AJB Aj Bell Plc

5 December 2024

AJ Bell plc

Final results for the year ended 30 September 2024

AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's largest investment platforms, today announces its final results for the year ended 30 September 2024.

Highlights

Financial performance

Shareholder returns

Operational performance

Platform business

AJ Bell Investments

Michael Summersgill, Chief Executive Officer at AJ Bell, commented:

"I am pleased to report on another excellent year for AJ Bell, with our dual-channel platform delivering strong growth in both customers and AUA. Platform customers increased by 14% to 542,000, while platform AUA increased by 22% to £86.5 billion, driven by strong net inflows and favourable market movements. AJ Bell Investments' range of simple, low-cost investment solutions also attracted excellent flows across both the advised and D2C markets, driving AUM up 45% to £6.8 billion. The continued growth of our business, underpinned by our scalable operating model, drove record financial performance in the year, with profit before tax up 29% to £113.3 million.

"Backed by our strong profitability and highly cash-generative business model, we have accumulated significant surplus capital above our regulatory requirements. We have today announced a record level of shareholder returns, reflecting the Board's confidence in the long-term outlook for AJ Bell. Firstly, a final dividend of 8.25 pence has been proposed, increasing the total ordinary dividend for the year by 16% to 12.50 pence, the 20^th consecutive year of ordinary dividend growth. Secondly, in line with our new capital allocation framework, we have announced a share buyback programme to return up to £30 million to shareholders. This level of buyback reflects our current capital position; however we see opportunities for further shareholder returns in future, over and above a progressive ordinary dividend, as we continue to deliver on our growth strategy.

"We remain committed to our purpose of helping people invest, focusing on our three strategic drivers: trust, ease of use, and low-cost. Over the past year, we have reduced fees for our customers and invested in our platform with a focus on ease of use, while sustaining our multi-year strategy to increase brand awareness. These factors, together with our market-leading customer service levels, have all contributed to our organic growth in the year, driving further market share gains in the growing UK investment platform market.

"We continue to engage actively with policymakers and regulators, campaigning on behalf of customers for a supportive landscape for long-term retail investors. Across the industry, the run up to the recent Autumn Budget saw some customers making significant decisions in response to speculation about tax reform. While Capital Gains and Inheritance Tax changes announced at the Budget will impact some customers, the fundamental features of the pension and investment tax system remain unchanged. The Government now has an opportunity to galvanise the retail investment market through a long-term commitment to tax stability, allowing more people to invest for the future with certainty. We will continue to campaign for stability and simplicity for retail investors, helping to make it easy for people to invest and plan for the long-term.

"Looking ahead, I am confident in the outlook for both AJ Bell and the broader platform market. The long-term structural growth drivers of the market remain strong, as more individuals recognise the importance of taking control of their financial future. Platforms offer an excellent solution for managing long-term finances, and we remain very well-positioned to capitalise on this growing demand. We will continue to reinvest the benefits of scale in our platform propositions, ensuring that we are well equipped to serve both existing and new customers, delivering great value to them alongside strong profitability and shareholder returns."

Financial highlights

Non-financial highlights

*see definitions

Contacts:

AJ Bell

Results presentation details

A pre-recorded video with Michael Summersgill (CEO) and Peter Birch (CFO) discussing these results will be available on our website (ajbell.co.uk/investor-relations) along with an accompanying investor presentation from 07.00 GMT today. Management will be hosting a meeting for sell-side analysts at 09.30 GMT today. Attendance is by invitation only.

Management will also be hosting a group call for investors at 15.30 GMT today. Please contact Kate Street at kstreet@jefferies.com for registration details.

Forward-looking statements

The full year results contain forward-looking statements that involve substantial risks and uncertainties, and actual results and developments may differ materially from those expressed or implied by these statements. These forward-looking statements are statements regarding AJ Bell's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies, and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as of the date of these full year results and AJ Bell does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these results.

Chair's statement

"AJ Bell rightly prides itself on its open and transparent culture which permeates throughout the whole organisation."   

Dear shareholder

This year I have thoroughly enjoyed immersing myself in the business to gain a deeper understanding of its drivers and culture. AJ Bell is a fantastic business; with a strong management team, collaborative Board and a track record of delivering growth. Our dual-channel business model is a real strength in the investment platform market and our focus on ease of use and low-cost, ensures we are well-positioned to deliver sustainable growth for the longer-term.

We have delivered an excellent set of results this year with PBT of £113.3 million. Over the past 12 months customer numbers increased by 66,000 to 557,000 and we delivered £6.1 billion of net inflows, ending the year with total AUA of £92.2 billion. Our strong performance reflects the investment we have made in our brand and propositions and our ongoing commitment to deliver excellent customer service, alongside improved retail investor confidence. Michael discusses our business performance and strategic progress in more detail in the CEO review.

This year the Board's primary areas of focus were succession planning at both Board and Executive Committee (ExCo) level and onboarding of new members, as well as ensuring that the right strategy is adopted to deliver sustainable success for the Company. As a Board we have aimed to support and appropriately challenge ExCo on their strategic priorities, for the benefit of all our stakeholders.

Board priorities

Growth and efficiency:

The business has delivered another excellent set of results in 2024, with impressive growth in both our customers and AUA. I fully recognise the importance of sustaining strong growth while also managing our cost base amid an unpredictable macroeconomic and political landscape. The Board's focus in the upcoming year will be on ensuring ExCo strikes an appropriate balance between growth and efficiency, continuing to deliver our growth plans whilst also realising operational gearing.

Consumer Duty:

Good customer outcomes are at the heart of everything we do, with good value products, simple communications and strong processes to support our customers. Our Consumer Duty implementation programme enabled us to strengthen our foundations and leverage new frameworks, tools and processes to further enhance the delivery of good consumer outcomes.

This year we completed our first annual Consumer Duty assessment. Whilst we are confident that we are operating in line with the requirements of the Duty, we recognise that embedding the Duty is a journey and there are opportunities to further enhance our business processes and continue to improve our customer offering. The Board's focus will be on maintaining oversight to ensure the business is delivering good consumer outcomes for its customers which are consistent with the Consumer Duty.

Executive Succession:

Succession planning for ExCo and other senior management has been a key priority for FY24. A comprehensive review took place during the year to evaluate our overall talent pool within the Company. It is gratifying to note the number of internal candidates identified, showcasing the effectiveness of personal development and career advancement at AJ Bell. We also continue to evaluate the market to identify external talent, ensuring a diverse senior management team in the future. The Board will maintain oversight and challenge the progress of our succession planning at ExCo level, and we anticipate further enhancements in the upcoming year.

Culture, purpose and stakeholder engagement

The Board plays a crucial role in shaping and embedding a strong and healthy culture by endorsing the core values and principles of the Group. The Board receives updates and feedback on staff engagement and regularly reviews its culture dashboard to monitor how we nurture our strong cohesive culture and ensure it remains a real strength as we continue to grow.

One of my priorities as Chair is to ensure that the voice of our stakeholders is heard and represented in Board discussions. We welcomed the opportunity to engage with our staff and shareholders in person again this year, providing invaluable insight into the operation and culture of our business. Throughout this year our senior management team and Board have connected with our staff through various platforms including hosting in-person and virtual leadership sessions, participating in our annual manager's day, attending talent networking events and regular employee surveys.

Positive, meaningful staff engagement is key to realising our strategic objectives and so as the nominated Employee Engagement Director I engaged with our Employee Voice Forum (EVF) members during the year to gather insights on a range of topics that directly impact our company's growth and direction.

Alongside fellow Non-Executive Directors (NED) and our CFO, Peter Birch, we discussed hybrid working, our culture, and the future role of artificial intelligence (AI) in supporting our operations. These have been high-quality debates and the forum has been invaluable for fostering discussions and ideas. It has been great to witness the high level of engagement and the initiatives that have emerged from these sessions.

This year we participated in the Great Place to Work survey for the first time, having previously used Best Companies to measure employee engagement. We were delighted to receive a score of 83% which places us amongst the best large companies in the country.

We have maintained a high level of engagement with existing and potential shareholders this year and I have spent time with our shareholders to hear their views. It was important this year for us to engage with our larger shareholders on proposed changes to our Remuneration Policy. Our Chair of the Remuneration Committee, Margaret Hassall, led the consultation exercise which demonstrated there is strong support for the proposals that will be put to a vote at our AGM in January 2025.

Board changes and succession

As reported last year, we were pleased to welcome Fiona Fry to the Board as an independent Non-Executive Director. Following regulatory approval in March 2024, Fiona was appointed Chair of the Risk & Compliance Committee, succeeding Simon Turner who completed nine years' service and stepped down from the Board on 31 March 2024. On behalf of the Board I would like to thank Simon for his significant contribution to the Company during his tenure and particularly for his support with the succession process for the Chair of Risk & Compliance Committee and ensuring a smooth handover to Fiona.

We were also delighted to welcome Julie Chakraverty to the Board on 1 June 2024, concluding our search for a further independent Non-Executive Director. Julie brings more than 30 years' experience in the financial services, consumer and cyber sectors which will be invaluable to the Board as we continue to focus on our strategic priorities.

The Board values diverse skills, experience and perspectives around the board table. With the appointments of Fiona and Julie during the year, our position has strengthened. The recent external Board evaluation and results from work commissioned on cognitive diversity confirmed that we have well-rounded Board skills and diverse thinking across the Board and ExCo. Whilst we are pleased with the results and our progress to date in meeting the diversity requirements of the FCA Listing rules and Parker Review recommendations, we acknowledge there is still more to be done to continue to drive greater diversity. Our challenge for the year ahead will be how we can enhance this at both Board and

ExCo levels.

Finally, in September we announced that Roger Stott will retire from the Board at the end of the year, after 16 years with AJ Bell, the final three of which were served as COO. Roger has been an excellent thought leader and ambassador and has played a significant role in the success of the business. I would like to extend my gratitude to Roger for his outstanding contribution to the Board and Company over many years, and especially for his support and guidance during my first year as Chair. We wish him all the very best for the future.

Further details on Board changes can be found in the Nomination Committee report.

Dividend

In line with our commitment to a progressive dividend, the Board is pleased to announce a final ordinary dividend of 8.25 pence per share, reflecting the financial performance of the business and strong capital position. The final ordinary dividend will be paid, subject to shareholder approval, at our AGM on 29 January 2025, to shareholders on the register at the close of business on 10 January 2025.

This brings the total ordinary dividend for the financial year to 12.50 pence per share, representing an increase of 16% on the previous year.

During the year the Board approved a new capital allocation framework. This reaffirmed our commitment to continue to invest in our organic growth plans and pay a progressive annual ordinary dividend. We have also committed to reviewing our capital position annually and will consider returning any surplus funds to shareholders through a share buyback or special dividend, in accordance with our Capital Allocation Policy. The Board is pleased to announce recent approval of our plan to return up to £30 million through a share buyback programme in the upcoming financial year.

Consideration of our wider stakeholders in some of our key decisions in the year is outlined in our Section 172 statement.

Looking ahead

AJ Bell is a financially strong business as evidenced by a profitable, well-capitalised and highly cash-generative business model. The business has a track record of delivering growth and has a clear strategy to ensure that this continues. Although we have seen improvements in the macroeconomic environment this year, geopolitical uncertainties continue. The recent Budget announcements, particularly around increases in capital gains tax and bringing unspent pension assets under the inheritance tax regime will also have an impact on some of our customers. Whilst these factors may present some challenges, it is clear that the fundamental growth drivers for the platform market remain firmly in place. The Board remains confident in the long-term prospects of the business.

I have thoroughly enjoyed being part of the team and am hugely proud of our achievements in 2024. On behalf of the Board I would like to thank our management team and all of our people for their hard work and commitment this year and I look forward to another successful year ahead.

Fiona Clutterbuck

Chair

4 December 2024

Chief Executive Officer's review

"Our easy-to-use, low-cost platform and market-leading customer service place us at the forefront of the UK investment platform market, ready to capitalise on the significant long-term growth opportunity."

Consistently strong growth

I am pleased to report on another excellent year in which we have delivered strong growth in customers and AUA. Our dual-channel approach to the platform market means we benefit from growth in both the advised and D2C sub-sectors of the market. This is set to continue, with approximately two-thirds of the estimated £3 trillion total addressable market still held off-platform.

We continue to increase our share of the growing UK investment platform market, both by attracting new customers entering the market for the first time and by attracting customers to AJ Bell from other platforms.

Over the past year we have reduced fees for our customers, invested in our platform propositions and sustained our multi-year marketing campaign to increase brand awareness. Together with our market-leading customer service levels, these factors have helped to drive our organic growth this year and will further strengthen our ability to capitalise on the significant long-term growth opportunity that exists in the platform market.

We have a track record of achieving consistently strong growth in our business whilst also increasing dividends to shareholders. Our growth this year has enabled us to deliver record financial results and further increase the level of surplus capital held. We are therefore pleased to recommend an increase in our ordinary dividend for the twentieth successive year, alongside the initiation of a share buyback programme to return up to £30 million of surplus capital to shareholders.

Another record performance

Platform customers increased by 14% to 542,000 (FY23: 476,000), whilst platform AUA increased by 22% to £86.5 billion (FY23: £70.9 billion), driven by strong net inflows of £6.1 billion, up 45% versus the prior year (FY23: £4.2 billion). This strong performance was supported by the continued investment in our platform propositions, pricing and brand, alongside improved retail investor confidence as markets rebounded and inflationary pressures eased. The increase in asset values across global equity markets led to favourable market movements of £9.5 billion.

AJ Bell Investments AUM increased by 45% to £6.8 billion (FY23: £4.7 billion). Our range of simple, low-cost investment solutions continues to perform exceptionally well, including our managed portfolios, which remain highly attractive to financial advisers via both AJ Bell Investcentre and third-party adviser platforms.

The growth in customers and AUA and the improving macroeconomic environment enabled us to deliver a record financial performance. Revenue increased by 23% to £269.4 million (FY23: £218.2 million), driven by higher revenue from interest income, custody fees and dealing fees. Profit before tax increased by 29% to £113.3 million (FY23: £87.7 million), driven by the increases in revenue and higher profit margin resulting from our focus on delivering operational gearing.

Our strategy to help people invest

We invest in our propositions with a focus on our three strategic drivers; ease of use, trust and low-cost.

Ease of use

We make it easy for customers to invest through our full-service and simplified propositions, supplemented by our in-house investment solutions. Our range of solutions provides our customers with a straightforward investment journey, supported by additional tools to make investing easier.

We are committed to continually investing in our propositions with a focus on ease of use to meet the evolving needs of customers and advisers.

Adviser efficiency

On our full-service advised proposition, AJ Bell Investcentre, we have improved efficiency and ease of use for advisers, helping them to remain focused on delivering excellent service to the customer.

We have developed a significantly improved interface, mapped to the advice process, to streamline the onboarding of new clients. Fund-specific illustrations and pre-sale costs & charges disclosures are produced instantly as part of the process, with all progress visible to the adviser on the onboarding dashboard.

We have also introduced a new feature which enables regular investments directly into model portfolios. This allows advisers to instruct the regular investments into a model portfolio rather than individual asset lines, again improving efficiency.

The development of AJ Bell Touch, our simplified advised proposition, is ongoing. We completed beta testing during the year, receiving some excellent feedback from advisers. The fully digital solution will expand our offering in the advised market. Through its streamlined, intuitive user interfaces, AJ Bell Touch is able to deliver greater efficiencies for advisers, enabling them to engage with a wider range of clients.

Improving and simplifying the D2C customer experience

A proportion of our addressable market sits in legacy pension products. The vast majority of people have multiple employers during their career, and subsequently accumulate several different pension pots which can result in higher charges, whilst also being more difficult to manage. Our customers have been consolidating such pensions with us for many years, but as part of our focus on ease of use we have launched our Ready-made pension service, helping customers to consolidate their existing pensions with minimal effort. The combination of a pension-finding service, a new pension product and a multi-asset investment solution with an all-in cost of just 0.45% represents excellent value for customers.

Customer experience is a key component of ease of use, and as such we are undertaking a project to roll out a new, fresh design for our D2C website in early 2025. This will be followed by the redesign of our mobile app. These developments will focus on improving navigation and enhancing content delivery for customers, all centred on ease of use.

Long-term cash savings represent a significant part of the addressable market for platforms. There are millions of people in the UK who hold high levels of cash savings for sustained periods of time, missing out on the superior returns that can be achieved through risk-based investing. Many of these consumers are deterred from investing due to its perceived complexity and their own lack of confidence. AJ Bell Dodl provides an ideal platform to address this market opportunity, and to increase its attractiveness to this cohort of customers, we introduced a highly-competitive interest rate for cash held in an ISA or Lifetime ISA, with the current rate of 4.84% being higher than the UK base rate of 4.75%. Customers are able to access educational content on the platform to help build their confidence to invest via AJ Bell Dodl's streamlined investment range.

Trust

Our award-winning platform propositions and market-leading customer service levels have enabled us to build a platform which is highly trusted by both customers and financial advisers, evidenced by our 94.2% customer retention rate. This trusted relationship is key to retaining existing customers.

Trust and brand awareness are also key drivers of a new customer's decision when choosing an investment platform. Therefore, alongside our highly trusted platform, we are continuing to focus on enhancing our brand awareness.

A scalable platform with market-leading customer service

Our scalable platform offers a reliable digital solution. During the year we processed in excess of ten million trades and transactions, highlighting our capacity to manage growing demand and ensuring our customers can invest whenever they choose.

While our digital services are at the core of our offering, we recognise there are moments in the investment journey when customers and advisers want to speak to us directly. Our knowledgeable Customer Services Team provide help and reassurance by ensuring queries are resolved swiftly and effectively. During the year we handled over 450,000 calls, with 97% of calls answered within 20 seconds, highlighting our commitment to providing exceptional service. The strength of our service is further demonstrated by our market-leading Trustpilot rating of 4.8-stars and being the only platform to be recognised as a Which? Recommended investment platform provider for six years in a row.

We believe this is paramount to retaining the trust of our customers and their advisers, and to ensure we maintain our high customer retention and referral rates.

Increased brand awareness

We continued our multi-year strategy to enhance brand awareness through our TV advertising campaign and title partnership with the AJ Bell Great Run Series. Our efforts have yielded positive results, with prompted brand awareness reaching an all-time high, reinforcing our position as a trusted platform in the market. We remain committed to this strategy, and recently relaunched our TV and radio advertising campaigns with refined messaging to build on our improved brand awareness.

Low-cost

Our scale, combined with an efficient dual-channel, single operating model, enables us to keep costs low for our customers. Our philosophy has always been to share the benefits of operating at scale with our customers so that we can provide one of the most competitively priced platforms in the market.

Reducing customer charges

During the year we have reduced charges on both our advised and D2C platform propositions.

For our advised customers, we reduced custody charges for assets held on the platform, as well as removing various transactional charges.

For our D2C customers, we halved our dealing charges on shares, ETFs, investment trusts and bonds to £5.00 per trade, while charges for frequent traders were reduced from £4.95 to £3.50.

Competitive interest rates

We pay competitive interest rates to customers on the instant access cash balances held on our platform. Customers often hold cash in their accounts temporarily while they wait for investment opportunities. This can differ for pensions, particularly where customers are approaching or are in retirement, as they will often hold larger cash balances to fund short-to-medium-term income withdrawals. We have therefore introduced new higher rates of interest on cash held in pensions in drawdown.

These price reductions and increased interest rates deliver annualised savings to our customers of over £20 million. We believe they will ensure that our pricing levels will remain highly competitive and sustainable over the medium term.

A highly engaged workforce

A strong, purpose-led culture and high levels of staff engagement are integral to our continued growth and success. This year we changed our employee engagement survey to Great Place to Work, a well-established employee engagement tool with accreditations recognised globally, as we wanted to continue to challenge ourselves and gain a different perspective on our workplace culture. We are therefore pleased to report strong results, being certified as a Great Place to Work with a total score of 83%, well in excess of the 65% accreditation threshold, placing us amongst the best large companies in the country.

We continue to invest in our pay and benefits package for employees. For FY24, we increased base pay by an average of 5% and introduced uplifts to employer pension contributions. Employee share ownership remains fundamental to our business and we continue to operate our annual free share scheme award, which has resulted in 79% of our workforce owning shares in the company.

We believe that having a diverse leadership team is important to ensure that we bring a wealth of perspectives to the table, and I am pleased with the strong levels of both demographic and cognitive diversity in our ExCo. In addition, we recognise the importance of having a robust and diverse talent pipeline, and our commitment to developing internal talent is demonstrated by over 200 internal promotions this year.

Leadership team changes

Roger Stott will be retiring and stepping down from his role as Chief Operating Officer (COO), as planned, on 31 December 2024. Throughout his 16-year tenure, Roger has served in several senior positions and has significantly contributed to our long-term success. Roger has been a pleasure to work with and I would like to thank him for his contribution to the business and wish him all the best in his retirement. His responsibilities will be assumed by our CFO, Peter Birch, and Chief Technology Officer (CTO), Mo Tagari. Peter and Mo are excellent leaders who have the skills and experience to ensure our focus on operational delivery remains as sharp as ever.

Following the year end, we announced the appointment of Ryan Hughes to our ExCo in the role of Managing Director of AJ Bell Investments, a role he had held on an interim basis since October 2023. Ryan excelled in his interim role and I look forward to continuing our work together as we build on the successes of our fast-growing AJ Bell Investments business.

Campaigning for retail investors

There are a number of ongoing legislative and regulatory developments that will impact customers in our market. We continue to engage with the Government and regulators on their behalf, campaigning for a range of measures which we believe will help to foster a supportive environment for long-term retail investors in the UK.

The new Labour Government's first Budget proposed subjecting unused pensions on death to inheritance tax (IHT) from April 2027. Bringing pensions into IHT in the way proposed is arguably the most complex and costly way of raising tax from pensions on death. As the proposals currently stand, they will create delays for beneficiaries, will be costly to administer and will prove unworkable in many situations. We have proposed alternative approaches directly to the Government that would address these issues and we will contribute to industry-wide efforts to agree a workable alternative.

The tax treatment of pension contributions and pension commencement lump sums are the cornerstone of the UK pension system. In the period leading up to the Budget, speculation around the amendment or withdrawal of these key incentives was covered extensively by national media outlets. This caused a meaningful change in customer behaviour, with contributions into pensions and withdrawals from them both increasing significantly. Whilst neither aspect of pension legislation was actually amended in the Budget, customers were clearly concerned.

Pension saving is a long-term financial decision and it requires a system in which people have a high degree of confidence. We will continue to make representations to the Treasury calling for a public commitment to stability in the pension tax system throughout this parliament. Our campaign for a 'Pensions Tax Lock' has been well received and we continue to call for Government to use this 'no-cost option' to ensure people saving for retirement can have confidence in pensions.

AJ Bell has campaigned over a number of years for simplification of the ISA system, making it easier for people to invest, reducing complexity in the savings and investment system and breaking down barriers between cash saving and investing. We are pleased proposals for a UK ISA will not be taken forward by this Government, with the introduction of another type of ISA risking undue product complexity with little benefit to customers. The Government has instead committed to simplifying the ISA system and making it easier for people to benefit from investing in ISAs and we look forward to working with policymakers and industry towards that objective.

The ongoing Advice Guidance Boundary Review represents an opportunity for us to provide greater support to our customers and we are in favour of proposals to permit more targeted support, as outlined by the FCA in late 2023. Feedback from the consultation on those proposals was published in November and we look forward to seeing them implemented in due course.

Outlook

The structural growth drivers of the platform market remain strong, as more individuals recognise the importance of taking control of their financial future.

We will continue to invest in our business with a focus on our technology and brand in order to capitalise on the significant growth opportunity the platform market presents.

The benefits of operating our dual-channel platform, underpinned by a single operating model, will continue to drive operational gearing. Alongside this, we are increasingly focused on creating efficiencies through a framework of strong cost control and the automation of processes.

Our diversified revenue model ensures we can deliver strong financial performance across a wide range of economic conditions. If the Bank of England's base rate reduces in line with current market expectations, this has the potential to gradually increase the attractiveness of investing, providing a potential tailwind for customer acquisition and inflows.

Pensions and ISAs are the core investment products in the UK and rely on continued belief from Government in the importance of long-term investing for individuals' financial futures. As with any new government, changes in legislation can be expected. There is a risk that some changes could reduce the attractiveness of long-term investing in these key products, or add complexity to the industry and increase costs. However, we remain confident that the new Government will continue to support the key, long-standing features of these products.

Finally, I would like to express my thanks to all members of the AJ Bell team. Their ongoing commitment and dedication continues to be at the heart of our success and it is a pleasure to work with them.

Michael Summersgill

Chief Executive Officer

4 December 2024

Financial review

"Our consistently strong financial performance has enabled us to invest in enhancing our propositions, lowering charges for our customers and increasing our brand awareness whilst delivering record results."

Overview

We are pleased to report excellent results for our business this year, achieving record highs in customer numbers, AUA, revenue and profit. Our dual-channel platform achieved very strong net inflows of £6.1 billion (FY23: £4.2 billion) and customer growth of 14% (FY23: 12%) as we realised the benefits of the investments we made in the business and retail investor confidence improved.

Our diversified revenue model enables us to deliver sustainable profit in different market conditions. Revenue increased by 23% to £269.4 million (FY23: £218.2 million), with increasing margins driving PBT up 29% to £113.3 million (FY23: £87.7 million).

The low-cost element of our business strategy ensures we can offer great value to our customers, and to achieve this we have continued to focus on maintaining an efficient operating model. We are reviewing processes, optimising resource allocation and leveraging technology as part of an organisational-wide initiative to continue to drive future operational efficiency. These efforts will deliver controlled cost growth and ensure we retain the capacity to invest in the business to deliver long-term growth.

Alongside consistently delivering strong business growth, we have also returned capital to shareholders in the form of a progressive dividend. Our excellent financial performance over recent periods, supported by our highly cash-generative business model, has allowed us to accumulate surplus capital beyond regulatory requirements. Consequently, the Board recommends a final dividend of 8.25 pence per share (FY23: 7.25 pence per share), alongside the launch of a share buyback programme of up to £30 million, set to begin immediately.

Business performance

Customers

Customer numbers increased by 66,000 during the year to a total of 557,000 (FY23: 491,000). D2C customers increased by 17%, with advised customers up by 8%. Our platform customer retention rate remained high at 94.2% (FY23: 95.2%).  

Assets under administration

Year ended 30 September 2024

Year ended 30 September 2023

We achieved platform net inflows of £6.1 billion (FY23: £4.2 billion), up 45% versus the prior year, highlighting the strength of our overall customer value proposition in both the advised and D2C markets.

Advised platform net inflows were £2.2 billion (FY23: £1.9 billion), driven by an increase in gross inflows to £6.5 billion (FY23: £5.0 billion). We have seen higher inflows from new customers supported by an uptick in inbound migration activity, as advisers were more willing to bulk transfer customers in FY24 following stronger market conditions. Outflows in the year increased to £4.3 billion (FY23: £3.1 billion), predominantly driven by higher levels of client withdrawals in response to inflationary pressures, and to a lesser extent, the impact of recent adviser consolidation.

D2C platform net inflows were £3.9 billion (FY23: £2.3 billion). Gross inflows increased to £6.6 billion (FY23: £4.3 billion), as investor confidence improved following a strong recovery in global equity markets. We achieved a 63% increase in SIPP gross inflows, reiterating the importance of tax-wrapped products for our customers, and also delivered strong inflows from new customers as our investment in brand continued to deliver results. Outflows increased to £2.7 billion (FY23: £2.0 billion), reflecting the overall growth in customers numbers, as well as some customers drawing down on their investments to meet higher costs of living.

Non-platform net inflows remained stable in line with our expectation, with AUA closing at £5.7 billion (FY23: £5.2 billion). Favourable market movements contributed £10.0 billion (FY23: £2.8 billion) as global equity values continued to recover strongly from the challenges experienced in previous years. This resulted in record closing AUA of £92.2 billion (FY23: £76.1 billion).

Assets under management

[1] Non-platform AUM relates to AJ Bell funds and MPS' held on third-party platforms.

We continue to see increased demand for our suite of straightforward, cost-effective investment solutions particularly in the advised market via AJ Bell Investcentre and third-party adviser platforms. We recorded net inflows of £1.5 billion, supported by strong investment performance that generated market movements of £0.6 billion, resulting in total AUM closing at £6.8 billion (FY23: £4.7 billion).   

Financial performance

Revenue

Revenue increased by 23% to £269.4 million (FY23: £218.2 million).

Recurring fixed fees increased by 5% to £32.1 million (FY23: £30.7 million), driven by increased pension administration revenue following growth in our advised platform customers.

Recurring ad valorem revenue grew by 25% to £202.0 million (FY23: £161.2 million) with two key driving factors. Firstly, we earned higher custody fee income in the period, driven by the higher average AUA on the platform. Secondly, net interest income generated on customer cash balances held on the platform also increased with the rate retained peaking in March. Cash held on the platform is readily available for customers to invest or withdraw and in most cases represents a temporary position while customers await investment opportunities. Our economies of scale allow us to generate better gross interest rates which enables us to pay market-competitive rates on customers' cash balances and keep our charges low. Further information on the impact to revenue of changes to the UK base interest rate has been disclosed in note 25 to the consolidated financial statements.

Transactional fees increased by 34% to £35.3 million (FY23: £26.4 million). Dealing activity was higher in the year due to improved retail investor sentiment following a recovery in global equity markets. FX revenue was also strong due to increased levels of dealing in overseas shares, particularly US.

Our consolidated revenue margin increased to 31.6bps (FY23: 29.8bps). This was in line with expectation following the increases to revenue detailed above. The revenue margin in the second half of the year was lower than the first half following the reduction in charges across the platform, which were effective from 1 April 2024, as we passed on the benefits of our scale to our customers.

In FY25, we expect our revenue margins to moderate slightly taking into account the annualised impact of our recent charge reductions. We expect our revenue margins to be sustainable beyond 2025.

Administrative expenses

Total administrative expenses increased by 23% to £162.2 million (FY23: £132.0 million) as we delivered planned investments in our people, technology and brand. The largest expense remains staff costs, which increased by £15.5 million to £80.3 million (FY23: £64.8 million) as we increased headcount to support our growth. We also further enhanced our benefits package and ensured that our people received appropriate salary increases that reflected the high inflation environment at the start of the year.

Distribution costs increased by 14% to £29.6 million (FY23: £25.9 million). This was driven by the delivery of our multi-channel advertising campaign, alongside our decision to increase spend on direct marketing activity in the lead up to the tax year end resulting in over 12,000 new customers joining the platform in March alone. As part of our initiatives to raise brand awareness we have continued our partnership as the title sponsor of the AJ Bell Great Run Series. In addition, we incurred costs relating to our new Ready-made pension service, which enables customers to locate their existing pensions and easily consolidate them into our range of award-winning funds.

Technology costs increased by 24% to £49.9 million (FY23: £40.3 million). We have continued to invest in our change teams to increase the pace at which we deliver enhancements to the platform. Our improved change capacity gave us the confidence to accelerate certain improvements to AJ Bell Investcentre in the second half of the year that had originally been planned for FY25, which resulted in technology costs being slightly higher than we guided in May 2024. This additional investment will deliver longer-term efficiencies.

Underlying operational and support costs increased by 18% to £76.5 million (FY23: £65.0 million) with 4% of the increase being higher transaction costs and higher variable pay, which were a direct consequence of increased customer dealing activity and the record financial performance of the business. The year-on-year increase also reflected a higher-than-normal level of salary inflation, which is expected to settle in future years, as well as increased headcount to drive business growth.

Exceptional operational and support costs of £6.2 million (£0.8 million) represent a provision for potential customer redress relating to historical SIPP operator due-diligence issues in respect of non-mainstream investments made by customers who had regulated financial advisers acting for them prior to 2014. During the year a small number of Financial Ombudsman Service (FOS) complaints were upheld in favour of customers and the provision represents management's best estimate of the cost to compensate these customers as well as other customers with comparable circumstances. The issue is historical in nature and does not relate to our ongoing business. We have one remaining FOS case in relation to such investments which has recently been provisionally upheld in our favour, compared with circa 800 open cases across the industry per the FCA's Dear CEO letter of 4 November 2024. On the basis of published FOS decisions, we believe that future complaints would be time-limited.

In FY25, we expect inflationary pressures to ease and further operational gearing to be realised. We will continue to invest to deliver our strategic priorities whilst maintaining strong profit margins.

Profitability and earnings

Investment income of £6.9 million (FY23: £2.4 million) was driven by higher interest earned on corporate cash balances in the year.

PBT increased by 29% to £113.3 million (FY23: £87.7 million) whilst PBT margin increased to 42.0% (FY23: 40.2%). The higher profit margin versus the prior year reflects the higher revenue margins combined with a lower rate of cost growth as we continue to drive cost efficiencies as part of our strategic focus.

The standard rate of UK corporation tax remained at 25.0% throughout the year. Our effective rate of tax for the period was slightly ahead of this at 25.6% (FY23: 22.2%).

Basic earnings per share rose by 23% to 20.46 pence (FY23: 16.59 pence) in line with the increase to PBT. Diluted earnings per share (DEPS), which accounts for the dilutive impact of outstanding share awards, also increased by 23% to 20.34 pence (FY23: 16.53 pence).

Financial position

The Group's financial position remains healthy, with net assets totalling £204.0 million as at 30 September 2024 (FY23: £166.0 million) and a return on assets of 41% (FY23: 41%).

Financial resources and regulatory capital position

Our financial resources are continually kept under review, incorporating comprehensive stress and scenario testing which is formally reviewed and agreed at least annually.

During the year, we have continued to maintain a healthy surplus over our regulatory capital requirement and as at the balance sheet date this was 206% (FY23: 222%) of the capital requirement.

We operate a highly cash-generative business, with a short working-capital cycle that ensures profits are quickly converted into cash. We generated net cash from operating activities of £96.3 million (FY23: £101.4 million) and held a significant surplus over our basic liquid asset requirement during the period, with our year-end balance sheet including cash balances of £196.7 million (FY23: £146.3 million).

Shareholder capital returns

For FY24, in line with our new capital allocation framework, the Board has recommended a final dividend of 8.25 pence per share (FY23: 7.25 pence per share), resulting in a total ordinary dividend of 12.50 pence (FY23: 10.75 pence) for the year. This equates to a pay-out of 61% of statutory profit after tax and is our 20th year of progressive ordinary dividend growth. Reflecting the significant surplus capital held in excess of our regulatory requirements, alongside our commitment to deliver enhanced shareholder returns, the Board approved a new share buyback programme of up to £30 million, to be completed before the end of the forthcoming financial year to 30 September 2025.

Peter Birch

Chief Financial Officer

4 December 2024

Principal risks and uncertainties

The Board is committed to a continual process of improvement and embedment of the risk management framework within the Group. This ensures that the business identifies both existing and emerging risks and continues to develop appropriate mitigation strategies through an effective internal control environment.

The Board believes that there are a number of potential risks to the Group that could hinder the successful implementation of its strategy. These risks may arise from internal and external events, acts and omissions. The Board is proactive in identifying, assessing and managing all risks facing the business, including the likelihood of each risk materialising in the short or longer term.

The principal risks and uncertainties facing the Group are detailed below, along with potential impacts and mitigating actions. The residual risk of the majority of the Group's principal risks and uncertainties has remained stable, however the residual risk has increased for ESG risk, due to increasing volumes of regulatory change, and liquidity risk, due to the increased scale and volume of orders being processed. The residual risk has decreased for people risk due to softening demand in the labour market and enhancements to recruitment processes and talent development programmes.

Residual risk direction

↑ Increased ↔ Stable ↓ Decreased

Viability statement

In accordance with provision 31 of the UK Corporate Governance Code 2018, the Board has assessed the viability of the Group, considering a four-year period to September 2028. The Board considers a four-year horizon to be an appropriate period to assess the Group's strategy and its capital requirements, considering the investment needs of the business and the potential risks that could impact the Group's ability to meet its strategic objectives.

This assessment has been made by considering the Group's financial position and regulatory capital and liquidity requirements in the context of its business model, strategy and four-year financial forecasts and in consideration of the principal risks and uncertainties, as detailed in the Strategic report Principal risks and uncertainties. The principal risks and uncertainties are those that may adversely impact the Group based on its business model and strategy and are derived from both the Group's business activities and the wider macroeconomic environment in which the Group operates but does not control.

As an FCA-regulated entity, as part of its Internal Capital and Risk Assessment (ICARA) the Group is required to use stress testing of the business model and strategy to identify whether it holds sufficient own funds and liquid assets. Forward-looking hypothetical stress testing scenarios have been determined by considering potential macroeconomic and idiosyncratic events that would have a significant adverse impact on the Group's ability to generate profits, and therefore maintain the existing levels of own funds and liquid assets, over the business planning period.

The Board-approved four-year financial forecast assumes the business continues to grow customer numbers and AUA through investment in our brand, product propositions, technology and people. The financial forecasts assume that the Bank of England base interest rate will continue to gradually fall throughout the forecast period, in line with market projections. There are no significant market movements in underlying asset values based on the position at the point the projections were approved by the Board.

The Board has considered the potential impact of three stress test scenarios, which cumulatively represent a severe, remote but plausible scenario:

1)   Macroeconomic (Market risk) - a significant reduction in equity market values, based on the 2008-09 global financial crisis. Asset values fall by 40% in year one, recovering to 20% below the level they were prior to the fall in year two, and remain flat in years three and four.

2)   Macroeconomic (Market risk) - Bank of England base interest rate reduced to 0.50% over a 15-month period leading to a lower interest rate retained on customer cash balances.

3)   Idiosyncratic (Technology risk, Third-party management risk) - prolonged IT issues with key operating software suppliers cause significant damage to AJ Bell's service and reputation, which results in a reduction in customers. Following year one the Group incurs development and licence costs to upgrade or replace key components of the platform software, with service levels and net inflows returning to normal in year three.

The Board has identified a number of potential management actions that could be taken in the event the modelled scenarios crystallise. The action selected would be dependent upon the nature of the scenario.

The results have confirmed that the Group would be able to withstand the adverse financial impact of these three scenarios occurring simultaneously over the four-year assessment period. This assumes that dividends and share buybacks are paid in line with the recommendation made in the 30 September 2024 annual report and with the Group capital allocation framework on a forward-looking basis. During the period, the Group continues to retain surplus financial resources over and above its regulatory capital and liquidity requirements, with or without any management remediation actions.

The Group's strategy and four-year financial forecasts were approved by the Board in September 2024. The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the four-year period ending September 2028.

The Strategic report was approved by the Board of Directors and signed on its behalf by:

Michael Summersgill

Chief Executive Officer

4 December 2024

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK-adopted International Accounting Standards and applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with UK-adopted International Accounting Standards and have elected to prepare the Parent Company financial statements in accordance with UK accounting standards and applicable law including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss for the Group for that period. The Directors are also required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the UK.

In preparing these financial statements, the Directors are required to:

·       select suitable accounting policies and then apply them consistently;

·       make judgements and accounting estimates that are reasonable and prudent;

·       for the Group financial statements, state whether they have been prepared in accordance with UK-adopted International Accounting Standards, subject to any material departures disclosed and explained in the financial statements;

·       for the Parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

·       prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group or Parent Company will continue in business; and

·       prepare a Directors' report, a Strategic report and Directors' Remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

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.

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Each of the Directors, whose names and responsibilities are listed in the Corporate Governance report, confirms that, to the best of their knowledge:

·       the financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

·       the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Parent Company, together with a description of the principal risks and uncertainties that they face.

We consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Approved by the Board on 4 December 2024 and signed on its behalf by:

Kina Sinclair

Company Secretary

4 Exchange Quay

Salford Quays

Manchester

M5 3EE

Consolidated income statement

for the year ended 30 September 2024                 

All revenue, profit and earnings are in respect of continuing operations.

There were no other components of recognised income or expense in either period and, consequently, no statement of other comprehensive income has been presented.

Consolidated statement of financial position

as at 30 September 2024

The financial statements were approved by the Board of Directors and authorised for issue on 4 December 2024 and signed on its behalf by:

Peter Birch

Chief Financial Officer

AJ Bell plc

Company registered number: 04503206