The IFRS result also includes the impact
as equity-settled share-based payment
expenses, deferred income and deferred
expenses, so we continue to supplement
our statutory reporting with the presentation
of our financial performance using two
APMs: the Cash result and the European
Embedded Value (EEV) result.
Taking each in turn:
The Cash result, and the Underlying cash
result contained within it, are based on IFRS
but adjusted to exclude certain non-cash
items, so therefore represent useful guides
to the level of cash profit generated by the
business. All items in the Cash result, and
During the year, the
was £455.9 million
(2019: £424.9 million), representing a margin
of 0.63% (2019: 0.63%) on average mature
FUM, excluding DFM and Asia FUM, in line
with prior guidance. It is only this mature
FUM excluding DFM and Asia FUM that
contributes to this net income figure and
this mature stock of FUM at any given time
substantially comprises all unit trust and
ISA business, as well as life and pensions
business written more than six years ago.
The development of mature FUM year-on-
year is dependent on four principal factors:
1. New unit trust and ISA flows;
2. The amount of life and pensions FUM
that moves from gestation into mature
FUM;
3. The retention of FUM; and
4. Investment returns on FUM.
Growth in gestation FUM has been more
rapid than growth in mature FUM in recent
years, mainly due to the strength of new
pensions business following ‘pensions
freedom’. While this therefore constrains
growth in net income from funds under
management today, it bodes well for the
future as gestation FUM matures and
begins making a positive contribution.
gestation FUM stood at £43.4 billion
movements or withdrawals) contribute in
excess of £365 million to net income from
funds under management and hence to
where initial
product charges levied on gross inflows
exceed new business-related expenses.
business in 2020 largely reflects the decline
in gross flows over the period, although the
relationship between the two is not linear.
in 2020 were
£200.0 million (2019: £186.2 million), up 7%
over the year and some £3 million below the
guidance that we provided last year, reflecting
management actions taken as the external
environment deteriorated during the year.
disciplined approach to expense
management, deferring or delaying
expenditure where possible and where
long-term growth and our ability to respond
to ongoing challenges presented by
COVID-19 will not be compromised.
were
business, laying the foundations for long-
collaboration with Salesforce as previously
announced. In addition, we accelerated the
development of certain projects and
technologies to ensure the Group and the
Partnership were able to adapt effectively
For example, we invested in providing
seamless electronic data capture systems,
electronic signature capability, and in digital
platforms to enable safe and secure virtual
interactions between the Partnership and
clients. These investments will benefit the
business in both the short and long-term.
increasing cyber risk so continue to take
appropriate action to mitigate such risks.
Our contribution to the increased
substantially and disappointingly during the
year, to £29.7 million, up from £22.3 million
in 2019. This reflected a significantly
increased rate of levy, over and above the
15% increase we expected at the beginning
of the year, exacerbated by a supplementary
levy announced in November 2020 and by
our growth as a proportion of the FSCS
funding classes in which we operate.
Although we are fundamentally supportive
of a mechanism that protects consumers,
we agree with the comment made by the
FCA chair Charles Randell when he said
“…all too often, the polluter doesn’t pay. The
cost of bad behaviour by firms which then
fail is usually mutualised through the FSCS,
rather than borne by the wrongdoers”. We
welcome the goal that has been outlined by
the FCA of redesigning the system to make
the polluters pay.
Reflecting its critical role in providing a
source of future organic growth in our
adviser population, we continue to invest
into building our programmes in
order to accommodate additional capacity
with greater geographic reach. Academy
operations adapted well to COVID-19, with the
programme being delivered online for existing
participants. However, given the uncertainty
and logistical challenges we deferred a
number of new entrants into the programmes
until 2021, which has resulted in Academy
costs decreasing by 13% year-on-year.
We have also further invested in developing
our presence in , as well as in
via
these businesses have been adversely
impacted by the financial uncertainties
expense management. Our investment for
the future also extends to our
, with one such example
being the costs associated with
reconfiguring more than 2,500 Partner
websites during the year.
The , which is a key
metric that provides a good indicator of
underlying performance and the impact
Recognised below the Underlying cash
result, our
activity has been a critical multi-year
project. In 2019, the final smooth migration
of business was completed which means
that all of our core UK business is safely
incur decommissioning expenses relating
to our legacy systems, and so our back-
office infrastructure costs were
completed these exercises no further
back-office infrastructure costs are
anticipated for 2021.
The in 2020 was therefore
£254.7 million (2019: £229.4 million).
EEV
The is sensitive to new
business written within the year and the 5%
reduction in gross flows year-on-year is the
main factor behind a reduced EEV operating
profit of £919.0 million (2019: £952.0 million).
The for the period has
been significantly impacted by the positive
but lower of
£304.4 million compared to the prior year
(2019: £768.6 million). The positive return
reflects increased market values across our
FUM as a result of stronger markets at year
end, following the recovery in the second
half of the year.
GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION
51
ANNUAL REPORT AND ACCOUNTS 2020 www.sjp.co.uk
STRATEGIC REPORT