Director Not applicable
6 Waiver of future emoluments by a Director Not applicable
7 Non pre-emptive issues of equity for cash Pages 102 to 103
8 Non pre-emptive issues of equity for cash in relation to major subsidiary holdings Not applicable
9 Any participation in a placing by a listed subsidiary undertaking Not applicable
10 Any contracts of significance Page 38
11 Provision of services by a controlling shareholder Not applicable
12 Shareholders’ waiver of dividends Page 38
13 Shareholders’ waiver of future dividends Page 38
14 Agreements with controlling shareholders Not applicable
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Sanne Group plc Annual Report and Accounts 2021
40
Governance Financial StatementsStrategic Report
Annual General Meeting
Sanne is expecting its takeover by Apex to
complete either late in the second quarter or
early in the third quarter of 2022, at which
point Sanne will delist as a public company
and Apex will own the entire share capital of
Sanne. In the event that the Acquisition will
not complete by 30 June 2022, Sanne will
send out a notice of the 2022 AGM, no less
than 21 days prior to the AGM occurring.
Disclosure of information to the
external auditors
The Directors who held office at the date of
the approval of this Directors’ Report each
confirm that:
• so far as they are aware, there is no
relevant audit information of which the
Company’s auditors are unaware; and
• each Director has taken all the necessary
steps to make themselves aware of any
relevant audit information and to establish
that the Company’s auditors are aware of
that information.
External auditor
Following the completion of the Acquisition,
the Directors expect the refreshed Board to
work with Apex to bring Sanne’s processes
and approach to the external audit in line with
that of the Apex group.
The Group’s external auditor is PwC. As a
listed company, Sanne is required to tender its
audit every ten years. Under those rules, PwC
could continue to audit up to and including the
year ending 31 December 2029. In the event
that the Acquisition does not complete, the
Directors expect to put forward a resolution to
reappoint PwC as auditors of the Company at
the 2022 AGM.
Going concern
The Directors have a reasonable expectation
that the Group has adequate resources to
continue in operational existence for at least
the next 12 months from the date of approval
of these consolidated financial statements.
The Directors have reviewed the Group’s
financial projections and cash flow forecasts
and believe, based on those projections and
forecasts, that it is appropriate to prepare the
consolidated financial statements of the
Group on a going concern basis. The Directors
have assessed the potential impact that the
COVID-19 pandemic may have on its ability to
continue as a going concern. The assessment
gave the Directors reasonable reassurance
that the Group will be able to continue as a
going concern. The Group has healthy cash
inflows through a good pipeline of existing and
new clients; the Group also has sufficient
finance facilities available if required. The
assessment included an analysis of the
Group's current financial position, ability to
trade, principal risks facing the Group, and the
effectiveness of its strategies to mitigate the
impact of liquidity risks. This was all assessed
considering the impact that COVID-19 has had
on global markets and based on this
assessment the Group has prepared the
financial statements on a going concern basis.
On 25 August 2021, the Board of Directors of
Sanne Group plc and the Board of Directors of
Apex Acquisition Company Limited (an
indirect wholly-owned subsidiary of Apex
Group Ltd) (collectively referred to as “Apex”)
announced a recommended all-cash offer of
920p per share to be made by Apex for the
Company's issued share capital. The Group’s
existing committed debt facilities contain a
standard change of control clause which,
upon completion of the acquisition, could
result in the existing committed debt facilities
being withdrawn. The Group does not have
visibility of Apex’s post completion funding for
the Group at this time. Therefore, this could
create some uncertainty as to the Group’s
going concern position. Whilst the Directors
have not had direct visibility of Apex’s post
completion funding for the Group, including
the terms on which such funding will be
provided, the Directors note the detailed
intentions statement included within the
announcement on 25 August 2021 which
states that Apex intend to continue investing
in and developing the Group and highlights the
Group’s current strong cash generation and
cash generating potential. Under International
Accounting Standard 1 and the International
Standard on Auditing (UK) 570 (Revised) the
announcement of the acquisition qualifies as
a material uncertainty that may cast
significant doubt upon the Group’s ability to
continue as a going concern. Therefore,
notwithstanding the material uncertainty post
completion of the acquisition, the Directors
are satisfied that the going concern basis
remains appropriate for the preparation of the
financial statements. The financial statements
do not include the adjustments that would
result if the Group were unable to continue as
a going concern.
Further detail is contained in the viability
statement on pages 29 to 30.
Post balance sheet events
In preparing the financial statements for the
year ended 31 December 2021, the expense
relating to share based payments was
calculated using an estimated date for the
Acquisition by Apex to complete at the end of
March 2022. Since the year end however, there
have been some delays in regulatory
approvals which mean the Acquisition is now
not expected to complete until either late in
the second quarter or early in the third quarter
of 2022. Further detail of the impact on the
financials is covered in note 41 of the financial
statements.
On behalf of the Board of Sanne Group plc
Martin Schnaier
Chief Executive Officer
31 March 2022
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Sanne Group plc Annual Report and Accounts 2021
41
Nomination and Governance
Committee Report
Committee membership and attendance
Membership and attendance at the three
scheduled Committee meetings during the
year was as follows:
Eligible
Committee members to attend Attendance
Rupert Robson (Chair) 3 3
Mel Carvill 3 3
Julia Chapman 3 3
Fernando Fanton
1
3 3
Sophie O’Connor
2
3 2
Nicola Palios 3 3
Andy Pomfret
3
1 1
Yves Stein
2
3 2
1. Fernando Fanton became a member of the Committee
on 5 January 2021.
2. Sophie O’Connor and Yves Stein were unable to attend
one meeting each due to pre-existing engagements.
3. Andy Pomfret stepped down from the Committee on
19May 2021.
Role and responsibilities
The Committee is responsible for reviewing
and nominating appointments to the Board
and ensures that there is effective planning to
manage succession to the Board, its
Committees and senior management. This
includes the development of a pipeline of
potential candidates for the Executive
Committee and senior management positions
with the requisite skills and experience to
support the long-term sustainable growth of
the business.
The Committee’s role and responsibilities
include:
• reviewing and nominating candidates for
both Executive and Non-executive roles on
the Board;
• managing the size, structure, composition,
knowledge, skills, capacity and diversity,
including gender diversity, of the Board
when considering suitable candidates;
• evaluating the Company’s policy and
practices for executive talent management
development and diversity;
• understanding the role and leadership
needs that are required by the business
and reviewing talent to ensure that the
Company maintains the ability to compete
and win further market share;
• considering Director performance and,
upon consideration, recommending to
shareholders their election or re-election at
the AGM;
• succession planning;
• reviewing the balance and composition of
the Board;
• considering the Code and other corporate
governance legislation, guidance or
regulatory change; and
• making necessary changes to the
corporate governance structure or
Company procedures in order to comply
with prevailing corporate governance
regulations, codes or market practice.
During the year the Committee reviewed its
terms of reference. The Committee’s terms of
reference are available on the Company’s
website at www.sannegroup.com.
Committee activities during the
year
During the year, the Committee:
• discussed senior executive appointments
and succession planning;
• reviewed the composition of the Board’s
committees;
• oversaw the induction programme for
Fernando Fanton;
• considered guidance on board diversity,
including the recommendations of the
Hampton-Alexander Review and the
Parker Review; and
• monitored the developments and changes
to the corporate governance environment.
Board changes during the year
Fernando Fanton was appointed to the Board
on 5 January 2021 as a Non-executive
Director and as a member of the
Remuneration, and Nomination and
Governance Committees. Fernando brings
significant technology experience, gained in
companies of different sizes from start-ups to
scale-ups and larger corporate organisations.
Andy Pomfret stepped down from the Board
at the conclusion of the 2021 AGM having
completed two three-year terms as a Non-
executive Director. Mel Carvill and Sophie
O’Connor succeeded Andy as the Senior
Independent Director and Chair of the Audit
Committee, respectively, following his
retirement.
Board succession planning and
Director re-election
The Committee annually reviews its
composition and long-term succession
planning. This process takes into
consideration the balance of skills, knowledge,
experience, independence and diversity of the
Board, to ensure that any new appointments
complement or address any gaps in these
areas. In 2020, the Committee oversaw the
recruitment of two new Non-executive
Directors and the Committee is satisfied the
Board’s current composition is appropriate to
adequately discharge its duties.
Apex will have full responsibility for the
composition of the Board following the
completion of the Acquisition, which is
expected to complete either late in the second
quarter or early in the third quarter of 2022.
Atcompletion, it is intended that the
Non-executive Directors will resign from the
Board. In the event that the Acquisition does
not complete before the next AGM of the
Company, the Board expects to put forward a
resolution to re-elect each of the Company’s
Directors at the 2022 AGM.
Non-executive Director
appointment process
During 2020, the Committee reviewed the
skills and background of the Board, the
Company’s leadership requirements in light of
its strategy, and the length of service of the
Chairman and Non-executive Directors. This
exercise identified that a technology specialist
would be a valuable addition to the Board to
ensure a continuing balance of diversity, skills
and experience.
It was agreed that an executive search firm
would be best positioned to identify potential
candidates and, following a tender process,
Korn Ferry were engaged to conduct the
Non-executive search. Korn Ferry also provide
consulting services to the Remuneration
Committee, and so there were processes in
place to ensure the advice received by the
Committee is independent of any other
services provided by Korn Ferry. When
considering potential candidates, the
Committee focussed on identifying individuals
with the capacity, expertise and experience to
discharge the specific role, recognising the
added value to be derived from diversity of
gender, social and ethnic background, and
cognitive and personal strengths.
The Committee shortlisted candidates from a
wide list of appropriate candidates produced
by Korn Ferry and the Chairman, CEO, CTO
and CHRO carried out first interviews.
Members of the Committee then
subsequently met the shortlisted candidates,
considering their skills and attributes against
the role profiles, and made a recommendation
to the Board. This process resulted in the
appointment of Fernando Fanton as a
Non-executive Director on 5 January 2021.
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Governance Financial StatementsStrategic Report
Board diversity
In accordance with the Code, the Company’s policy seeks to ensure that the Board has the right balance of independence, skills and knowledge to
enable it to meet its responsibilities and ensure that proposed appointments and succession to the Board are based on merit and judged against
objective criteria. The Board also supports the recommendations in the Code to ensure that diversity and gender are considered when making
Director appointments. The Company recognises that its success, competitiveness, and ability to understand the needs of its clients are
dependent upon its ability to embrace the benefits of diversity in the Boardroom. Effective boards reflect differences in culture, gender, skills,
background, regional and industry experience, and other qualities. All of these factors are considered in determining the composition of the Board
The Board meets the voluntary gender diversity target set out by the Hampton-Alexander review, with one third of the Board being female.
Following the appointment of Fernando Fanton, an Argentine national, the Board also meets the recommendations of the Parker Review of having
at least one Director from an ethnic minority background, well in advance of the 2024 deadline for FTSE250 Boards.
Diversity and inclusion
Equality and diversity are fundamental values supported by Sanne.
Sanne is an equal opportunities employer and encourages diversity. The Board recognises that diversity in our workforce brings a range of
perspectives and skills that make Sanne stronger, contributing to our continued success, whilst also reflecting our client base and the
communities in which we operate. Sanne’s diversity and inclusion statement can be found on the Company’s website in the 2020 Annual Report
and Accounts.
Sanne considers applicants for all roles regardless of gender, ethnicity, religion and age. Applicants are all treated equally, and we have a diverse
workforce. All appointments are made based on merit and are measured against specific objective criteria including the skills and experience
required for the position.
We respect individuals and their rights in the workplace and specific policies are in place to prevent or, where issues are raised, address
harassment and bullying and to ensure equal opportunities.
We are committed to ensuring that disabled people are afforded equality of opportunity in respect of entering and continuing employment with us.
The Group aims to provide training opportunities that are identical, as far as possible, for disabled and non-disabled employees.
Gender diversity at Sanne is an important metric for the business to constantly address and we are committed to increasing the participation of
women at Board, executive and management levels.
In 2021, we have continued to improve in this area. In the 2022 FTSE Women Leaders Review, Sanne placed seventh amongst 34FTSE 350
financial services companies, and 32
nd
amongst all FTSE 250 companies, in the 2021 rankings of women on boards and in leadership.
Directors’ training and induction
A revised induction and training programme
for Non-executive Directors was approved by
the Committee in 2019. The programme is
based on the Chartered Governance Institute’s
guidance and is tailored to Sanne and the
specific requirements of each Director. The
induction programme was used for the
onboarding of Fernando Fanton following his
appointment to the Board and further detail of
its application is covered in Board
Effectiveness on pages 36 to 37.
Management succession planning
The Committee supports the development of
talent at all levels of the Group. The CEO and
the CHRO therefore present their succession
planning and key person risk reviews to the
Committee twice a year. Succession planning
focuses primarily on the Executive Committee,
Regional Managing Director and Country Head
positions, but also identifies high potential
talent across every area of the business. The
key person risk review identifies individuals
with specialist knowledge or key relationships
and ensures appropriate plans are in place to
mitigate the Group’s reliance on these
individuals. These reviews take into
consideration the readiness, and training and
development needs of identified candidates,
and informs the personalised plans put in
place for potential successors and high
potential talent.
A new performance management programme
was introduced during the year which has
better enabled the mentorship of likely
successors. The Committee recognises the
importance of setting the tone and culture of
the organisation from the top and therefore
monitors the cultural factors that impact
talent strategies.
The Committee is hopeful that future leaders
can be identified in each jurisdiction, and
developed from within the organisation, to
create a diverse talent pipeline. The
Committee is proud of what the Group has
achieved in this area. In the last 18 months,
Sanne has internally promoted a number of
long-term employees to prominent managerial
positions:
• David Fowler – Global Head of Private
Equity
• Paloma González – Head of Sanne Spain
• Rhea Hood – Global Head of Strategic
CRM
• Richard Murray – Global Head of Product
• Sean Murray – Global Head of Operations
• Graeme Rate – Head of Sanne Ireland
• Manuel Rodríguez – Regional Managing
Director
• Chris Thoume – Global Head of Digital
Innovation
• Rubina Toorawa – Head of Sanne
Mauritius
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Nomination and Governance
Committee Report continued
Sanne Group plc Annual Report and Accounts 2021
43
The table below shows the level of female representation throughout the Group as at 31December 2021.
Female No. of female Total no. of
Level representation employees employees
Board of Directors 33% 3 9
Executive Committee
1
33% 2 6
Director-level employees
2
36% 69 193
Rest of staff 59% 1,168 1,989
1. The Executive Committee row excludes the Executive Directors who are captured in the Board of Directors.
2. The Directors row captures all staff at Director level, except for the Executive Committee members and Executive Directors who are captured in the previous rows.
Board evaluation
Provision 21 of the Code recommends a formal and rigorous annual evaluation of the performance of the Board, its committees, the
Chairman,and each individual director. In light of the Acquisition, which will result in the Chairman and the Non-executive Directors stepping
downfrom the Board on completion, it was decided that it was not appropriate to conduct a formal Board evaluation process for the year
ended31 December 2021.
Progress against 2020 recommendations
A full external Board evaluation was carried out in 2020 by Chris Stamp of Ceradas Limited. As part of the Board evaluation, Ceradas made some
recommendations to further improve the effectiveness of the Board, covering:
• Enhancing post-merger integration reviews
• Optimising the use of video-conferencing technology for Board meetings and discussions
• Changing the balance of the Board agenda to focus more on strategic and key operational matters and deal more efficiently with more routine
matters and schedule them to follow CEO and CFO reports
• Utilising the Workforce Advisory Panel to gain more insight on key employee matters such as retention
• Processes around Board and committee minutes
• Improving guidance to the Board on corporate governance matters
The Committee reviewed progress made against each of these recommendations and were satisfied they had been implemented appropriately.
Rupert Robson
Chair of the Nomination
and Governance Committee
31 March 2022
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Governance Financial StatementsStrategic Report
Audit Committee Report
Committee Membership and attendance
Membership and attendance at the six
1
scheduled Committee meetings during the
year was as follows:
Eligible
Committee members to attend Attendance
Sophie O’Connor
2
(Chair) 6 6
Andy Pomfret
3
3 3
Mel Carvill 6 6
Nicola Palios 6 6
1. In addition to the six scheduled meetings, the Committee
met on one further occasion to discuss ad hoc items.
2. Sophie O’Connor became Chair of the Committee
on19May 2021.
3. Andy Pomfret, who previously Chaired the Committee,
stepped down from the Board and the Committee
on19May 2021.
Appropriate skills and experience
To maintain the integrity of the composition of
the Audit Committee, and to ensure sufficient
co-ordination between the Committee and
those other committees which may discuss
overlapping matters, the Audit Committee
includes the Chairs of the Risk Committee and
the Remuneration Committee. The Committee
is composed entirely of independent Non-
executive Directors and complies with the
Code.
All Committee members have appropriate
relevant financial services sector experience.
Sophie O’Connor is a Chartered Accountant
and has significant financial, audit and risk
management experience gained in the
financial services sector both in the UK and
the USA. Mel Carvill is a Chartered Accountant,
holds an Advanced Diploma in Corporate
Finance and has worked across a range of
sectors in the global financial services
industry. In addition, Nicola Palios brings
expertise from her experience as managing
partner of a firm providing legal and
alternatives administration services.
At the invitation of the Committee, the CEO,
CFO, CRO, and Internal Audit Director attended
meetings, and other management are
requested to attend meetings during the year
as required. In addition, the PwC lead audit
partner attended all meetings held during
2021.
Role and responsibilities
During the year, the Committee, and the Board,
devoted time to assessing the approach to,
and the integrity of, the Group’s financial
reporting, monitoring the effectiveness of the
Group’s internal financial controls framework,
and overseeing the activities of the Internal
Audit function and the external auditors. At the
request of the Board, the Committee reviewed
the contents of the 2021 Annual Report and
Accounts and confirmed to the Board that, in
its opinion, the Annual Report and Accounts
taken as a whole is fair, balanced and
understandable and provides information for
shareholders and investors that enables them
to review the Group’s financial position,
performance, business model and strategy.
The Audit Committee also took the lead on
determining the approach to the Annual
Report and Accounts given the timing of the
Apex takeover.
The Committee’s roles and responsibilities
include:
• monitoring the integrity of the financial
statements of the Group including its
annual and half-year reports, any interim
management statements and other
formal announcements relating to Sanne’s
financial performance. The Committee
reports to the Board on significant
financial reporting issues and judgements
made;
• keeping under review the Company’s
internal financial control systems that
identify, assess, manage and monitor
financial risk;
• monitoring and reviewing the
effectiveness of the Company’s external
auditors, recommending the auditors’
remuneration and assessing their
independence and objectivity along with
the effectiveness of the external audit
process;
• reviewing and assessing the Internal Audit
function, including oversight of the work of
Internal Audit with steps taken to address
findings and improve the control
environment; and
• reviewing the adequacy and security of
the Company’s arrangements for its
employees and contractors to raise
concerns about possible wrongdoing in
financial reporting or other matters in line
with whistleblowing procedures.
A full list of the Committee’s duties is
contained within the Committee’s terms of
reference which are available on the
Company’s website at www.sannegroup.com.
Fair, balanced and understandable
assessment
In line with Provision 27 of the Code, the
Committee has been requested by the Board
to consider whether it supports the view that
the Company’s Annual Report and Accounts,
when taken as a whole, is fair, balanced and
understandable and, further, that it provides
the necessary information for shareholders
and other users to assess the Group’s position
and performance, risks, business model and
strategy. To make this assessment the
Committee considered:
• guidance provided to each contributor to
the Annual Report and Accounts;
• any new requirements as a consequence
of regulatory changes;
• input provided from pre-year end
discussions with the auditors;
• input provided pre-year end from senior
management and corporate functions;
• a review by senior management to ensure
consistency and balance;
• reviews conducted by the external
advisers and the auditors based on
consistency and best practice; and
• review and consideration by the
Committee and final sign-off by the Board.
This process enabled the Committee, and then
the Board, to confirm that the 2021 Annual
Report and Accounts, when taken as a whole
is fair, balanced and understandable.
Controls over financial reporting
Sanne has robust internal control and risk
management systems in relation to the
process for preparing and ensuring the
accuracy and reliability of the consolidated
financial statements. The key features of
these controls and systems are:
• clearly defined lines of accountability and
delegation of authority;
• regular monitoring by management,
including consideration of developments
in accounting regulations and best
practice in financial reporting. Appropriate
training is provided to key finance
personnel on relevant developments in
accounting standards;
• preparation of monthly management
accounts at Group and jurisdictional level;
• review of local management accounts by
jurisdictional managing directors and
jurisdictional financial controllers;
• the Group’s consolidation of the results of
each business unit, with appropriate
adjustments, is subject to various levels of
review by the Group finance function;
• appropriate review of the disclosures
made in the Annual Report and Accounts,
including by the Committee and the Board;
• reports from management and the
external auditors regarding significant
judgements, changes in accounting
policies and estimates, and other pertinent
matters relating to the financial
statements are provided to the
Committee; and
• the financial statements of each material
Group subsidiary, including all regulated
and operating entities, are subject to an
external audit.
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Audit Committee Report continued
Sanne Group plc Annual Report and Accounts 2021
45
Topics discussed by the Committee during the year
The timetable of the Committee is linked to the Group’s reporting cycle, annual audit, and financial reporting timetable. The Committee’s activities
carried out during the year covered, but was not limited to, the following topics:
Financial Statements
and Reports
• Alternative
Performance
Measures
• Approach to the 2021
Annual Report and
Accounts
• Full-year results 2020
• Half-year results 2021
• Impairment review
• New and revised
accounting standards
Finance
• Acquisitions
• Apex transaction
costs
• Claims and
contingencies
• Going concern
assessment
• Share based
payments
• Tax and transfer
pricing
• Viability testing
External Audit
• Effectiveness review,
audit quality
• External Audit Plan
and regular reports
Internal Audit
• Internal audit charter
• Internal audit plan
• Internal audit
progress and
resourcing
• Internal audit reports
• Review of risk
management and
internal controls
Other
• Review of
Whistleblowing Policy
• Whistleblowing
Report
Significant financial statement issues considered by the Committee
The table below summarises the significant financial statement issues considered by the Committee. Management provided detailed papers on all
these items which the Committee members then discussed, reviewed and provided significant challenge on the various estimates and
interpretations made by management.
Significant financial and reporting issue How the issue has been addressed
Management maintains key controls over the largely quarterly billing cycles. The timings of the
billing cycle are arranged to minimise accrued income balances at key reporting dates and thus give
greater certainty over income which is still to be converted into cash.
Management assesses the recoverability of all receivables at the year end and attest to the quality of
assets considering various forward-looking assumptions to determine the expected credit losses,
these included but were not limited to the expected future economic changes in the operating
jurisdiction, specific client relationships and the expected future client and fund liquidity. We agreed
with management’s assessment that no additional provision for losses or impairment either to
accrued income or trade receivables was needed.
We considered the results of management’s impairment assessment which reviews triggers for
impairment around asset lives, valuation and verification of assets. We considered the judgements
taken in relation to asset lives and the methodology applied to consider asset verification and we
were satisfied that no changes in treatment were needed.
With regards to goodwill, we considered the judgements taken in relation to short and long-term
growth rates, cost bases and discount rates used and we were again satisfied that no changes in
treatment were needed.
Share based payments We have reviewed the methodology used for the accounting of share-based payments and are
comfortable with the assessment by management as to the number of shares expected to vest
under the terms of the Performance Share Plan and Restricted Stock Awards. In doing so we have
reviewed and are satisfied with management judgments and expectations around the achievement
of performance targets and the leavers’ assumptions applied.
Alternative Performance Measures (APMs) We considered all APMs used by management in the Annual Report and Accounts, and we are
comfortable that all of the APMs provide useful alternative information about the underlying
performance of the Group. We are satisfied that an equal measure of importance is given to both
statutory and alternative performance measures in the Annual Report and Accounts.
Revenue recognition, accrued income
and trade receivables
Evaluation of impairment of intangible
assets including goodwill and useful life
of intangible assets
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Governance Financial StatementsStrategic Report
External audit
The Committee manages the relationship with
the Group’s external auditors, PwC, on behalf
of the Board. The Committee considers
several areas in relation to the appointment of
the external auditors, namely their
performance in discharging the statutory
audit, the scope of the audit and terms of
engagement, their independence and
objectivity, and their remuneration. The
Committee receives and reviews a report from
PwC relating to the Company’s Annual Report
and Accounts and the external audit process.
Independence and tenure
Independence is vital for the integrity of the
audit. The Committee is satisfied that PwC are
fully independent from the Company’s
management and have no conflicts of interest.
The review of any non-audit fees ensures that
continued independence is maintained. All
non-audit spend is reviewed by the Committee
in accordance with the Sanne’s Policy for
Approval of Non-audit Services.
The Company is required by the Code to
undertake a competitive tender for the role of
external auditor at least every ten years. PwC
were appointed as external auditor during
2019 following a competitive tender process
and their appointment to this position will be
kept under review. PwC also conducted a
firmwide assessment of their services
provided to Apex and confirmed that they
would remain independent following the
Acquisition.
Effectiveness
A review was held by the Committee on the
effectiveness of the external audit provided by
PwC, with consideration given to:
• the quality of planning;
• communication between the audit team
and management;
• the quality and knowledge of the audit
team;
• regulatory insights;
• the content of regular meetings with the
Chair of the Committee, the CFO, and the
Managing Director of Finance;
• the overall performance and delivery of
the audit; and
• the FRC’s audit quality inspection and
supervision of PwC published in July
2021.
Following the review, it was agreed that the
audit had been conducted in a professional,
challenging and robust manner and that the
audit plan agreed with the Committee had
been followed.
Re-appointment
The Audit Committee has confirmed it is
satisfied with the independence, objectivity,
and effectiveness of PwC. Following the
completion of the Acquisition, the Directors’
expect the refreshed Board to work with Apex
to bring Sanne’s processes and approach to
the external audit in line with that of the Apex
group.
Audit and non-audit fees
The Committee provides approval for
non-audit fee spend in accordance with the
FRC Ethical Standard. Assurance is provided
that there is no threat to the auditor’s
independence and objectivity. The policy
governing non-audit spend is reviewed by the
Committee on a periodic basis, is aligned with
the requirements of the FRC’s Revised Ethical
Standard, and applies additional restrictions
on the use of PwC’s services. The Committee
monitors expenditure on non-audit services
and each item requires approval in advance.
PwC do not provide any non-audit services to
Sanne, except for those services closely
related to audit and assurance, to ensure
auditor independence.
The Group audit fee was £1.3 million. The fees
paid for non-audit services to PwC were
£215,000 The ratio of non-audit fee to audit
fee is 16.5%. During the year the Group
incurred non-audit fees for work on: ISAE 3402
control reports; agreed upon procedures; and
other regulatory reporting services. It was
considered by the Committee that there was
no perceived threat to auditor independence
as there was no relationship to the financial
reports and that these items would not impact
auditor independence. The external auditors
were considered the most suitable supplier for
these services, taking into account the
alignment of these services to the work
undertaken by external audit and PwCs
expertise.
Internal Audit
During the year the Group operated its own
Internal Audit function which was supported
by a co-source arrangement with BDO and,
where required, a number of other providers to
supplement resources and provide capability
in specialist areas. The Internal Audit Director
is invited to attend the Committee and meets
with the Chair of the Committee on a monthly
basis.
The internal audit strategy and plan for 2021
was discussed and approved by the
Committee. The Committee monitors the
effective performance of the Internal Audit
function against the plan and ensures that the
audit scope continues to focus on all relevant
areas of activity. The internal audit reports
detailing issues identified and management
actions taken to improve the control
environment were presented to the
Committee for their consideration.
The Committee determined that the Internal
Audit function, supported by the co-source
arrangement, is appropriate for the business
in terms of the quality, experience and
expertise.
Whistleblowing
During the year the Whistleblowing Policy was
reviewed by the Committee to ensure that it
was effective. The Group uses a system
enabling employees who are aware of, or
suspect, misconduct, illegal activities, fraud,
and abuse of assets or violations of any
Company policy, to report these confidentially.
The Committee is provided with reporting on
the operation of the Whistleblowing Policy at
each scheduled meeting. In the event of a
whistleblowing event, the Committee would
keep the Board informed of all developments
where appropriate.
Sophie O’Connor
Chair of the Audit Committee
31 March 2022
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Sanne Group plc Annual Report and Accounts 2021
47
Risk Committee Report
Committee Membership and attendance
Membership and attendance at the
4scheduled Committee meetings during the
year was as follows:
Eligible
Committee members to attend Attendance
Mel Carvill (Chair) 4 4
Sophie O’Connor 4 4
Andy Pomfret
1
2 2
Yves Stein
2
4 3
1. Andy Pomfret stepped down from the Board and the
Committee on 19 May 2021.
2. Yves Stein was unable to attend one meeting due to a
pre-existing engagement.
Appropriate skills and experience
To maintain the integrity of the composition of
the Committee, and to ensure sufficient
co-ordination between the Committee and the
Audit Committee, which may discuss
overlapping matters, the Chair of the
Committee is a member of the Audit
Committee and the Chair of the Audit
Committee is a member of the Committee.
The Committee is composed entirely of
Independent Non-executive Directors and is in
compliance with the Code.
All Committee members have appropriate
relevant financial sector experience.
Mel Carvill is a Chartered Accountant,
Chartered Insurer and has worked across a
range of sectors in the global financial services
industry. Sophie O’Connor is a Chartered
Accountant and has significant financial, audit
and risk management experience, gained in
the financial services sector both in the UK
and the USA. Yves has more than 30 years of
experience in the banking industry through
various senior positions in corporate banking,
fund services, and wealth management.
At the invitation of the Committee, the CEO,
CFO, CRO, GHoC, CLO and Internal Audit
Director attend meetings. In addition, external
audit and additional members of management
and other individuals are invited to attend
meetings during the year as required.
Risk management framework and
internal controls
The Board is responsible for ensuring the
maintenance of a robust Risk Management
Framework with regards to the principal risks
facing Sanne in achieving its strategic
objectives. The Board has delegated
responsibility for the monitoring of the
Company’s risk management strategy and
approach to the Committee.
The Committee ensures the effective
application of the Risk Management
Framework in a manner proportionate to the
nature and scale of the organisation. The
Committee oversees the implementation of
risk assessments to identify and assess all of
the Group’s risk exposures, ensuring these
risks are appropriately controlled in line with
the Group’s defined risk appetite.
The CRO and GHoC have provided the
Committee with regular reporting on risk and
compliance emerging threats, changing risk
exposures and the associated mitigation
strategies.
The Internal Audit function has assessed
Sanne’s risk management and control
framework. Key framework components have
been reviewed and key controls validated from
the Group’s principal risk assessment. No
material weaknesses or significant failings
were identified.
Role and responsibilities
In 2021, the Committee continued to monitor
Sanne’s risk management framework, risk
appetite positions and, risk assessments in order
for the Group to be well placed to respond to
emerging risks and our business environment.
During the reporting period, the Committee
advised the Board on the approach and
application of risk management and
compliance as described in this report.
The Board has overseen and monitored the
Group’s risk appetite and principal risk
positions, ensuring residual risk remains stable
or improves.
The Committee’s role and responsibilities
include:
• advising the Board on the Company’s
overall risk appetite, tolerance and strategy
and overseeing the risk exposures of the
Company and its future risk strategy;
• keeping the Company’s overall risk
assessment processes under review and
ensuring that appropriate qualitative and
quantitative metrics are used;
• setting a standard for the accurate and
timely monitoring of large exposures and
certain risks, which the Company believes
are of critical importance;
• advising the Board on proposed strategic
transactions including acquisitions or
disposals, focusing in particular on risk
aspects and implications for the
Company’s risk appetite and tolerance;
• reviewing reports on any material breaches
of risk limits and the adequacy of proposed
actions;
• reviewing the adequacy of operational
resilience and business continuity
arrangements over the Company’s
provision of services;
• reviewing the Company’s systems and
controls for the prevention of financial
crime;
• considering and approving the remit of the
risk management function and ensure it
has adequate resources and appropriate
access to information to enable it to
perform its function effectively;
• keeping under review the performance of
the CRO and GHoC; and
• working with management to ensure the
Company’s purpose, values and risk culture
expectations are appropriately embedded
in the Company’s risk strategy and risk
appetite and are reflected in observed
behaviours and decisions.
A full list of the Committee’s duties is contained
within the Committee’s Terms of Reference,
which is available on the Company’s website at
www.sannegroup.com.
Topics discussed by the Committee
during the year
The Committee’s activities, carried out during
the year and subsequently, covered, but were
not limited to, the following topics:
Compliance
• Adequacy and suitability of resources
• Horizon scanning
• Regulatory updates and implementation of
material regulatory change
• Status of regulatory inspections
• The implementation of material regulatory
change
Risk Management
• Emerging risks and horizon scanning
• ESG risk
• International assurance standards
• Operational resilience
• Principal and jurisdictional risks
• Risk and compliance strategies
• Risk appetite
• Risk governance of the technology change
agenda
• Risk reporting metrics, including indicators
and tolerances
• Sanne’s Risk Management Framework
Other
• Apex Acquisition
• COVID-19
• Internal audit updates
Principal risks
The Principal Risks and uncertainties facing
the Company are set out in the risk
management report section of the Strategic
Report on pages 27 to 28.
Mel Carvill
Chair of the Risk Committee
31 March 2022
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Sanne Group plc Annual Report and Accounts 2021
48
Governance Financial StatementsStrategic Report
Remuneration Committee Report
This Remuneration Committee Report is unaudited
Dear shareholder
On behalf of the Board, I am pleased to
present this Report on the Remuneration
Committee (the Report) in respect of the year-
ended 31 December 2021.
Basis for this Report
Sanne is expecting its takeover by Apex to
complete either late in the second quarter or
early in the third quarter of 2022, at which
point Sanne will delist as a public company
and Apex will own the entire share capital of
Sanne.
As a result of the Board’s expectation that the
Acquisition will complete before or very
shortly after any 2022 AGM, there will not be
the usual advisory shareholder vote to
approve the Directors’ Remuneration Report or
a shareholder vote to approve a new
remuneration policy.
Given the timing of the acquisition by Apex
and to streamline the Company’s reporting
processes generally, the Board and
Committee have determined that this Report
will comply with the UK Listing Rules and the
Code but any disclosures that were made in
previous reports on a voluntary basis will be
excluded. This means that, for example,
disclosures required under The Large and
Medium-sized Companies and Groups
(Accounts and Reports) (Amendment)
Regulations 2013 and the Companies
(Miscellaneous Reporting) Regulations 2018
will not be included as these regulations do
not apply to the Company as a Jersey
incorporated company. This is consistent with
the general approach taken with the rest of
this Annual Report and Accounts.
On this basis, this Report sets out details of
our approach to the operation of the Executive
Directors’ remuneration policy (the
Remuneration Policy) over the year, in
accordance with the Code requirements.
Performance and reward for 2021
The attention of the Committee has been
centred on ensuring that Management
remained appropriately incentivised to deliver
another year of outstanding performance,
notwithstanding the significant work entailed
with the acquisition by Apex.
Over the course of 2021, Sanne has delivered
excellent financial performance with profit
growth of 12.6%, total shareholder return of
over 50% and extremely strong new business
growth. In addition, we successfully
completed a number of strategic acquisitions
to further strengthen the Group’s offering.
The FY21 annual bonus plan paid out at
50.45% of the maximum opportunity and the
vesting level for awards under the 2019-21
PSP cycle was 57.2%. In determining the final
bonus outcome, the Committee considered
the strategic objectives set for the Executive
Directors at the start of the year and the
transformational year this has been for Sanne.
The Committee noted that as a result of the
acquisition by Apex, some of the objectives
were considered to no longer be relevant,
whilst the balance of the objectives had been
met in full. The Committee, having considered
the significant work undertaken by the
Executive Directors in relation to the
acquisition by Apex, the strategic progress
made during the year, and the outstanding
outcome for shareholders, and the
record-breaking new business wins, exercised
discretion to allow the strategic objectives to
pay out in full. The Committee believes this
results in a bonus outturn which appropriately
reflects and rewards for performance
delivered during 2021. The Committee has
reviewed 2021 remuneration levels and
incentive outturns and is satisfied that this is
consistent with the remuneration approach for
employees generally, taking into account
salary increases awarded for the year and the
incentive outturns across the workforce.
Overall, the Committee is satisfied that the
Remuneration Policy has operated as
intended and remuneration is appropriate,
rewarding for achievement of stretching
financial targets and key strategic and
operational objectives and delivery of
outstanding shareholder returns.
Closing remarks
The Committee has acted very carefully to
ensure that the remuneration paid for FY2021
provides a strong link to the performance
delivered, is fair and consistent throughout the
Company and that the decisions made
generally are in the long-term interests of
current and future shareholders and all other
stakeholders.
Nicola Palios
Chair of the Remuneration Committee
31 March 2022
“Performance of the business has been outstanding in a year where, as well as delivering
strong operational performance with significant new business wins and three further
acquisitions, management has created excellent value for shareholders. Management
also ensured that the business is in the best possible shape for the new owners to take it
forward to the next stage of the strategy. In these circumstances, the Remuneration
Committee has considered very carefully the impact of the acquisition by Apex on the
Remuneration Policy and its operation”
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Remuneration Committee Report continued
Directors' Remuneration Policy Principles
The Code sets out principles against which the Remuneration Committee should determine the remuneration policy for executive directors; as
follows:
Principle Committee approach
Our policy is understood by the Executive Directors and has been clearly
communicated to our shareholders.
We have previously consulted our Workforce Advisory Panel on our
remuneration policy.
We have a simple policy offering pension at the same rate as employees, an
annual bonus plan consistent with most employees and performance shares
for longer term performance.
There is more complexity for Executive Director packages to ensure a robust
link to performance and avoid reward for failure and to comply with investor
and Code requirements.
We have mitigated these risks through careful plan design, including long term
performance measurement, deferral and shareholding requirements (including
post cessation of employment) and discretion (including to override the
formulaic outcomes of incentives) and clawback provisions.
Incentives are subject to individual caps and the Remuneration Committee has
discretion to override the formulaic outcomes of these plans if they are not
considered appropriate.
Incentive plans are determined based on a proportion of base salary so there
is a sensible balance between fixed pay and performance-linked elements.
There are provisions to override the formula driven outcome of incentive plans,
deferral and clawbacks to ensure that poor performance is not rewarded.
Bonus plans operate widely throughout the Company and are all approved by
the Committee to ensure consistency with Company purpose, values and
strategy.
The structure of the Remuneration Policy complies with the provisions set out in the Code.
Strategic rationale for remuneration policy, structure and performance metrics
The Remuneration Policy is designed to ensure it continues to allow us to incentivise and reward the Executive Directors to achieve our strategy in
both the short and long-term. Operation of the Remuneration Policy is considered annually in light of key financial, strategic and operational
priorities of the Group and the wider stakeholder experience, including the level of salary increase and the types of performance metrics. Stretching
targets are set by the Committee taking account of the Company’s business plan and external expectations. The presence of bonus deferral, the
operation of the performance share plan and the shareholding requirement aligns the interests of Executive Directors and shareholders and
promotes a long-term approach to performance and risk management.
Consideration of shareholder views and engagement during 2021
The Committee considers an open and constructive dialogue with investors to be important to establishing a successful Remuneration Policy
which is considered fair and transparent by both Executive Directors and shareholders. The Committee engages pro-actively and extensively with
major shareholders and shareholder bodies prior to proposing changes to the policy. The Committee also welcomes investor feedback and has
considered views raised at the AGM and at other times throughout the year. Ordinarily, there would have been a comprehensive engagement
process with our major shareholders and representative bodies ahead of seeking shareholder approval for a new policy at the 2022 AGM.
However, the likely acquisition by Apex meant that this engagement was not necessary.
Clarity – remuneration arrangements should be transparent
and promote effective engagement with shareholders and the
workforce.
Simplicity – remuneration structures should avoid complexity
and their rationale and operation should be easy to
understand.
Risk – remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks
that can arise from target-based incentive plans, are identified
and mitigated.
Predictability – the range of possible values of rewards to
individual directors and any other limits or discretions should
be identified and explained at the time of approving the policy.
Proportionality – the link between individual awards, the
delivery of strategy and the long-term performance of the
company should be clear. Outcomes should not reward poor
performance.
Alignment to culture –incentive schemes should drive
behaviours consistent with company purpose, values and
strategy.
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Governance Financial StatementsStrategic Report
Consideration of employment conditions elsewhere in the Group and engagement with the workforce during 2021
The Committee is aware of the potential disconnect which can be created if Executive Director remuneration is set in isolation and therefore is
updated during the year with details of the pay and employment conditions in the wider workforce. In particular, the Committee is made aware of
general salary increases, general benefit provision and the proposed level of annual bonuses. The Committee is also responsible for reviewing the
proposed participants of the PSP and other Group incentive plans. As part of the consideration of remuneration arrangements in connection with
the acquisition by Apex, the Committee considered the treatment of all employee remuneration arrangements, alongside those of senior
executives to ensure that there was a consistent approach taken.
The planned employee engagement on executive remuneration as part of the policy review did not take place due to the Apex acquisition.
Executive Directors’ service contracts
Date of appointment Expiry date of current service agreement or
(date of service contract) letter of appointment, or date of resignation
Executive Directors
James Ireland 1 July 2018 (23 January 2019) N/A (rolling six month notice period)
Martin Schnaier 23 January 2019 (1 July 2018) N/A (rolling six month notice period)
Chairman and Non-executive Directors
Contractual terms of the current Non-Executive Directors are set out below.
Non-executive directors are appointed for an initial term of approximately three years, until the conclusion of the Company's Annual General
Meeting (AGM) occurring approximately three years from the date of appointment. Non-executive directors are typically expected to serve two
three-year terms but may be invited by the Board to serve for an additional three year period. Any term renewal is subject to Board review and
re-election by the Company's shareholders at each AGM. It is intended that the Non-Executive Directors will step down on completion of the
acquisition by Apex.
Rupert Robson 2024 AGM, expiry date of current letter of
appointment
Nicola Palios 2024 AGM, expiry date of current letter of
appointment
Mel Carvill 2024 AGM, expiry date of current letter of
appointment
Julia Chapman 2024 AGM, expiry date of current letter of
appointment
Yves Stein 2024 AGM, expiry date of current letter of
appointment
Sophie O’Connor 2024 AGM, expiry date of current letter of
appointment
Fernando Fanton 2024 AGM, expiry date of current letter of
appointment
26 March 2015
Re-appointed 28 February 2018 and 19May
2021
26 March 2015
Re-appointed 3 May 2018 and
19 May 2021
1 January 2018
Re-appointed 19 May 2021
1 July 2018
Re-appointed 19 May 2021
1 October 2018
Re-appointed 19 May 2021
16 November 2020
5 January 2021
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Sanne Group plc Annual Report and Accounts 2021
51
TSR Performance graph
The graph below illustrates the Company’s TSR performance relative to the FTSE 250 Index since Admission. Performance is shown from the
Admission date of 1 April 2015 (using the 200p offer price as the base) to 31 December 2021. The graph shows the value of £100 invested in the
Company and £100 invested in the FTSE 250 index and their respective performance over that period.
Membership of the Remuneration Committee
The Committee is constituted in accordance with the recommendations of the UK Corporate Governance Code. The Committee is a committee of
the Board which determines the Group’s policy on the remuneration of the Executive Directors, the Chairman and other relevant members of senior
management. The Committee’s terms of reference can be found on the Company’s website, www.sannegroup.com. Membership and attendance
at the four scheduled
1
Committee meetings, together with further unscheduled meetings during the year, was as follows:
Eligible to Attended
Current Committee members attend during 2021
Nicola Palios (Chair of the Committee) 4 4
Julia Chapman 4 4
Fernando Fanton
2
4 4
Rupert Robson 4 4
1. In addition to the four scheduled meetings, the Committee met on five other occasions to discuss matters arising in the context of the acquisition of Sanne by Apex, and other ad hoc remuneration
matters.
2. Fernando Fanton was appointed as a Non-executive Director, and became a member of the Committee, on 5 January 2021.
None of the Committee has any personal financial interest (other than as a shareholder), conflicts of interest from cross-directorships or
day-to-day involvement in the running of the business.
The CFO and Chief Human Resources Officer are invited to attend meetings as appropriate. The Group Company Secretary acts as secretary to
the Committee. In addition, the Committee’s advisers, Korn Ferry, may be invited to attend.
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Remuneration Committee activities in 2021
The Committee’s activities, carried out during the year and subsequently, covered, but was not limited to, the following topics:
Strategy and Policy
• Confirmed that the remuneration policy remained appropriate for FY2021
Annual Salary
• Review of salaries for Executive Directors
Annual Bonus
• Review of executives’ personal objectives for FY2020 bonus
• Review of personal performance
• Determined FY2020 bonus outcomes
• Setting measures and targets, including appropriate non-financial metrics for FY2021 bonus
PSP
• Determined vesting levels for FY2018-20 award cycle
• Set measures and targets for FY2021-23 award
Reports from Advisers
• Briefings (including governance)
• Benchmark data and market practice
• Induction for new Committee members
Corporate Governance
• Regulatory updates
Actions in relation to the acquisition by Apex
• Consideration of the possible impact on the FY2021 annual bonus and assessment of performance against the financial and strategic
objectives. Discretion was ultimately used under the strategic objectives element of the annual bonus to determine that there should be a full
pay out, as described in the Chair’s Statement. The Committee also used discretion to determine that the full bonus payment should be in cash.
• Consideration of treatment of outstanding FY2020-22 and FY2021-23 PSP awards at the likely time of the acquisition in relation to the
assessment of the EPS and TSR performance conditions and the approach to other vesting terms in the PSP rules and policy
• Treatment of other deferred share awards held by employees
• Appropriate retention arrangements for key senior employees
• Approach to the triennial remuneration policy review
Advisers
Korn Ferry have advised the Committee since August 2018, when they were appointed by the Committee following a competitive tender process.
Korn Ferry are founder members of the Remuneration Consultants Group and adhere to the Code of Conduct in relation to executive remuneration
consulting in the UK.
In 2021, the fees paid to Korn Ferry in respect of remuneration advice amounted to £65,489 (2020: £69,080). Charges were based upon time spent
on the services and the seniority of staff performing the work.
For and on behalf of the Board.
Nicola Palios
Chair of the Remuneration Committee
31 March 2022
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53
Directors’ Responsibilities Statement
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law, the Directors have elected to
prepare the financial statements in
accordance with applicable law and
International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The financial statements are required by law
to give a true and fair view of the state of
affairs of the Group and of the profit or loss of
the Group for that period.
International Accounting Standard 1 requires
that financial statements present fairly for
each financial year the Group’s financial
position, financial performance and cash
flows. This requires the faithful representation
of the effects of transactions, other events
and conditions in accordance with the
definitions and recognition criteria for assets,
liabilities, income and expenses set out in the
International Accounting Standards Board’s
‘Framework for the preparation and
presentation of financial statements’. In
virtually all circumstances, a fair presentation
will be achieved by compliance with all
applicable IFRSs.
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;
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
company will continue the business; and
• state whether applicable accounting
standards have been followed, subject to
any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping
proper accounting records that disclose with
reasonable accuracy at any time the financial
position of the Group and enable them to
ensure that the financial statements comply
with the Companies (Jersey) Law 1991. They
are also responsible for safeguarding the
assets of the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
On 25 August 2021 the Group and Apex
announced a recommended all cash offer of
920p per share to be made by Apex for the
Group to be effected by means of a scheme of
arrangement under Article 125 of the Jersey
Companies Law (Scheme). Further, on
5October 2021, the Board announced that at
the Court Meeting and General Meeting, each
held in connection with the Scheme, the
requisite majority of Scheme and Sanne
Shareholders had voted in favour of the offer
by Apex. The Group’s existing committed debt
facilities contain a standard change of control
clause which, from the point of completion of
the acquisition, could result in the existing
committed debt facilities being withdrawn and
having not had direct visibility of Apex’s post
completion funding for the Group at this time,
this could create some uncertainty as to the
Group’s going concern position. Whilst the
Directors have not had direct visibility of
Apex’s post completion funding for the Group,
the Directors note the detailed intentions
statement included within the announcement
on the 25 August 2021 which states that Apex
intend to continue investing in and developing
the Group as well as the Group’s strong cash
generation. The Independent Auditor’s Report
included within the Group’s Annual Report and
Accounts for the year ended 31 December
2021 also highlights this material uncertainty.
Notwithstanding the uncertainty regarding
Apex’s post completion funding, the Directors
are satisfied that the going concern basis
remains appropriate for the preparation of the
financial statements. For further details on the
financial impact of the transaction, see note 7
of the financial statements.
The Annual Report and Accounts, taken as a
whole, are fair and balanced and
understandable and provide the information
necessary for Shareholders to assess the
Company’s position, performance, business
model and strategy.
The Directors confirm that they have complied
with the above in preparing these financial
statements.
So far as the Directors are aware, there is no
relevant audit information of which the
Company’s auditors are unaware, and each
Director has taken all the steps that he or she
ought to have taken as a director in order to
make himself or herself aware of any relevant
audit information and to establish that the
Company’s auditors are aware of that
information.
Statement as a result of the Disclosure and
Transparency Rules of the Financial Conduct
Authority:
We confirm that to the best of our 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 of the parent Company
and its undertakings included in the
consolidation taken as a whole; and
• the Strategic Report and Directors’ Report
include a fair view of the development and
performance of the business and the
position of the Company and the
undertakings included in the consolidation
taken as a whole, together with a
description of the principal risks and
uncertainties that they face.
This responsibility statement has been
approved by the Board of Directors of Sanne
Group plc on 31 March 2022 and is signed on
its behalf by:
Martin Schnaier
Chief Executive Officer
31 March 2022
James Ireland
Chief Financial Officer
31 March 2022
The Directors are responsible for keeping proper accounting records that disclose, with
reasonable accuracy, at any time, the financial position of the Company. The Directors are
responsible for preparing the financial statements in accordance with applicable law and
regulations.
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Governance Financial StatementsStrategic Report
Independent Auditors’ Report
to the members of Sanne Group plc
Report on the audit of the financial statements
Opinion
In our opinion, Sanne Group plc’s group financial statements:
• give a true and fair view of the state of the group’s affairs as at 31 December 2021 and of its loss and cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included within the Annual Report, which comprise: Consolidated Balance Sheet as at 31 December
2021; the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement and the
Consolidated Statement of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes Financial Reporting Council’s (“FRC”) Ethical Standard, as applicable to listed public interest entities in accordance with the
requirements of the Crown Dependencies’ Audit Rules and Guidance for market-traded companies, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in the Audit Committee Report, we have provided no non-audit services to the company or its controlled undertakings
in the period under audit.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 3 to the
financial statements concerning the group’s ability to continue as a going concern. On 25 August 2021 the Board of directors of Sanne Group plc
(“Sanne” or “the group”) and the Board of directors of Apex Acquisition Company Limited (an indirect wholly-owned subsidiary of Apex Group Ltd)
(collectively referred to as “Apex”) announced that they have reached agreement on the terms and conditions of a recommended all cash offer for
the group. The directors have not had detailed visibility of Apex’s post completion funding for the group, including the terms on which such funding
will be provided, or the detailed plans behind the intentions statements included within the announcement. These conditions, along with the other
matters explained in note 3 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the
group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group were unable
to continue as a going concern.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included:
• We obtained management’s latest forecasts that support the Board’s assessment and conclusions with respect to the going concern basis of
preparation of the financial statements.
• We checked the mathematical accuracy of management’s forecasts.
• We corroborated management’s base case to appropriate supporting documentation.
• We evaluated management’s base case forecast and downside scenarios, challenging the underlying data and adequacy and appropriateness
of the underlying assumptions used to make the assessment. We evaluated the directors’ plans for future actions in relation to their going
concern assessment, should these be required.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, other than the material uncertainty identified in
note 3 to the financial statements, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to adopt the going concern basis of accounting, or in respect of the directors’
identification in the financial statements of any other material uncertainties to the group’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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Sanne Group plc Annual Report and Accounts 2021
55
Our audit approach
Context
Sanne Group plc is a FTSE listed company on the London Stock Exchange. Sanne’s business comprises the delivery of fund administration and
fiduciary trust and related services principally to institutional markets. Sanne operates in a number of overseas territories, in particular Jersey,
South Africa, Mauritius, Luxembourg and the United States of America.
Overview
Audit scope
• We performed an audit of the complete financial information of 4 financially significant components’ profit before tax across a number of
jurisdictions, as each represents more than 15% of absolute profit before tax.
• We also performed audit procedures on selected other balances, components, the group consolidation adjustments and the financial
statement disclosures.
• Taken together, our audit work accounted for more than 80% coverage over turnover, more than 70% coverage over direct costs and operating
expenses and more than 80% coverage over the consolidated results of the group.
Key audit matters
• Material uncertainty related to going concern
• Revenue recognition
• Impairment of goodwill and intangible assets
• Accounting for business combinations
• Share based payment expense
Materiality
• Overall materiality: £1.2 million (2020: £1.0 million) based on 5% of adjusted profit before tax. We adjusted loss before tax for the share based
payments accelerated vesting of £3.8 million and costs related to the Apex transaction of £21.7 million.
• Performance materiality: £0.9 million (2020: £0.8 million).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described
below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.
Share based payment expense is a new key audit matter this year. The “Impact of COVID-19”, which was a key audit matter last year, is no longer
included because the degree of uncertainty brought about by COVID-19, affecting key assumptions in the group’s future business performance
and the wider economic conditions, was not significant to our audit as at 31 December 2021. Otherwise, the key audit matters below are
consistent with last year.
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Governance Financial StatementsStrategic Report
Key audit matter How our audit addressed the key audit matter
Revenue recognition
Refer to the Audit Committee Report, Note 3: Significant accounting policies
and Note 6: Revenue
Auditing standards state that there is a rebuttable presumption that the
auditor will identify the risk of fraud in revenue recognition as a
significant risk. We have identified three main revenue streams, being
fixed, time and Net Asset Value (‘NAV’) based fees.
Due to the significant audit effort required as a result of the various
revenue streams and number of contracts held across the group and the
significance of the revenue balance to the Consolidated financial results,
the risk has not been rebutted and we have assessed revenue to be a key
audit matter.
We understood and evaluated management’s internal controls over
fixed, time and NAV based fees, including reviewing the receivables
cycle, time capturing,the work-in-progress cycle and controls
surrounding time recording, NAV based fees and fixed fees to identify
key controls. We evaluated the design and tested the operating
effectiveness of management’s key internal controls over fixed and time
based fee revenue streams. We also understood and evaluated the IT
systems in place that support revenue and billing in the
business,utilising our IT specialists. Where appropriate, we
supplemented our work with additional substantive procedures to
compensate for control deficiencies identified. We performed the
following procedures over revenue:
• Utilised data auditing techniques for certain jurisdictions to ensure
that revenue from fixed and time based fees was recognised in
accordance with the accounting policies and relevant frameworks.
For a sample of fixed and time based fee revenue, we agreed
sampled revenue transactions to the relevant supporting
documentation and client contracts;
• We recalculated NAV based fees, on a sample basis, and agreed
inputs to supporting documentation, including NAV reports and
relevant agreements. We reviewed the group’s oversight
procedures over NAV valuations by obtaining relevant audit
evidence. We performed retrospective review and considered the
historical accuracy of the Sanne Group’s prior year NAV estimates
by comparing a sample of NAVs to audited information;
• Reviewed management’s models for compliance with International
Financial Reporting Standards (‘IFRS’), including the assumptions
therein; and
• Performed substantive testing over credit notes issued after year
end and assessed whether they related to the current financial year.
No material issues were identified.
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Sanne Group plc Annual Report and Accounts 2021
57
Key audit matter How our audit addressed the key audit matter
Goodwill
Our audit procedures on the discounted cash flow models used by
management in determining the value in use of these assets, included:
• Testing the projected cash flows used in the discounted cash flow
models to determine whether they are reasonable and supportable
given the current macroeconomic climate and expected future
performance of the CGU;
• Comparing the projected cash flows for the next financial period
with the latest approved budgets for consistency;
• Comparing the projected cash flows against historical
performance;
• Testing the mathematical accuracy of the discounted cash flow
model;
• Comparing the risk-free rate, discount rates and weighted average
cost of capital used by management in their discounted cash flows
(as disclosed in Note 16 to the consolidated financial statements)
to our internally developed benchmarks, with the assistance of our
valuation experts;
• Performing sensitivity analysis to determine which key
assumptions are the most sensitive. We identified that the
valuation was most sensitive to the key assumptions around
revenue growth rates, cost margins and discount rates;
• Performing sensitivity analysis to determine the extent to which a
reduction in these key assumptions, both individually or in
aggregate, would result in goodwill impairment, and considered the
likelihood of such events occurring; and
• Confirmed that management performed climate change sensitivity
modelling for selected CGUs identified as low-lying island territories
most likely impacted by climate change.
We concluded that no impairment was required for the year ended 31
December 2021.
We also considered the adequacy of the disclosure in the financial
statements of the impairment assessment of goodwill.
Impairment of goodwill and intangible assets
Goodwill Refer to the Audit Committee Report, Note 3: Significant accounting
policies, Note 4: Critical accounting judgements and key sources of estimation
uncertainty and Note 16: Goodwill
In previous years and during the current year there have been a number of
acquisitions by the group resulting in a goodwill balance of £269.2 million
(2020: £188.5 million) relating to 18 (2020: 10) cash generating units as at the
year-end.
An annual impairment assessment for goodwill was performed by
management, as required by IAS 36, including consideration of COVID-19.
Management uses an income approach (discounted cash flow model) to
determine the value in use of each cash generating unit (CGU) to which
goodwill is allocated.
The annual impairment assessment performed by management was
considered a matter of significance to our current year audit due to the
complexity of the assessment process and significant judgements applied by
management when determining the assumptions included in the discounted
cash flow models.
The performance of financial markets and the general economic conditions in
the geographical region and division within which a particular CGU operates
are determining factors in the recoverability of the asset value. Management
also makes use of assumptions regarding the revenue growth rates (including
the terminal growth rate), cost margins and the risk-free rate and discount
rates, including the weighted average cost of capital in the discounted cash
flow models.
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Key audit matter How our audit addressed the key audit matter
Intangible assets
Value in use was determined by management using discounted cash
flow models. The models make use of the following key assumptions:
projected contract revenue after attrition, revenue growth rates, cost
margins, discount rates and risk-free rates. We performed the following
testing on the value in use calculations:
• Comparing the projected contract revenue for the next financial
period against historical performance, adjusted for contracted
clients that have been lost during the year;
• Assessing the reasonability of the 5% general attrition rate used in
the model for the remaining forecast period by comparing the
actual contract revenue of the immediate past financial period to
the projected contract revenue for the same period as per the ‘at
acquisition purchase price’ allocation calculation;
• Assessing the reasonability of the cost margins used in the model
by comparing these against historical performance;
• Testing the mathematical accuracy of the model;
• Comparing the risk-free rate and discount rates used by
management in their model to our internally developed
benchmarks, with the assistance of our valuation experts;
• Performing sensitivity analysis to determine the extent to which a
reduction in key assumptions, both individually or in aggregate,
would result in impairment, and considered the likelihood of such
events occurring; and
• The projected revenue growth rate was tested to determine
whether they are reasonable and supportable given the current
macroeconomic climate and expected future performance of the
contracts. We found the growth rate used by management to be
comparable to the independently established rates after allowing
for the expected future outlook.
No material issues were identified.
Intangible assets Refer to the Audit Committee Report, Note 3: Significant
accounting policies, Note 4: Critical accounting judgements and key sources of
estimation uncertainty and Note 17: Other intangible assets
The group has recognised contract and customer intangible assets
amounting to £35.2 million (2020: £29.0 million) and £8.1 million (2020:
£6.6million) respectively. These contract and customer intangibles were
acquired as part of past business combinations, as well as from acquisitions
during the year.
An annual assessment for impairment indicators was performed by
management where there was objective evidence of impairment, as required
by IAS 36, which included consideration of COVID-19. The following intangible
assets showed indicators of impairment: Delorean, CCS, AgenSynd Group,
DTC (Sanne Japan) and Sanne Sweden.
For these contract intangible assets with impairment indicators, management
determined the recoverable amount based on the value in use of the assets in
order to assess whether this was lower than the carrying value and whether
an impairment would be required. Using this valuation, the recoverable
amount was determined to be higher than the carrying amount and therefore
management determined that no impairment was required.
The impairment assessments performed by management were considered a
matter of significance to our current year audit due to the complexity of the
assessment process and significant judgements applied by management
when determining assumptions such as: projected contract revenue after
attrition, revenue growth rates, cost margins, discount rates and
risk-freerates.
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59
Key audit matter How our audit addressed the key audit matter
We obtained and reviewed management’s key accounting analysis
papers and purchase agreements relating to the acquisitions and
assessed for compliance with IFRS, including the assumptions therein.
We obtained and tested the mathematical accuracy of management’s
calculations relating to the accounting for business combinations.
Our audit procedures on the valuation of the fair value of consideration
transferred included:
• Agreeing consideration paid in cash to bank statements;
• Testing completeness of the consideration by reviewing the
purchase agreements;
• In respect of issuance of equity instruments, confirming the share
price with independent sources and, with the assistance of our
valuation experts, evaluating the reasonability of the discount rate
applied by management.
Our audit procedures on the fair value of the net assets acquired
included:
In relation to intangible assets acquired;
• With the assistance of our valuation experts, evaluating the
appropriateness of the valuation models applied by management;
• Comparing the projected contract revenue for the next financial
period against historical performance, adjusted for contracted
clients that have been lost during the year;
• Comparing the risk-free rate and discount rates used by
management in their model to our internally developed
benchmarks, with the assistance of our valuation experts. Our
internal benchmarks were determined using our view of various
economic indicators. We found that the risk-free rate and discount
rates applied by management were comparable with our internally
developed benchmarks;
• Assessing the cost margins used in the valuation model by
comparing against the historical performance of each respective
acquired business; and
• Evaluating the reasonability of the attrition rate by comparing the
historical contract revenue to the forecasted contract revenue used
in the model. We also assessed the adequacy of the disclosures
related to business combinations in the consolidated financial
statements.
In relation to other net assets acquired;
• Obtaining appropriate supporting evidence, for example, bank
confirmations in relation to cash balances acquired.
No material issues were identified.
Accounting for business combinations
Refer to the Audit Committee Report, Note 3: Significant accounting policies,
Note 4: Critical accounting judgements and key sources of estimation
uncertainty, Note 16: Goodwill, Note 17: Other intangible assets and Note 35:
Business combinations
During the year Sanne completed three acquisitions with a combined total
consideration of £114.5 million, including £12.7 million of contingent
consideration and £15.2 million of issuance of equity instruments. Acquired
intangibles recognised in these transactions totalled £110.5 million, with
goodwill totalling £85.5 million being recognised.
Management determined the fair value of consideration transferred and the
net assets acquired as required by International Financial Reporting
Standards (“IFRS”) 3.
Due to the level of judgement applied by management in determining the
valuation of the assets acquired and the consideration paid, including
contingent consideration, and the significance of the goodwill and intangible
assets balances recognised through business combinations to the Sanne
Group’s financial statements, we have determined this as a key audit matter.
Significant judgements applied by management when determining
assumptions include: projected contract revenue,attrition rate, discount rate
and cost margins.
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Key audit matter How our audit addressed the key audit matter
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the group, the accounting processes and controls, and the industry in which it operates.
The group is structured on a jurisdictional basis, with significant components identified in Luxembourg, Mauritius and the United States of
America, and with significant centralised group processes and accounting functions operating out of Jersey and South Africa.
For the four significant components identified, we have instructed component auditors to perform an audit of the complete financial information of
the component, including profit before tax and taxation balances, as appropriate. We have also scoped in additional components that did not meet
the significant component threshold, with either an audit of complete financial information of the component, including the profit before tax and
taxation balances, as appropriate, or testing specific financial statement line items to obtain the required coverage over the group financial
statements. We have also tested centralised group processes performed in Jersey and South Africa to obtain further coverage of financial
statement line items.
As the group audit team, we determined the level of involvement required at those components to be able to conclude whether sufficient and
appropriate audit evidence had been obtained as a basis for our opinion on the financial statements as a whole. In our role as group auditors we
exercised oversight over the work performed by auditors of the components including performing the following procedures:
• Maintained an active dialogue with reporting component audit teams, including regular group wide audit team conference/video calls and
specific conference/video calls for each reporting territory covering scope, status and results prior to inter-office reporting; and
• Video conferencing and/or remote audit workpaper reviews, to satisfy ourselves as to the sufficiency of audit work performed at the
significant and additional components.
Based on the scoping procedures and detailed audit work performed across the group, we have obtained sufficient comfort across the individual
account balances within the group financial statements, obtaining more than 80% coverage over turnover, more than 70% of direct costs and
operating expenses and more than 80% coverage over the consolidated results of the group.
We understood and evaluated the control environment in place over the
share based payment expense and performed the following to address
the risks identified for each type of share based payment transaction:
• Obtained calculations, including those of the accelerated expense,
and tested that these were in line with the terms of the individual
scheme and consistent with the accounting records.
• Obtained and reviewed supporting documentation for new grants
and modifications to the schemes.
• Tested the valuation of new awards made in the year, using our
internal experts to assist in assessing the reasonableness of
assumptions.
• Reviewed the reasonableness of estimates in relation to the vesting
period, performance conditions, leaver rates and market conditions,
including appropriate consideration of the potential acquisition.
• Obtained details of all outstanding awards and tested that the
charge is spread in accordance with the vesting period.
• Obtained detailed listings of awards, exercises/forfeitures at an
employee level and reconciled these listings to the movement
schedule. On a sample basis, we vouched these to supporting
documentation.
• Obtained and reviewed detailed calculations of social security costs
for the year.
No material issues were identified.
Share based payment expense
Refer to the Audit Committee Report, Remuneration Report, Note 3: Significant
accounting policies, Note 4: Critical accounting judgements and key sources of
estimation uncertainty, Note 34: Share based payments
Accounting for share based payments is complex due to the judgemental
nature of the valuation of the award, the use of assumptions (such as
performance obligations and leaver rates) and market conditions.
The likelihood of an error occurring is driven by a number of factors such as
the complexity of the schemes, the number of schemes in operation, the
required record keeping and calculations being manually produced using
spreadsheets.
We consider this to be a key audit matter for the year ended 31 December
2021 because of the above factors and because of the acceleration of the
share based payment expense, due to the change in vesting period as a result
of the transaction with Apex increasing the quantum of the expense in
theyear.
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61
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality £1.2 million (2020: £1.0 million).
How we determined it 5% of adjusted profit before tax. We adjusted loss before tax for share based payments
accelerated vesting of £3.8 million and costs related to the Apex transaction of £21.7 million.
Rationale for benchmark applied In determining our materiality, we considered financial metrics which we believed to be relevant
to the users of the financial statements, and concluded that the group adjusted profit before
tax, after adding back costs related to the Apex transaction and related accelerated share-based
payment expense to profit, were the most appropriate. In arriving at this benchmark, we believe
we have used a metric that is reflective of the on-going, underlying business of the group,
adjusting for items which are considered exceptional, or one-off, due to their nature, while still
providing an appropriate threshold for a robust audit.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was £56,000 and £1,000,000. Certain components were audited to a local statutory audit materiality that
was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2020: 75%) of overall materiality, amounting to £0.9 million (2020: £0.8 million) for the group financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £58,000 (2020: £51,000) as
well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures
(TCFD) recommendations. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an
audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement
is materially consistent with the financial statements and our knowledge obtained during the audit, and, except for the matters reported in the
section headed ‘Material uncertainty related to going concern’, we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
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• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the group’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is
appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with
the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements
and our knowledge and understanding of the group and its environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements in
accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to
regulatory principles in the jurisdictions in which Sanne Group plc operates, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements
such as Companies (Jersey) Law 1991. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journals to
increase revenue, and management bias in accounting estimates and judgemental areas of the financial statements such as the accounting for
business combinations, impairment of goodwill and intangible assets and share based payments, as described in our key audit matters. The group
engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response
to such risks in their work. Audit procedures performed by the group engagement team and/or component auditorsincluded:
• Discussions with group and local management, including Internal Audit, Risk, Compliance and, where relevant, General Counsel, including
consideration of known or suspected instances of non-compliance with laws and regulations and fraud impacting the group and/or the
component;
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• Reviewing governance committee minutes for the plc Board, Audit Committee, Risk Committee and local Board meetings;
• Assessing executive and finance management remuneration structures and how closely relevant financial metric thresholds have been met (or
not met) and how bias could therefore have occurred;
• Assessment of any matters reported through the group’s whistleblowing arrangements and the results of the investigation of such matters;
• Reviewing correspondence with regulators in relation to compliance with laws and regulations;
• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
• Procedures relating to judgemental areas of accounting and significant estimation, including as described in the related key audit matters; and
• Identifying and testing journal entries, in particular any journal entries posted by key decision makers of the business, journal entries posted by
unexpected users who were outside of the finance team or administrative and accounting teams, as well as journal entries containing unusual
account descriptions and journal entries posted with unusual account combinations, specifically in relation to revenue.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target
particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Article 113A of the
Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent
in writing.
Other required reporting
Companies (Jersey) Law 1991 exception reporting
Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• proper accounting records have not been kept by the company, or proper returns adequate for our audit have not been received from branches
not visited by us.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 1 August 2019 to audit the financial statements for
the year ended 31 December 2019 and subsequent financial periods. The period of total uninterrupted engagement is 3 years, covering the years
ended 31 December 2019 to 31 December 2021.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
Jeremy Jensen
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognized Auditor
London
31 March 2022
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64
Consolidated Income Statement
For the year ended 31 December 2021
2021 2020
Note £'000 £'000
Turnover 6 203,726 174,874
Third-party fund management fees (9,568 ) (5,186 )
Net revenue
1
Direct costs
1
(82,778 ) (69,138 )
Gross profit 111,380 100,550
Other operating income 238 151
Operating expenses (108,154 ) (76,760 )
Operating profi t 3,464 23,941
Comprising:
Underlying operating profit from continuing operations 7 54,239 48,036
Non-underlying items within operating profit from continuing operations 7 (50,775 ) (24,095 )
Other (losses)/gains (259 ) 804
Finance costs 8 (5,429 ) (4,324 )
Finance income 9 61 108
Share of net loss of associate 21 (76 ) –
(Loss)/Profit before tax (2,239 ) 20,529
Comprising:
Underlying profit before tax from continuing operations 7 50,555 44,877
Non-underlying items within (loss)/profit before tax from continuing operations 7 (52,794 ) (24,348 )
(2,239 ) 20,529
Tax 10 (4,855 ) (4,362 )
(Loss)/Profit after tax from continuing operations (7,094 ) 16,167
Discontinued operations 11 – 8,679
(Loss)/Profit for the year (7,094 ) 24,846
Comprising:
Underlying profit for the year 7 42,193 37,992
Non-underlying items within (loss)/profit for the year 7 (49,287 ) (13,146 )
(7,094 ) 24,846
Earnings per ordinary share ("EPS") from continuing operations
(expressed in pence per ordinary share)
Basic 12 (4.5 ) 11.1
Diluted 12 (4.4 ) 11.1
Underlying basic 12 26.8 25.5
Underlying diluted 12 26.6 25.4
1 Net Revenue comprises revenue less third-party fund management fees. Direct costs comprise direct costs of £92.3 million (2020: £74.3 million) less third-party fund management fees of £9.6 million
(2020: £5.2 million).
The notes are an integral part of these Consolidated Financial Statements.
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Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Note £'000 £'000
(Loss)/Profit for the year (7,094 ) 24,846
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit retirement obligation 35 782 (419 )
Income tax relating to items not reclassified 10 (115 ) 95
Revaluation and exchange rate differences of equity investments 20 10,103 (234 )
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
1
(6,572 ) (830 )
Total other comprehensive income/(expense) for the year 4,198 (1,388 )
Total comprehensive (expense)/income for the year (2,896 ) 23,458
Comprising:
Total comprehensive (expense)/income for the year from continuing operations (2,896 ) 14,779
Total comprehensive income for the year from discontinued operations – 8,679
Total comprehensive (expense)/income for the year (2,896 ) 23,458
1 Refer to the “Financial review" section for further information relating to the movement in the exchange differences on translation of foreign operations.
The notes are an integral part of these Consolidated Financial Statements.
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Consolidated Balance Sheet
As at 31 December 2021
2021 2020
Note £'000 £'000
Assets
Non-current assets
Goodwill 16 269,178 188,478
Other intangible assets 17 47,476 38,160
Equipment 18 8,445 8,971
Minority equity investment 20 209 8,765
Investment in associate 21 1,035 –
Financial asset at amortised cost 22 – 830
Right-of-use asset 23 40,632 33,724
Contract assets 25 124 66
Deferred tax asset 30 14,389 9,008
Total non-current assets 381,488 288,002
Current assets
Trade and other receivables 24 71,187 53,713
Cash and cash equivalents 48,070 57,119
Cash and cash equivalents in escrow 5,500 –
Contract assets 25 12,544 8,244
Total current assets 137,301 119,076
Total assets 518,789 407,078
Equity
Share capital 27 1,623 1,474
Share premium 27 299,234 207,190
Own shares 28 (443 ) (562 )
Shares to be issued 34 9,754 3,006
Retranslation reserve (20,536 ) (13,964 )
Accumulated losses (29,928 ) (18,751 )
Total equity 259,704 178,393
Non-current liabilities
Borrowings 29 – 133,549
Deferred tax liabilities 30 19,088 15,165
Provisions 31 3,247 2,936
Defined benefit retirement obligation 35 414 1,086
Lease liability 23 40,446 34,405
Total non-current liabilities 63,195 187,141
Current liabilities
Borrowings 29 99,444 –
Trade and other payables 32 55,876 15,059
Current tax liabilities 3,535 2,661
Provisions 31 579 359
Contract liabilities 33 30,634 18,542
Lease liability 23 5,822 4,923
Total current liabilities 195,890 41,544
Total equity and liabilities 518,789 407,078
The financial statements were approved by the Board of Directors on 31 March 2022 and signed on its behalf by:
Martin Schnaier James Ireland
Chief Executive Officer Chief Financial Officer
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share Share Own Shares to Retranslation Accumulated Total
capital premium shares be issued reserve Losses Equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2020 1,466 203,423 (1,166 ) 7,723 (13,134 ) (26,487 ) 171,825
Profit for the year – – – – – 24,846 24,846
Other comprehensive expense
for the year
Actuarial loss on the defined
benefit retirement obligation – – – – – (419 ) (419 )
Income tax relating to items
not reclassified – – – – – 95 95
Revaluation and exchange
rate differences of
equity investments – – – – – (234 ) (234 )
Exchange differences on
translation of foreign operations – – – – (830 ) – (830 )
Total comprehensive income
for the year – – – – (830 ) 24,288 23,458
Issue of share
capital - acquisitions 27, 34 8 3,767 – (3,096 ) – – 679
Dividend payments 15 – – – – – (20,583 ) (20,583 )
Share-based payments 34 – – – 2,978 – – 2,978
Shares vested 34 – – 638 (4,599 ) – 4,031 70
Net buyback of own shares – – (34 ) – – – (34 )
Balance at 31 December 2020 1,474 207,190 (562 ) 3,006 (13,964 ) (18,751 ) 178,393
Loss for the year – – – – – (7,094 ) (7,094 )
Other comprehensive income/
(expense) for the year
Actuarial gain on defined
benefit retirement obligation – – – – – 782 782
Income tax relating to items
not reclassified – – – – – (115 ) (115 )
Revaluation and exchange
rate differences of
equity investments – – – – – 10,103 10,103
Exchange differences on
translation of foreign operations – – – – (6,572 ) – (6,572 )
Total comprehensive expense
for the year – – – – (6,572 ) 3,676 (2,896 )
Issue of share
capital - acquisitions 27 25 15,172 – – – – 15,197
Issue of share capital 27 124 76,872 – – – – 76,996
Dividend payments 15 – – – – – (15,994 ) (15,994 )
Share-based payments 34 – – – 7,973 – – 7,973
Shares vested 34 – – 157 (1,225 ) – 1,141 73
Net buyback of own shares – – (38 ) – – – (38 )
Balance at 31 December 2021 1,623 299,234 (443 ) 9,754 (20,536 ) (29,928 ) 259,704
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Governance Financial StatementsStrategic Report
Sanne Group plc Annual Report and Accounts 2021
68
Consolidated Cash Flow Statement
For the year ended 31 December 2021
2021 2020
Note £'000 £'000
Operating profi t from:
Continuing operations 3,464 23,941
Discontinued operations – 8,783
Operating profi t including discontinued operations 3,464 32,724
Adjustments for:
Depreciation of equipment 18 2,269 2,869
Depreciation of right-of-use asset 23 6,499 5,795
Lease liability interest 23 (1,644 ) (1,530 )
Amortisation of other intangible assets 13 16,436 15,677
Amortisation of developed software 13 499 –
Amortisation of contract assets 25 16 10
Impairment of right-of-use asset 23 – 497
Lease liability extinguishment 23 (144 ) –
Share-based payments expense 34 8,563 2,978
Disposal of equipment 69 175
Decrease in provisions (9 ) –
Impairment loss recognised on trade receivables 24 583 1,458
Defined benefit retirement obligation 35 106 5
Gain on disposal of discontinued operations 11 – (7,748 )
Gain on bargain purchase 36 (13 ) (38 )
Deferred consideration and remuneration (252 ) (3,153 )
Costs related to the Apex transaction 7 21,708 –
Operating cash flows before movements in working capital 58,150 49,719
Increase in receivables (20,964 ) (5,750 )
Increase in contract liabilities 12,352 292
Increase in payables (1,738 ) 2,738
Cash generated from operations 47,800 46,999
Income taxes paid (8,525 ) (7,557 )
Net cash generated from operating activities 39,275 39,442
Investing activities
Interest income on bank deposits 9 51 98
Purchases of equipment 18 (1,744 ) (1,954 )
Software development costs paid 17 (2,038 ) (2,322 )
Acquisition of subsidiaries 36 (79,918 ) (11,699 )
Acquisition of minority equity investment 20 – (387 )
Proceeds from sale of minority equity investment 20 18,492 –
Acquisition of investment in associate 21 (720 ) –
Proceeds from disposal of discontinued operations 11 – 8,638
Financial assets at amortised cost granted 22 – (820 )
Proceeds from financial assets at amortised cost settled 22 840 –
Net cash used in investing activities (65,037 ) (8,446 )
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69
Consolidated Cash Flow Statement continued
For the year ended 31 December 2021
2021 2020
Note £'000 £'000
Financing activities
Dividend payments 15 (15,994 ) (20,583 )
Issue of share capital and share premium 27 76,996 –
Bank loan interest 8 (2,178 ) (2,632 )
Net buyback of own shares (38 ) (34 )
Shares vested (6 ) (8 )
Capitalised loan cost 29 (1,580 ) (29 )
Redemption of bank loans 29 (262,484 ) (12,302 )
New bank loans raised 29 229,186 14,821
Lease liability payments (5,720 ) (5,006 )
Net cash generated from/(used in) financing activities 18,182 (25,773 )
Net (decrease)/increase in cash and cash equivalents (7,580 ) 5,223
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes (1,469 ) 442
Cash and cash equivalents at the end of the period 48,070 57,119
Cash flows fr
om continuing oper
ations (7,580 )
(5,836 )
Cash flows from discontinued operations 11 – 11,059
Net (decrease)/increase in cash and cash equivalents (7,580 ) 5,223
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Sanne Group plc Annual Report and Accounts 2021
70
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
Governance Financial StatementsStrategic Report
1. General information
Listing on the London Stock Exchange. The registered office and principal place of business is IFC 5, St Helier, Jersey JE1 1ST . The principal activity
In the opinion of the Directors there is no ultimate controlling party.
These consolidated financial statements are presented in Pounds Sterling. Foreign operations are included in accordance with the policies set out in
note 3. The financial information set out in this announcement does not constitute the Group's annual report and accounts for the year ended 31
December 2021 but is derived from those report and accounts. The external auditor has reported on those report and accounts; their report was
unqualified but does highlight a material uncertainty arising from the impending Acquisition of the Group by Apex in relation to going concern. This
is discussed in more detail in the going concern paragraphs below.
The accounting policies have been applied consistently in the current and prior year, other than as set out below.
2. Adoption of new and revised Standards
Standards in issue not yet effective
Certain new accounting standards and interpretations have been published, that are not yet effective for 31 December 2021 reporting periods and
have not been early adopted by the Group. These standards, listed below, are not expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
(a) Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
(b) Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts — Cost of Fulfilling a Contract
(c) Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework
(d) Annual Improvements to IFRS Standards 2018–2020
New and revised standards effective for the year
In the current year, the Group applied a number of amendments to IFRSs and new interpretations issued by the International Accounting Standards
Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2021. Their adoption has not had any material
impact on the disclosures or on the amounts reported in these consolidated financial statements. The most significant of these standards are set
out below.
(a) COVID-19-related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) – Applicable to annual reporting periods beginning on or
after 1 April 2021
(b) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) – Applicable to annual reporting periods
beginning on or after 1 January 2021. (Refer to note 29 for further detail on the application)
(c) Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 19
3. Significant accounting policies
Basis of accounting
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. The consolidated financial statements have also been prepared in accordance
with IFRS as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee
("IFRS IC") to the extent that such standards have been endorsed by the European Union.
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial assets measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The principal accounting policies
adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) during each year. Control is achieved where the Company:
• has the power over the investee;
• is exposed, or has rights, to variable return from its involvement with the investee; and
• has the ability to use its power to affect its returns.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
3. Significant accounting policies continued
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income when the
Company obtains control over the subsidiary and ceases when the Company loses control over the subsidiary. Where necessary, adjustments are
made to the financial results of the subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
Under Article 105(11) of the Companies (Jersey) Law 1991, the Directors of a holding company need not prepare separate financial statements
(i.e.Company only financial statements). Company only financial statements for the Company are not prepared unless required to do so by the
members of the Company by ordinary resolution. The members of the Company had not passed a resolution requiring separate financial
statements and, in the Directors' opinion, the Company meets the definition of a holding company. As permitted by law, the Directors have elected
not to prepare separate financial statements.
Going concern
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the next
12months from the date of approval of these consolidated financial statements. The Directors have reviewed the Group’s financial projections and
cash flow forecasts and believe, based on those projections and forecasts, that it is appropriate to prepare the consolidated financial statements of
the Group on the going concern basis. The Directors have assessed the potential impact that the COVID-19 pandemic may have on its ability to
continue as a going concern. The assessment gave the Directors reasonable reassurance that the Group will be able to continue as a going concern.
The Group has healthy cash inflows through a good pipeline of existing and new clients; the Group also has sufficient finance facilities available if
required. The assessment included an analysis of the Group's current financial position, ability to trade, principal risks facing the Group, and the
effectiveness of its strategies to mitigate the impact of liquidity risks. This was all assessed considering the impact that COVID-19 has had on global
markets and based on this assessment the Group has prepared the financial statements on a going concern basis.
On 25 August 2021, the Board of Directors of Sanne Group plc and the Board of Directors of Apex Acquisition Company Limited (an indirect wholly-
owned subsidiary of Apex Group Ltd) (collectively referred to as “Apex”) announced a recommended all-cash offer of 920p per share to be made by
Apex for the Company's issued share capital. The Group’s existing committed debt facilities contain a standard change of control clause which,
upon completion of the acquisition, could result in the existing committed debt facilities being withdrawn. The Group does not have visibility of
Apex’s post completion funding for the Group at this time. Therefore, this could create some uncertainty as to the Group’s going concern position.
Whilst the Directors have not had direct visibility of Apex’s post completion funding for the Group, including the terms on which such funding will be
provided, the Directors note the detailed intentions statement included within the announcement on 25August 2021 which states that Apex intend
to continue investing in and developing the Group and highlights the Group’s current strong cash generation and cash generating potential. Under
International Accounting Standard 1 and the International Standard on Auditing (UK) 570 (Revised) the announcement of the acquisition qualifies as
a material uncertainty that may cast significant doubt upon the Group’s ability to continue as a going concern. The Independent Auditor’s Report
included within the Group’s Annual Report and Accounts for the year ended 31 December 2021 also highlights this material uncertainty. Therefore,
notwithstanding the material uncertainty post completion of the acquisition, the Directors are satisfied that the going concern basis remains
appropriate for the preparation of the financial statements. The financial statements do not include the adjustments that would result if the Group
were unable to continue as a going concern.
Further detail is contained in the viability statement included in the Audit Committee report of the Group’s Annual Report and Accounts for the year
ended 31 December 2021.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of assets transferred by the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred and as non-underlying items within operating expenses.
The acquiree’s identifiable assets and liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the
acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the
fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable
assets acquired and the liabilities assumed.
When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a
business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional
information obtained during the "measurement period" (which cannot exceed one year from the acquisition date) concerning facts and
circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments
depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent
reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured at subsequent reporting dates at fair value with the corresponding gain or loss being recognised in profit or loss, as non-underlying
items within operating expenses.
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Governance Financial StatementsStrategic Report
3. Significant accounting policies continued
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually, or if indicators of impairment are identified. For the purpose of
impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Refer to note 16.
Other intangible assets
Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as the cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any
impairment losses.
The Group performs assessments at the end of each reporting period, in order to identify any possible indicators of impairment. This is a separate
assessment from the annual goodwill impairment review. Should there be any indicators of impairment, the Group estimates the recoverable
amount of the asset and if an impairment should be recognised.
Contract intangibles
Contract intangibles consist of the recognition of the legal relationships gained through acquisition. On initial recognition, the values are determined
by relevant factors such as business product life cycles, length of notice, ease of movement and general attrition. These intangibles are amortised
over their useful lives using the straight-line method, which is estimated at four to eight years, based on management’s expectations and client
experience. The amortisation charge for the year is included in the consolidated income statement under "operating expenses" and is considered to
be a non-underlying cost.
Customer intangibles
Customer intangibles consist of the recognition of value attributed to the customer lists through acquisition. On initial recognition, the values are
determined by relevant factors such as the Group’s growth pattern and ability to cross-sell to existing clients. Subsequently, these intangibles are
amortised over their useful lives using the straight-line method, which is estimated at four to ten years, based on management’s expectations and
client experience. The amortisation charge for the year is included in the consolidated income statement under "operating expenses" and is
considered to be a non-underlying cost.
Software
Costs associated with maintaining software programmes are recognised as an expense when incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when
the recognition criteria are met.
Software as a service ("Saas") agreements are assessed to determine if the agreement includes or may include an intangible asset. Costs incurred
to obtain or develop the intangible asset are capitalised if the asset is an identifiable, non-monetary asset without physical substance that is under
the Group's control and from which it is probable that expected future economic benefits attributable to the asset will flow to the entity and if the
cost of the asset can be measured reliably. Costs are capitalised until the asset is ready for use as intended by management. At this point in time,
cost capitalisation will cease.
The costs related to software under development are categorised between research expenditure and development expenditure. Research
expenditure and development expenditure that do not meet the recognition criteria are recognised as expenses when incurred. Development costs
previously recognised as an expense are not recognised as an asset in a subsequent period.
Amortisation commences when the asset is ready for use as intended by management. Amortisation is recognised to write off the cost of assets
less their residual values over their useful lives. This is done using the straight-line method over a seven-year period for developed computer
software.
Investment in associate
An associate is an entity over which the Group has significant influence but not control or joint control. Significant influence is obtained if the Group
holds between 20% and 50% of the voting rights in a company. However, significant influence can also be demonstrated through other means which
include, but are not limited to, representation on the board of directors of the associate, the ability to participate in policy-making decisions
(forexample dividend declaration), material transactions between the Group and the associate, interchange of managerial personnel or the provision
of essential technical information. An investment in associate is initially recognised at cost and is subsequently accounted for using the equity
method.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
3. Significant accounting policies continued
On initial recognition of the investment in associate, the amount by which the cost of the investment in associate exceeds the fair value of the net
identifiable assets of the associate is recognised as goodwill. Conversely, if the fair value of the net identifiable assets of the associate exceeds the
cost of the investment in associate, the difference is recognised as income in the Group's profit or loss.
Goodwill relating to the investment in associate is included in the carrying amount of the investment in associate and is not amortised.
Subsequently, the carrying amount of the investment in associate is adjusted to recognise the Group’s share of the post-acquisition profits or losses
and other comprehensive income of the investee in the Group's profit or loss and other comprehensive income respectively. Dividends received or
receivable are recognised as a reduction in the carrying amount of the investment.
The Group does not recognise its share of losses in an equity-accounted investment that exceed the value of its investment (including any other
unsecured long-term receivables) unless it is obligated to, or has made payments on behalf of the other entity.
The Group only eliminates unrealised gains on transactions between it and its associate to the extent that they do not exceed the value of the
Group's investment in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. The accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the accounting
policies adopted by the Group.
The carrying amount of the investment in associate is tested for impairment if indicators of impairment are identified. For the purpose of
impairment testing, an investment in associate is a single cash-generating unit. The Group will impair the cash-generating unit if its recoverable
amount is less than its carrying amount.
The goodwill recognised at initial recognition is not tested separately for impairment from the investment in associate. Instead it is included in the
carrying amount of the investment in associate when testing for impairment.
Finance income
Finance income is recognised using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying
amount of a financial asset, unless the assets subsequently became credit impaired. In the latter case, the effective interest rate is applied to the
amortised cost of the financial asset. Finance income is recognised on an accrual basis.
Revenue recognition
Revenue is measured at the transaction price. The transaction price is the amount of consideration that the Group expects to receive in exchange
for the services rendered.
Rendering of services
Revenue is based on and charged on three principal elements per the contracts with customers, 1) Assets under management (open-ended funds)
where revenue is charged as a percentage of the assets under management, 2) Assets under management (closed-ended funds) where fees are also
charged as a percentage of assets under management, 3) Service-based fees where the revenue is charged based on an agreed fee structure for
various services being provided. All revenue is recognised over time as the performance obligations are satisfied and customers benefit from these
services.
The Group provides a number of services to its customers, ranging from trust / fiduciary services to accounting and administrative activities. As the
revenue recognition under IFRS 15's “five step model” is identical for all Sanne Group plc’s services, the five step approach is applied as follows:
Step 1 - Identify the contract
Contractual agreements exist between Sanne Group plc and its subsidiaries and all customers which create enforceable rights and obligations.
Step 2 - Identify performance obligations
The services to the customer set out in the agreement are separately identifiable. Each service set out in the contract is distinct as each component
can be performed and delivered separately. The different services have been identified as separate and distinct services, thus being separate
performance obligations.
Step 3 - Determine transaction price
Service-based fees are based on either pre-set (fixed) fees which are based on the expected amount of work (time spent at the relevant charge-out
rates) to be performed or on a variable agreement where it is based on the actual amount of work (time spent at the relevant charge-out rates) but
only to be determined once the work is finalised. Determining the transaction price for these fees varies by the amount of time spent, supported by
time sheets.
Step 4 - Allocate transaction price
The transaction prices are allocated to the performance obligations (the provision of the services) based on the stand-alone selling prices. The
Group uses the best available data to determine a price for the services rendered which is based on time spent at a specific charge-out rate. The
Group makes use of the practical expedient whereby it expects to received settlement for the services rendered within 12-months after the service
was rendered and therefore, no adjustment is made to the transaction price for a financing component.
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73
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Sanne Group plc Annual Report and Accounts 2021
74
3. Significant accounting policies continued
Step 5 - Recognise revenue
The Group concluded that the obligations are satisfied over time and recognises the revenue for these services on a time-spent basis as the
performance obligations are satisfied over time.
Contracts with customers make provision for annual transaction price increases, generally in line with a relevant local inflation measure. These
increases do not change the performance obligations, and the increased prices are applied prospectively when revenue is recognised.
Revenue is recognised in the subsidiary where the contract with the customer is based. The segmental reporting is presented based on the
jurisdiction in which the specific customer relationships are owned and managed. Therefore, the revenue stated in the segmental reporting is
presented based on the jurisdiction where revenue is generated but may not be the same as the contracted jurisdiction.
Contract assets
Contract assets represent the billable provision of services which have been rendered and where performance obligations have been met but
customers have not been invoiced at the reporting date. Contract assets are recorded based on agreed fees to be billed in arrears and time spent as
performance obligations are met, based on charge-out rates in force at the work date, less any specific provisions against the value of contract
assets where recovery may not be made in full.
Costs incurred in obtaining a contract are capitalised if these costs are directly linked to obtaining a contract. Costs that would have been incurred
regardless of the contract being obtained are expensed. Capitalised costs are amortised over the shorter period of seven years and the useful life of
the contract. The contract assets are assessed at the end of the financial year for impairment by determining if the carrying amount is less than the
remaining consideration that the entity expects to receive in exchange for the goods or services to which the asset relates, less the costs that relate
directly to providing those goods or services that have not been recognised as expenses.
Contract liabilities
Contract liabilities represent fees billed in advance in respect of contractual services and give rise to a trade receivable when recognised. Contract
liabilities are released to revenue on a time apportioned basis in the appropriate financial year.
Leases
The Group assesses contracts entered into to determine if a contract is, or contains, a lease. A contract contains a lease if it conveys the right to
control the use of an identified asset for a period, in exchange for consideration. At initial recognition of a new lease, the lease liability is recognised
as the present value of future payments, discounted using the incremental local borrowing rate (unless the interest rate implicit in the lease is
available for use). A corresponding right-of-use asset is recognised on initial recognition and is measured at an amount equal to the lease liability,
less any lease incentives and lease payments made before the commencement date, plus any initial direct costs and dilapidation costs.
The Group accounts for lease and non-lease components separately, unless these are not separable based on stand-alone prices. In such instances
the Group makes use of the practical expedient to account for the lease and non-lease components as a single lease component.
Subsequently, the Group allocates lease payments between finance costs and the lease liability. The finance cost is charged to profit or loss over the
lease period. The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life or the lease term.
The Group made use of the practical expedient whereby leases in a class of underlying asset to which the right-of-use relates, with a lease term of
12 months or less, are accounted for as a short-term lease. Consequently, no lease liability or right-of-use asset is recognised thereon, and the lease
payments are accounted for in the consolidated income statement on a straight-line basis.
The Group also made use of the "low value asset" practical expedient and defines low value assets as those assets with a purchase price for a new
and unused asset of £5,000 or less.
The Group sub-leases a small portion of its premises in certain jurisdictions. The rentals payable received under the sub-leases are recognised as
other income on a straight-line basis over the term of the relevant lease.
Foreign currencies
The separate financial statements of each Group company are presented in the currency of the primary economic environment in which it operates
(its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are
expressed in Pounds Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial
statements.
In preparing the separate financial statements of the subsidiary companies, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at
fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
3. Significant accounting policies continued
Exchange differences are recognised in the consolidated income statement in the year in which they arise. Exchange differences arising from
minority equity investments are recognised in the statement of comprehensive income when they arise.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s operations with a functional currency other
than Pounds Sterling are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the
exchange rates at the date of the transactions. Exchange differences arising, if any, are recognised in other comprehensive income and
accumulated in equity in the retranslation reserve.
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a
subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant
influence over an associate that includes a foreign operation), all accumulated exchange differences in respect of that operation, attributable to the
Group, are reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate. Exchange differences arising are recognised in other comprehensive income and accumulated in the translation
reserve in the consolidated statement of changes in equity.
Defined contribution retirement benefit
Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered services entitling them
to contributions.
Defined benefit retirement obligation
The Group has a defined benefit retirement obligation in Mauritius due to a regulatory requirement. The defined benefit retirement obligation is
recognised in line with IAS 19.
The liability recognised in the consolidated balance sheet in respect of the defined benefit retirement obligation is the present value of the defined
benefit retirement obligation at the end of the financial year less the fair value of plan assets; however; the Group has no plan assets.
The defined benefit retirement obligation is calculated at half year and year end by independent, qualified actuaries using the projected unit credit
method.
The present value of the defined benefit retirement obligation is determined by discounting the estimated future cash outflows using interest rates
of high-quality corporate bonds, that are denominated in the currency in which the benefits will be paid, and have terms to maturity approximating
terms of the related defined benefit retirement obligation.
Defined benefit costs are categorised as follows:
– service cost
– net interest expense or income; and
– remeasurement
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other
comprehensive income in the financial year in which they arise. Past-service costs are recognised immediately in profit or loss.
Earnings per share
The Group presents basic and diluted earnings per share ("EPS"). In calculating the weighted average number of shares outstanding during the
financial year, any share restructuring is adjusted by a factor to make it comparable with other periods. For diluted EPS, the weighted average
number of ordinary shares is adjusted assuming conversion of all dilutive potential ordinary shares.
Both basic and diluted EPS measures are shown for the statutory profit position, the Group has also presented an alternative version where profit is
adjusted for non-underlying items to provide an additional understanding of the financial performance of the Group (note 12).
Taxation
Tax on the profit or loss for the period comprises current and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income
statement as it excludes income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance
sheetdate.
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3. Significant accounting policies continued
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit.
The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow for all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled, or the asset is realised, based on tax
laws and rates that have been enacted or substantively enacted at the balance sheet date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would result from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities when
they relate to income taxes levied by the same taxation authority, and the Group intends to settle its current tax assets and liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax is recognised in the consolidated income statement, except when related to items that are recognised in other
comprehensive income or directly in equity, in which case, the current and deferred tax are recognised in other comprehensive income or directly in
equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
Equipment
Equipment is stated at cost less accumulated depreciation and any recognised impairment loss. Software that forms an integral part of the related
hardware, where the hardware cannot operate without the specific software, is treated as equipment.
Depreciation is recognised to write off the cost of assets less their residual values over their useful lives, using the straight-line method, over the
following periods:
Computer equipment 3 to 7 years
Computer software 3 years
Fixtures and equipment 5 to 24 years
The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period with the effect of any changes
in estimate accounted for on a prospective basis.
The gain or loss arising on the disposal or scrappage of an asset is determined as the difference between the sale proceeds and the carrying
amount of the asset and is recognised in profit or loss.
Impairment of tangible and intangible assets (excluding goodwill)
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of
the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit ("CGU") to which the asset belongs. When a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual CGUs, otherwise they are allocated to the smallest group of CGUs for which a reasonable
and consistent allocation basis can be identified.
The recoverable amount of an asset is the higher of its fair value less costs of disposal or the value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable
amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount,
limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. An impairment loss reversal
is recognised immediately in profit or loss.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
3. Significant accounting policies continued
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated balance sheet when the Group becomes party to the contractual
provisions of the instrument.
Financial assets
All financial assets are recognised and derecognised on trade date, where the purchase or sale of a financial asset is under a contract whose terms
require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and call deposits held with banks.
Call deposits held with banks are redeemable in the favour of the Group within 24 hours' notice, without early payment penalties or interest forfeits.
These call deposits have a maturity of three months or less from the date of acquisition.
Trapped cash represents the minimum cash balance to be held to meet regulatory capital requirements, as set out by relevant laws and regulations
in the different jurisdictions. The trapped cash is determined based on certain rules that are different in each jurisdiction. Trapped cash is recognised
as cash and cash equivalents.
Financial assets at amortised cost
The Group’s business model is to collect the contractual cash flows from its financial assets, excluding equity investments not held for trading. The
cash flows of these financial assets consist solely of payments of principal and interest. Therefore, these financial assets are classified at amortised
cost. These financial assets are subsequently measured at amortised cost using the effective interest method, less any expected credit losses.
Interest income is recognised by applying the effective interest rate, except in the case of receivables where the recognition of interest would be
immaterial. Refer to note 37 disclosing the financial assets categorised as financial assets at amortised cost.
Financial assets at fair value through other comprehensive income
The Group holds equity investments that are not held for trading. The Group has made the irrevocable election to carry the investments at fair value
through other comprehensive income. On initial recognition, the investments are measured at fair value, plus transaction costs. Subsequently, these
investments are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income,
accumulating in retained earnings. Dividends on the equity investments are recognised in profit or loss. On disposal of the equity investments, the
cumulative fair value gain or loss will not be reclassified to the consolidated income statement.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on its financial assets classified at amortised cost. The amount of expected credit
losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the financial asset. The Group assesses, on a
forward-looking basis, the expected credit losses associated with its financial assets at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit risk.
When the expected credit loss for trade receivables is determined, the Group makes use of the simplified approach, whereby the loss recognised is
equal to the lifetime expected credit losses. Lifetime expected credit losses represent the expected losses that may result from possible default
events, and the probability of such an event occurring, over the lifetime of the financial asset. The expected lifetime credit losses of the trade
receivables are estimated using a provision matrix. The matrix is based on the Group’s historical credit loss experience, the most significant factor
being the days past due. It is then adjusted for forward-looking factors specific to the trade receivables.
The carrying amount of a financial asset at amortised cost is reduced by the impairment loss directly except for trade receivables, where the
carrying amount is reduced through the use of an allowance account. Trade receivables that are considered uncollectible are written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or loss.
Financial liabilities and equity
Debt and equity instruments issued are classified as either financial liabilities or as equity in accordance with the substance of the contractual
arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised as the proceeds received, net of direct issue costs.
The repurchase of the Company’s own equity instruments are recognised and deducted directly in equity. No gain or loss is recognised in profit or
loss on the purchase, sale, issue or cancellation of the Company’s own equity.
Financial liabilities
All financial liabilities are classified at amortised cost. At initial recognition, financial liabilities are measured at fair value less transaction costs.
Financial liabilities are subsequently measured using the effective interest method.
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3. Significant accounting policies continued
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that discounts estimated future cash payments over the expected term of the financial liability, or, where
appropriate, a shorter period. No interest is levied on financial liabilities that are short-term and immaterial.
Accrued interest is recorded separately from the associated borrowings within current liabilities.
Own shares/Employee share trust
Own shares represent the shares of the Company that are held in treasury and by the Group’s employee share ownership trust (which forms part of
the Group's consolidated financial statements). Own shares are recorded at cost and deducted from equity. When shares vest unconditionally, are
cancelled or are reissued they are transferred from the own shares reserve at their weighted average cost. Any consideration paid or received by the
Trust for the purchase or sale of the Company’s own shares is shown as a movement in shareholders’ equity.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are determined as the expected future cash
outflows discounted at a pre-tax rate that reflects current market assessments of the risks specific to the provision.
Contingent liabilities
Contingent liabilities are obligations arising from past events, whose existence will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events, not wholly within the control of the Group or are present obligations that arises from past events, but are not
recognised because it is not probable that an outflow of resources will occur or the amount of the obligation cannot be sufficiently measured.
Contingent liabilities are not recognised, but are disclosed.
Prepayments
Prepayments are treated as current assets, and represent goods or services that the Group has paid for before the delivery thereof. Prepayments
are released to the relevant expense in the period to which the delivery of goods or services relates.
Fiduciary activities
The assets and liabilities of trusts and companies under administration and held in a fiduciary capacity are not included in these consolidated
financial statements.
Share-based payments
Employees of the Group receive bonus allocations in the form of share-based payments under Performance Share Plans, Restricted Stock Awards
and Annual Performance Bonuses, whereby eligible employees render services as consideration for equity instruments (shares).
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value
excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based
payment transactions are set out in note 34.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to equity reserves.
The vesting period is the period over which all of the specified vesting conditions are to be satisfied. In the event that the Company received a
general offer that will result in the offering party obtaining control over the Company ("an exit event"), the shares will vest upon the date when such
an offer becomes unconditional. Share plans containing service conditions or conditions linked to an exit event result in a grant with a variable
vesting period. The length of the expected vesting period will be estimated for plans with variable vesting periods. An exit event will result in an
acceleration of the vesting period. Refer to note 4 for the significant estimate made in determining the vesting period.
The grant date fair value is estimated with reference to the market price of the Company’s shares. The fair value of share plans containing market-
based vesting conditions are determined using a valuation model that takes into account the share price at grant date, expected price volatility, and
a risk-free rate.
Direct costs
Direct costs are defined by management as the costs of the income generating divisions including staff payroll, marketing and travel attributable to
the division in relation to the delivery of services and supporting growth.
Operating profit
The operating profit reflects the profit earned from the Group’s business operations. It includes revenue and other operating income less direct and
indirect costs. The operating profit comprises underlying and non-underlying items. Operating profit excludes finance costs, finance income and
foreign exchange gains and losses.
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
3. Significant accounting policies continued
Non-underlying items
Non-underlying items are disclosed and described separately in the consolidated financial statements where, in the opinion of the directors, it is
appropriate to do so to provide further information regarding the financial performance of the Group.
The Group’s core business is the administration, reporting, and fiduciary services it provides in various jurisdictions. All acquisition and integration
related costs are disclosed as non-underlying as these fall outside the core business of the Group. Certain Restricted Share Award grants form part
of the non-underlying items as they are used as a tool to retain key personnel relating to the acquisitions and recruit senior management to support
the acquisitions. Amortisation of contract and customer intangible assets recognised through the acquisitions is also included as non-underlying.
These charges are based on judgements about the value and economic life of assets that, in the case of items such as customer relationships,
would not be capitalised in normal operating practice. Therefore, excluding the amortisation of intangible assets from underlying earnings allows the
income and costs of both organically generated and acquired contracts to be presented on a like-for-like basis. Any impairment losses relating to
contract and customer intangible assets are also deemed to be outside of the course of ordinary business. Gains or losses from the disposal of
subsidiaries or business lines are deemed non-underlying items.
Certain expenses that are deemed to be one-off in nature are classified as non-underlying items and are assessed regularly to determine if they are
non-underlying in nature, note 7 provides further details on management's reasons for classifying regarding a cost as non-underlying. These costs
include legal costs, costs to refinance the Group's borrowings (the borrowings are mainly used to make new acquisitions), deal costs (and any
accruals due to investment banker fees) relating to the upcoming completion offer made by Apex and the accelerated portion of the share-based
payments expense as a result of the upcoming completion offer.
All the non-underlying items are regarded as expense items outside the normal course of business and disclosed separately to assist Shareholders
to better analyse the performance of the core business. Changes to the subsequent contingent consideration arising from prior and current financial
year business combinations are included in non-underlying items.
Further details of the nature of non-underlying items are given in note 7.
Discontinued operations
A discontinued operation is a component of the entity that has been disposed of, or is classified as held for sale, and that represents a separate
major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the
consolidated income statement.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which
the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and
future years.
Critical judgements in applying the Group’s accounting policies
The critical judgements at the balance sheet date made by the directors in the process of applying the Group’s accounting policies and that have the
most significant effect on the amounts recognised in financial statements are set out below.
Classification of equity investment in Alternative Assets Accounting Software Inc.
In the prior year, the Group purchased an equity investment (5.9% of the ordinary shares) in Alternative Assets Accounting Software Inc. ("the
investee") and applied its judgement in determining the classification of the equity investment. On 23 April 2021, the Group increased its investment
in the investee to 11.1%, with an additional increase on 21 October 2021 to 15.8%. The Group reassessed the investment to determine if the Group
exercise significant influence over the investee. The Group has representation on the board of the investee and can participate in policy-making
decisions such as dividend declarations. These factors are sufficient enough to indicate that the Group has significant influence over the investee
and consequently the investment will be treated as an investment in associate.
Other judgements
Lease term
The Group made a judgement regarding the lease terms. In determining the lease term, management considers all facts and circumstances that
create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if it is reasonably certain that the lease will be extended. Exercising either the extension or termination
options is case dependent and is an ongoing assessment. Therefore, should the Group apply an extension option, the lease liability and right-of-use
asset would be increased. Should the Group terminate an agreement, both the lease liability and right-of-use asset would be derecognised.
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4. Critical accounting judgements and key sources of estimation uncertainty continued
Costs related to the Apex transaction
The Group recognised certain expenses and accruals relating to the Apex transaction. These fees include but are not limited to investment banker
fees, legal fees and professional advisory fees. The Costs related to the Apex transaction have a contractual obligation to be settled. Judgement
was applied to assess if the transaction will be successfully completed. The Directors’ judgement is that the Apex transaction will be completed
successfully after year-end, the expected costs can be reasonably estimated, therefore the Group provided for these fees in the current year. Note 7
sets out the reason for disclosing these costs as non-underlying items.
Subsequent to the balance sheet date, new information came to light such that the acquisition of the Group by Apex is now expected to complete
either late in the second or early in the third quarter of 2022. The circumstances resulting in the delay only occurred after year end and have been
judged to be non-adjusting after the reporting period. See Note 41 for further information and see the key sources of estimation uncertainty below
for the consequent sensitivity involved.
Key sources of estimation uncertainty
Initial recognition of intangible assets
During the financial year, the Group acquired the PEA group, Strait Capital Company Limited and the PraxisIFM group. These business combinations
gave rise to the recognition of customer and contract intangibles. The Multi-Period Excess Earnings Method (MEEM) was applied to determine the
value of these intangible assets. This method requires various judgements to be made, the most significant of which is the number of years the
customer base acquired is expected to generate revenue for the Group. The periods were chosen based on management’s best judgement,
supported by historical evidence. Refer to note 36 for further details relating to the acquisitions.
The intangible assets recognised through the business acquisition of the PEA group amount to £7.5 million. The valuation was performed assuming
a seven year useful life in the MEEM model's cash flow forecast. If the valuation was performed using six years as the expected useful life in the
model to determine the fair value of the assets, the fair value would be £0.9 million lower, and if the fair value estimate was performed over eight
years, the asset value would be £0.9 million higher.
The intangible assets recognised through the business acquisition of Strait Capital Company Limited amount to £5.8 million. The valuation was
performed assuming a seven year useful life in the MEEM model's cash flow forecast. If the valuation was performed using six years as the
expected useful life in the model to determine the fair value of the assets, the fair value would be £0.7 million lower, and if the fair value estimate
was performed over eight years, the asset value would be £0.7 million higher.
The intangible assets recognised through the business acquisition of the PraxisIFM group amount to £11.8 million. The valuation was performed
assuming a seven year useful life in the MEEM model's cash flow forecast, except for the Luxembourg CGU, which was forecast over a five year
period. If the valuation was performed using six years (four years for the Luxembourg CGU) as the expected useful life in the model to determine the
fair value of the assets, the fair value would be £1.5 million lower, and if the fair value estimate was performed over eight years (six years for the
Luxembourg CGU), the asset value would be £1.4 million higher.
Probability of vesting of equity instruments granted in terms of share-based payment schemes
On 25 August 2021, the Group and Apex announced a recommended all cash offer of 920p per share to be made by Apex for the Group ("the Apex
transaction"). This has a direct impact on the vesting period estimation. All plans were accelerated to account for a shortened vesting period,
because the upcoming completion offer will result in plans vesting earlier.
The cumulative expense recognised for the Group's share-based payment schemes reflects, in the opinion of the Directors, the number of equity
instruments granted that will ultimately vest. At each reporting date, management adjusts the unvested equity instruments with the forfeited
instruments. Management is of the opinion that this number, adjusted for future attrition rates, represents the most accurate estimate of the
number of instruments that will ultimately vest. The vesting period was determined based on management's best estimate, after considering
external advise on the expected closing date of the Apex transaction. The closing date is expected to be in March 2022. If the expected vesting
period was 3 months longer, the share-based payment expensed would have been £1.9 million lower for the year.
Other estimates
Contract assets
The Group recognises contract assets within revenue and as a receivable for amounts that remain unbilled at the year end, recorded at the
recoverable amount. The recoverable amount of contract assets is assessed on an individual basis using the judgement of management, and takes
into account an assessment of the customer's financial position, the aged profile of the contract assets, and an assessment of historical recovery
rates. Refer to note 25 for further disclosure regarding estimation uncertainty relating to contract assets.
Impairment testing
Goodwill
Goodwill is assessed annually for impairment and the following assumptions are deemed to be key sources of estimation: the revenue growth rate,
the discount rate, and the terminal growth rate. Management has assessed that no reasonably possible changes to any CGU would cause the
aggregate carrying amount of that CGU to materially exceed its recoverable amount. Note 16 sets out these rates and sensitivities.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
5. Segmental reporting
The reporting segments engage in corporate, fund and private client administration, reporting and fiduciary services. Declared revenue is generated
from external customers.
The chief operating decision maker is considered to be the Executive Directors of Sanne Group plc. Each segment is defined as a set of business
activities generating a revenue stream determined by segmental responsibility and the management information reviewed by the Executive
Directors. The Executive Directors evaluate segmental performance on the basis of gross profit, calculated as revenue less direct costs comprising
staff, marketing and travel costs. No intersegment sales are made.
The Group’s consolidated financial statements for the year ended 31 December 2021 have four reportable segments under IFRS 8, namely EMEA,
Asia-Pacific & Mauritius, North America and Channel Islands.
The reporting of various client contracts and their related costs moved between segments during the year ended 31 December 2021, the
comparative numbers were also adjusted to reflect this change. The change in the segmental allocation of the contracts (and related costs) was
driven by the reassessment of where revenue is generated and the work performed. The most significant of these moves was between EMEA and
Channel Islands.
Turnover Direct costs Gross profit
For the year ended 31 December 2021 £'000 £'000 £'000
Segments
EMEA
1
72,559 (32,378) 40,181
Third-party fund management fees 9,568 (9,568) –
Asia-Pacific & Mauritius 39,729 (12,940) 26,789
North America 37,939 (19,001) 18,938
Channel Islands 43,931 (18,459) 25,472
Total 203,726 (92,346) 111,380
Other operating income 238
Operating expenses (108,154)
Operating profit 3,464
Other gains and losses (259)
Finance costs (5,429)
Finance income 61
Share of net loss of associate (76)
Loss before tax (2,239)
Turnover Direct costs Gross profit
For the year ended 31 December 2020 £'000 £'000 £'000
Segments
EMEA
1
63,588 (27,830) 35,758
Third-party fund management fees 5,186 (5,186) –
Asia-Pacific & Mauritius 36,214 (10,886) 25,328
North America 29,564 (14,067) 15,497
Channel Islands 40,322 (16,355) 23,967
Total 174,874 (74,324) 100,550
Other operating income 151
Operating expenses (76,760)
Operating profit 23,941
Other gains and losses 804
Finance costs (4,324)
Finance income 108
Profit before tax 20,529
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5. Segmental reporting continued
Geographical information
The Group's revenue from external customers by geographical location of the contracting Group entity is detailed below.
2021 2020
£'000 £'000
Jersey and Guernsey 36,086 35,389
Rest of Europe
1
78,919 69,185
Mauritius 23,013 23,061
Americas 36,071 28,017
South Africa 4,083 3,252
Asia-Pacific 15,986 10,784
Total net revenue from continuing and discontinued operations 194,158 169,688
Third-party fund management fees 9,568 5,186
Total turnover from continuing and discontinued operations 203,726 174,874
The geographical revenue is disclosed based on the jurisdiction in which the contracting legal entity is based and is not based on the location of the
client or where the work is performed. The geographic revenue split is therefore very different to the segmental reporting split.
No single customer made up more than 10% of the Group's revenue in the current or prior year.
1 The EMEA revenue and direct costs are shown as net revenue and net direct costs. This is because net revenue and net direct costs exclude the impact of third-party fund management fees, which
are not considered relevant in allocating resources to segments. Third-party fund management fees relate to asset management fees for a small number of funds that are clients of the Group’s
AIFM Management Company in Luxembourg and are limited to the EMEA operations. Given these revenues are not economically the Group's, the Group sought to separate these and believe that
net revenues are a more accurate reflection of the income that the Group earned for its services to the relevant fund entity.
6. Turnover
2021 2020
£'000 £'000
Disaggregation of revenue from contracts with customers
Basis for fees charged
EMEA
– Assets under management (open-ended funds) 5,135 4,380
– Assets under management (closed-ended funds)
1
23,523 22,994
– Third-party fund management fees 9,568 5,186
– Service-based fees 43,901 36,145
Asia-Pacific & Mauritius
–Assets under management (closed-ended funds) 1,161 1,378
–Service-based fees 38,568 34,855
North America
–Assets under management (closed-ended funds) 1,432 –
–Service-based fees 36,507 29,562
Channel Islands
–Assets under management (closed-ended funds) 1,604 1,637
–Service-based fees 42,327 38,737
Total turnover 203,726 174,874
1 The EMEA revenue generated from assets under management (closed-ended funds) is shown as net revenue. This is because net revenue excludes the impact of third-party fund management
fees, which are not considered relevant in allocating resources to segments. Third-party fund management fees relate to asset management fees for a small number of funds that are clients of
the Group’s AIFM Management Company in Luxembourg and are limited to the EMEA operations. Given these revenues are not economically the Group's, the Group sought to separate these and
believe that net revenues are a more accurate reflection of the income that the Group earned for its services to the relevant fund entity.
2021 2020
£'000 £'000
Timing of turnover recognition
Over time
EMEA 82,127 68,705
Asia-Pacific & Mauritius 39,729 36,233
North America 37,939 29,562
Channel Islands 43,931 40,374
Total turnover over time 203,726 174,874
Total turnover over time 203,726 174,874
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
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83
7. Non-underlying items
2021 2020
£'000 £'000
Operating profit from continuing operations 3,464 23,941
Non-underlying items within operating profit from continuing operations:
Share-based payments (i) 1,960 1,951
Share-based payments accelerated vesting (i) 3,827 –
Amortisation of other intangible assets (Refer to note 17) (ii) 16,436 15,677
Acquisition cost earn-out charges (iii) 1,824 485
Acquisition and integration costs (iii) 2,428 2,443
Gain on bargain purchase (Refer to note 36) (iv) (13) (38)
Impairment of right-of-use asset (v) – 497
Lease liability extinguishment (v) (144) –
Onerous lease contract (v) (99) 691
Legal fees (vi) 2,212 1,326
Costs related to the disposal of minority equity investment (vii) 434 –
Costs related to the Apex transaction (viii) 21,708 –
Other (iii) 202 1,063
Total non-underlying items included in operating profit from continuing operations 50,775 24,095
Underlying operating profi t from continuing operations 54,239 48,036
2021 2020
£'000 £'000
(Loss)/profit before tax from continuing operations (2,239) 20,529
Non-underlying items within in operating profit from continuing operations:
Total non-underlying items included in operating profit from continuing operations 50,775 24,095
Onerous lease contract (v) 6 16
Refinancing (Refer to note 29) (ix) 1,336 –
Foreign exchange loss on acquisition restructuring (iii) 601 237
Share of net loss made by the investment in associate (Refer to note 21) (x) 76 –
Total non-underlying items from continuing operations 52,794 24,348
Underlying profit before tax from continuing operations 50,555 44,877
2021 2020
£'000 £'000
(Loss)/Profit for the year
1
(7,094) 24,846
Total non-underlying items from continuing operations 52,794 24,348
Gain on disposal of discontinued operations before tax (xi) – (7,748)
Tax effect of non-underlying items (3,507) (3,454)
Total non-underlying items from continuing and discontinued operations 49,287 13,146
Underlying profit for the year
1
42,193 37,992
1 This figure includes profit of loss for the year after tax from both continuing and discontinued operations.
In the opinion of the directors, as explained below, the above disclosures reflect income and expenses which are not representative of the underlying
performance and strategy of the Group.
(i) The share-based payments expense relates only to the costs classified as non-underlying. Refer to note 34 for details on all the share-based payments (for underlying and non-underlying in
aggregate). All acquisition-related share-based payments plans are awards granted as part of acquisitions to act as retention tools for key management and to recruit senior management to
support the various acquisitions. These grants are thus not in the normal course of the underlying business and are disclosed separately. Due to the Apex transaction, the vesting period of
share-based payments was accelerated to March 2022. A transaction this nature is outside of the ordinary scope of business activities, because it relates to the disposal of 100% of the
ownership in the Company. The total accelerated costs amounted to £3.8 million. This is the amount by which the total accelerated share-based payment expenses exceeded the share-based
payments expense accounted for on the vesting periods, before acceleration. The excess amount is included as a non-underlying item, because the acceleration is outside of the normal course
of activities.
(ii) The amortisation charges relate to the amortisation of other intangible assets (specifically contract and customer intangible assets) acquired as part of acquisitions and is directly linked to the
acquisitions. Therefore, it is excluded from underlying cost, because these charges are based on judgements around the value and economic life of assets. These assets are not capitalised in normal
operating practice.
(iii) The Group has completed various acquisitions in the past two years. Acquisition and integration costs include deal advisory fees, one-off costs of integrating companies, accruals for cash
earn-out payments, and exchange rate gains or losses made during the integration period. Acquisitions are outside the scope of the Group's underlying business. Therefore, these costs are
disclosed as non-underlying costs to enable shareholders to assess the core ongoing performance of the Group. Most acquisition and integration costs are incurred in the first two years
following acquisition. This period can be longer depended on the nature of the costs. Integration and deal costs relating to acquisitions for the financial year ended 31 December 2021 amounted
to £2.4 million. Costs incurred in relation to acquisition opportunities not yet executed or abandoned are disclosed as “Other” (£0.2 million). The "Acquisition costs earn-out charges" amounting
to £1.8 million relate to the acquisition of Inbhear Fund Services Limited and the PEA group. Part of the acquisition pay-out is classified as remuneration under IFRS 3 and accrues over time.
(iv) On 1 April 2020, the Group acquired all the shares in Inbhear Management Services Limited as part of the wider Inbhear transaction. As with item (iii) above, acquisitions are outside the day-to-
day activities of the Group's ongoing business. With the full consideration linked to continued employment, no consideration was paid for the acquisition and consequently a gain on bargain
purchase was recognised. Refer to note 36 for further information. Due to measurement period adjustments, a gain on bargain purchase was subsequently recognised on the acquisition of
Sanne Group Japan Trust Company, acquired on 1 October 2020.
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84
7. Non-underlying items continued
(v) During 2020, the Group decided to make use of the break clause in its office lease agreement in the UK and moved into a new premises in London. COVID-19 and prolonged building work and
renovations to the previous office building limited the Group’s ability to sublease the premises. Because the property was not in use, and the Group was not able to sublease it, the right-of-use
asset became idle and was impaired. This impairment is classified as a non-underlying item in order to present only premises expenses incurred for occupied office space and eliminate the
effect of double counting premises expenses. The Group provided for onerous costs. The premises rental costs are classified as lease components and the lease liability was modified for the
change in the lease term. Other costs payable by the Group, per the lease agreement, are classified as non-lease component costs and were provided for as onerous costs. The provision created
for the onerous costs in the prior year has been reversed to profit or loss. In addition to a small over provision, the Group was able to claim refunds on premises related costs. The Group reached
a settlement agreement with the landlord, resulting in the write-off of the remaining carrying amount of the lease liability on the relevant premises.
(vi) During the financial year ended 31 December 2021, the Group incurred fees amounting to £2.2 million for ongoing legal cases, outside of the scope of ordinary business. These expenses are
excluded from underlying cost as they are one-off costs.
(vii) On 5 August 2021, the majority shareholders of Colmore A.G. entered into an agreement to sell their shares in Colmore A.G. to Preqin Limited. The Group sold its shares held as a minority equity
investment alongside those of the majority shareholders. As part of the disposal the Group incurred disposal costs which are classified as non-underlying.
(viii)On 25 August 2021 the Company announced that the Board had reached an agreement with Apex on the terms of a recommended all cash offer of 920p per share to be made by Apex. This
agreement will result in the delisting of the Company. In order to execute the agreement, the Group is obligated to incur certain costs. This transaction and the related costs are considered to be
outside of the ordinary operations of the Group and have been classified as non-underlying. These include investment banker fees, legal fees and professional advisory fees. The Group has
accrued for the costs over the period in which the Apex transaction is expected to close, being 31 March 2022. The Group expected the total costs to amount to £22.3 million, the majority of
which related to work performed during the current financial year and is disclosed in the table above.
(ix) On 18 March 2021, the Group refinanced its loan facility. The balance of the unamortised loan costs was written off and classified as non-underlying because the refinancing was done to
support future acquisitions which are not part of the day-to-day operations of the Group. The refinancing resulted in the recognition of a modification loss of £1.3 million, which is included in
finance costs in the consolidated income statement.
(x) The Group has accounted for the investment in associate using the equity method. The Group's share of the associate’s loss is recognised in profit or loss. This strategic investment was made
to utilise the technology being developed by Alternative Assets Accounting Software Inc. and the losses or gains made by the associate are not part of the Group’s core business. Refer to note
21.
(xi) On 1 July 2020, the Group disposed of its private client business in Jersey, resulting in a gain on disposal of discontinued operations. Refer to note 11 for further details.
8. Finance costs
2021 2020
£'000 £'000
Bank loan interest 2,178 2,632
Amortised loan fees 271 162
Loan fees written off 1,336 –
Interest on lease liabilities 1,644 1,530
Total finance costs 5,429 4,324
Details regarding the bank borrowings can be found in note 29. Refer to note 7 for details regarding the loan fees written off.
9. Finance income
2021 2020
£'000 £'000
Interest income on bank deposits 51 98
Interest income on financial assets at amortised cost 10 10
Total finance income 61 108
10. Tax
2021 2020
£'000 £'000
The tax charge comprises:
Current period 9,363 6,935
Adjustments in respect of prior periods (219) (321)
Total current tax expense 9,144 6,614
Deferred tax (note 30)
Increase in deferred tax assets (3,054) (380)
Decrease in deferred tax liabilities (1,120) (1,863)
Total deferred tax credit (4,174) (2,243)
Total tax charge for the year 4,970 4,371
2021 2020
£'000 £'000
The income tax expense is attributable to:
Profit from continuing operations before tax 4,855 4,362
Profit from discontinued operations before tax – 104
Deferred tax from other comprehensive income 115 (95)
4,970 4,371
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
Sanne Group plc Annual Report and Accounts 2021
85
10. Tax continued
In addition to the amount charged to the consolidated income statement, the following amounts relating to tax have been recognised in other
comprehensive income:
2021 2020
£'000 £'000
Deferred tax:
Items that will not be reclassified subsequently to profit or loss:
– Actuarial gain/(loss) on defined benefit retirement obligation 115 (95)
Total income tax credited in other comprehensive expenses 115 (95)
The difference between the total current tax shown above and the amount calculated by applying the UK standard income tax rate of 19% (2020: 19%)
to the profit before tax is as follows:
2021 2020
£'000 £'000
(Loss)/Profit from continuing operations before tax (2,239) 20,529
Profit from discontinued operations before tax – 8,783
Profit on ordinary activities before tax (2,239) 29,312
Tax on (loss)/profit on ordinary activities at standard UK income tax rate of 19% (2020: 19%) (425) 5,569
Effects of amounts that are not (taxable)/deductible in calculating income tax:
Income not (taxable)/expenses not deductible for tax purposes
1
5,593 (1,245)
Non-deductible amortisation 49 110
Depreciation in excess of capital allowances 224 24
Foreign taxes not at UK rate
2
342 122
Malta tax refund concession (389) –
Japan assessed loss utilised (607) –
Deferred tax not recognised - taxable losses
3
402 112
Adjustments in respect of prior periods (219) (321)
Total tax 4,970 4,371
1 Expenses that are not tax deductible increased substantially compared to the prior year. The increase is largely driven by the exceptional costs incurred in relation to the professional fees as a
result of the Apex transaction. These costs are viewed as capital in nature and the Group will not benefi t from an income tax deduction for these expenses.
2 With the UK tax rate at 19% (2020: 19%) the impact of the current year acquisitions on the tax expense is significant as a majority of the acquired jurisdictions have higher tax rates than 19%
(2020:19%).
3 Deferred tax not recognised refers to jurisdictions where management is doubtful that future deferred tax assets would be able to be utilised through taxable profits being realised in future.
Income tax expense computations are based on the jurisdictions in which profits were earned at prevailing rates in the respective jurisdictions.
The UK standard income tax rate is 19% (2020: 19%). Management has chosen to reconcile to this rate as the Company is a UK tax resident.
2021 2020
£'000 £'000
Reconciliation of effective tax rates
As per consolidated financial statements:
Tax charge 4,970 4,371
(Loss)/Profit from continuing and discontinued operations before tax (2,239) 29,312
Effective tax rate on continuing and discontinued operations -222.0% 14.9%
Effective tax rate on continuing operations -216.8% 21.2%
Effective tax rate on discontinued operations 0.0% 1.2%
Tax charge 4,970 4,371
Adjusted for:
Prior period adjustments 219 321
Tax effect of non-underlying items 3,913 4,003
Deferred tax on US goodwill amortisation (625) (870)
Total adjustments 3,507 3,454
Underlying tax charge 8,477 7,825
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86
10. Tax continued
2021 2020
£'000 £'000
(Loss)/Profit from continuing and discontinued operations before tax (2,239) 29,312
Non-underlying items 52,794 16,600
Profit before tax and non-underlying items 50,555 45,912
Underlying effective tax rate on continuing and discontinued operations 16.8% 17.0%
Underlying effective tax rate on continuing operations 16.8% 17.4%
Underlying effective tax rate on discontinued operations 0.0% 1.2%
The effective tax rate of -222.0% (2020: 14.9%) has fluctuated due to the large non-deductible expenditure related to the Apex transaction. The
underlying effective tax rate decreased to 16.8% (2020: 17.0%). The underlying effective tax rate was calculated against the underlying profit before
tax after having excluded the tax effect of non-underlying expenses and the deferred tax in relation to the tax allowance for the amortisation of
goodwill in the US.
2021 2020
£'000 £'000
Tax losses
Unused tax losses for which no deferred tax asset has been recognised 1,663 589
Potential tax benefit @ jurisdictional tax rate (2020: 19%) 402 112
The unused tax losses were incurred by loss-making subsidiaries. These subsidiaries are not likely to generate taxable income in the foreseeable
future, but can be carried forward indefinitely. The unused tax losses have been presented at the tax rate applicable to the jurisdiction in which the
loss was generated.
11. Discontinued operations
The Group entered into an agreement on 13 March 2020 to sell the private client business in Jersey to JTC plc, subject to the relevant regulatory
approvals. The transaction concluded on 1 July 2020 and the agreed-upon clients and staff members were transferred to JTC plc for a
consideration of £9 million with a £0.4 million working capital adjustment. The sale of the business line was reported as a discontinued operation in
the prior financial year. The revenue and direct costs were included in the Channel Islands reporting segment prior to the disposal.
The Group created a special purpose vehicle ("SPV") to facilitate the sale of the private client business. The SPV was under common control, as the
entities involved in the transaction were all ultimately controlled by the same party both before and after the combination and the control was not
transitory. The sale of the SPV to JTC plc after the creation of the SPV is not considered transitory control as the entity was created as a conduit to
facilitate the lift-out of the private client business in the transaction.
The financial information relating to the discontinued operations is set out below:
2020
£'000
Revenue 2,006
Expenses (971)
Profit before income tax expense 1,035
Income tax expense (104)
Profit from discontinued operations after tax 931
Gain on disposal of discontinued operations after tax 7,748
Profit from discontinued operations 8,679
The following disclosure relates to the cash flows from the discontinued operations:
2020
£'000
Net cash inflow from operating activities 2,421
Net cash inflow from investing activities (inflow from the proceeds) 8,638
Net increase in cash generated by the disposal group 11,059
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
Sanne Group plc Annual Report and Accounts 2021
87
11. Discontinued operations continued
The following details relate to the gain on disposal of the discontinued operations:
2020
£'000
Cash consideration received 8,638
Trade and other payables (55)
Carrying amount of net assets (835)
Gain on sale of discontinued operations before tax 7,748
Income tax expense –
Gain on disposal of discontinued operations after tax 7,748
The carrying amounts of assets and liabilities as at the date of sale (1 July 2020) were:
01 Jul 2020
£'000
Contract assets 850
Trade receivables 187
Contract liabilities (202)
Carrying amount of net assets 835
12. Earnings per share
2021 2020
£'000 £'000
(Loss)/Profit for the year (7,094) 24,846
Non-underlying items:
Non-underlying expenses before tax 52,794 16,600
Tax effect of non-underlying items (3,507) (3,454)
Underlying profit 42,193 37,992
Refer to note 7 for further detail on non-underlying items.
Shares Shares
2021 2020
Weighted average numbers of ordinary shares in issue 157,562,919 145,242,091
Effect of dilutive potential ordinary shares:
Restricted Stock Awards 1,028,841 467,317
Performance Share Plan 1,251,469 43,009
Weighted average number of ordinary shares for the purposes of diluted EPS 159,843,229 145,752,417
Effect of non-underlying dilutive potential ordinary shares:
Performance Share Plan (572,126) –
Restricted Stock Awards (694,037) –
Weighted average number of ordinary shares for the purposes of underlying diluted EPS 158,577,066 145,752,417
Earnings per share-based on total operations 2021 2020
Basic EPS (pence) (4.5) 17.1
Diluted EPS (pence) (4.4) 17.1
Underlying basic EPS (pence) 26.8 26.1
Underlying diluted EPS (pence) 26.6 26.0
Earnings per share-based on continuing operations 2021 2020
Basic EPS (pence) (4.5) 11.1
Diluted EPS (pence) (4.4) 11.1
Underlying basic EPS (pence) 26.8 25.5
Underlying diluted EPS (pence) 26.6 25.4
Earnings per share-based on discontinued operations 2021 2020
Basic EPS (pence) – 6.0
Diluted EPS (pence) – 6.0
Underlying basic EPS (pence) – 0.6
Underlying diluted EPS (pence) – 0.6
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88
Governance Financial StatementsStrategic Report
12. Earnings per share continued
The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares.
Basic EPS is calculated by dividing the (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue
during the financial year.
Diluted EPS takes into consideration the Company's dilutive, contingently issuable shares as disclosed above. These arrangements have no impact
on the earnings or underlying earnings figures used to calculate diluted EPS. The weighted average number of ordinary shares used in the diluted
calculation is inclusive of the number of shares which are expected to be issued to satisfy the awards when they become due and where the
performance criteria, if any, have been deemed to have been met as at 31 December 2021.
Underlying basic EPS and underlying diluted EPS are calculated in the same way as basic EPS and diluted EPS with the difference being that the
earnings used are the underlying earnings, being the (loss)/profit for the year adjusted for non-underlying items and the tax impact of non-underlying
items. In the current year, the underlying diluted EPS calculation was amended to remove the impact that the Apex transaction has (due to the
acceleration of the vesting of certain share scheme options) on the weighted average number of ordinary shares used for the purposes of
determining the underlying diluted EPS.
13. Profit or loss for the year
2021 2020
£'000 £'000
Profit or loss for the year has been arrived at after (crediting)/charging:
Net foreign exchange gains
1
259 (804)
Depreciation of equipment (see note 18) 2,269 2,869
Depreciation of right-of-use asset (see note 23) 6,499 5,795
Gain on disposal of equipment 69 175
Gain on bargain purchase (see note 36) (13) (38)
Gain on disposal of discontinued operations before tax (see note 11) – 7,748
Auditor remuneration for audit services for the company and subsidiaries 1,268 1,254
Auditor remuneration for other services 215 568
Amortisation of other intangible assets (see note 17) 16,436 15,677
Amortisation of developed software (see note 17) 499 –
Amortisation of contract assets (see note 25) 16 10
Staff costs (see note 14) 110,231 91,327
Impairment loss recognised on trade receivables (see note 24) 583 1,458
Facilities expense 3,051 2,822
1 The prior year net foreign exchange gains have been adjusted to include the non-underlying foreign exchange gains of the prior year that was not previously included. The amount was previously
disclosed as £1.0 million.
14. Staff costs
2021 2020
£'000 £'000
The aggregate payroll costs are as follows:
Salaries and bonuses 86,794 76,719
Social security 7,137 6,228
Pension cost 1,288 828
Other benefits 6,449 4,385
Share-based payments (see note 34) 8,563 3,167
110,231 91,327
The average number of full time employees analysed by category and segment are as follows:
2021 2020
Client services
EMEA 891 596
Asia-Pacific & Mauritius 450 391
North America 273 170
Channel Islands 167 221
Group services 378 413
2,159 1,791
Information in relation to aggregate Directors’ remuneration is contained in the Directors’ Remuneration Report of the Group’s Annual Report and
Accounts for the year which detail the remuneration payable to each Director for service in 2021.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
Sanne Group plc Annual Report and Accounts 2021
89
15. Dividends
2021 2020
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the prior year 15,994 13,624
Interim for the current year – 6,959
Total dividends 15,994 20,583
Proposed final dividend – 14,591
Dividends are declared in accordance with Jersey laws and can be distributed from all reserves. As a result of the terms of the Apex transaction, the
Directors concluded that there will be no recommendation to pay an interim or final dividend for 2021.
2021 2020
Pence Pence
per share per share
Dividend per share ("DPS"):
Interim for the current year – 4.8
Final proposed for the current year – 9.9
Total dividend per share – 14.7
2021 2020
Weighted average number of ordinary shares in issue 157,562,919 145,242,091
16. Goodwill
Goodwill represents the excess of the cost of the acquisition over the fair value of the Group's share of the net identifiable assets of the acquired
subsidiary at the date of acquisition.
Goodwill movements £'000
At 1 January 2020 180,414
Inbhear Fund Services Limited 4,432
Sanne Trustees (Cayman) Limited 2,799
Sanne Group Japan Trust Company 145
Exchange differences 688
At 31 December 2020 188,478
PEA Group 18,596
Strait Capital Company Limited 25,938
PraxisIFM group 40,957
Sanne Group Japan Trust Company - measurement period adjustment (Refer to note 36) (119)
Exchange differences (4,672)
At 31 December 2021 269,178
On 1 March 2021, the Group acquired the PEA group, consisting of five entities. The acquired entities are Private Equity Administrators Sweden AB
and PEA Depositary Services AB, both incorporated in Sweden, Private Equity Administrators ApS and PEA Depositary Services ApS, both
incorporated in Demark and Private Equity Administrators Limited, incorporated in Guernsey.
On 7 April 2021, the Group acquired Strait Capital Company Limited, incorporated in the United States of America.
On 1 December 2021, the Group acquired the PraxisIFM group, consisting of six entities. The acquired entities are Praxis Fund Services (Jersey)
Limited, incorporated in Jersey (Channel Islands); Praxis Fund Services (Malta) Limited, incorporated in Malta; International Fund Management
Limited and Praxis Fund Services Limited, both incorporated in Guernsey; PraxisIFM Fund Services (UK) Limited, incorporated in the United Kingdom
and PRAXISIFM Luxembourg S.A, incorporated in Luxembourg.
A measurement period adjustment was made to the acquisition accounting of Sanne Group Japan Trust Company, to accommodate new
information gained after the acquisition, pertaining to circumstances that existed on the date of acquisition. This measurement period adjustment
resulted in the goodwill being derecognised and a gain on bargain purchase being recognised.
Note 36 holds further information relating to the above mentioned acquisitions.
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90
16. Goodwill continued
The goodwill has been allocated to the following CGUs:
2021 2020
Carrying Carrying
amount amount
£'000 £'000
Sanne South Africa 7,029 7,567
Sanne Netherlands 1,649 1,649
Sanne North Americas 40,569 40,224
Sanne Mauritius 55,927 55,452
Luxembourg Investment Solutions S.A. 57,934 61,686
Sanne Luxembourg 5,880 6,260
Sanne Spain 7,838 8,345
Sanne Ireland 4,246 4,521
Sanne Cayman Islands 2,670 2,647
Sanne Japan – 127
Sanne Denmark 9,182 –
Sanne Sweden 2,821 –
Sanne Guernsey 6,216 –
Sanne North America - Texas 26,334 –
PraxisIFM Jersey 249 –
PraxisIFM Guernsey 25,910 –
PraxisIFM Malta 3,896 –
PraxisIFM UK 8,574 –
PraxisIFM Luxembourg 2,254 –
269,178 188,478
Due to the measurement period adjustment on Sanne Group Japan Trust Company, no goodwill is recognised on Sanne Japan. Refer to note 36 for
further details.
In accordance with the Group's accounting policy, the carrying amount of goodwill is not subject to systematic amortisation but is reviewed annually
for impairment. The review assesses whether the carrying amount of goodwill could be supported by the recoverable amount which is determined
through value in use calculations for each CGU. The key assumptions applied in the value in use calculations are the discount rates and the
projected cash flows.
The calculations of the recoverable amounts of all CGUs are based on key assumptions. The values of these assumptions are specific to each CGU.
The future cash flows, on which the value in use calculations are based, take into consideration the impact of the COVID-19 pandemic on markets
globally. The result of the goodwill impairment assessment undertaken is that each CGU maintained sufficient headroom. As a result, none of the
CGUs are impaired.
The recoverable amount of each CGU is its value in use calculated using certain assumptions. The most significant assumptions are the cash flows
(mainly driven by revenue growth and the cost margin), the discount rate and the terminal growth rate. The expected cash flows are based on a
combination of the Group's budgeted and historic data. Refer to note 17 for details relating to the impairment assessment performed on contract
and customer intangible assets and including the discount rate and other key assumptions used.
Discount rates
Management estimates the discount rates to be used in calculating the value in use using pre-tax rates that reflect current market assessments of
the time value of money. In assessing the discount rate applicable to the Group, the following factors have been considered:
(i) Long-term treasury bond rate for the relevant jurisdiction;
(ii) Cost of equity based on an adjusted beta for the relevant jurisdiction; and
(iii) Risk premium to reflect the increased risk of investing in equities,
Projected revenue and costs
Projected revenue and costs are calculated with reference to each CGU's latest budget and business plan which are subject to a rigorous review and
challenge process. Management prepares the budgets by assessing historic revenues from existing clients, the pipeline of new projects, historic
pricing, and the required resource base needed to service new and existing clients, coupled with their knowledge of wider industry trends and the
economic environment. Cash flows are projected for five years with a terminal value at the end of year five.
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
16. Goodwill continued
Projected revenue and costs are calculated using the prior financial year's actual result, excluding lost client revenue. These results are compounded
by the budgeted numbers. Growth rates used are specific to the CGUs and vary between 2% and 16% (2020: 3% and 13%). The expected revenue
growth was adjusted to incorporate a downturn in future revenues due to the impact of COVID-19 on global markets and was based on conservative
cash flow projections. The terminal growth rate applied after five years is based on the forecasted nominal GDP and inflation of the operating
jurisdiction, accounting for the expected mid-term effect that COVID-19 may have on global markets.
Material movements have been seen in the weighted average revenue growth rates for Sanne Netherlands. Sanne Netherlands saw strong client
wins in the prior year; this is expected to slow down in the mid-term, resulting in a lower weighted average revenue growth rate.
Key assumptions
The following discount rates (pre-tax WACC rates), weighted average revenue growth rates and terminal growth rates have been used in the
assessments. No material movements were identified in the WACC rates used between 2020 and 2021. Where the terminal growth exceeds the
weighted average revenue growth rate, the Group makes use of a conservative approach to the mid-term growth rate, whereas the terminal growth
rate was based on external observable sources.
Weighted Weighted
average average
Discount Discount revenue revenue Terminal Terminal
rate rate growth rate growth rate growth rate growth rate
2021 2020 2021 2020 2021 2020
Sanne South Africa 25% 25% 9% 12% 5% 5%
Sanne Netherlands 9% 9% 6% 12% 3% 3%
Sanne North Americas 9% 9% 10% 10% 4% 3%
Sanne Mauritius 12% 12% 4% 4% 5% 6%
Luxembourg Investment Solutions S.A. 7% 7% 12% 11% 3% 4%
Sanne Luxembourg 7% 7% 11% 11% 3% 4%
Sanne Spain 9% 10% 9% 13% 3% 3%
Sanne Ireland 7% 8% 4% 8% 4% 4%
Sanne Cayman Islands 8% 9% 14% 18% 4% 3%
Sanne Denmark 6% – 14% – 3% –
Sanne Sweden 7% – 15% – 3% –
Sanne Guernsey 8% – 2% – 3% –
Sanne North America - Texas 8% – 16% – 4% –
PraxisIFM Jersey 8% – 15% – 3% –
PraxisIFM Guernsey 8% – 8% – 3% –
PraxisIFM Malta 9% – 13% – 4% –
PraxisIFM UK 8% – 13% – 3% –
PraxisIFM Luxembourg 7% – 2% – 3% –
Sanne Japan – 10% – 15% – 1%
Based on the value in use calculations, no CGU requires impairment.
Sensitivity to changes in assumptions
The impairment review of the Group is sensitive to changes in key assumptions, most notably projected cash flows and the pre-tax discount rate.
Management has independently performed a sensitivity analysis on each CGU where the discount rate used was increased by between 0.5% and
1.0%, the expected mid-term growth decreased by between 1.0% and 5.0%, and the expected cost margin increased by between 2.0% and 8.0%, with
all other assumptions remaining constant. None of the CGUs showed indications of impairment. Management believes that any reasonably possible
change in the key assumptions, on which the recoverable amount of a CGU is based, would not cause the aggregate carrying amount to materially
exceed the recoverable amount of any CGU.
The Group considered the potential impact of climate change on the CGUs. In order to assess a potential severe impact of climate change transition
risk, additional sensitivity modelling was performed across CGUs that are likely to be impacted by climate change. The CGUs under consideration
included those that are low lying territories relative to sea levels (these being Mauritius, the Netherlands and the Cayman Islands). This was achieved
by extending the discounted cash flows to a limited 30-year life, excluding any terminal value. In this scenario, which the Group considers to be a low
probability, none of the relevant CGUs would be impaired.
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17. Other intangible assets
Developed Software
computer under
Contract Customer software development Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2020 80,167 15,837 – 276 96,280
Acquired during the year 4,928 1,050 – – 5,978
Additions due to software development – – – 2,322 2,322
Transfer between asset classes – – 1,191 (1,191) –
Exchange difference (729) (171) – – (900)
At 31 December 2020 84,366 16,716 1,191 1,407 103,680
Acquired during the year 20,452 4,604 – – 25,056
Additions due to software development – – 116 1,922 2,038
Transfer between asset classes – – 2,640 (2,640) –
Exchange difference (1,250) (321) – – (1,571)
At 31 December 2021 103,568 20,999 3,947 689 129,203
Developed Software
computer under
Contract Customer software development Total
£'000 £'000 £'000 £'000 £'000
Accumulated amortisation
At 1 January 2020 43,273 7,619 – – 50,892
Charge for the year 13,024 2,653 – – 15,677
Exchange difference (881) (168) – – (1,049)
At 31 December 2020 55,416 10,104 – – 65,520
Charge for the year 13,507 2,929 499 – 16,935
Exchange difference (579) (149) – – (728)
At 31 December 2021 68,344 12,884 499 – 81,727
Carrying amount
At 31 December 2021 35,224 8,115 3,448 689 47,476
At 31 December 2020 28,950 6,612 1,191 1,407 38,160
Annual amortisation on the contract and customer intangibles is recognised in operating expenses and is a non-underlying item. The annual
amortisation on developed computer software is recognised in operating expenses as an underlying item.
Contract and customer intangible assets acquired
During the financial year ended 31 December 2021, the Group made the following acquisitions:
Contract Customer
intangible intangible
asset at asset at
acquisition acquisition
date date
Acquisition Acquisition date £'000 £'000
Sanne Denmark 1 March 2021 2,930 676
Sanne Sweden 1 March 2021 775 174
Sanne Guernsey 1 March 2021 2,428 529
Sanne North America - Texas 7 April 2021 4,705 1,069
PraxisIFM Jersey 1 December 2021 651 151
PraxisIFM Guernsey 1 December 2021 6,379 1,476
PraxisIFM Malta 1 December 2021 245 57
PraxisIFM UK 1 December 2021 1,211 282
PraxisIFM Luxembourg 1 December 2021 1,128 190
Total additions through acquisitions 20,452 4,604
Refer to note 36 for further details on the acquisitions noted above and note 4 for further details around the accounting estimates made at the initial
recognition of the contract and customer intangible assets for the acquisitions made during the financial year ended 31 December 2021.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
17. Other intangible assets continued
Analyses of the carrying amounts of the intangible assets acquired are as follows:
Carrying Carrying
amount amount
Amortisation 2021 2020
Acquisition Acquisition date period end £'000 £'000
Contract intangible
Ariel (Various jurisdictions) 1 May 2014 30 April 2021
–
75
CCS (Sanne Ireland) 1 March 2016 28 February 2023 142 281
IDS Group (Sanne South Africa) 1 June 2016 31 May 2024 559 850
FLSV FAS (Sanne North America) 1 November 2016 31 October 2022 1,329 2,900
IFS Group (Sanne Mauritius) 1 January 2017 31 December 2022 6,424 12,741
LIS Group (Luxembourg Investment Solutions S.A. and
Sanne Luxembourg) 6 February 2018 31 January 2023 2,904 5,946
AgenSynd Group (Sanne Spain) 3 September 2018 31 August 2025 1,209 1,638
Inbhear (Sanne Ireland) 1 May 2020 30 April 2027 1,316 1,663
Avalon (Sanne Cayman Islands) 1 October 2020 30 September 2027 1,607 1,870
DTC (Sanne Japan) 1 October 2020 30 September 2025 705 986
Sanne Denmark 1 March 2021 28 February 2028 2,509 –
Sanne Sweden 1 March 2021 28 February 2028 657 –
Sanne Guernsey 1 March 2021 28 February 2028 2,139 –
Sanne North America – Texas 7 April 2021 31 March 2028 4,265 –
PraxisIFM Jersey 1 December 2021 30 November 2028 643 –
PraxisIFM Guernsey 1 December 2021 30 November 2028 6,303 –
PraxisIFM Malta 1 December 2021 30 November 2028 239 –
PraxisIFM UK 1 December 2021 30 November 2028 1,197 –
PraxisIFM Luxembourg 1 December 2021 30 November 2026 1,077 –
Total 35,224 28,950
Carrying Carrying
amount amount
Amortisation 2021 2020
Acquisition Acquisition date period end £'000 £'000
Customer intangible
Delorean (Various jurisdictions) 1 June 2013 31 May 2023 166 287
Ariel (Various jurisdictions) 1 May 2014 30 April 2024 19 27
CCS (Sanne Ireland) 1 March 2016 28 February 2023 116 229
IDS Group (Sanne South Africa) 1 June 2016 31 May 2024 381 579
FLSV FAS (Sanne North America) 1 November 2016 31 October 2022 254 553
Sorato (Sanne Netherlands) 1 December 2016 30 November 2023 17 25
IFS Group (Sanne Mauritius) 1 January 2017 31 December 2022 1,221 2,422
LIS Group (Luxembourg Investment Solutions S.A. and
Sanne Luxembourg) 6 February 2018 31 January 2023 489 1,001
AgenSynd Group (Sanne Spain) 3 September 2018 31 August 2025 388 526
Inbhear (Sanne Ireland) 1 May 2020 30 April 2027 295 373
Avalon (Sanne Cayman Islands) 1 October 2020 30 September 2027 359 418
DTC (Sanne Japan) 1 October 2020 30 September 2025 123 172
Sanne Denmark 1 March 2021 28 February 2028 579 –
Sanne Sweden 1 March 2021 28 February 2028 147 –
Sanne Guernsey 1 March 2021 28 February 2028 466 –
Sanne North America - Texas 7 April 2021 31 March 2028 969 –
PraxisIFM Jersey 1 December 2021 30 November 2028 149 –
PraxisIFM Guernsey 1 December 2021 30 November 2028 1,458 –
PraxisIFM Malta 1 December 2021 30 November 2028 56 –
PraxisIFM UK 1 December 2021 30 November 2028 278 –
PraxisIFM Luxembourg 1 December 2021 30 November 2026 185 –
Total 8,115 6,612
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17. Other intangible assets continued
Contract and customer intangible assets annual impairment assessment
The method of valuation and subsequent review of the carrying amount of intangible assets is outlined in note 3. Triggers for impairment are
assessed by comparing the actual revenue results and cost margins in the financial year to the forecast revenues and cost margins as at acquisition
for the same financial year. Lower actual results are considered a to be a trigger for an impairment assessment.
As part of that subsequent review, triggers for impairment were detected and impairment assessments performed for the intangible assets relating
to Delorean, CCS, IDS Group, AgenSynd Group, DTC (Sanne Japan) and Sanne Sweden. Triggers for impairment were not identified in the current
year for the LIS Group (LIS and CP) or Ariel (various jurisdictions).
The recoverable amount is determined using the value in use method. A pre-tax WACC is used to discount pre-tax cash flows in the value in use
assessments. The pre-tax WACC was calculated per CGU and may be different to the pre-tax WACC used to discount the goodwill, because the
intangible assets have a finite useful life and no terminal value.
The recoverable amount exceeded the carrying value of the intangible assets which showed indicators for impairment. Consequently no impairment
was recognised.
Discount Discount Remaining Remaining
rate rate useful life useful life
2021 2020 2021 2020
Delorean (Various jurisdictions) 9% – 2 years –
CCS (Sanne Ireland) 8% 8% <1 year 2 years
IDS Group (Sanne South Africa) 20% 20% 2 years 3 years
AgenSynd Group (Sanne Spain) 10% 11% 4 years 5 years
DTC (Sanne Japan) 10% – 4 years –
Sanne Sweden 11% – 6 years –
LIS Group (LIS and CP) – 6% – 4 years
Ariel (Various jurisdictions) – 8% – <1 years
No comparative information is presented if a CGU did not have an indicator for impairment in the prior financial year.
Software intangible assets
The below asset classes are recognised where the SaaS agreement gives rise to an intangible asset:
Carrying Carrying
amount amount
2021 2020
£'000 £'000
Developed computer software 3,448 1,191
Software under development 689 1,407
The Group entered into cloud computing agreements. The Group assessed each "SaaS" agreement to determine if the agreement contains an
intangible asset. The agreement contains an intangible asset if it provides the Group with a resource that it can control (i.e. if the Group has the
power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits). The Group
has an intangible asset if the Group has the contractual right to take possession of the software during the hosting period without significant penalty
and if it is feasible for the Group to run the software on its own hardware or contract with another party, unrelated to the supplier, to host the
software. When both conditions are met, the Group accounts for the implementation costs, being those costs incurred in preparing the intangible
asset for the asset to operate in the manner as intended by management. All other costs are expensed in profit or loss.
The Group entered into agreements with various suppliers, whereby new software will be developed for the Group's exclusive use. These assets are
classified as "software under development" when they give rise to an intangible asset, but the asset is under development and not yet ready for use
as intended by management. Once the "software under development" is ready for use, as intended by management, cost capitalisation ceases and
the asset is transferred from being classified as "software under development" to the "developed computer software" asset class and amortisation
commences.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
17. Other intangible assets continued
Management has applied judgement to determine if the software being developed is an intangible asset and for which development costs can be
capitalised. The software is identifiable because it arises from contractual rights, regardless of whether those rights are transferable or separable
from the entity or from other rights and obligations. The Group concluded that it controls the assets classified as "software under development" and
"developed computer software" because it is able to take possession of the software as there are no financial penalties or operational barriers that
act as significant disincentives to the Group. Control is further strengthened in instances where the Group can operate and/or host the software
without reliance on the supplier and the Group can determine when and how upgrades to the software are made. Where the agreement also
provides exclusive use of the software, it further supports instances where the Group controls the software. When these conditions are met, the
Group recognises the costs incurred as an intangible asset. The software will enable the Group to add value to its clients as clients will be able to
use the software to engage with the Group when the Group renders its services. It will also enhance the efficiency of services rendered, thereby
saving future potential expenses.
18. Equipment
Computer Computer Fixtures and
equipment software equipment Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2020 6,005 3,035 11,141 20,181
Additions 1,067 171 716 1,954
Additions through acquisitions 85 267 47 399
Disposals (272) – (270) (542)
Exchange differences (47) (41) 94 6
At 31 December 2020 6,838 3,432 11,728 21,998
Additions 812 220 712 1,744
Additions through acquisitions 289 265 416 970
Disposals (835) (284) (696) (1,815)
Exchange differences (80) (109) (193) (382)
At 31 December 2021 7,024 3,524 11,967 22,515
Computer Computer Fixtures and
equipment software equipment Total
£'000 £'000 £'000 £'000
Accumulated depreciation
At 1 January 2020 4,034 2,520 3,643 10,197
Charge for the year 1,431 290 1,148 2,869
Additions through acquisitions 80 267 42 389
Disposals (126) – (241) (367)
Exchange differences (46) (34) 19 (61)
At 31 December 2020 5,373 3,043 4,611 13,027
Charge for the year 676 302 1,291 2,269
Additions through acquisitions 182 231 375 788
Disposals (783) (284) (680) (1,747)
Exchange differences (58) (90) (119) (267)
At 31 December 2021 5,390 3,202 5,478 14,070
Computer Computer Fixtures and
equipment software equipment Total
£'000 £'000 £'000 £'000
Carrying amount:
At 31 December 2021 1,634 322 6,489 8,445
At 31 December 2020 1,465 389 7,117 8,971
As at 31 December 2021 £7.8 million (2020: £7.7 million) of fixed assets are fully depreciated and still in use.
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19. Subsidiaries
Detailed below is a list of subsidiaries of the Company as at 31 December 2021 which, in the opinion of the Directors, principally affect the profit and
/ or the net assets of the Group. All these subsidiaries are 100% owned by the Group, with 100% of voting power held. They all engage in the
provision of alternative asset and corporate administration and fiduciary services. All subsidiaries only have ordinary shares.
Subsidiaries Country of incorporation
Sanne Group (Cayman) Limited
1
Cayman Islands
Sanne Trustees (Cayman) Limited
2
Cayman Islands
Sanne Fiduciary Services (UK) Limited England and Wales
Sanne Group (UK) Limited England and Wales
Sanne Group Administration Services (UK) Limited England and Wales
Sanne Trustee Company UK Limited England and Wales
AgenSynd Limited England and Wales
AgenSynd France SAS France
Sanne Group (Guernsey) Limited Guernsey
Sanne Group Asia Limited Hong Kong
Sanne Group Japan KK Japan
Sanne Group Japan Trust Company
3
Japan
Sanne Fiduciary Services Limited Jersey
Sanne Finance Limited Jersey
Sanne Fund Administration Limited Jersey
Sanne Holdings Limited Jersey
Sanne International Limited Jersey
Sanne Trustee Services Limited Jersey
Sanne Group Funding Limited Jersey
Sanne Group (Luxembourg) S.A. Luxembourg
Luxembourg Investment Solutions S.A. Luxembourg
SANNE Mauritius Mauritius
SANNE Trustees (Mauritius) Mauritius
Sanne Group (Netherlands) B.V. Netherlands
Sanne Financial Management Consulting (Shanghai) Co Ltd Peoples Republic of China
Sanne Capital Markets Ireland Limited Republic of Ireland
Sanne Corporate Administration Services Ireland Limited Republic of Ireland
Sanne Fund Services Malta Limited Republic of Malta
Sanne Management Company RF (PTY) Limited Republic of South Africa
Sanne Fund Services SA (PTY) Limited Republic of South Africa
Sanne Group d.o.o. Beograd Serbia
Sanne (Singapore) PTE Limited Singapore
AgenSynd S.L. Spain
Sanne Group U.S. LLC United States of America
Sanne Group Delaware Inc. United States of America
Acquired or incorporated during the year Country of incorporation
Private Equity Administrators ApS Denmark
PEA Depositary Services ApS Denmark
Sanne Netherlands Management Netherlands
Sanne Depositary Services Ireland Limited Republic of Ireland
Private Equity Administrators Sweden AB Sweden
PEA Depositary Services AB Sweden
Strait Capital Company Limited United States of America
Sanne Fund Management (Guernsey) Limited
4
Guernsey
Sanne Fund Services (Guernsey) Limited
5
Guernsey
Sanne Fund Services (Jersey) Limited
6
Jersey
Sanne Fund Services (Luxembourg) S.A.
7
Luxembourg
Sanne Fund Services (UK) Limited
8
England and Wales
Sanne Fund Administration (Malta) Limited
9
Republic of Malta
1 Formerly known as Inbhear Management Services Limited
2 Formerly known as Avalon Trust & Corporate Services Limited
3 Formerly known as Deutsche Trust Company Limited
4 Formerly known as International Fund Management Limited
5 Formerly known as Praxis Fund Services Limited
6 Formerly known as Praxis Fund Services (Jersey) Limited
7 Formerly known as PRAXISIFM Luxembourg S.A
8 Formerly known as PraxisIFM Fund Services (UK) Limited
9 Formerly known as Praxis Fund Services (Malta) Limited
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
20. Minority equity investments
The Group acquired a minority interest in certain entities, as listed below. The shares are not held for trading and, at initial recognition, the Group
made the irrevocable election to carry the investments at fair value through other comprehensive income. The Group regards the transactions to be
strategic investments and the classification to be the most relevant, based on the Group's business model.
2021 2020
£'000 £'000
Non-current assets
Unlisted securities
Colmore A.G. – 8,398
Alternative Assets Accounting Software Inc. – 367
Listed securities
The International Stock Exchange Group Limited 155 –
Sequoia Economic Infrastructure Income Fund Limited 54 –
209 8,765
Reconciliation of fair value measurements of financial instruments (other than trade and other receivables):
2021 2020
£'000 £'000
At 1 January 8,765 8,632
Additions – 387
Additions through acquisitions 200 –
Fair value remeasurement through other comprehensive income 10,409 –
Foreign exchange loss through other comprehensive income (306) (234)
Foreign exchange loss through retranslation reserve (6) (20)
Sale of minority equity investment (18,492) –
Step acquisition of an investment in associate (refer to note 21) (361) –
At 31 December 209 8,765
Colmore A.G.
On 5 August 2021, the majority shareholders of Colmore A.G. entered into an agreement to sell their shares in Colmore A.G. to Preqin Limited.
TheGroup sold its shares held as a minority equity investment alongside those of the majority shareholders.
As part of the sale of the investment to Preqin, the Group may be entitled to receive a contingent consideration payment at the end of December
2025. The contingent consideration will be based on Colmore A.G.'s annualised annual recurring revenue and will be settled in cash by Preqin
Limited. The contingent consideration was considered as part of the fair value measurement of the investment at the reporting date. Management
estimated the fair value of the contingent consideration as £nil as at 31 December 2021, because there are significant uncertainties regarding the
probability that the contingent consideration targets will be met.
Listed securities
The Group holds minor investments in two listed entities. The investments are classified as level 1 on their fair value hierarchy and their values are
based on unadjusted quoted tradable market prices. There have been no transfers between levels during the current year. The listed securities are
equity investments not held for trading and an irrevocable election was made to carry the investments at fair value through other comprehensive
income.
21. Investment in associate
On 23 April 2021, the Group increased its investment in Alternative Assets Accounting Software Inc. from 5.9% to 11.1%. The first investment had a
fair value of £0.4 million. The additional investment was acquired for a cash consideration of £0.4 million. After the additional investment, the Group
reassessed the investment and concluded it has significant influence over the investee (refer to note 4 for the judgement applied in the
assessment). Consequently, the Group accounted for the investment as an investment in associate. The Group applied step acquisition accounting
and transferred the investment from a minority equity investment to an investment in associate carried at cost.
The carrying amount of the minority equity investment presented at fair value through profit or loss at the time of the transaction was £0.4 million.
The Group’s accounting policy for a step acquisition of an investment in associate is to measure the cost of the investment in associate as the sum
of the fair value of the interest previously held plus the fair value of the additional consideration transferred that resulted in significant influence
(totalling £0.7 million on 23 April 2021).
On 21 October 2021, the Group increased its investment in Alternative Assets Accounting Software Inc. from 11.1% to 15.8%. The percentage held is
equal to the voting rights of the Group in the associate. The additional investment was acquired for a cash consideration of £0.4 million.
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21. Investment in associate continued
The share capital of the investee consists solely of ordinary shares that are held directly by the Group and the proportion of ownership interest held
equals the voting rights held by the Group. The country of incorporation is also its principal place of business. Alternative Assets Accounting
Software Inc. is a private company and does not trade publicly.
The Group's investment in associate which, in the opinion of the Directors, is material to the Group at 31 December 2021 and 31 December 2020 is
as follows:
% of ownership interest
2021 2020 2021 2020
% % £'000 £'000
Investment in associate measured using the equity method
Alternative Assets Accounting Software Inc. 15.8% 5.9% 1,035 –
The summarised balance sheet of Alternative Assets Accounting Software Inc. as at 31 December 2021 is as follows:
2021
£'000
Non-current assets 4
Current assets 467
Total assets 471
Non-current liabilities –
Current liabilities (11)
Total liabilities (11)
Total net assets 460
The summarised profit or loss of Alternative Assets Accounting Software Inc. for the period 23 April 2021 to 31 December 2021 is as follows:
2021
£'000
Revenue 37
Gross loss (219)
Loss for the period 23 April 2021 to 31 December 2021 (593)
A reconciliation of the summarised financial information of Alternative Assets Accounting Software Inc. for the period 23 April 2021 to 31 December
2021 is as follows:
2021
£'000
Opening net assets on 23 April 2021 312
Equity investment by the Group 720
Loss for the period 23 April 2021 to 31 December 2021 (593)
Foreign exchange gain / loss 21
Closing net assets as at 31 December 2021 460
Group's share of closing net assets 73
Goodwill 987
Foreign exchange gain / loss (25)
Carrying amount of investment in associate as at 31 December 2021 1,035
The impact of the investment in associate on the consolidated financial statements of the Group is as follows:
2021
£'000
Balance at 1 January –
Step acquisition 361
Increase in owner's equity 720
Share of associate's loss (76)
Foreign exchange gain / loss 30
Balance at 31 December 1,035
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
22. Financial asset at amortised cost
The financial asset at amortised cost include the following:
2021 2020
£'000 £'000
Non-current asset
Loan granted and interest accrued – 830
The Group classifies its financial assets at amortised cost only if both the following criteria are met:
(i) the asset is held within a business model whose objective is to collect the contractual cash flows, and
(ii) the contractual terms give rise to cash flows that are solely payments of principal and interest.
The loan granted and all accrued interest was settled as part of the sale of Sanne Group plc's share in Colmore A.G. Refer to note 20 for further
details regarding the sale transaction.
23. Leases
This note provides information for leases where the Group is a lessee. The Group only applied the IFRS 16 lease accounting to its qualifying leases.
Office space is leased by the Group in various jurisdictions.
2021 2020
£'000 £'000
Right-of-use asset 40,632 33,724
2021 2020
£'000 £'000
Lease liabilities
Non-current 40,446 34,405
Current 5,822 4,923
Total lease liabilities 46,268 39,328
During the 2021 financial year, the Group made £8.9 million (2020: £4.5 million) in additions to the right-of-use assets. The total cash outflow for
leases amounted to £7.4 million (2020: £6.5 million).
The Group impaired the right-of-use asset relating to its previous London premises. During the prior year, the Group decided to make use of the
break clause in its office lease agreement in the UK jurisdiction. COVID-19 and prolonged building work and renovations to the building limited the
Group's ability to sublease the building. It was also not possible to sublease the building in 2021 due to operational challenges outside the Group's
control. Consequently the change in the estimated lease term was treated as a lease modification, decreasing both the lease liability and the
right-of-use asset. The right-of-use asset was assessed as a standalone CGU as it has the capability of generating income if it is subleased. The
recoverable amount was less than the carrying amount and resulted in the right-of-use asset being impaired. During the current year, the lease
liability was extinguished and the remaining balances released to profit or loss. These transactions are non-underlying in nature.
The consolidated income statement includes the following amounts relating to leases:
2021 2020
£'000 £'000
Depreciation on right-of-use assets 6,499 5,795
Interest expense (included in finance costs) 1,644 1,530
Expenses relating to short-term leases 535 650
Impairment of right-of-use asset – 497
Lease liability extinguishment (144) –
Rental income (86) –
Leases are negotiated for a variety of terms over which rentals are fixed with break clauses and options to extend for a further period at the then
prevailing market rate. Rental agreements which qualify for IFRS 16 span from 1 year to 24 years. Judgement was applied in assessing the lease
term over which the lease liability should be recognised. The fixed duration per the rental agreement was used as a starting point. Thereafter the
term is adjusted based on the contract clauses. Should the Group determine it will make use of a break clause, the lease term is adjusted for the
break clause if the Group considers it highly probable that it will extend the agreement per the extension clauses.
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23. Leases continued
The Group is exposed to potential future increases in variable lease payments based on consumer price indexes, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on the consumer price index take effect, the lease liability is reassessed,
using the incremental borrowing rate as at commencement date, and adjusted against the right-of-use asset.
During the year, certain leases were extended by exercising extension clauses included in the leases. These lease extensions were treated as lease
modifications by discounting the remaining lease payments based on the extended agreement, discounted at the incremental borrowing rate as at
the modification date. The increase in the lease liability increased the right-of-use asset. The right-of-use asset is depreciated over its remaining
useful life at modification date.
The incremental borrowing rate is determined with reference to the operating jurisdiction's risk-free rate, adjusted for credit risk, using the interest
rate premium as per the Group's current borrowings and the liquidity premium, by adjusting the interest rate up or down based on the remaining
duration of the rental agreement. Judgement was applied to determine the point where the upward or downward adjustment is made to the interest
rate. The Group applied a different incremental borrowing rate to each lease in each jurisdiction. The unique discount rate best represents the
monetary environment in which the subsidiary operates at commencement (or transition date). This approach best reflects what the Group would
have to pay to obtain a similar asset in the economic environment in which the subsidiary operates. The incremental borrowing rates ranged
between 0.81% and 9.77%.
24. Trade and other receivables
2021 2020
£'000 £'000
Trade receivables 63,766 47,934
Allowance for doubtful receivables (1,346) (1,498)
62,420 46,436
Prepayments 5,824 4,807
Other debtors 2,943 2,470
Total trade and other receivables 71,187 53,713
Trade receivables
Trade receivables disclosed above are amounts due from services rendered in the ordinary course of business. At initial measurement, they are
recognised at fair value and are subsequently measured at amortised cost, using the effective interest method.
The Group considers all receivables over 60 days to be past due.
In the current year, no client represented more than 5% of the total trade receivables balance. In the prior year, an institutional client represented
5%of the total trade receivables balance.
The Directors consider the carrying amount of trade and other receivables to be approximately equal to their fair value.
Movement in the allowance for doubtful receivables:
2021 2020
£'000 £'000
Balance at the beginning of the year 1,498 862
Recognised through acquisitions 205 30
Impairment losses recognised 583 1,458
Amounts written off during the year as uncollectable (597) (550)
Amounts recovered during the year (351) (374)
Exchange differences 8 72
Total allowance for doubtful receivables 1,346 1,498
The expected credit losses were measured by grouping the trade receivables in a manner that reflects shared credit risk characteristics and days
past due. The expected loss rates are based on the payment profiles of the respective trade receivable groups. In assessing the payment profiles the
Group considers the expected future economic changes in the operating jurisdiction, specific client relationships and the expected future client and
fund liquidity. This is then adjusted for forward-looking evidence indicating that the Group will not be able to collect the debts or bill the customers.
All impairment losses relate to receivables from contracts with customers.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
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24. Trade and other receivables continued
The following tables provide information about expected credit losses for trade receivables, from individual customers as at 31 December 2021 and
31 December 2020:
Gross
2021 carrying Loss Net carrying
Expected amount allowance amount
31 December 2021 loss rate £'000 £'000 £'000
<31 days 0% 50,747 13 50,734
31-60 days 0% 1,030 – 1,030
61-90 days 0% 2,127 6 2,121
91-120 days 1% 4,711 46 4,665
121-180 days 5% 1,196 58 1,138
180+ days 31% 3,955 1,223 2,732
Total 63,766 1,346 62,420
Gross
2020 carrying Loss Net carrying
Expected amount allowance amount
31 December 2020 loss rate £'000 £'000 £'000
<31 days 0% 34,037 26 34,011
31-60 days 0% 1,459 – 1,459
61-90 days 0% 2,276 9 2,267
91-120 days 0% 4,653 16 4,637
121-180 days 0% 1,021 – 1,021
180+ days 32% 4,488 1,447 3,041
Total 47,934 1,498 46,436
All age buckets disclosed above have expected credit losses applied. Buckets where the expected credit loss rate is 0% have no material credit losses.
25. Contract assets
2021 2020
£'000 £'000
EMEA 4,817 3,832
Asia-Pacific & Mauritius 4,324 2,817
North America 416 762
Channel Islands 2,987 833
Balance at 31 December 12,544 8,244
2021 2020
£'000 £'000
Contract assets relating to contracts with customers 1 January 8,244 6,460
Increase in contract assets for the financial year 10,932 9,228
Contract assets released to revenue (7,669) (5,908)
Additions through acquisitions 914 –
Disposal group held for sale – (850)
Exchange differences 123 (686)
Balance at 31 December 12,544 8,244
The contract assets listed above relate to unbilled work recognised on time spent as performance obligations are met. These assets are all current
and based on expected recoverability. The contract assets are subject to the impairment requirements of IFRS 9. Contract assets substantially have
the same risk characteristics as the trade receivables and therefore the simplified approach is applied to contract assets. The Group concluded that
the expected loss rates applied to trade receivables in the <31 days category are an appropriate estimation of the expected credit losses for contract
assets. Payments are due as soon as invoices are raised.
The failure to recover 15% (based on an extreme worst case scenario) of the £12.5 million year end balance (2020: £8.2 million) would result in an
impairment of £1.9 million (2020: £1.2 million).
Refer to note 3 where the Group's accounting policy for the recognition of contract balances and corresponding performance obligations is set out
in greater detail.
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Governance Financial StatementsStrategic Report
25. Contract assets continued
Contract assets recognised from costs incurred to obtain a contract
In addition to the contract balances disclosed above, the Group recognised contract assets in relation to costs incurred to obtain customer
contracts. The contract assets are recognised as non-current assets.
2021 2020
£'000 £'000
Balance at 1 January 66 –
Contract assets recognised to obtain a customer contract 76 76
Accumulated amortisation recognised as a cost to provide the service (16) (10)
Foreign exchange loss (2) –
Balance at 31 December 124 66
No impairment losses were recognised on the contract assets recognised for costs incurred to obtain a contract.
The Group incurs costs when entering into certain contracts with customers which are only incurred if the contracts are successfully obtained. The
Group renders services in terms of these new contracts, generating revenue over the duration of the contract. The Group realises the cost of
entering into the contracts over the useful life of the contractual agreement or seven years (whichever period is shorter). This matches the expense
to the revenue that is generated by the contract over time.
26. Net (debt)/cash
2021 2020
£'000 £'000
Bank loan (see note 29) (99,444) (133,549)
Trapped cash (i) (12,642) (13,353)
Trapped cash in escrow (ii) (5,500) –
Less: Cash and cash equivalents 48,070 57,119
Less: Cash and cash equivalents in escrow (ii) 5,500 –
Total net (debt)/cash (64,016) (89,783)
The Group had undrawn borrowings at 31 December 2021 of £109.1 million (2020: £15.0 million) and an uncommitted accordion of £100.0 million
(2020: £70.0 million). See note 29.
(i) Trapped cash is the aggregate of the minimum amounts of cash legal entities within the Group are required to hold in order to maintain compliance
with any regulatory or legal capital or liquidity requirements that apply to them. The balance of trapped cash is somewhat fluid and will depend on
the other assets of the respective entities. It is not specifically held in segregated accounts. Trapped cash can be used by the business, however, it
could lead to a breach of the regulatory compliance requirements. Refer to note 37 for additional information on capital management.
(ii) The trapped cash in escrow relates to the acquisition of the PraxisIFM group. The total consideration paid amounted to £54 million, of which £5.5
million was paid into an escrow account on 1 December 2021. The amount is disclosed separately on the consolidated balance sheet, because it is
restricted cash. The Group does not have access to this cash, however the payment is seen as a conditional payment, which only extinguishes the
obligation to pay the previous owners once the condition under which the payment in escrow was made is satisfied. The cash held in escrow will be
released from the escrow account in July 2022, if the largest client of PraxisIFM remains with the Group by July 2022.
27. Share capital and share premium
2021 2020
£'000 £'000
Authorised
500,000,000 (2020: 500,000,000) ordinary shares of £0.01 each 5,000 5,000
Called up, issued and fully paid
162,277,287 (2020: 147,388,877) ordinary shares of £0.01 each 1,623 1,474
588,693 Ordinary shares (0.4% of the issued share capital) are held by Sanne Group Employees' Share Trust (''EBT'') (2020: 804,585) and have been
treated as treasury shares in accordance with IAS 32 Financial Instruments.
At 31 December 2021, the Company held 98,533 (2020: 98,533) treasury shares.
Ordinary shares have a par value of £0.01 each. They entitle the holder to participate in dividends and one vote.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
27. Share capital and share premium continued
Movements in share capital during the year ended 31 December
2021 2020
£'000 £'000
Balance at 1 January 1,474 1,466
Issue of shares:
FAS deferred consideration – 6
Avalon Trust & Corporate Services Limited acquisition consideration – 2
PEA group acquisition consideration 13 –
Straight Capital Company Limited acquisition consideration 12 –
Share placing transaction 124 –
Balance at 31 December 1,623 1,474
Movements in share premium during the year ended 31 December
2021 2020
£'000 £'000
Balance at 1 January 207,190 203,423
Issue of shares:
FAS deferred consideration – 3,089
Avalon Trust & Corporate Services Limited acquisition consideration – 678
PEA group acquisition consideration 7,602 –
Straight Capital Company Limited acquisition consideration 7,570 –
Share placing transaction 76,872 –
Balance at 31 December 299,234 207,190
The Company issued 1,288,502 ordinary shares on 1 March 2021 as part of the acquisition of the PEA group with a further 35,792 ordinary shares
issued on 9 April 2021. Refer to note 36 for further details on the acquisition.
The Company issued 1,135,095 ordinary shares on 7 April 2021 to fund the acquisition of Strait Capital Company Limited. Note 36 contains further
details on the acquisition.
On 8 April 2021, the Company issued 12,429,021 ordinary shares in a share placing transaction, to the value of £77 million. The ordinary shares have
been placed by Jefferies International Limited and J.P. Morgan Securities plc.
On 1 October 2020, the Company issued 119,053 ordinary shares as consideration for the acquisition of Sanne Trustees (Cayman) Limited
(previously known as Avalon Trust & Corporate Services Limited). Note 36 contains further details on the acquisition.
On 2 November 2020, the Company issued 636,656 ordinary shares as the final settlement of the deferred consideration for the acquisition of Sanne
Group U.S. LLC that took place on 1 November 2016.
28. Own shares
2021 2020 2021 2020
Shares Shares £'000 £'000
EBT 588,693 804,585 443 562
Treasury 98,533 98,533 – –
Total 687,226 903,118 443 562
Sanne Group Employees' Share Trust ("EBT")
During the year, the EBT settled commitments under share-based payments of 221,511 shares. The EBT also repurchased 5,619 shares during the
year from employees.
The remaining shares and cash are held by the EBT to fulfil the Group's future obligations under share plans.
Treasury shares
The Company held 98,533 (2020: 98,533) shares in treasury resulting from repurchases of shares which are held under restrictive sale agreements,
at a total cost of £2.
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Governance Financial StatementsStrategic Report
29. Borrowings
On 18 March 2021, the Group refinanced its loan facility. On 19 March 2021, the Group used the refinanced loan facility to repay the existing loan in
full. The repayment amounted to £137.1 million. The refinanced facility matures on 18 March 2024 with extension options of up to two years. The
loan was disclosed as a current liability, despite the contractual term, because it will be settled within the next 12 months as part of the completion
of the Apex transaction. Interest is charged at the Sterling Overnight Index Average ("SONIA") for amounts drawn in Pounds Sterling (and the
Secured Overnight Financing Rate ("SOFR") for amounts drawn in United States Dollar) plus a variable margin and a spread adjustment dependent
on the selected interest repayment period. The balance of the unamortised loan costs, relating to the loan that was refinanced, were written off.
The new loan is structured as a £210 million multicurrency revolving credit facility plus an uncommitted accordion facility of £100 million with a
consortium of six banks namely HSBC Bank plc, Citibank N.A., DNB (UK) Limited, Fifth Third Bank National Association, The Governor and Company
of the Bank of Ireland and JP Morgan Chase Bank N.A. The new loan is now structured solely as a revolving credit facility that can be drawn down
and repaid by the Group at any time. The loan and accordion have a maturity of 18 March 2024 and charge commercial rates. The group drew down
£139.7 million from the new facility on the date of refinancing. The drawn amount was utilised to repay the previous facility, as well as the
transaction costs incurred.
Covenants attached to the loan relate to interest cover and leverage. Undrawn funds in the revolving credit facility are charged at 35% of the interest
margin whilst the accordion facility attracts no interest until drawn.
The Group assessed if the change to the agreement would constitute a significant modification under IFRS 9. The difference between the net
present value of the remaining cash flows under the modified terms vs the net present value of the remaining cash flows under the agreement, prior
to refinancing, was less than 10%. The change to the revolving credit facility's terms did not result in a substantial modification. Consequently, the
accounting treatment of the borrowings remains unchanged.
The balances available and drawn are as follows:
2021 2020
£'000 £'000
Available
Revolving credit facility 210,000 150,000
Uncommitted accordion facility 100,000 70,000
310,000 220,000
Drawn
Revolving credit facility 100,780 134,913
Capitalised loan fees (1,336) (1,364)
Total borrowings 99,444 133,549
Reconciliation of loan balance
2021 2020
£'000 £'000
Balance at 1 January 133,549 129,572
Redemption of bank loans (262,484) (12,302)
New bank loans raised 229,186 14,821
Amortisation for the year 271 162
Loan fees paid (1,580) (29)
Loan fees written off 1,336 –
Exchange gain (834) 1,325
Balance at 31 December 99,444 133,549
The above balance for the revolving credit facility represents the carrying amount of borrowings at a floating interest rate. The Group's financiers
have replaced LIBOR with SONIA for amounts drawn in Pounds Sterling and with SOFR for amounts drawn in United States Dollar. No material
changes were made to the financial statements as a result of the LIBOR reform, because the re-estimating of the future interest payments has no
significant effect on the carrying amount of the borrowings. The Group does not have fixed rate borrowings.
The Directors consider the carrying amount of the borrowings to approximate its fair value.
During the year ended 31 December 2021, the Group repaid £125.4 million of the drawn revolving credit facility and drew down a total of
£86.4million from its facility during the year ended 31 December 2021. This was done in addition to the drawn down and repayment made on
19March 2021, the refinancing date. The repayment was largely funded through the shares issued on 8 April 2021 (refer to note 27).
Refer to note 37 for further details relating to the borrowings' liquidity risk.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
30. Deferred taxation
The deferred taxation recognised in the financial statements is set out below:
2021 2020
£'000 £'000
Deferred tax asset 14,389 9,008
Deferred tax liabilities (19,088) (15,165)
(4,699) (6,157)
The deferred tax at year end is made up as follows:
2021 2020
£'000 £'000
Other intangible assets (5,697) (7,907)
Other timing differences 998 1,750
(4,699) (6,157)
The movement in the year is analysed as follows:
2021 2020
£'000 £'000
Balance at 1 January (6,157) (7,607)
Recognised through acquisitions (2,814) (715)
Other comprehensive income (115) 95
Income statement movements
Other intangible assets 2,210 1,156
Leases - right-of-use assets 2,109 325
Leases - lease liabilities (2,176) (188)
Tangible assets (460) (155)
Share-based payments 1,252 (683)
Other timing differences - income statement 1,467 1,694
Foreign exchange (15) (79)
Balance at 31 December (4,699) (6,157)
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.
The Group expects the deferred tax asset to be recovered as follows:
2021 2020
£'000 £'000
Deferred tax asset
Recovered in no more than 12 months after year-end 3,719 818
Recovered in more than 12 months after year-end 10,670 8,190
Balance at 31 December 14,389 9,008
The group expects the deferred tax liability to be settled as follows:
2021 2020
£'000 £'000
Deferred tax liability
Settled in no more than 12 months after year-end (4,843) (2,611)
Settled in more than 12 months after year-end (14,245) (12,554)
Balance at 31 December (19,088) (15,165)
The Group reassessed the recovery / settlement duration of certain temporary differences to be more than 12 months after year-end, instead of less
than. This resulted in the prior year amounts being restated. In the prior year, the deferred tax assets recovered in no more than 12 months after
year-end was disclosed as £3.0 million and deferred tax assets recovered in more than 12 months after year-end was disclosed as £6.0 million. The
deferred tax liability settled in no more than 12 months after year-end was disclosed as £7.3 million in the prior financial year and the deferred tax
liability settled in more than 12 months after year-end was disclosed as £7.9 million. The restated amounts are show in the above two tables.
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31. Provisions
2021 2020
£'000 £'000
Balance at 1 January 3,295 2,475
Provisions raised due to new lease agreements 325 –
Change in dismantling estimate 150 792
Additions through acquisitions 221 –
Provisions utilised during the financial year (86) –
Foreign exchange loss (79) 28
Balance at 31 December 3,826 3,295
Of which are:
Non-current provisions 3,247 2,936
Current provisions 579 359
Balance at 31 December 3,826 3,295
The provision carried principally relates to dilapidations for property leases and will be utilised upon the dismantling of the fixtures in the properties
leased, which is expected to occur at the end of rental agreements. The rental agreements span from 1 year to 24 years. A best estimate of the
dismantling costs was made. However, the final costs will be determined based on the state of the property and the work required. The Group
expects the cash outflow to occur at the end of the lease term.
32. Trade and other payables
2021 2020
£'000 £'000
Trade creditors 1,029 599
Other payables 2,044 3,590
Other taxes and social security 3,920 3,634
Accruals (i) 34,674 6,949
Contingent consideration 14,209 287
Total trade and other payables 55,876 15,059
Trade creditors, other payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors
consider the carrying amount of the trade and other payables to approximate the fair value.
(i) Included in this balance is £21.7 million relating to the transactional costs of the Apex transaction. £0.9 million of this balance relates to the PEA
group's acquisition and will be payable if the staff remain employed by the Group.
Refer to note 37 regarding the fair value assumptions made in valuating the contingent consideration at the end of the financial year.
33. Contract liabilities
2021 2020
£'000 £'000
EMEA 9,208 7,809
Asia-Pacific & Mauritius 4,559 4,121
North America 10,142 336
Channel Islands 6,725 6,276
Balance at 31 December 30,634 18,542
The following disclosure indicates how much of the revenue, recognised in the current financial year, relates to carried-forward contract liabilities
and how much revenue is billed in advance.
2021 2020
£'000 £'000
Contract liabilities at 1 January 18,542 17,634
Revenue recognised in the current period that was included in the contract liability balance at the beginning of the period (19,304) (17,985)
Contract liabilities recognised during the year 31,276 18,886
Additions through acquisitions 218 –
Disposal group held for sale – (202)
Exchange differences (98) 209
Balance at 31 December 30,634 18,542
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
33. Contract liabilities continued
Payments are due as soon as invoices are raised. Revenue is recognised over time as the performance obligations are met.
The Group expects the contract liabilities to realise fully as revenue in the next 12 months, as performance obligations are satisfied over time.
Refer to note 3 where the Group's accounting policy for the recognition of contract balances and corresponding performance obligations is set out
in greater detail.
34. Share-based payments
2021 2020
£'000 £'000
Sanne Group plc
Performance Share Plan 3,623 374
Restricted Stock Awards 4,860 2,779
Social security accrual 80 14
Total share-based payments expense recognised in the income statement 8,563 3,167
Change in vesting period estimate
The Apex transaction resulted in acceleration of the vesting period of the share-based payments. The below sets out the accelerated portion of the
share-based payments expense for the year.
2021 2020
£'000 £'000
Sanne Group plc
Performance Share Plan 2,498 –
Restricted Stock Awards 1,329 –
Total accelerated share-based payments expense 3,827 –
Refer to note 7 for further details regarding the treatment of the accelerated portion of the share-share based payments expense.
Performance Share Plan
During the current and prior years the Group granted awards over its ordinary shares under the terms of its Performance Share Plan ("PSP"). The
exercise of awards under the PSP is conditional upon the achievement of one or more challenging performance targets set at the time of the grant
and measured over a three-year performance period from grant date. All the awards were granted for nil consideration.
The fair value for Performance Share Plans containing a market condition was valued on grant date using the Geometric Brownian Motion, which
incorporated a Monte Carlo simulation. This was performed by determining the share price at grant date and applying the model under certain
assumptions, for example the reinvesting of dividends and a risk-free rate linked to a three-year UK government bond.
Management estimates the number of shares to be vested based on the performance targets set to be achieved and the current performance of the
Group. This is then grown by 10% as per market expectation to determine the probable performance at vesting date. The fair value of share awards
granted during the financial year amounted to £2.6 million.
A summary of the rules for this scheme and the related performance conditions are set out in the Remuneration Report.
Restricted Stock Awards
During the current and prior years the Group granted awards over its ordinary shares in the form of Restricted Stock Awards (“RSA”). The awards are
granted as part of the mechanics of an acquisition to act as retention incentives. The vesting of the awards is subject to continued employment over
an agreed period. All the awards were granted for nil consideration. The fair value of share awards granted during the financial year amounted to
£3.6 million.
The number of PSP share-based payment awards granted are as follows:
Number of shares Number of shares
2021 2020
Performance Share Plan
Outstanding at 1 January 1,447,592 1,016,548
Granted during the year 518,865 558,379
Forfeited during the year (58,691) (89,060)
Vested during the year – (38,275)
Outstanding at 31 December 1,907,766 1,447,592
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34. Share-based payments continued
The number of RSA share-based payment awards granted are as follows:
Number of shares Number of shares
2021 2020
Restricted Stock Awards
Outstanding at 1 January 1,172,561 1,679,064
Granted during the year 606,077 381,973
Forfeited during the year (45,038) (63,997)
Vested during the year (210,240) (824,479)
Outstanding at 31 December 1,523,360 1,172,561
The fair value of services received in return for share awards granted is measured by reference to the fair value of the shares granted. The RSA
scheme has vesting dates from 2022 to 2024. The PSP scheme has vesting dates between 2022 and 2024. On 25 August 2021, the Group and Apex
announced a recommended all cash offer of 920p per share to be made by Apex for the Group. This has a direct impact on the vesting period
estimation. All plans were accelerated to account for a shortened vesting period, because the upcoming offer will result in the plans vesting earlier.
Shares to be issued per the consolidated balance sheet comprise the following:
2021 2020
£'000 £'000
Balance at 1 January 3,006 7,723
Increase in share-based payments 7,973 2,978
FAS acquisition - deferred consideration settled – (3,096)
Shares vested (1,225) (4,599)
Balance at 31 December 9,754 3,006
35. Long-term employee benefits
Defined contribution retirement benefit
The Group participates in various defined contribution retirement benefit plans, to which it makes monthly contributions in specific jurisdictions. The
total contributions during the year were £1.2 million (2020: £0.7 million), paid in full by the employer.
Defined benefit retirement obligation
The Group has a defined benefit retirement obligation in respect of the 'Workers' Rights Act 2019 ("the Act"). In terms of the Act in Mauritius, an
employer is obligated to pay a lump sum to the employee upon retirement in proportion to the years of service employed at the company.
The Group has no specific assets to cover the obligation as it is all self funded by the Group.
The Group recognised a net defined benefit retirement obligation of £0.4 million (2020: £1.1 million) on the consolidated balance sheet in respect of
amounts that are expected to be paid out to employees under the Act. The Group does not expect a significant change in contributions for the
following year.
The most recent actuarial valuation of the defined benefit retirement obligation was carried out at 31 December 2021 by the State Insurance
Company of Mauritius.
2021 2020
£'000 £'000
Defined benefit retirement obligation
Present value of defined benefit retirement obligation at the beginning of the year 1,086 684
Amounts recognised in the consolidated income statement
– Current service cost 63 105
– Net interest expense 43 37
Amounts recognised in the consolidated statement of comprehensive income
– Actuarial (gain)/loss on defined benefit retirement obligation (782) 419
Direct benefits paid – (81)
Exchange difference on translation 4 (78)
Present value of defined benefit retirement obligation at 31 December 414 1,086
The plan is exposed to actuarial risks such as interest rate risk and salary risk.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
35. Long-term employee benefits continued
The cost of providing the benefits is determined using the Projected Unit Method. The principal assumptions used for the purpose of actuarial
valuation were as follows:
2021 2020
Discount rate
1
5.0% 3.9%
Future salary increases 2.5% 2.5%
Future pension increases 3.0% 3.0%
Withdrawal rate 28.0% 17.0%
Retirement age 65 years 65 years
1 The discount rate is determined by reference to market yields on bonds.
Significant actuarial assumptions for determination of the defined benefit retirement obligation are the discount rate and expected salary increase.
The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the
reporting period.
2021 2020
£'000 £'000
Increase due to 1% decrease in discount rate 167 251
Decrease due to 1% increase in discount rate 125 194
Increase due to 1% increase in future salary increases 211 301
Decrease due to 1% decrease in future salary increases 160 236
Weighted average duration of the defined benefit obligation (years) 31 years 20.4 years
36. Business combinations
Business combinations concluded in the year ended 31 December 2021
PEA Group
On 1 March 2021 the Group acquired 100% of the issued share capital of Private Equity Administrators Sweden AB and PEA Depositary Services AB,
both incorporated in Sweden. As part of the same acquisition, the Group acquired 100% of the issued share capital of Private Equity Administrators
ApS and PEA Depositary Services ApS, both incorporated in Denmark, as well as Private Equity Administrators Limited, incorporated in Guernsey.
PEA specialises in providing boutique fund administration and depositary services to alternative fund structures.
The acquisition provides the Group with an opportunity to scale its Guernsey operations, strengthening its position in the Channel Islands.
Theacquisition also allows the Group to expand its geographical footprint, and its offering for its EMEA operations, into the important Scandinavian
markets.
Fair value of consideration
A cash consideration of £16.9 million (€19.4 million) was paid for 100% shareholding in the PEA group on acquisition date. On 1 March 2021,
1,288,502 ordinary shares in Sanne Group plc were issued and on 9 April 2021 a further 35,792 ordinary shares in Sanne Group plc were issued.
Thefair value of the consideration settled in shares amounted £7.6 million (€8.8 million) on acquisition date.
A contingent consideration payment was made during 2021 at £2.3 million (€2.6 million). The payment was settled in cash and was based on the
change in working capital in the six month period following the acquisition date for the entities located in Sweden and Denmark and the regulatory
requirement calculation for the entity located in Guernsey.
An earn-out payment (dependent on the continued employment of key employees) will be made in 2022 at an estimated value of £2.1 million
(€2.5million). The earn-out payment is based on the lower of £2.1 million (€2.5 million) and three times the increase in gross profit. Management's
best estimate was used to determine the fair value of the total earn-out payment.
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36. Business combinations continued
EUR GBP
'000 '000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Equipment 3 - 5 years 112 97
Customer and contract intangibles 7 years 8,684 7,512
Right-of-use asset 6 years 469 405
Deferred tax assets 16 14
9,281 8,028
Current assets
Trade and other receivables 156 135
Contract assets 626 542
Cash and cash equivalents 2,629 2,274
3,411 2,951
Current liabilities
Trade and other payables 1,194 1,032
Contract liabilities 33 29
Lease liability 114 109
Current tax liabilities 59 51
1,400 1,221
Non-current liabilities
Lease liability 281 233
Provisions 73 63
Deferred tax liabilities 1,501 1,298
1,855 1,594
Identifiable net assets 9,437 8,164
Goodwill 21,429 18,596
Total consideration 30,866 26,760
Total consideration satisfied by:
Cash consideration - at acquisition 19,425 16,862
Equity instruments (1,324,294 shares in Sanne Group plc) 8,803 7,615
Contingent consideration 2,638 2,283
Fair value of consideration payable at acquisition date 30,866 26,760
Net cash inflow arising at acquisition:
Cash consideration 19,425 16,862
Less: cash and cash equivalents balances acquired (2,629) (2,274)
Net cash outflow at acquisition 16,796 14,588
Transaction costs
The Group incurred £1.4 million relating to acquisition and integration expenses during 2021. These costs are included in operating expenses and
are disclosed as non-underlying expenses in note 7.
Goodwill
Goodwill represents the fair value of assets that do not qualify for separate recognition or other factors. These include the opportunities for new
business wins from new clients, the effects of an assembled workforce, and synergies from combining operations of the acquiree and the acquirer.
Goodwill is not tax deductible.
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £0.1 million. This gross trade and other receivables
balance is expected to be recovered in full.
Governance Financial StatementsStrategic Report
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111
36. Business combinations continued
Effect on the results
The acquisition of the PEA Group contributed revenue of £6.3 million and a profit of £3.0 million to the Group’s profit for the period between the date
of acquisition and the balance sheet date. If the business had been acquired on 1 January 2021, on a pro rata basis, the Group's revenue for the
financial year ended 31 December 2021 would have been £195.5 million (£1.3 million higher) and net loss £6.5 million (a £0.6 million lower loss).
Strait Capital Company Limited
On 7 April 2021, the Group acquired 100% of the issued share capital of Strait Capital Company Limited, incorporated in the United States of
America. The acquired company specialises in providing fund administration, financial oversight, and regulatory compliance services for private
equity funds, hedge funds, family offices, fund of funds, SPVs, and other investment vehicles.
The acquisition provides the Group with an opportunity to grow its existing operations in North America.
Fair value of consideration
The payment for 100% of the issued share capital of Strait Capital Company Limited is satisfied through a cash payment of £15.7 million
($21.6million). And the issuance of 1,135,095 ordinary shares in the Company on 9 April 2021 to the value of £7.6 million ($10.4 million).
A contingent consideration payment will be made in 2022, estimated to be £8.6 million ($11.8 million) on acquisition date. The contingent
consideration is based on a revenue multiple, limited to £8.6 million ($11.8 million). The estimated contingent consideration will be determined on
the expected revenue for the period 1 January 2021 to 31 March 2022. The contingent consideration will be settled partly in cash and partly in a
variable number of shares in the Company. The variable number of shares are valued using the share price as at the end of the reporting period,
resulting in the fair value of the contingent consideration amounting to £8.6 million ($11.8 million).
USD GBP
'000 '000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Equipment 3 - 5 years 53 39
Customer and contract intangibles 7 years 7,935 5,774
Right-of-use asset 1,068 780
Deferred tax assets 294 214
9,350 6,807
Current assets
Trade and other receivables 364 265
Cash and cash equivalents 497 362
861 627
Current liabilities
Trade and other payables 683 499
Contract liabilities 12 8
Lease liability 202 147
897 654
Non-current liabilities
Deferred tax liabilities 294 214
Provisions 127 96
Lease liability 738 537
1,159 847
Identifiable net assets 8,155 5,933
Goodwill 35,643 25,938
Total consideration 43,798 31,871
Total consideration satisfied by:
Cash consideration - at acquisition 21,591 15,712
Equity instruments (1,135,095 shares in Sanne Group plc) 10,420 7,582
Contingent consideration 11,787 8,577
Fair value of consideration payable at acquisition date 43,798 31,871
Net cash inflow arising at acquisition:
Cash consideration 21,591 15,712
Less: cash and cash equivalents balances acquired (497) (362)
Net cash outflow at acquisition 21,094 15,350
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36. Business combinations continued
Transaction costs
The Group incurred £1.9 million relating to acquisition and integration expenses during 2021. These costs are included in operating expenses and
are disclosed as non-underlying expenses in note 7.
Goodwill
Goodwill represents the fair value of assets that do not qualify for separate recognition or other factors. These include the opportunities for new
business wins from new clients, the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer.
Goodwill, along with the acquisition costs incurred, is tax deductible over a period of fifteen years.
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £0.3 million. This gross trade and other
receivables balance is expected to be recovered in full.
Effect on the results
Strait Capital Company Limited contributed revenue of £6.4 million and a profit of £3.3 million to the Group’s profit for the period between the date of
acquisition and the balance sheet date. If the business had been acquired on 1 January 2021, on a pro rata basis, the Group's revenue for the financial
year ended 31 December 2021 would have been £196.3 million (£2.1 million higher) and net loss of £6.0 million (£1.1 million less of theloss).
PraxisIFM group
On 1 December 2021, the Group acquired 100% of the issued share capital of six entities, collectively called the PraxisIFM group. The acquired
entities are Praxis Fund Services (Jersey) Limited, incorporated in Jersey (Channel Islands); Praxis Fund Services (Malta) Limited, incorporated in
Malta; International Fund Management Limited and Praxis Fund Services Limited, both incorporated in Guernsey; PraxisIFM Fund Services (UK)
Limited, incorporated in the United Kingdom and PRAXISIFM Luxembourg S.A, incorporated in Luxembourg. The acquired companies specialises in
providing fund administration, financial oversight, and regulatory compliance services for private equity funds, hedge funds, family offices and fund
of funds. Refer to note 19 for details regarding entities, forming part of this acquisition that have subsequently been renamed.
The PraxisIFM group is one of the leading players in the European listed funds sector and augments Sanne’s existing presence in this important
market. It also increases Sanne Group plc’s footprint in important European Private Equity markets, by expanding its EMEA segment.
Fair value of consideration
The payment for the controlling interest in the PraxisIFM group is satisfied through a cash payment of £54 million and a working capital adjustment
of £1.9 million, payable shortly after the end of the financial year.
As part of the £54.0 million cash payment, £5.5 million was into an escrow account. The cash held in escrow will be released from the escrow
account in July 2022, if the largest client of PraxisIFM remains with the Group by July 2022. The amount in escrow is included in the total
consideration paid for the PraxisIFM group. However, until the final condition is met the amount in escrow is recognised a contingent consideration
of £5.5 million. The amount is also disclosed separately on the consolidated balance sheet as cash and cash equivalents in escrow, because it is
restricted cash until the condition under which the payment in escrow was made is satisfied.
GBP
'000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Equipment 3 - 7 years 45
Customer and contract intangibles 5 - 7 years 11,770
Minority equity investment 200
Deferred tax assets 54
12,069
Current assets
Trade and other receivables 1,576
Contract assets 372
Cash and cash equivalents 4,020
5,968
Current liabilities
Trade and other payables 992
Contract liabilities 180
Provisions 64
Current tax liabilities 303
1,539
Non-current liabilities
Deferred tax liabilities 1,584
1,584
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
36. Business combinations continued
GBP
'000
Identifiable net assets 14,914
Goodwill 40,957
Total consideration 55,871
Total consideration satisfied by:
Cash consideration - at acquisition 48,500
Cash consideration in escrow - at acquisition 5,500
Contingent consideration 1,871
Fair value of consideration payable at acquisition date 55,871
Net cash inflow arising at acquisition:
Cash consideration 48,500
Cash consideration in escrow 5,500
Less: cash and cash equivalents balances acquired (4,020)
Net cash outflow at acquisition 49,980
The acquired minority equity investment represent a small shareholding in listed securities. These were measured at their share price on the date of
acquisition.
Transaction costs
The Group incurred £0.7 million relating to acquisition and integration expenses during 2021. These costs are included in operating expenses and
are disclosed as non-underlying expenses in note 7.
Goodwill
Goodwill represents the fair value of assets that do not qualify for separate recognition or other factors. These include the opportunities for new
business wins from new client, the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer.
Goodwill is not tax deductible.
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £1.6 million. This gross trade and other
receivables balance is expected to be recovered in full.
Effect on the results
The PraxisIFM group contributed revenue of £0.9 million and a profit of £0.6 million to the Group’s profit for the period between the date of
acquisition and the balance sheet date. If the business had been acquired on 1 January 2021, on a pro rata basis, the Group's revenue for the
financial year ended 31 December 2021 would have been £204.3 million (£11.0 million higher) and net loss of £0.2 million (£6.9 million less on
theloss).
Business combinations concluded in the year ended 31 December 2020
Inbhear Management Services Limited and Inbhear Fund Services Limited
On 1 April 2020 the Group acquired 100% of the issued share capital of Inbhear Management Services Limited (subsequently renamed Sanne Group
(Cayman) Limited), incorporated in the Cayman Islands. As part of the same acquisition, the Group acquired 100% of the issued share capital of
Inbhear Fund Services Limited on 1 May 2020. The acquired companies position themselves as a partner to managers who have a long-term
investment horizon. The entities have a valued institutional client base and are well known for providing high levels of client service.
The acquisition provides the Group with an opportunity to expand its platform into the Cayman Islands and Ireland, growing its existing North
America and EMEA operations.
Fair value of consideration
The consideration for the Inbhear Fund Services Limited acquisition was satisfied through a payment of £8.2 million (€9.4 million) in cash.
Acontingent payment, estimated to be £1.2 million (€1.4 million), will be made in 2022 and is linked to the employment of key management.
Thisisconsequently treated as remuneration instead of consideration.
The consideration for the Sanne Group (Cayman) Limited acquisition is accounted for as a contingent payment and amounts to the issuance of
approximately 559,721 shares. At 31 December 2021, no issuance of shares has occurred. The contingent consideration is based on a multiple of
the average gross profit generated by the business operations in 2020, 2021 and 2022. Should the required target not be met, no shares will be
granted. Should actual results of the business exceed the target amount a maximum of 746,295 shares will be granted. The consideration will be
accounted for as non-underlying share-based payments, because it is also dependent on certain staff remaining employed within the Group until the
shares vest.
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36. Business combinations continued
EUR GBP
'000 '000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Equipment 3 - 5 years 11 10
Customer and contract intangibles 7 years 2,513 2,207
Deferred tax assets 3 3
2,527 2,220
Current assets
Trade and other receivables 377 332
Cash and cash equivalents 2,130 1,870
2,507 2,202
Current liabilities
Trade and other payables 268 235
Current tax liabilities 70 62
338 297
Non-current liabilities
Deferred tax liabilities 314 276
Identifiable net assets 4,382 3,849
Goodwill 5,048 4,432
Gain on bargain purchase (43) (38)
Total consideration 9,387 8,243
Total consideration satisfied by:
Cash consideration - at acquisition 9,387 8,243
Fair value of consideration payable at acquisition date 9,387 8,243
Net cash inflow arising at acquisition:
Cash consideration 9,387 8,243
Less: cash and cash equivalents balances acquired (2,130) (1,870)
Net cash outflow at acquisition 7,257 6,373
Fair value of consideration
The payment for the controlling interest in Sanne Group (Cayman) Limited is made solely in the form of share-based payments, to the value of
£3.8million ($4.8 million). The number of shares that will be issued is based on the performance of Sanne Group (Cayman) Limited in 2020, 2021
and 2022. The consideration will be accounted for as non-underlying share-based payments.
A cash consideration of £8.2 million (€9.4 million) was paid for the controlling interest in Inbhear Fund Services Limited on acquisition date.
Acontingent payment (depending on the continued employment of the previous owners) will be made in 2022 at an estimated value of £1.2 million
(€1.4 million).
Transaction costs
The Group incurred £0.7 million in the prior year relating to acquisition and integration expenses. These costs have been expensed within operating
expenses and are disclosed as non-underlying expenses in note 7.
Goodwill
Goodwill is represented by assets that do not qualify for separate recognition or other factors. These include the opportunities for new business
wins from new client, the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer. Goodwill is
not tax deductible and was recognised on the acquisition of Inbhear Fund Services Limited.
Gain on bargain purchase
A gain on bargain purchase was recognised on the acquisition on Sanne Group (Cayman) Limited because the fair value of the assets exceeded the
consideration paid in terms of the accounting standards. The Group believes the new acquisition will yield opportunities for new business wins, the
effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer. The gain on bargain purchase is not
taxable.
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
36. Business combinations continued
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £332k. The gross amount receivable is £332k
of which all debt is expected to be collected.
Effect on the results
Inbhear Management Services Limited and Inbhear Fund Services Limited contributed revenue of £1.7 million and a profit of £0.5 million to the Group’s
profit for the period between the date of acquisition and 31 December 2020. If the business had been acquired on 1 January 2020, on a pro rata basis,
the Group revenue for the financial year ended 31 December 2020 would have been £170.5 million (£0.8 million higher) and net profit £25.1 million
(£0.3 million higher).
Avalon Trust & Corporate Services Limited
On 1 October 2020, the Group acquired 100% of the issued share capital of Avalon Trust & Corporate Services Limited, incorporated in the Cayman
Islands. The company is a highly regarded trust and corporate services provider. The legal entity was subsequently renamed to Sanne Trustees
(Cayman) Limited.
The acquisition of Sanne Trustees (Cayman) Limited strengthens the Group’s Cayman Islands offering, which was established with the acquisition
of Sanne Group (Cayman) Limited, and grows its existing North America operations.
Fair value of consideration
The consideration for the Sanne Trustees (Cayman) Limited acquisition is satisfied through a cash payment of £5.4 million ($6.9 million). The
remainder of the consideration was settled in the form of 119,053 shares. The shares in Sanne Group plc were adjusted for the lack of marketability
(due to the trade restriction), using the Finnerty Average-Strike Put Option Model.
USD GBP
'000 '000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Customer and contract intangibles 7 years 3,240 2,509
Current assets
Trade and other receivables 588 455
Cash and cash equivalents 769 596
1,357 1,051
Current liabilities
Trade and other payables 75 58
Contract liabilities 314 243
389 301
Identifiable net assets 4,208 3,259
Goodwill 3,614 2,799
Total consideration 7,822 6,058
Total consideration satisfied by:
Cash consideration - at acquisition 6,945 5,379
Equity instruments (119,053 shares in Sanne Group plc) 877 679
Fair value of consideration payable at acquisition date 7,822 6,058
Net cash inflow arising at acquisition:
Cash consideration 6,945 5,379
Less: cash and cash equivalents balances acquired (769) (596)
Net cash outflow at acquisition 6,176 4,783
Transaction costs
The Group incurred £16k relating to acquisition and integration expenses during the prior year. These costs have been expensed within operating
expenses and are disclosed as non-underlying expenses in note 7.
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36. Business combinations continued
Goodwill
Goodwill is represented by assets that do not qualify for separate recognition or other factors. These include the opportunities for new business
wins from new client, the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer. Goodwill is
not tax deductible.
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £455k. The gross amount receivable is £455k
of which all debt is expected to be collected.
Effect on the results
Avalon Trust & Corporate Services Limited contributed revenue of £0.4 million and a profit of £0.3 million to the Group’s profit for the period between
the date of acquisition and 31 December 2020. If the business had been acquired at 1 January 2020, on a pro rata basis, the Group revenue for the
financial year ended 31 December 2020 would have been £170.8 million (£1.1 million higher) and net profit £25.6 million (£0.8million higher).
Business combinations concluded in the year ended 31 December 2020
Deutsche Trust Company Limited
On 1 October 2020 the Group acquired 100% of the issued share capital of Deutsche Trust Company Limited (subsequently renamed to Sanne
Group Japan Trust Company), incorporated in Japan. This company offers trust services.
The acquisition provides the Group with an opportunity to expand its platform and service offering in Japan and grow its existing Asia-Pacific
operations.
Fair value of consideration
The consideration for the Sanne Group Japan Trust Company acquisition is satisfied through a cash payment of £4.7 million (¥633.8 million). The
consideration price was lower due to the cash balances being acquired on a Pound-for-Pound basis. A contingent payment of £140k (¥19.0 million)
was made during the current year, and was based on the revenue from the existing trust structures in the twelve months after acquisition.
JPY GBP
'000 '000
Recognised amounts of identifiable net assets (at fair value) at acquisition:
Non-current assets Useful economic life
Customer and contract intangibles 5 years 171,947 1,262
Current assets
Trade and other receivables 67,728 497
Cash and cash equivalents 561,681 4,122
Contract assets 7,827 57
637,236 4,676
Current liabilities
Trade and other payables 74,085 542
Current tax liabilities 18,512 136
92,597 678
Non-current liabilities
Deferred tax liabilities 60,182 442
60,182 442
Identifiable net assets 656,404 4,818
Gain on bargain purchase (3,613) (13)
Total consideration 652,791 4,805
Total consideration satisfied by:
Cash consideration - at acquisition 633,836 4,665
Contingent consideration 18,955 140
Fair value of consideration payable at acquisition date 652,791 4,805
Net cash inflow arising at acquisition:
Cash consideration 633,836 4,665
Less: cash and cash equivalents balances acquired (561,681) (4,122)
Net cash outflow at acquisition 72,155 543
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For the year ended 31 December 2021
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117
36. Business combinations continued
Transaction costs
The Group incurred £0.6 million relating to acquisition and integration expenses during 2021 (2020: £0.5 million). These costs have been expensed
within operating expenses and are disclosed as non-underlying expenses in note 7.
Gain on bargain purchase
In the prior year the Group recognised goodwill relating to this acquisition, subject to measurement period adjustments. A measurement period
adjustment was made to accommodate new information gained after the acquisition, pertaining to circumstances that existed on the date of
acquisition. In the prior year, the contingent consideration was estimated as £0.3 million (¥40.5 million). Due to the measurement period adjustment,
the contingent consideration is now estimated as £0.1 million (¥19.0 million). This resulted in the total consideration being £4.8 million (¥652.8
million) instead of the £5.0 million (¥674.3 million) previously disclosed. The measurement period adjustment resulted in the derecognition of
goodwill (Refer to note 16) and the recognition of a gain on bargain purchase, as disclosed in the table above.
A gain on bargain purchase was recognised on the acquisition on Sanne Group Japan Trust Company because the fair value of the assets exceeded
the consideration paid in terms of the accounting standards. The Group believes the new acquisition will yield opportunities for new business wins,
the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer. The gain on bargain purchase is
not taxable.
Trade and other receivables
The fair value of the financial assets acquired includes trade and other receivables with a fair value of £497k. The gross amount receivable is £497k
of which all debt is expected to be collected.
Effect on the results
Sanne Group Japan Trust Company contributed revenue of £0.4 million and a profit of £0.4 million to the Group’s profit for the period between the
date of acquisition and 31 December 2020. If the business had been acquired at 1 January 2020, on a pro rata basis, the Group revenue for the
financial year ended 31 December 2020 would have been £170.9 million (£1.2 million higher) and net profit £25.9 million (£1.1 million higher).
37. Financial instruments
The Group’s financial instruments comprise bank loans, minority equity investments, cash and cash equivalents, trade payables, other payables,
trade receivables, and other receivables.
2021 2020
Level £'000 £'000
Categories of financial instruments
Financial assets
Financial assets at amortised cost
Cash and bank balances 48,070 57,119
Trade and other receivables (i) 74,964 54,680
Loan granted (ii) – 830
Financial assets at fair value through other comprehensive income
Minority equity investments (iii) 1 209 –
Financial assets at fair value through other comprehensive income
Minority equity investments (iii) 3 – 8,765
Financial liabilities
Financial liabilities at amortised cost
Bank loan 99,444 133,549
Trade and other payables (iv) 38,602 11,138
Lease liability 46,268 39,328
Financial liabilities at fair value
Contingent consideration (v) 3 14,209 287
(i) Includes contract assets but excludes other debtors and prepayments. Refer to note 24 for further details.
(ii) This relates to a loan that was granted. Refer to note 22 for further details.
(iii) Refer to note 20 for further information relating to the minority equity investments and the sale thereof.
(iv) Excludes other taxes and social security and deferred consideration but includes accrued interest payable. Refer to note 32 for further details.
(v) This represents the contingent consideration payable on the Strait Capital Company Limited acquisition. The contingent consideration is carried at
fair value and is based on a revenue multiple, limited to £8.6 million ($11.8 million). The estimated contingent consideration will be determined on
the expected revenue for the period 1 January 2021 to 31 March 2022. The contingent consideration will be settled in cash, resulting in the fair
value of the contingent consideration amounting to £8.6 million ($11.8 million) as at 31 December 2021. In addition to the contingent consideration
payable to Strait Capital Company Limited acquisition, an amount of £5.5 million is payable on the PraxisIFM group acquisition. This amount relates
to the cash paid into an escrow account that will be released to the previous owners of the PraxisIFM group once the conditions attached to the
amount paid in escrow are satisfied. In the prior year it related to the Deutsche Trust Company acquisition. Refer to note 32.
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37. Financial instruments continued
The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as
possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the
valuation technique utilised are (the "fair value hierarchy"):
Level 1: Quoted prices in active markets for identical items;
Level 2: Observable direct or indirect inputs other than Level 1 inputs; and
Level 3: Unobservable inputs, thus not derived from market data.
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value
measurement of the item. Transfers of items between levels are recognised in the financial year in which they occur.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt and equity balance. The managed capital refers to the Group's debt and equity balances. Refer to
note 27 for the quantitative disclosure of the share capital.
As disclosed in note 29, the Group has a loan which requires it to meet cash flow, leverage and interest cover covenants. In order to achieve the
Group’s capital risk management objective, the Group aims to ensure that it meets financial covenants attached to borrowings. Breaches in meeting
the financial covenants would permit the lender to immediately call the loan. Refer to note 29 for the quantitative disclosure of the borrowings.
In line with the loan agreement, the Group tests compliance with the financial covenants on a quarterly basis and considers the results in making
decisions affecting dividend payments to shareholders or issue of new shares. The Group complied with the financial covenants of its borrowing
facilities during the 2021 and 2020 financial years.
Individual regulated entities within the Group are subject to regulatory requirements to ensure adequate capital and liquidity to meet local
requirements in Jersey, Guernsey, Ireland, the Netherlands, Luxembourg, the Cayman Islands and South Africa, which are monitored monthly to
ensure compliance. There have been no breaches of applicable regulatory requirements during the year or at year end. The regulatory requirement
of adequate capital is referred to by Sanne Group plc as "trapped cash", the quantitative balance of which can be observed in note 26.
Financial risk management objectives
The financial risk management policies are discussed by management on a regular basis to ensure that they are in line with the overall business strategies
and risk management philosophy. Management set policies which seek to minimise the potential adverse effects affecting the financial performance of the
Group. Management provide necessary guidance and instructions to the employees covering specific areas, such as market risk (foreign exchange and
interest rate risk), credit risk, liquidity risk, and in investing excess cash. The Group does not hold or issue derivative financial instruments.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's income or the value of
its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates; the interest rates are directly linked to the
SONIA for amounts drawn in Pounds Sterling (and the SOFR for amounts drawn in United States Dollar) plus a spread adjustment based on the
selected interest payment period and a variable margin, based on the leverage ratio of the Group: the higher the leverage ratio the higher the margin on
the SONIA. The risk is managed by the Group maintaining an appropriate leverage ratio and through this ensuring that the interest rate is kept as low
as possible. Refer to note 29 for information on the Group's implementation of the recent LIBOR reforms and its impact on the financial statements.
The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the floating rate liabilities.
The Group considers a reasonable interest rate movement in SONIA to be 25 basis points based on historical changes to interest rates. If interest
rates had been higher/lower by 25 basis points and all other variables were held constant, the Group’s profit for the year ended 31 December 2021
would decrease/increase by £0.5 million (2020: £0.2 million based on LIBOR).
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
37. Financial instruments continued
Foreign currency risk management
The Group manages exposure to foreign exchange rates by carrying out the majority of its transactions in the functional currency of the Group
company in the jurisdiction in which it operates. The Group entities maintain assets in foreign currencies sufficient for regulatory capital purposes in
each jurisdiction. The volatility of the Sterling is due to the uncertainty of the United Kingdom leaving the European Union at the start of 2021 and the
effect it might have on global markets. The Group's strong momentum and diverse geographic presence, as well as the favourable underlying trends
in the markets in which the Group operates, give the Directors confidence in the continued management of the impact on the Group after the United
Kingdom left the EU. The carrying amounts of the Group’s material foreign-currency-denominated monetary assets and monetary liabilities are as
follows:
Assets Liabilities
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Euro 42,934 42,021 2,470 7,163
United States Dollar 27,212 23,620 3,920 2,895
South African Rand 2,409 1,838 9 48
72,555 67,479 6,399 10,106
Foreign currency risk management sensitivity analysis
The principal currency of the Group's financial assets and liabilities is Pounds Sterling. The Group, however, does own trading subsidiaries based in
the United States of America, South Africa, Mauritius, Asia and Europe which are denominated in a currency other than the principal currency. The
Group therefore faces currency exposures.
The following table illustrates management's assessment of the foreign currency impact on the year end balance sheet and presents the possible
impact on Group's total comprehensive income for the year and net assets arising from potential changes in the Euro, United States Dollar, or South
African Rand exchange rates with all other variables remaining constant. A strengthening or weakening of the Sterling by 20% is considered an
appropriate variable for the sensitivity analysis given the scale of foreign exchange fluctuations over the last two years. This is based on the Group's
most volatile currency, namely the South African Rand, where it is not uncommon to see a 20% fluctuation.
Effect on Group comprehensive
income and net assets
Strengthening / (weakening) 2021 2020
of Sterling £'000 £'000
Euro +20% (6,744) (5,810)
United States Dollar +20% (3,882) (3,454)
South African Rand +20% (400) (298)
Euro (20%) 8,093 6,972
United States Dollar (20%) 4,658 4,145
South African Rand (20%) 480 358
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s principal
exposure to credit risk arises from the Group’s trade receivables from clients.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. The carrying amount of
financial assets recorded in the historical financial information, which is net of impairment losses, represents the Group’s maximum exposure to
credit risk as no collateral or other credit enhancements are held.
Cash and cash equivalents are subject to the impairment requirements of IFRS 9. As balances are mainly held with reputable international banking
institutions, they were assessed to have low credit risk and no loss allowance is recognised. Cash and cash equivalents are held mainly with banks
which are rated "A-" or higher, with the exception of a few BBB rated institutions, by Standard & Poor’s Rating Services.
The credit risk on liquid funds and borrowings is limited because the counterparties are banks with high credit-ratings assigned by international
credit rating agencies.
The Group manages credit risk by review at take-on around:
• Risk of insolvency or closure of the customer's business;
• Customer liquidity issues; and
• General creditworthiness, including past default experience of the customer, and customer types.
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37. Financial instruments continued
Subsequently, customer credit risk is managed by each of the Group entities subject to the Group’s policies, procedures and controls relating to
customer credit risk management. Outstanding customer receivables are monitored and followed up continuously. Provisions are made when there
is objective, forward-looking, evidence that the Group will not be able to collect the debts or bill the customer. This evidence can include the
following: an indication that the customer is experiencing significant financial difficulty or default, probability of the fund being liquidated, or similar
factors. Analysis is done on a case by case basis in line with the Group policy. The ageing of trade receivables and the loss allowance at the
reporting date is disclosed in note 24. Note 25 sets out the expected credit loss of contract assets.
The Group has rebutted the presumption that there have been significant increases in credit risk since initial recognition of trade receivables by
considering the payment profiles of the trade receivables past due on a case by case basis. Historically, the Group has had immaterial debt write-
offs, supporting the fact that the clients do not incur significant increases in their credit risk when becoming past due.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk to maintain
adequate reserves by regular review around the working capital cycle using information on forecast and actual cash flows.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk
management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management requirements.
Regulation in most jurisdictions also requires the Group to maintain a level of liquidity so the Group does not become exposed.
The Group manages liquidity risk to maintain adequate reserves by regular reporting around the working capital cycle using information on forecast
and actual cash balances.
Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its financial liabilities with agreed repayment terms. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The
table includes both interest and principal cash flows. To the extent that interest flows are from floating rates, the undiscounted amount is derived
from interest rates at the balance sheet date.
<3 months 3-12 months 1-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000
31 December 2021
Bank loans (i) 101,171 – – – 101,171
Trade payables and accruals (ii) 42,445 – – – 42,445
Provisions 61 519 1,013 2,234 3,827
Lease liability 1,578 4,191 21,010 19,489 46,268
145,255 4,710 22,023 21,723 193,711
<3 months 3-12 months 1-5 years > 5 years Total
£'000 £'000 £'000 £'000 £'000
31 December 2020
Bank loans (i) 571 1,744 144,173 – 146,488
Trade payables and accruals (ii) 14,758 – – – 14,758
Provisions 184 175 947 1,989 3,295
Lease liability 1,187 3,735 13,898 20,507 39,327
16,700 5,654 159,018 22,496 203,868
For the purpose of the above liquidity risk analysis, the amortised value has been adjusted for:
(i) The future interest payments not yet accrued and the repayment of capital upon maturity.
(ii) The accrued bank loan interest payable at the balance sheet date.
Fair value of financial instruments
For all financial instruments, excluding the instruments classified as carried at fair value through other comprehensive income, the Directors
consider the carrying amounts of financial assets and financial liabilities in the historical financial information to approximate their fair values.
Governance Financial StatementsStrategic Report
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Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2021
38. Related party transactions
The Group’s related parties are key management personnel, comprising all members of the plc Board and the Executive Committee who are
responsible for planning and controlling the activities of the Group.
The remuneration of any employee who met the definition of "key management personnel" of the Group at the end of the year is set out below in
aggregate for each of the categories specified in IAS 24 Related Party Disclosures for the period they served as key management personnel.
2021 2020
£'000 £'000
Short-term employee benefits 2,868 2,719
Share-based payments 3,088 516
Total short-term payments 5,956 3,235
Key management personnel, in their capacity as shareholders, also receive dividends from the Group when declared. This is standard for all
shareholders.
Other than the items listed above, the Group has not entered into any material transactions with related parties.
Refer to note 19 for a list of subsidiaries of the Company as at 31 December 2021 which, in the opinion of the Directors, principally affect the profit
and / or the net assets of the Group.
39. Change in accounting estimate
The estimated total useful lives of certain items of IT equipment used throughout the Group were revised effective 1 January 2021, to align with
current technological developments. The net effect of the changes for the financial year ended 31 December 2021 was a decrease in depreciation
expense of £0.4 million. The remaining changes are shown for the period 1 January to 31 December.
Assuming the assets are held until the end of their estimated useful lives, depreciation in future years relating to these assets will be
increased/(decreased) by the following amounts:
£'000
Period
1 January to 31 December 2021 (398)
1 January to 31 December 2022 (28)
1 January to 31 December 2023 182
1 January to 31 December 2024 161
1 January to 31 December 2025 61
1 January to 31 December 2026 16
1 January to 31 December 2027 6
1 January to 31 December 2028 2
40. Contingent liabilities
In the ordinary course of business, the Group is subject to legal claims and/or proceedings. Should such an event occur, the Board would consider
its best estimate of the amount required to settle the obligation and, where appropriate, establish a provision. While there can be no assurances that
circumstances will not change, based upon information currently available, the Directors do not believe there is any such claim or proceeding that
could have a material adverse effect on the Group’s financial position.
41. Post balance sheet events
In the application of the Group’s accounting policies, which are described in note 3, the directors made judgements, estimates and assumptions
about the expected closing date of the Apex takeover. This estimate had a direct impact on the expected vesting period of the Group’s Share-based
Payment expense in the current year (refer to note 34 for further details). Based on information available at year end, the estimated closing date for
the transaction was March 2022. The acquisition of the Group by Apex is now expected to complete either late in the second quarter or early in the
third quarter of 2022. The circumstances resulting in the delay only occurred after year-end and was assessed to be a non-adjusting event after the
reporting period. If the event occurred before year end or was assessed as an adjusting item, this would have resulted in a longer expected vesting
period and, in the event the Acquisition were to complete at the end of the second quarter, on 30 June 2022, share-based payments would have
been £1.9 million lower for the 2021 financial year.
We have been watching with concern the increasing geopolitical uncertainties and humanitarian crises arising from the conflict in the Ukraine.
Whilst our thoughts are with all those affected by the crisis, the Group does not operate in either Russia or the Ukraine and has very limited exposure
to the region. In addition, the Group’s income is not expected to be materially impacted by the wider economic market volatility and asset price
fluctuations. As such, we do not expect the political and economic implications of the conflict to have any material impact on the Group’s
performance.
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Governance Financial StatementsStrategic Report
Glossary of Terms
A
ABP
Annual Bonus Plan
ABS
Asset backed security
Act
Companies (Jersey) Law 1991
Acquisition
The acquisition of Sanne Group plc by Apex
Acquisition Company Limited, a subsidiary of
Apex Group Limited
Agensynd
AgenSynd S.L.
AGM
Annual General Meeting
AIFMD
The Alternative Investment Fund Managers
Directive
Annualised new business revenue
Expected revenue for a single, full year,
excluding one-off onboarding and start-up
fees from a new client structure
Apex
The Apex Group Limited group of companies
APM
Asia Pacific and Mauritius
APMs
Alternative Performance Measures
APAC
Asia Pacific
Avalon
Avalon Trust & Corporate Services Limited
B
Board
The Board of Directors of the Company
Brexit
The withdrawal of the United Kingdom from
membership in the European Union
C
CC
Constant currency
CDO
Collateralised debt obligation
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CGU
Cash-generating unit
Channel Islands
Jersey and Guernsey
Chief Operating Decision Maker (CODM)
The Executive Directors of the Board
CHRO
Chief Human Resources Officer
CI
Channel Islands reporting segment
CLO
Chief Legal Officer
CMBS
Commercial mortgage-backed security
CODE
UK Corporate Governance Code adopted by
the Financial Reporting Council in 2018
Colmore
Colmore A.G.
Company
Sanne Group plc
Court Sanction Date
The date on which the hearing of the Royal
Court of Jersey at which the court order to
sanction the Scheme under Article 125 of the
Jersey Companies Law will be sought
COVID-19
Respiratory illness caused by a coronavirus
CRO
Chief Risk Officer
CSR
Corporate Social Responsibility
CRO
Chief Technology Officer
D
Designated NED
A Non-executive Director designated to liaise
with the WAP and feed back the views and
experience of the workforce to the Board in
line with the recommendations of the Code
DEPS
Diluted earnings per share
Deutsche Bank Trust Company / DBTC
Deutsche Trust Company Limited, formerly
Deutsche Bank’s Japanese trust company
business
DTR
The FCA’s Disclosure Guidelines and
Transparency Rules
E
EBITDA
Earnings before interest, tax, depreciation and
amortisation
EBT
Employee benefit trust
EMEA
Europe, Middle East and Africa reporting
segment (excludes Channel Islands and
Mauritius)
EPS
Earnings per share
ESG
Environmental, Social and Governance
EU
The European Union
F
FRC
Financial Reporting Council
G
GAAP
Generally Accepted Accounting Principles
GDPR
General Data Provision Regulation
GHoC
Group Head of Compliance
GP
Gross profit
Group
The Company and all of its subsidiaries
I
IFRS
International Financial Reporting Standard(s)
Inbhear
Inbhear Fund Services Limited and Inbhear
Management Services Limited together
K
KPI
Key performance indicator
L
LIS
Luxembourg Investment Solutions S.A. and
Compliance Partners S.A. together
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Glossary of Terms continued
Listing
The Company’s Listing on the London Stock
Exchange (LSE)
Listing Rules
Regulations subject to the oversight of the
FCA applicable to the Company’s Premium
Listing on the LSE
LTIP
Long-term Incentive Plan
M
MIFID II
The second version of the Markets in Financial
Instruments Directive as defined by EC
Council Directive 2014/65/EU
MTN
Medium term note
N
NA
North American reporting segment
NED
A Non-executive Director of the Company
North America
USA and Canada
O
Operating Platform
The Group’s global operating platform
incorporates its technology systems, people,
operating procedures and policies
P
PBT
Profit before tax
Preqin
Preqin Ltd.
Private Client
The Group’s Jersey based Private Client
business
PSP
Performance Share Plan
PwC
PricewaterhouseCoopers LLP
R
RCF
Revolving credit facility
Regulators
Regulatory authorities impacting the Group
including the Commission de Surveillance du
Secteur Financier (CSSF) in Luxembourg, the
UK’s Financial Conduct Authority (FCA), the
Jersey Financial Services Commission (JFSC)
and the Mauritian Financial Services
Commission (FSC), amongst others
RMBS
Residential mortgage-backed security
S
Scheme
The scheme of arrangement under Article 125
of the Jersey Companies Law between Sanne
and Sanne shareholders which is approved or
imposed by the Royal Court of Jersey and
agreed to by Sanne and Apex
Scheme Document
The circular dated 10 September 2021 sent by
Sanne to Sanne Shareholders which set out
the terms and conditions of the Scheme
Section 172
Section 172(1) of the UK Companies Act 2006
SID
Senior Independent Director
T
TISE
The International Stock Exchange in Guernsey
TSR
Total shareholder return
W
WAP
A formal workforce advisory panel which
collects the views of the workforce as a whole
and acts as an advisory committee to the
Board in line with the recommendations of the
Code
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124
Governance Financial StatementsStrategic Report
Shareholder and Corporate Information
Shareholder enquiries
Any Shareholder with enquiries relating to their shareholding should in
the first instance contact our Registrar, Equiniti, using the contact
information provided on this page.
Electronic Shareholder communications
Shareholders who would prefer to view documentation electronically
can elect to receive automatic notifications by email each time the
Company distributes documents, instead of paper copies. Registering
for electronic communications is very straightforward and can be done
via Shareview, at www.shareview.co.uk. Shareview is Equiniti’s suite of
online services that helps Shareholders manage their holdings and
gives access to useful information.
There is no fee for using this service and you will automatically receive
confirmation that a request has been registered. The facility allows
Shareholders to view details of their holdings, submit a proxy vote for
Shareholder meetings, complete a change of address and provide
dividend mandates online, so that dividends can be paid into a
mandated bank account.
Share price information
Information on the Company’s share price is available on the
Company’s website at www.sannegroup.com.
Investor relations
info@sannegroup.com
Registered office
IFC 5
St Helier
Jersey
JE1 1ST
Registered Company Number
Company number: 117625
LEI: 2138005UBLKEZRITH576
London Stock Exchange, Symbol: Lon: SNN
FTSE 250
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
T: 0371 384 2909 (UK)*
T: +44 121 415 0196 (outside UK)
* Lines are open from 8:30am to 5:30pm, Monday to Friday, excludingUK Bank Holidays
Location of register of members
Equiniti (Jersey) Limited
26 New Street
St Helier
Jersey
JE2 3RA
Channel Islands
Auditor
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
United Kingdom
Joint Brokers
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
United Kingdom
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
United Kingdom
262975 Sanne AR Text_pp122_end.qxp 04/04/2022 13:26 Page 124
Sanne Group plc
T: +44 (0) 1534 722787
E: cosec@sannegroup.com
W: sannegroup.com
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