TIDMARDN
RNS Number : 1744P
Arden Partners plc
16 February 2021
Arden Partners plc
("Arden" or the "Company" or the "Group")
Audited results for the year ended 31 October 2020
Arden Partners plc (AIM: ARDN), the institutional stockbroking
company, today announces audited results for the year ended 31
October 2020.
Market overview
-- Arden made a good start to the year despite the elevated
political uncertainty then prevailing around Brexit and the General
Election
-- Trading towards the end of the first half was negatively
impacted by the Covid-19 pandemic which led to unprecedented
declines in equity markets, the Company's trading operation
suffering material losses and a pause on all corporate activity
-- In the second half and in reaction to the economic impact of
the pandemic, equity markets improved and there was a dramatic
increase in demand for capital
-- Consequently, second half deal flow was dominated by equity
fund raisings for our clients relating both to re-capitalisation
and growth finance
Operational highlights
-- Profitable second half trading performance across the Group
following an extremely challenging first half
-- 22 transactions completed (2019: 39 transactions) including
10 equity fundraisings (2019: 9 equity fundraisings)
-- GBP90 million raised for our listed clients (2019: GBP67 million)
-- Second half trends continued into the current year, with four
secondary fundraisings (raising GBP51
million) and three M&A transactions completed in our first
quarter
Financial highlights
-- Revenue: GBP5.9 million (2019: GBP6.6 million)
-- Revenues before equity trading losses increased by 7.2% on previous year
-- Profitable second half giving a loss before tax for the year
GBP1.4 million (2019: GBP2.6 million loss before tax)
-- Recovery in equity trading position in second half and since the year end
-- Basic loss per share: 5.0p (2019: 8.9p loss per share)
-- Net asset value per share of 13.9p (2019: 18.1p)
Commenting on the results and Arden's outlook, Mark Ansell,
Chairman, said:
"The challenges faced by our industry in 2020 were unprecedented
and I am very proud of our employees' efforts in ensuring that
disruption to our business was minimised. Your Board continues to
employ strategies to protect and enhance shareholder interests by
ensuring the health and well-being of our staff and supporting our
corporate and institutional clients.
The strategies adopted in recent years regarding the changes in
our industry and then those adopted to cope with the challenges
posed by Covid-19 are now showing positive results and our team
delivered a strong result in the second half of the year and this
performance level has continued into the current year.
Whilst the macro outlook remains uncertain, our second half
performance and more recent trading, together with less volatile
equity markets and a good M&A pipeline, gives us confidence of
a return to profitability in the current financial year."
For further enquiries:
Arden Partners plc
Donald Brown - Chief Executive Officer
James Reed-Daunter - Executive Director
Steve Douglas - Group Finance Director 020 7614 5900
GCA Altium Limited (NOMAD)
Tim Richardson 020 7484 4040
Newgate Communications (Press enquiries)
Adam Lloyd/Tom Carnegie 020 7653 9850
Notes for editors
Arden is a dedicated corporate adviser and multi-service
stockbroker to small and mid-cap companies in the UK and their
investors.
The core of our business is the effective management of the
needs of our significant and growing base of corporate clients, and
the effective support of their relationships with existing and
potential shareholders.
These relationships are enhanced by the quality of our corporate
finance advice and industry research, and the strong market
presence of our sales and trading teams.
Our corporate finance capabilities encompass M&A, corporate
finance advisory, broking and Sponsor and NOMAD services. We
represent our clients in private transactions and AIM and Main
Market share issues.
Our research is designed to be sector focused, concentrating on
top down thematic trends which highlight companies giving investors
an exposure to the real growth areas of the small-cap and AIM
markets.
It is the job of the sales team to keep institutions abreast of
these themes and stock ideas. When there is a requirement for our
corporate clients to raise money to fulfil their growth ambitions,
the sales team is in a strong position to effect this, with its
entrenched relationships with the UK institutional and
non-institutional markets.
Our market making and trading teams provide liquidity in the
shares of our corporate clients. We also trade the shares of
non-client corporates on behalf of institutions.
The Arden Wealth Management team offers a bespoke service to our
clients, with the ability to trade/invest in equities, bonds and a
range of global investment funds, as well as allowing clients to
participate in Primary and Secondary equity placings.
Chairman's Statement
The macro agenda during the early part of the year was dominated
by the UK General Election of December 2019. The clear result of
that election led to strong equity market gains and presaged a
resurgence of corporate activity. However, this encouraging trading
environment was rapidly curtailed by the impact of the Covid-19
pandemic which resulted in unprecedented declines in equity
markets, significant volatility levels and a pause on all corporate
activity, all of which significantly impacted the half year results
we announced in July 2020.
During the second half, transaction volumes recovered as many
listed companies sought to re-equitise in response to the impact of
Covid-19. UK regulators reacted promptly to ensure that equity
capital could be readily accessed and investors backed their
investee companies to come through the immediate shock of the
pandemic. Initially some of our clients' strategic plans were
paused while balance sheet strengthening was prioritised.
Relatively quickly, however, they were able to re-focus on more
positive developments. As market volatility declined towards the
end of the year, it became clear that the preponderance of
financing would be directed towards new growth opportunities.
Thanks to early action and our flexible operating model, we
remained fully operational and therefore able to focus on our
clients' needs and how we could continue to assist them. I am
grateful for the efforts of all of our employees, for ensuring an
immediate and seamless switch to remote working, for working to
make our offices Covid-secure and for remaining flexible throughout
an exceptionally challenging period.
Over the year, the Board took action to ensure the
appropriateness of the Company's cost base. This was particularly
evident with the actions taken to manage costs and preserve cash as
Covid-19 impacted the UK market. The Board will continue to take
all necessary action to minimise the impact of any further
uncertainty caused by Covid-19 or any other macro-economic
factors.
Overall the impact of these trading conditions resulted in
revenues for the year falling by 10.5% to GBP5.9 million (2019:
GBP6.6 million), a loss before tax of GBP1.4 million (2019: GBP2.6
million loss before tax) and a loss per share of 5.0p (2019: loss
per share of 8.9p). Excluding the losses of the equity trading
operation which were incurred during the unprecedented equity
market declines in the first half of the year, we delivered year on
year revenue growth of 7.2%. It is important to note the strong and
profitable trading performance across the Group in the second half
that returned a profit before tax of GBP0.2m for that period
although continued uncertainties did see some transactions carried
over to the new financial year
Our balance sheet remains strong. As at 31 October 2020 our net
asset value per share was 13.9p (2019: 18.1p). We hold cash and
cash equivalents in excess of our capital adequacy requirements and
sufficient to protect us against short to medium term market
fluctuations. We continue to believe the Group is well positioned
in its markets, a position from which we can continue to execute
our ongoing growth strategy.
The current year started in a promising and profitable manner as
we completed four equity fundraisings and three M&A
transactions in our first quarter. Whilst the macro outlook remains
uncertain, with the news continuing to be dominated by the
pandemic, our second half performance and more recent trading,
together with less volatile equity markets and a good M&A
pipeline, gives us confidence of a return to profitability in
2021.
Corporate progress is not possible without good people and this
is especially true in challenging times. I would like to take the
opportunity to place on record my thanks to the Board, our
corporate and institutional clients and all our hard-working staff
for their support during this unprecedented year.
Mark Ansell
Chairman
Chief Executive's Statement
Overview
The challenges faced in 2020 have been unprecedented.
Nevertheless, our strategic focus of providing first class services
to our corporate clients has remained unchanged. Our corporate
clients, as our most important source of revenue, are critical to
our business model and in recent years we have enhanced the service
levels provided to them through sector-focused hiring, greater
client interaction and by developing greater depths of expertise.
In a year of such disruption, we were able to continue to serve our
clients unhindered and with confidence and commitment. Despite the
disruptions of the Covid-19 pandemic, we were able to continue to
execute transactions and take on new clients in targeted
sectors.
In March 2020, in line with most UK corporates, we rapidly
prepared for the anticipated adverse impact of Covid-19 on the UK
economy by managing our costs and taking action to strengthen our
balance sheet. I am extremely proud of our employees' reaction to
the disruption of this period. The health and well-being of our
staff and our continuing support to our corporate and institutional
clients will protect and enhance shareholder interests.
Cost cutting measures included salary and fee sacrifices for all
staff, the furloughing of staff, utilising government support,
deferring an agreed element of VAT and PAYE and the cancellation or
deferral of discretionary expenditure.
As market volatility increased during the early stages of the
pandemic we encouraged our teams to support their clients with
increased levels of interaction. We were proactive in engaging with
them to assess their funding requirements both for balance sheet
strengthening and for other strategic opportunities arising from
the impact of Covid-19. Our connectivity with institutional
investors was pivotal in our being able to provide timely and
critical advice to our corporate clients.
Our equity trading operation was significantly impacted by the
exceptional market volatility in the first half, recording a
substantial loss. However, this business has returned to
profitability in the second half and continues to trade profitably
in the current year to date.
Business review
Overall for the year under review revenues decreased by 10.5% to
GBP5.9m (2019: GBP6.6m) and the operating loss was GBP1.4m (2019:
operating loss of GBP2.6m). These results were materially impacted
by the losses incurred by the equity trading operation in the first
half. In the second half, we benefitted from a partial recovery in
some of our positions and are continuing to do so in the current
financial year. Excluding the losses of the equity trading
operation, we would have delivered year on year revenue growth of
7.2%.
Revenue summary
Division 2020 2019 % change
GBP'm GBP'm
------------------------------------ ------- ------- ---------
Equities (0.5) 0.7 (171.7)
Corporate Finance (incl. corporate
retainers) 6.3 5.8 8.6
Wealth Management 0.1 0.1 241.8
Total Revenue 5.9 6.6 (10.5)
Corporate Finance
2020 2019 % change
---------------------------------- ----- ----- ---------
Revenue (GBP'm) 6.3 5.8 8.6
Number of corporate transactions 22 36 (38.9)
Funds raised (GBP'm) 90 67 34.3
Number of corporate clients
at year end 47 55 (14.5)
Corporate finance revenue growth of 8.6% resulted from higher
average deal fees, rather than an increase in deal volumes. This
was partly a function of the market but it also reflected our
strategy of increasing our share of fees on transactions in line
with our relative performance on them. Deal volumes rose towards
the end of the year and continues to do so in the current year. The
IPO market also reopened towards the end of the year and we expect
this transaction stream to be a focus in 2021.
Retainer revenue from corporate clients was broadly flat year on
year, reflecting our efforts to ensure appropriate fees for our
retained advisory and broking services. The decrease in client
numbers was disappointing, although this was partly the result of
M&A and a number of delistings.
Equities
2020 2019 %
GBP'm GBP'm change
--------- ------- ------- --------
Revenue (0.5) 0.7 (171.7)
The major impact on this divisions' results for the year was the
loss made by the equity trading operations in the first half. As a
provider of liquidity in more volatile small and mid-cap equities
we are exposed to a certain level of systemic risk. However, in the
second half we benefitted from a partial recovery in some of our
positions which reduced the overall trading loss. Our book is
profitable in the current year to date.
Excluding the losses on equity trading, other equity and
research income remained broadly flat year on year. The
repercussions of MiFID II, introduced in January 2018, will
continue to impact this operation for as long as they remain in
force in their current guise.
Access to research is a vital part of small and mid-cap
investing. Our Research Portal provides investors with the greatest
possible access to our corporate client research and is available
by registering on our website (www.arden-partners.com). Our
research is also available via the ResearchTree portal where it has
been repeatedly highly ranked for its quality.
Current trading and outlook
Trading in the current financial year to date has been very
encouraging. In the first quarter of the current year we have
completed four secondary equity fundraisings (raising GBP51
million) and three M&A transactions. Market sentiment has
remained positive, creating a favourable environment for our
equities division, notably our equities trading operation.
However, the Covid-19 pandemic continues to disrupt the UK
economy and, although recent developments around vaccines are
encouraging, we remain cautious. Less volatile equity markets and a
strong M&A pipeline gives us confidence of returning to
profitability in 2021.
I would like to thank all our clients and shareholders for their
continued support and to express the appreciation of the entire
Board for the considerable hard work and commitment of our
staff.
Donald Brown
Chief Executive Officer
Finance Review
Revenue
Revenue for the full year totalled GBP5.9 million, a decrease of
10.5% on the prior year. Revenue was materially impacted by the
losses incurred in the first half by the equity trading operation.
Excluding the losses of the equity trading operation, the Company
delivered revenue growth of 7.2% for the year.
2020 2019 % change
-------------------------------- ----- ----- ---------
Revenue (GBP'm) 5.9 6.6 (10.5)
Average number of employees 43 50 (14.0)
Revenue per employee (GBP'000) 138 132 4.5
Average headcount decreased by 14% in the year as the Board took
measures to mitigate the impact of the Covid-19 pandemic on the
Group. Through the second half of the year, we have selectively
recruited for front-office roles (junior and senior) in areas where
we see growth opportunities.
Average revenue per employee is materially distorted by the
equity trading losses. Adjusting for these losses shows a
substantial growth in this key performance indicator.
Costs
2020 2019 %
GBP'm GBP'm change
------------------------------- ------- ------- --------
Staff costs 4.0 5.6 (28.1)
Non-staff costs 3.1 3.7 (14.1)
Total administrative expenses 7.1 9.3 (22.6)
Average number of employees 43 50 (14.0)
Staff costs include restructuring payments of GBP0.3 million
(2019: GBPnil). The reduction in staff costs is the result of the
reduced headcount through the year together with the salary and fee
sacrifices made by all directors and employees in the year. Salary
and fee levels have now been restored to normal levels.
Non-staff costs were also tightly controlled in light of market
conditions, with discretionary expenditure substantially reduced.
Overall, these costs were reduced by 15.2%.
Liquidity position
The Group's liquidity position (which comprises cash and cash
equivalents, long market making equity positions, trade and other
receivables) was GBP5.9 million at the year-end (2019: GBP6.9
million). The decrease is primarily due to funding the trading
losses for the year.
This cash and cash equivalent position is stated before
deducting c.GBP0.6 million of PAYE and VAT payments deferred in
accordance with government guidance. Post the year end the deferred
PAYE has been repaid in full and the deferred VAT will be repaid
in-line with HMRC requirements.
Despite the operating loss, cash at bank as at 31 October 2020
was GBP2.4 million, a similar level to the prior year (2019: GBP2.5
million).
The Directors believe that the liquidity position, which is an
alternative performance measure, provides more useful information
for shareholders on the underlying liquidity of the Group than the
reported net assets number, as it focuses solely on the liquid
assets of the Group.
Net asset position and capital adequacy
The Group's net assets at the year-end were GBP4.6 million
(2019: GBP6.1 million), the reduction being the result of the loss
incurred in the year. The capital adequacy ratio as at 31 October
2020 was 249% (2019: 266%).
The Group holds surplus capital on its balance sheet and
continually assesses this position throughout the year. During the
year, the Group assessed the liquidity of its capital resources by
realising certain assets into cash. This exercise confirmed to the
Board that the Group's liquid assets could be accessed, at short
notice, should market conditions remain depressed.
Steven Douglas
Group Finance Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2020
2020 2019
GBP'000 GBP'000
---------------------------------------- ------- -------
Revenue 5,929 6,627
Administrative expenses (7,105) (9,181)
Expected credit loss (210) (98)
----------------------------------------- -------
Loss from operations (1,386) (2,652)
Finance income 44 94
Finance expense (14) -
----------------------------------------- -------
Loss before taxation (1,356) (2,558)
Income tax charge (2) (2)
----------------------------------------- ------- -------
Loss after taxation (1,358) (2,560)
Other comprehensive income for the
year:
Items that will or may be reclassified
subsequently to profit or loss:
Deferred tax taken to equity - (3)
Total comprehensive loss for the year
attributable to equity shareholders (1,358) (2,563)
========================================= ======= =======
Loss per share
Basic (5.0p) (8.9p)
========================================= ======= =======
Diluted (4.9p) (8.9p)
========================================= ======= =======
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2020
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ------- ------- -------
Assets
Non-current assets
Property, plant and equipment 71 111
Right of use assets 164 -
Deferred tax asset - 2
Total non-current assets 235 113
---------------------------------------- ------- ------- ------- -------
Current assets
Assets held at fair value
through P&L 1,955 3,043
Trade and other receivables 2,464 2,866
Collateral deposits 48 -
Cash and cash equivalents 2,400 2,538
---------------------------------------- ------- ------- ------- -------
Total current assets 6,867 8,447
---------------------------------------- ------- ------- ------- -------
Total assets 7,102 8,560
---------------------------------------- ------- ------- ------- -------
Current liabilities
Financial liabilities held
at fair value
through P&L (149) (244)
Trade and other payables (2,199) (2,258)
Lease liabilities (66) -
Total current liabilities (2,414) (2,502)
---------------------------------------- ------- ------- ------- -------
Non-current liabilities
Lease liabilities (52) -
---------------------------------------- ------- -------
Total non-current liabilities (52) -
---------------------------------------- ------- ------- ------- -------
Total liabilities (2,466) (2,502)
---------------------------------------- ------- ------- ------- -------
Net assets 4,636 6,058
======================================== ======= ======= ======= =======
Shareholders' equity
Called up share capital 3,338 3,338
Capital redemption reserve 700 700
Share premium account 6,691 6,691
Employee Benefit Trust reserve (182) (974)
Retained earnings (4,469) (2,255)
---------------------------------------- ------- ------- ------- ---------
Total equity before deduction
of own shares 6,078 7,500
Own shares (1,442) (1,442)
---------------------------------------- ------- ------- ------- ---------
Total equity 4,636 6,058
======================================== ======= ======= ======= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 October 2020
2020 2019
GBP'000 GBP'000
-------------------------------------------- ------- -------
Operating activities before taxation
Loss before taxation (1,356) (2,558)
Adjustments for:
Fair value adjustments (252) (98)
Depreciation charges - Property, plant
and equipment 66 71
Depreciation charges - Right of use
assets 337 -
Net interest receivable (44) (94)
Net interest paid on lease liabilities 14 -
Share based payment expense 147 89
--------------------------------------------- ------- -------
Operating cash flow before changes
in working capital (1,088) (2,590)
Decrease in operating assets 1,691 1,389
Decrease in operating liabilities (139) (252)
Cash from/(used in) operations 464 (1,453)
Income taxes paid - -
-------------------------------------------- ------- -------
Net cash flows from/(used in) operating
activities 464 (1,453)
--------------------------------------------- ------- -------
Investing activities
Purchases of property, plant and equipment (26) (78)
Net interest received 44 94
--------------------------------------------- ------- -------
Net cash flows from investing activities 18 16
--------------------------------------------- ------- -------
Financing activities
Payment of lease liability (395) -
Net interest paid on lease liabilities (14) -
Purchase of own shares (211) (399)
Dividends paid to equity shareholders - (293)
--------------------------------------------- ------- -------
Net cash flows used in financing activities (620) (692)
--------------------------------------------- ------- -------
Decrease in cash and cash equivalents (138) (2,129)
Cash and cash equivalents at the beginning
of the year 2,538 4,667
--------------------------------------------- ------- -------
Cash and cash equivalents at the end
of the year 2,400 2,538
============================================= ======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2020
Employee
Share Capital Benefit Available
Share Premium Redemption Own Trust for sale Retained
Capital Account Reserve Shares Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
Balance at
31 October
2018 3,338 6,691 700 (1,168) (849) (7) 519 9,224
Transition
adjustment - - - - - 7 (7) -
At 1 November
2018 (as restated) 3,338 6,691 700 (1,168) (849) - 512 9,224
Loss for year - - - - - - (2,560) (2,560)
Deferred tax
taken to equity - - - - - - (3) (3)
Total comprehensive
income for
the year - - - - - - (2,563) (2,563)
Contributions by
and distributions
to owners
Dividends - - - - - - (293) (293)
Purchase of
own shares - - - (274) - - - (274)
Purchase of
EBT shares - - - - (125) - - (125)
Share based
payments - - - - - - 89 89
Balance at
31 October
2019 3,338 6,691 700 (1,442) (974) - (2,255) 6,058
Loss for year - - - - - - (1,358) (1,358)
--------- --------- ------------- --------- --------- ------------ ---------- --------
Total comprehensive
income for
the year - - - - - - (1,358) (1,358)
Contributions
by and distributions
to owners
Purchase of
EBT shares - - - - (211) - - (211)
Distribution
of EBT shares - - - - 1,003 - (1,003) -
Share based
payments - - - - - - 147 147
Balance at
31 October
2020 3,338 6,691 700 (1,442) (182) - (4,469) 4,636
======================= ========= ========= ============= ========= ========= ============ ========== ========
Notes
1. The capital redemption reserve represents the nominal value
of shares that have been cancelled that were previously held as Own
Shares.
2. Own Shares represents shares purchased to be held as treasury shares at historical cost.
3. The Employee Benefit Trust reserve represents shares held in
the parent Company by the Arden Partners Employee Benefit Trust
which is consolidated in these financial statements in accordance
with the accounting policy in note 1.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 October 2020
1) Accounting policies
Arden Partners plc is a public limited company incorporated in
the United Kingdom under the Companies Act 2006.
Basis of preparation
The principal accounting policies applied in the preparation of
the financial statements are set out below. The policies have been
consistently applied to the Group and Company to all the years
presented.
The financial reporting framework that has been applied in their
preparation is applicable law and international accounting
standards in conformity with the requirements of the Companies Act
2006 and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
The Consolidated and Company Financial Statements have been
prepared under the historical cost convention as modified by the
revaluation of certain financial assets, financial liabilities and
derivative instruments to fair value.
The Group continues to adopt the going concern basis in
preparing the financial statements.
New standards effective during the year
The Group applies, for the first time, IFRS 16 Leases. The
impact of which is set out below.
IFRS 16 Leases
IFRS 16 has been adopted from 1 November 2019 and applied on a
modified retrospective basis which recognises a right of use asset
at an equal amount to the lease liability, using the Group's
current incremental borrowing rate. Comparative figures have not
been restated.
The Group made the following additional choices, as permitted by
IFRS 16, for existing operating leases:
-- to apply a single discount rate to a portfolio of leases with
reasonably similar characteristics.
-- not to bring leases with 12 months or fewer remaining to run
as at 1 November 2019 on balance sheet. Costs for these items
continue to be expensed directly to the income statement.
-- for all leases, the lease liability was measured at 1
November 2019 as the present value of any future lease payments
discounted using the incremental borrowing rate. The Group also
excluded any initial direct costs (e.g. legal fees) from the
measurement of the right of use assets at transition.
-- to apply the use of hindsight when reviewing the lease
arrangements for determination of the measurement or term of the
lease under the retrospective option.
The weighted average incremental borrowing rate applied to lease
liabilities on 1 November 2019 was 5%.
Right of use assets are initially measured at the amount of the
lease liabilities and adjusted by the amount of any prepaid or
accrued lease prepayments as at 31 October 2019.
The aggregate lease liability recognised in the Statement of
Financial Position at 1 November 2019 and the Group's operating
lease commitment at 31 October 2019 is set out below:
GBP'000
-------------------------------------------------------------
Operating lease commitment at 1 November 2019 538
Effect of discounting lease commitments at a rate
of 5% (20)
Lease liability at 1 November 2019 518
====================================================== ======
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by the group's incremental borrowing
rate on commencement of the lease is used.
On initial recognition, the carrying value of the lease
liability also includes:
-- Amounts expected to be payable under any residual value guarantee;
-- The exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to assess that option;
and
-- Any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
As permitted under IFRS 16, all leases are accounted for by
recognising a right of use asset and a lease liability except
for:
-- Leases with a term of twelve months or less remaining at 1 November 2019
-- Lease of low value assets
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term. When
the group revises its estimate of the term of any lease (because,
for example, it re-assesses the probability of a lessee extension
or termination option being exercised), it adjusts the carrying
amount of the lease liability to reflect the payments to make over
the revised term, which are discounted at the same discount rate
that applied on lease commencement. The carrying value of lease
liabilities is similarly revised when the variable element of
future lease payments dependent on a rate or index is revised. In
both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being
amortised over the remaining (revised) lease term.
IFRIC 23 Uncertainty Over Income Tax Positions
IFRIC 23 clarifies how to recognise and measure current and
deferred income tax assets and liabilities when there is
uncertainty over income tax treatments. IFRIC 23 did not have a
material impact on the Group.
Standards that have been issued, but are not yet effective for
the year ended 31 October 2020 include:
Amendment to IAS 1 and IAS 8: Definition of Material
In October 2018, the International Accounting Standards Board
(Board) issued 'Definition of Material (Amendments to IAS 1 and IAS
8)' to clarify the definition of 'material' and to align the
definition used in the Conceptual Framework and the standards
themselves.
The amendment is effective for periods beginning on or after 1
January 2020.
Amendment to IFRS 3
In October 2018, the International Accounting Standards Board
(Board) issued Definition of a Business (Amendments to IFRS 3) to
make it easier for companies to decide whether activities and
assets they acquire are a business or merely a group of assets.
The amendment is effective for periods beginning on or after 1
January 2020.
Significant accounting policies
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The Company has taken advantage of Section 408 of the Companies
Act 2006, and the Statement of Comprehensive Income of the parent
Company is not presented. The parent Company's loss after taxation
for the financial year amounted to GBP1,358,000 (2019: loss
GBP2,565,000).
Revenue
In accordance with IFRS 15, revenue is recognised to the extent
that it is probable that the economic benefits associated with the
transaction will flow into the Group. Where consideration includes
financial instruments or other non--cash items, revenue is measured
at fair value using an appropriate valuation method.
Revenue comprises commission earned on primary, secondary and
private capital raising (Corporate placing commission), Corporate
Finance advisory fees, Corporate Finance annual retainer fees, the
net realised and unrealised trading gains or losses of shares
traded on a principal basis, commissions and fees earned from
trading shares on an agency basis and Research retainer fees.
Corporate Finance Division
-- Corporate placing commissions are variable fees agreed on a
deal by deal basis based on a percentage of the funds raised as
part of a transaction. Given that fees related to this work are
success based, there is a significant risk of reversal of the
variable revenue and therefore the performance obligation is
satisfied at a point in time when the transaction is completed.
Where there are arrangements in place for an element of revenue to
be paid away the cost is recognised in administrative expenses.
-- Corporate Finance advisory fees are only recognised once all
performance obligations have been met and there is a contractual
entitlement for the Group to receive them for advisory fees this is
typically only when a deal completes.
-- Corporate Finance retainer fees are accrued over the period
for which the service is provided and are based on a contract
between the Group and the client. The negotiated contract price
varies by contract and is documented in the contract.
Equities Division
-- Net trading gains or losses are the realised and unrealised
profits and losses from market-making long and short positions on a
trade date basis and comprise all gains and losses from changes in
the fair value of financial assets and liabilities held for
trading, together with any related dividend on positions held. Net
trading gains or losses also include gains and losses arising on
equity options and warrants received in lieu of corporate finance
fees.
-- Commission is recognised when receivable in accordance with
the date of the underlying transaction. It is variable fee based on
a percentage of the transaction and therefore performance
obligation is satisfied at the date of the underlying transaction
to which the brokerage relates.
-- Research retainer fees are recorded in the period to which
they relate and the contract price can be variable from period to
period based on the level or standard of research provided.
Contracts are in place between the Group and each of its research
clients and amounts recorded are either over a period for which the
service is provided, or where discretionary based on variable
considerations derived from the most recent level of research
provided in the previous period updated for recent events or
communications with the client.
Interest receivable
Finance income, which comprises principally interest received,
is recognised using the effective interest rate method.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of
depreciation and impairment in value.
Depreciation is provided to write off the cost, less estimated
residual values, of all property, plant and equipment evenly over
their expected useful lives on a straight line basis. It is
calculated at the following rates:
Improvements to leasehold
buildings * 33.33% per annum
Fixtures, fittings and computer
equipment
* 33.33% per annum
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets
The Company's financial assets comprise trading investments,
trade and other receivables, collateral deposits and cash and cash
equivalents. The classification of financial assets at initial
recognition depends upon the purpose for which they are acquired
and their characteristic. Financial assets are measured initially
at their fair value.
Financial assets held at fair value through profit or loss are
held for trading and are acquired principally for selling. These
include market making positions valued at the closing market bid
price at the balance sheet date and presented within current asset
investments. The change in the value of investments held for
trading is recognised in the profit and loss account. Purchases and
sales of investments are recognised on trade date with the
associated financial assets and liabilities presented as market
making counterparty debtors and creditors up to settlement
date.
Also included within financial assets held at fair value through
profit or loss are derivative assets comprising options and
warrants that are initially accounted for and measured at fair
value on the date the Group becomes a party to the contractual
provisions of the derivative contract and subsequently measured at
fair value. The gain or loss on re-measurement is taken to the
income statement within revenue, as part of net trading gains or
losses. Fair values are obtained from quoted prices prevailing in
active markets, including recent market transactions and valuation
techniques including discounted cash flow models and option pricing
models as appropriate. The fair values of the warrants are
determined using the Black Scholes model. These valuation
techniques maximise the use of observable market data, such as the
quoted share price. The variables used in the valuation includes
exercise price, expected life, share price at the date of grant,
price volatility and risk-free interest rate.
Gains and losses from the financial assets held at fair value
through profit and loss are presented within revenue as equities
division income.
Financial assets also include trade and other receivables,
collateral deposits and cash and cash equivalents. Trade and other
receivables are amounts due from customers for services performed
in the ordinary course of business. If collection is expected in
one year or less, they are classified as current assets. If not,
they are presented as non-current assets.
Trade and other receivables are initially recorded at fair value
and thereafter are measured at amortised cost using the effective
interest rate.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using the lifetime
expected credit losses. During this process the probability of the
non-payment of trade receivables is assessed. This probability is
then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables, which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated
provision.
Financial liabilities
The Group's financial liabilities comprise trading liabilities
and trade and other payables including market making counterparty
creditors and provisions. The classification of financial
liabilities at initial recognition depends upon the purpose for
which they are acquired and their characteristic.
Financial liabilities held at fair value through profit or loss
are held for trading and are acquired principally for repurchasing.
These include market making positions valued at the closing market
offer price at the balance sheet date and presented within current
liability investments. The change in the value of investments held
for trading is recognised in the profit and loss account.
Non-derivative financial liabilities are initially recognised at
fair value less any directly attributable transaction costs. After
initial recognition, these liabilities are measured at amortised
cost using the effective interest method. The entities' borrowings,
trade and most other payables fall into this category of financial
instruments. The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled, or expire.
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers and are initially recorded at fair value and thereafter
at amortised cost using the effective interest rate method.
Stock borrowing collateral
The Group may enter into stock borrowing arrangements with
certain institutions. These are entered into on a collateralised
basis with securities or cash advances received as collateral.
Under such arrangements a security is purchased with a
commitment to return it at a future date at a future agreed price.
The securities purchased are not recognised on the Statement of
Financial Position and the transaction is treated as a secured loan
made for the purchase price.
Where cash has been used to effect the purchase, the cash
collateral amount is recorded as a pledged asset on the Statement
of Financial Position.
Foreign currency transactions
Transactions in foreign currencies are translated into sterling
at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into sterling at the exchange
rate ruling at the reporting date. Foreign exchange differences
arising on translation are recognised in the Statement of
Comprehensive Income within administrative expenses.
Taxation
Income tax on the profit or loss for the periods presented
comprises current and deferred tax. Income tax is recognised in the
Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity, in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided based upon temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Dividends
Dividends are recognised when they become legally payable.
Interim dividends are recognised when paid. Final dividends are
recognised when approved by shareholders at an Annual General
Meeting. Dividends unpaid at the reporting date are only recognised
as a liability at that date to the extent that they are
appropriately authorised and are no longer at the discretion of the
Company.
Own Shares
The cost of purchasing Treasury Shares held by the Company are
shown as a deduction against equity and are declared as Own
Shares.
Leases
All leases are accounted for by recognising a right of use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the
unpaid lease payments discounted using an incremental borrowing
rate.
Right of use asset are initially measured at the amount of the
lease liabilities plus initial direct costs, costs associated with
removal and restoration and payments previously made. Right of use
assets are amortised on a straight line basis over the term of the
lease.
Lease liabilities are subsequently increased by the interest
charge using the incremental borrowing rate and reduced by the
contractual payments.
Pension costs
Contributions to defined contribution pension schemes are
charged to the Statement of Comprehensive Income in the period in
which they become payable.
Government Grants
During the year the Group has received grants from the UK
Government in relation to Coronavirus Job Retention Scheme. The
income from these grants has been offset against the expense to
which it relates.
Employee Benefit Trust
Arden Partners Employee Benefit Trust is a trust established by
Trust deed in 2006 and the assets and liabilities are held
separately from the Company. Its assets and liabilities are fully
consolidated in the consolidated and Company Statements of
Financial Position, and holdings of Arden Partners plc shares by
the Arden Partners Employee Benefit Trust are shown as a deduction
from Company and consolidated equity under the heading "Employee
Benefit Trust reserve".
Share based payments - equity settled
All options granted are recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value is
measured using the Black-Scholes model, taking into account the
terms and conditions upon which the options were granted.
Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. Vesting
conditions for all the share option schemes relate to service
conditions and profit, which are non market conditions the features
of which are not incorporated not the fair value of the option. As
long as all other vesting conditions are satisfied, a charge is
made irrespective of whether the market conditions are satisfied.
The cumulative expense is not adjusted for failure to achieve a
market vesting condition.
Where the terms of an equity settled award are modified, an
incremental value is calculated as the difference between the fair
value of the repriced option and the fair value of the original
option at the date of re-pricing. This incremental value is then
recognised as an expenses over the remaining vesting period in
addition to the amount recognised in respect of the original option
grant.
Critical accounting estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expense. The estimates
and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances, the results of which form the basis of judgements
about carrying amounts of assets and liabilities. Actual results
may differ from those amounts.
Estimates and judgements that may have an effect on the next
financial year are discussed below:
Derivative Financial Assets
The equity options are initially accounted for and measured at
fair value on the date the Group becomes a party to the contractual
provisions of the option contract and subsequently measured at fair
value. The gain or loss on re-measurement is taken to the income
statement within revenue, as part of net trading gains or losses.
The fair value of equity options are estimated by using valuation
models such as Black-Scholes.
Expected Credit Losses
The Group has internal processes designed to assess the credit
risk profile of its financial instruments, and to determine the
relevant stage for calculating the expected credit losses.
For Trade and other receivables, the group has established a
provision matrix that incorporates the Groups historical credit
loss experience and whether a receivable is overdue or not.
Factors considered in determining whether a default has taken
place include how many days past due date a payment is,
deterioration in the credit worthiness of a client, and knowledge
of specific events that could influence a client's ability to
pay.
Incremental borrowing rate
When discounting lease payments if the interest rate is not
implicit in the lease the Group uses the incremental borrowing
rate, being an estimate of the rate that the Group would have to
pay to borrow the funds necessary to obtain an asset of similar
value to the right of use asset in a similar economic environment
with similar terms, security and conditions.
Share Based Payments
Employee services received, and the corresponding increase in
equity, are measured by reference to the fair value of the equity
instruments at the date of grant. The fair value of share options
is estimated by using valuation models, such as Black-Scholes, on
the date of grant based on certain assumptions.
2) Revenue
Revenue is wholly attributable to the principal activity of the
Group and arises solely within the United Kingdom.
2020 2019
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Equities Division (538) 751
Corporate Finance Division 6,341 5,839
Wealth Management Division 126 37
Total revenue 5,929 6,627
-------------------------------------------- -------------- --------------
Services transferred at a point in time 3,590 4,164
Services transferred over a period of time 2,339 2,463
-------------------------------------------- -------------- --------------
Total revenue 5,929 6,627
============================================ ============== ==============
Included within revenue of the Equities Division is a loss of
GBP1,296,000 (2019: GBP113,000) derived from the equity trading
operation.
Included within revenue of the Equities Division is a profit of
GBP252,000 (2019: GBP97,000) relating to the fair value adjustment
of warrants held within assets that are fair valued through profit
or loss.
Included within revenue of the Equities Division is a profit of
GBP300,000 (2019: GBP63,000) relating to the fair value of a
warrant over securities which was received as consideration for
Corporate Finance services rendered.
The Directors are of the opinion that there are three operating
segments and while segment revenues are reviewed internally
business resources are not allocated to segments for the purposes
of deriving either profit or assets. In 2020, two of the Group's
customers contributed revenue of GBP1,525,000, being more than 10%
of the Group's total revenue. In 2019, none of the Group's
customers contributed revenue of more than 10% of the Group's total
revenue.
3) Earnings per share
In addition to the basic earnings per share, underlying earnings
per share has been shown because the Directors consider that this
gives a more meaningful indication of the underlying performance of
the Group. Where applicable, all adjustments are stated after
taking into consideration current tax treatment ignoring deferred
tax.
Year ended Year ended
31 October 2020 31 October 2019
Pence per Numerator Pence per Numerator
Share GBP'000 Share GBP'000
----------------------------------- --------------- -------------- ---------------- ---------------
Loss per share (5.0) (1,358) (8.9) (2,560)
Add: IFRS2 share-based
payments 0.5 147 0.3 89
----------------------------------- --------------- -------------- ---------------- ---------------
Underlying basic loss
per share (4.5) (1,211) (8.6) (2,471)
=================================== =============== ============== ================ ===============
Diluted loss per share (4.9) (1,358) (8.9) (2,560)
Add: IFRS2 share-based
payments 0.5 147 0.3 89
----------------------------------- --------------- -------------- ---------------- ---------------
Underlying diluted loss
per share (4.4) (1,211) (8.6) (2,471)
=================================== =============== ============== ================ ===============
Year ended Year ended
31 October 2020 31 October 2019
Number Number
---------------------------------- ---------------- ----------------
Denominator
Weighted average number
of shares in issue for
basic earnings calculation 27,308,302 28,794,079
Weighted average dilution
for outstanding share
options 599,862 52,235
---------------------------------- ---------------- ----------------
Weighted average number
for diluted earnings calculation 27,908,164 28,846,314
================================== ================ ================
The 1,995,000 (2019: 2,310,700) shares held by the Arden
Partners Employee Benefit Trust and 4,304,724 (2019: 4,304,724)
shares held in Treasury, being the weighted average number of
treasury shares in issue during the year, have been excluded from
the denominator.
No adjustment has been made to the diluted loss per share of
4.9p as the dilution effect of the weighted average number of
outstanding share options of 599,862 would be to decrease the loss
per share.
4) Annual Report and Accounts
Copies of the 2020 Report and Accounts will be posted to
shareholders shortly. Copies will also be available from the
Company's registered office and from the Company's website
www.arden-partners.com
The statutory accounts for the year ended 31 October 2020 will
be delivered to the Registrar of Companies in due course.
Statutory accounts for the year ended 31 October 2019 have been
delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
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END
FR GPUBCPUPGGMA
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February 16, 2021 02:00 ET (07:00 GMT)
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