TIDMARP
RNS Number : 1619L
Ashcourt Rowan PLC
02 July 2014
ASHCOURT ROWAN PLC: PRELIMINARY GROUP AUDITED RESULTS FOR THE
YEAR ENDED 31 MARCH 2014
2 July 2014
A year of progress and expansion
Ashcourt Rowan plc (AIM:ARP.L), the UK wealth management group,
today announces its group audited results for the year ended 31
March 2014.
Commenting, Jonathan Polin, group chief executive officer,
said:
"This was a year of significant progress for the group. During
the period the group made two acquisitions - the discretionary
wealth management business of Generali Portfolio Management (UK)
Limited and UK Wealth Management from Duke Street Capital. The
acquisition of UKWM, completed after year end, adds scale to our
existing financial planning business and provides us with a
corporate pensions business that is established for growth, leaving
us well-placed to exploit the de-annuitisation of UK pensions as
announced in the Budget and reaffirms our desire to concentrate on
the pre- and post-retirement markets.
"We have delivered on the objectives to grow underlying
profitability, increase assets under management and deliver
acquisitions. We have a clear and well defined strategy from which
I am confident we can grow the business and create value."
Operational and financial highlights
-- Delivering growth in underlying EBITDA* profitability: GBP3.8
million achieved during the year, a 37% increase on GBP2.8 million
last year. Second half underlying EBITDA* of GBP2.9 million.
-- Underlying EBITDA margin for full year at 12% (H2: 18%) up from 8% last year.
-- Delivered positive cash flow from operations (after exceptionals) at GBP0.7 million in H2.
-- Total funds under management and influence at GBP4 billion,
of which GBP1.9 billion discretionary or managed (18% year-on-year
growth), including the acquisition of the Generali Portfolio
Management (UK) Limited business.
-- Cost discipline continues, with overall underlying* cost base reduced by 7% during the year.
-- Very solid balance sheet position: no debt and cash at
GBP21.4 million at year end, reflecting proceeds from shareholder
placing.
-- Adjusted Profit before Tax*** of GBP3.2 million for the year.
-- Profit before Tax of GBP0.5 million in H2 (H2 2013: GBP1.2
million loss). On a full year basis, Loss before Tax reduced to
GBP2 million from GBP2.5 million, reflecting last instalment of
Change Management Programme exceptionals, now completed, in
addition to acquisition related expenses, amortisation and
depreciation.
-- Integration of discretionary investment management on
outsourced Figaro platform completed during the year, allowing to
more confidently add new assets and teams.
-- Acquisition of UKWM agreed in December 2013 and completed
after year end. As a result, March 2014 pro-forma funds under
management and influence of GBP5.2 billion, of which GBP2.2 billion
were discretionary or managed assets.
Financial statistics - continuing operations
(GBP million unless specified)
Full year Full year Six months Six months
31 March 31 March ended 31 ended 30
2014 2013 March 2014 Sept 2013
------------------------------ ---------- ---------- ------------ -----------
Total funds under management GBP4.0 GBP3.7 GBP4.0 GBP3.7
and influence billion billion billion billion
------------------------------ ---------- ---------- ------------ -----------
Discretionary assets under GBP1.9 GBP1.6 GBP1.9 GBP1.6
management billion billion billion billion
------------------------------ ---------- ---------- ------------ -----------
Revenue 31.5 32.6 16.3 15.2
------------------------------ ---------- ---------- ------------ -----------
Underlying EBITDA* 3.78 2.76 2.91 0.87
------------------------------ ---------- ---------- ------------ -----------
EBITDA after exceptionals** 0.0 (0.3) 1.5 (1.5)
------------------------------ ---------- ---------- ------------ -----------
Profit (loss)before tax (2.0) (2.5) 0.5 (2.5)
------------------------------ ---------- ---------- ------------ -----------
EPS (continuing operations (5.70) (8.74) (8.82)
- pence per share) p p 4.28p p
------------------------------ ---------- ---------- ------------ -----------
Underlying EBITDA margin 12% 8% 18% 6%
------------------------------ ---------- ---------- ------------ -----------
* before interest, tax, depreciation, amortisation, impairments,
exceptional, earn-in and earn-out payments and share-based payment
costs.
** before interest, tax, depreciation, amortisation,
impairments, earn-in and earn-out payments and share-based payment
costs.
*** PBT adjusted for exceptional costs, accelerated depreciation
of decommissioned systems, amortisation of acquired client
intangibles, earn-in/earn-out payments and GSOP P&L charge
Nature of announcement
This Annual Results Release was approved by the directors on 1
July 2014.
The financial information set out in this Annual Results Release
does not constitute the company's statutory accounts for 2014 or
2013. Statutory accounts for the years ended 31 March 2014 and 31
March 2013 have been reported on by the Independent Auditor. The
Independent Auditor's Reports on the Annual Report and Financial
Statements for 2014 and 2013 were 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.
Statutory accounts for the year ended 31 March 2013 have been filed
with the Registrar of Companies. The statutory accounts for the
year ended 31 March 2014 will be delivered to the Registrar
following the Company's annual general meeting.
-Ends-
About Ashcourt Rowan plc
Ashcourt Rowan plc provides a range of expert, integrated wealth
management and employee benefits consultancy services for
individuals, families, charities and trusts, business owners and
employers.
Its financial planners, investment managers and consultants
deliver services to clients on a face-to-face basis nationally,
supported by dedicated technical departments in London and
Leeds.
Headquartered in the City of London, Ashcourt Rowan has offices
in Bath, Bournemouth, Brighton, Cambridge, Chelmsford, Exeter,
Leeds, Macclesfield, Maidstone, Manchester, Pontefract, Rugby,
Salisbury, St Andrews, Winchester and York.
www.ashcourtrowan.com
For further information please contact:
Peel Hunt LLP(Nominated adviser and joint broker)
Guy Wiehahn/ Harry Florry
Tel: 020 7418 8900
Cantor Fitzgerald (financial adviser and joint broker)
Rishi Zaveri
Tel: 020 7894 7667
Media enquiries:
Maitland
Marina Burton/ Daniel Yea
Tel: 020 7379 5151
Email: ashcourtrowan@maitland.co.uk
Ashcourt Rowan
Katy Moore, marketing manager - communications
Tel: 020 7871 7252
Email: katymoore@ashcourtrowan.com
Highlights of the year
-- Growth in underlying EBITDA* profitability: GBP3.8 million
achieved during the year, a 37% increase on GBP2.8 million last
year.
-- Underlying EBITDA margin for full year at 12% (H2: 18%).
-- Total funds under management and influence: GBP4 billion, of
which GBP1.9 billion discretionary or managed, including the
acquisition of the Generali Portfolio Management (UK) Limited book
of business completed in January 2014 adding over GBP210 million in
discretionary assets.
-- Cost discipline continued, with overall underlying* cost base reduced by 7% during the year.
-- Solid balance sheet position: no debt and cash at GBP21.4
million at year end (reflecting proceeds from share placing).
-- Loss before tax - after Change Programme and acquisition
related exceptionals, amortisation and depreciation - reduced to
GBP(2.0)million from GBP(2.5) million. Reflecting last instalment
of Change Management Programme exceptionals in the first half, now
completed, in addition to acquisition related expenses.
-- Integration of investment management on outsourced Figaro
platform completed during the year.
-- Acquisition of UKWM agreed in December 2013 - supported by a
shareholder placing - completed after the year end and being
integrated. As a result, March 2014 pro-forma funds under
management and influence of GBP5.2 billion, of which GBP2.2 billion
discretionary or managed assets.
Financial overview - continuing operations
(GBP million unless specified)
Full year Full year Six months Six months
31 March 31 March ended 31 ended 30
2014 2013 March 2014 Sept 2013
-------------------------------------- ---------- ---------- ------------ -----------
Total funds under management GBP4.0 GBP3.7 GBP4.0 GBP3.7
and influence billion billion billion billion
-------------------------------------- ---------- ---------- ------------ -----------
Discretionary assets under GBP1.9 GBP1.6 GBP1.9 GBP1.6
management billion billion billion billion
-------------------------------------- ---------- ---------- ------------ -----------
Revenue 31.5 32.6 16.3 15.2
-------------------------------------- ---------- ---------- ------------ -----------
Underlying EBITDA: Profit
before interest, tax, depreciation,
amortisation, impairments,
exceptional, earn-in and
earn-out payments and share-based
payment costs 3.78 2.76 2.91 0.87
-------------------------------------- ---------- ---------- ------------ -----------
Profit (Loss) before interest,
tax, depreciation, amortisation
and impairments, earn-in
and earn-out payments and
share based costs 0.0 (0.3) 1.5 (1.5)
-------------------------------------- ---------- ---------- ------------ -----------
Profit (loss)before tax (2.0) (2.5) 0.5 (2.5)
-------------------------------------- ---------- ---------- ------------ -----------
EPS (continuing operations (5.70) (8.74) (8.82)
- pence per share) p p 4.28p p
-------------------------------------- ---------- ---------- ------------ -----------
Underlying EBITDA margin 12% 8% 18% 6%
-------------------------------------- ---------- ---------- ------------ -----------
* before interest, tax, depreciation, amortisation, impairments,
exceptional, earn-in and earn-out payments and share-based payment
costs.
Overview
Report of the chairman
I am pleased to report the financial results of your Company,
Ashcourt Rowan plc, for the year ended 31st March 2014.
A Year of Significant Progress
I characterise my first full year as Chairman as an extremely
busy one for our team and a period of significant progress for your
Company. Whilst global political and economic uncertainty continues
to feature in all our lives, financial markets have remained
broadly supportive to our activities; major progress has been made
in establishing a sound base of "operational infrastructure" and a
more distinct service offering across our business in support of
our overall growth strategy together with a strengthened and
highly-focused executive team.
In addition to the introduction of our outsourced operational
and custody platform, our ambitions have been supported by the
successful acquisitions of Generali and UK Wealth Management which
not only add scale but also help refine and support our strategic
direction. Jonathan Polin, our group chief executive officer,
refers in detail to these topics in his report.
Financial Results
After a challenging first half, our full year financial results
show significant progress over the previous period. With total
asset levels at GBP4.0 billion (end Mar 14) and headcount being
closely controlled, underlying EBITDA rose to GBP3.8 million in the
year in line with our expectations.
We maintain a highly disciplined approach to our financial
resources and year end cash of GBP21.4 million remains well in
excess of regulatory requirements, even when adjusted for GBP12.5
million UKWM consideration payment after year-end. This year to
March 2015 we expect to see significant financial benefits arise
from our acquisition strategy and our second half net profit before
tax of GBP0.5 million after all exceptional items reflects the
potential arising from major transformation and our acquisition
programme leading to a return to underlying profitability.
Shareholders and Governance
We place great emphasis on sound governance and during the year
there were 19 meetings in total of the Board or its various
committees reflecting our commitment to fulfilling our overall
responsibilities and in overseeing the implementation of our
strategy under the leadership of our CEO, Jonathan Polin.
We recognise also the trust placed in us by our shareholders and
thank them for the enormous support shown during the year towards
our inorganic growth activities.
Looking Ahead
With the consolidation of a number of our activities into our
new Leeds office, the establishment of a far more robust
operational infrastructure and increased scale brought about
through our acquisitions, we look to the future with high
expectation. We are as a group far stronger, more focussed and
committed to achieving a premier position in the industry and the
executive team has worked tirelessly to achieve so much over the
past several years.
I am hugely grateful for the dedication and contribution of all
our employees during a year of real progress - we are grateful also
for the trust and loyalty shown by our clients and shareholders of
the group which is fundamental for our achievements during the
year.
Hugh Ward
Non-Executive Chairman
1 July 2014
Overview
Report of the chief executive officer
2013/14 was a year of significant progress for the group which
included key growth initiatives after the completion of the change
management programme. Asset growth was achieved through our
acquisition strategy and we succeeded in meeting our underlying
EBITDA target of GBP3.8 million for the full year - an increase of
37% on our previous year. This was a pleasing result after the
first half.
During the year the group made two acquisitions - the
discretionary wealth management business of Generali Porfolio
Management (UK) Limited (the "Generali team"), and UK Wealth
Management ("UKWM"), the financial planning, corporate solutions
and discretionary manager purchased from Duke Street Capital. The
UKWM transaction was completed after the year end on 4 April
2014.
Assets under management/influence
The group has two distinct pools of assets (discretionary and
managed) within our investment management business (Ashcourt Rowan
Asset Management) and assets under influence through our financial
planning business (Ashcourt Rowan Financial Planning). Total assets
managed or influenced by the group were GBP3.7 billion at the start
of the year and ended the year at GBP4.0 billion. Discretionary
assets also grew from GBP1.6 billion to GBP1.9 billion - an
increase of 18% over the period. The discretionary asset growth
was, in the main, the result of the acquisition of the Generali
team.
A sign of the improved financial situation in the UK has been
the fact that clients have continued to invest and we saw a
meaningful pick up in investment in the final quarter. The group
has always benefitted from long-term client loyalty and we continue
to see a low withdrawal rate, just under 7% from discretionary
services, which reflects not only the good investment performance
we have achieved, but also client satisfaction with both the change
management programme and our new integrated model.
Investment performance
The group has invested heavily in the development of a central
investment research team and has attracted exceptional talent in
this area. It is vital that we deliver good investment returns to
our clients. The work we have completed is best seen through the
returns enjoyed by clients in our Managed Portfolio Service.
Financials
We had a slow start to the first half as reported in our
interims. Activity rate accelerated and revenue growth was stronger
in the second half of the year and revenues ended H2 at GBP16.3
million against GBP15.2 million in H1 - an increase of 8%.
Notwithstanding the above, revenues on a year-on-year basis
declined by around GBP1 million reflecting the planned changes we
made in late 2012 and early 2013. We had hoped to mitigate this
decline with faster revenue growth but as a result of the
reorganisation of the financial planning business, and the Figaro
Platform migration, this took longer to come through than expected.
We expect to be back on track this year as we concentrate on
growing assets and recurring revenues, which is evidenced by our
two acquisitions.
Financial planning
During the year we introduced new management to our financial
planning business. This was not without opportunity cost. However,
it is vital for us to ensure that we deliver the strategy and
achieve the culture we need to attract the best in the industry.
The new team has settled in and delivered a new financial planning
proposition that gives even greater transparency to clients and a
wider choice of services.
This year there has been a continuing effort to convert clients
to our new service agreements as we move our financial planning
business away from its previous reliance on trail commission. This
is interwoven with our strategy to re-platform our clients
We re-platformed GBP77 million of our assets under influence and
moved GBP39 million into our discretionary services either as new
ARAM clients (c. half in value) or from existing ARAM clients as
new money from their other external investments demonstrating our
ability to secure a greater share of our existing clients' wallets.
A further GBP38 million was converted to an ongoing service
agreement delivering an average yield of 74 basis points per annum
- a material uplift, as a proof statement of the growth strategy to
shareholders.
As part of our continuing plan to develop first class services
and transparency to our clients we are increasing the drive on
re-platforming our clients to ongoing service agreements and, where
suitable, discretionary management. To accelerate this process we
are utilising additional tools, methods and processes this
financial year.
Across the group we are increasing the pace of centralised lead
generation and business development projects. We have increased our
services to professional introducers and worked on identifying
further affiliations to drive new distribution deals.
Investment management
The investment management business is now fully repositioned
onto the Figaro platform. Like all system migrations this was a
challenging process but I am pleased to report we completed it
within expectations and are now looking at delivering enhancements
to the basic service. As we have seen in the industry with others
in the sector, platform migrations are complex and take up a
material amount of key management and operational bandwidth which
has impacted some of our growth initiatives. Thankfully, that
process is now behind us allowing maximum focus on the development
of new clients.
In addition to the acquisition of the Generali team we also
completed our first external team lift out. Harry Burnham, an
investment director with Brewin Dolphin, joined us in October 2013
with his team. The transfer of his assets started in the last
quarter of the last year and we expect it to accelerate in the
first half of this year. We have refined and broadened our
investment offering allowing us to engage with a wider range of
clients and requirements.
We spent last year building out our discretionary services for
independent financial advisers. We recruited Chris Legge from
Brewin Dolphin, and he will shortly be joined by James Brooke, to
assist in the development of this business.
Non-organic developments
It is our aim to drive scale and profitability from the
consolidation of the wealth management sector, which we anticipated
would happen over the next few years. Consolidation is occurring at
an increasing pace and we are seeing significant opportunities in
the market. During 2013/14 we completed two acquisitions - the
Generali team and UKWM - and one team lift out.
The Generali team increases our discretionary assets by over
GBP210 million and our revenues by nearly GBP2 million on a
full-year basis. In addition this acquisition increases average
client size by value and, together with an exceptionally talented
team, will benefit our overall asset management business in the
longer term.
In parallel to finalising the integration of the Generali team,
at the end of 2013 we announced the proposed acquisition of UKWM.
UKWM is a wealth management business with five offices, 126 people
and three divisions: financial planning, corporate pensions and
discretionary asset management. The acquisition serves to fill a
gap in the north-east, giving us much more balanced geographical
coverage, and adds scale to our financial planning business. It
also gives us a corporate pensions business that is established for
growth. The recent announcement in the Budget of greater freedoms
for retirees will provide opportunities that we are well positioned
to exploit.
We completed the acquisition of UKWM in April and are
progressing well with the integration and the realisation of
synergies we outlined of GBP2.25 million.
Summary
The business has had a busy year and delivered on the objectives
to grow underlying profitability, increase assets under management
and deliver acquisitions with strategic as well as cost and revenue
synergies. Looking back to when I arrived in 2011, we have a very
different company today, not only in terms of financials, operating
platform, improved technology and investment performance but
critically in changed culture and behaviours. We have travelled a
difficult and painful road and are now in a position from which we
can grow and create real shareholder value. Our staff have worked
tirelessly and have had to contend with new processes, different
operating platforms and the added distractions and difficulties of
re-platforming. We now have a group fully-equipped for the next
phase of development.
We are standing on the brink of realising the potential value
that we have all been working so tirelessly to achieve for the past
two and a half years. It has taken a great deal of faith, hard work
and patience to get to this point and I would like to take this
opportunity to thank all our staff and shareholders for their
commitment to our journey.
Jonathan Polin
Group Chief Executive Officer
1 July 2014
Strategic Report
Our vision
Our vision is to be a premier provider of integrated financial
planning, corporate solutions and investment management services in
the UK, delivering holistic financial advice and investment
solutions to meet the wealth management and pension needs of
private clients, charities and corporates.
Our aim is to develop a business that:
-- Provides high quality advice and tailored plans;
-- Understands clients' financial priorities and puts clients' interests first;
-- Re-invigorates trust in financial services;
-- Has robust institutional quality controls and investment process at its centre; and
-- Is the place the highest-quality staff in the industry want to work.
We believe this will create value for shareholders and employees
through a combination of organic growth, effective cost management
and earning-enhancing acquisitions.
Key market and industry trends
We believe the industry continues to be shaped by key underlying
trends, including: regulatory pressures driving transparency and
simplification; changing legislation in the personal and group
pension domain; shifting demographics and customer preferences; and
finally, strong asset growth experienced through a migration to
platform solutions and direct to consumer providers.
The introduction of the Financial Conduct Authority (FCA) marks
the dawn of a new era in regulation for the industry. The
supervision of wealth managers and private banks has moved to a
more 'outcomes-based' approach, i.e. what outcomes are achieved for
the clients, rather than a basic compliance with the rules. As a
result, regulatory reviews are starting to focus on business models
of firms, particularly their strategies, culture and front-line
processes. Since the introduction of RDR, most financial advisers
are charging a combination of a one-off fixed fee, hourly fees or a
fee based on assets under management. However, costs to customers
are seen by many as too high. The challenge and opportunity from
RDR is hence driving a shakeout in the industry, creating room for
more well-qualified and sophisticated advisers who genuinely add
value with client-focused propositions. The recent data from Imas
Corporate Finance - an independent advisory firm offering advice on
M&A activity of UK financial services business - suggests that
there is indeed a resurgence of adviser numbers in the industry,
along with a drop of about 20% in the number of advisers with
network memberships. This suggests an underlying refocus from
advisers around aligning with firms with strong systems and
controls and propositions with transparent advice and charging
structure.
Additionally, fundamental changes in the way people access their
pension in almost a century proposed in this year's Budget by
Chancellor of the Exchequer George Osborne will see 13 million
savers in the UK being given access to their pension pots from the
age of 55. The requirement for people to effectively buy an annuity
has always been unpopular with savers and their advisers, and so
the prospect of freedom of choice has been widely welcomed. We
believe this creates a greater need for advice from savers both at
the point of being able to take their pension (age 55+), but also
during the time they are accumulating savings. New products and
sophisticated advice will be pre-requisites.
The advent of auto enrolment provides new opportunities to
service around one million employers and 9-10 million employees,
particularly within the under-served mid-market segment. The new
legislation is creating the awareness with employers and members of
the need to plan towards their retirement. According to the annual
Scottish Widows Retirement report, 53% of the population are saving
more than 12% of their salary, higher than the previous five years.
However, the report also points to around 30% of the population
surveyed who are still in need of advice. We believe firms with
differentiated value propositions providing a range of services,
from pension planning through to business protection and commercial
insurance, are likely to succeed in capitalising the opportunity
within the corporate market.
The financial crisis in the last five years has put a great deal
of stress on the saver and pensioner population in the UK. However,
there is a growing awareness among the investor population around
the need for transparent charges and linkage towards the value they
are receiving. An increasingly financially literate, richer and
more technology savvy clientele is asking for clarity in fees,
advice and reporting.
Similarly, advisors are looking for technology to drive
efficiencies in their business model, whilst getting a full suite
of tools including product wrappers, managed portfolios, portfolio
management and tax tools. The DIY platforms currently available in
their various guises - direct-to-consumer (D2C) / self-advised /
guided investment / execution only - are predicted to expand over
the next decade. Nevertheless, it is difficult to ascertain how
beneficial these propositions will be for people genuinely in need
of differentiated advice. There is an opportunity in the
marketplace for automated low cost advice solutions to cater to
potentially new client segments or clients that are no longer
viable for traditional face-to-face advice and for a more efficient
delivery of advice through hybrid digital and traditional models.
With a huge flux in this segment of the market, it remains to be
seen whether having a platform dilutes the importance of
face-to-face advice or creates fertile opportunities for advisers
offering differentiated propositions. Furthermore, this requirement
is sanctioned by FCA's recent thematic review on D2C advice
platform with guidance expected later in 2014.
Business model
Delivery of holistic advice through side-by-side financial
planning and investment management capabilities is central to our
business model.
Reflecting the above, the group's activities during 2013/14 were
organised in two main business units (and separate regulated
entities): financial planning and investment management. We have
decided to form Ashcourt Rowan Corporate Solutions as a separate
business unit, inclusive of our existing corporate activities and
resource previously embedded within financial planning, increasing
both the breadth and the depth of our specialist corporate planning
advice services.
The table below summarises our business model and the key
metrics of the three business units, pre and post the post-year end
acquisition of UKWM referenced in this report.
Ashcourt Rowan Group
=========================================================================================================================================================================================
GBP4 billion assets under management or influence (GBP5.2 billion
post UKWM)
252 staff (375 post UKWM)
12 locations (17 post UKWM)
=========================================================================================================================================================================================
Ashcourt Rowan Asset Ashcourt Rowan Financial Ashcourt Rowan
Management Planning Corporate Solutions*
(post UKWM)
=========================================================== ============================================================= =============================================================
* GBP2.1 billion assets under management or advice * GBP1 billion discretionary assets managed by Ashcourt * Added post year-end following acquisition of UKWM
(GBP2.4 billion including UKWM) Rowan Asset Management (part of GBP1.9 billion in
Investment Management)
* Around GBP2 million in revenue before any transfer of
* Of that, GBP1.9 billion in discretionary and manage corporate activities presently included in Ashcourt
d * GBP1.8 billion third party FUI (GBP2.8 billion Rowan Financial Planning
assets (GBP2.2 billion incl. UKWM), of which GBP1 including UKWM)
billion introduced by Ashcourt Rowan Financial
Planning * 14 corporate consultants and advisors
* GBP11.8 million revenue in FY 2014 (excluding UKWM
adding around GBP5 million in revenue)
* Combination of financial planning introduced, * Wide offering covering group plans, actuarial
external IFAs and direct services, employee benefits, annuities and
* 62 financial planners, including 18 from UKWM protection.
acquisition
* GBP19.7 million revenue in FY 2014 (excludes UKWM,
adding c. GBP2 million of revenue)
* 16 paraplanners
* 32 investment managers (including 3 from UKWM)
* c. 50,000 clients, in service or transactional
* 6 investment professionals in central research team
* c. 9,700 clients
* Average client size: GBP220,000
=========================================================== ============================================================= =============================================================
Key features of our operating model
* Standardised operating platforms across businesses,
driving consistent delivery to clients
* Relentless focus on one 'Ashcourt Rowan' way
* Centralised and streamlined decision making focus
* Consolidated operational functions and clear
organisation structure
* Ability to scale up to meet front-of-house business
requirements
* Single point of responsibility for operational
controls
* Consistent application of procedures and policy
across offices/regions
* Continuous improvement to underlying processes to
remove wasteful/redundant activities
* Centralised cost discipline
* Develop opportunities for career disciplines across
multiple business lines
=========================================================================================================================================================================================
* Additional business unit post UKWM acquisition completed on 4
April 2014.
Our client groups and services
Under the banner of holistic planning, advice and
fully-integrated investment solutions, we deliver a range of
services to our main client groups:
-- Private clients: we have a segmented proposition to cater for
mass affluent, affluent and high net worth clients
-- Trusts and charities
-- Corporate clients
Foundation services Tax planning Family wealth risk Holistic planning,
and annual reviews assessments and advice and fully
preservation integrated investment
solutions
-------------------- ------------------------ ------------------------ -----------------------
Stress testing School and university Protection
plans funding
-------------------- ------------------------ ------------------------ -----------------------
Managing life Mortgages Managing your income
changing events needs
-------------------- ------------------------ ------------------------
Inheritance tax Investment management Planning for retirement
planning
-------------------- ------------------------ ------------------------
Employee benefits Corporate financial planning
--------------------------------- ------------------------------------- -----------------------
Our investment management business unit manages or advises on
GBP2.1 billion of the total GBP4 billion under management or
influence (GBP2.4 billion and GBP5.2 billion respectively post-UKWM
acquisition). Out of the total group's assets under management or
influence, around 48% are discretionary or managed. Very
importantly, the proportion of discretionary and managed assets,
the main focus of our value creation proposition, has grown
steadily in the last few years from 37% in March 2011, 39% in March
2012 and 43% in March 2013. A further 6% of our total assets are
advisory assets in our investment management business and 46% are
third party funds under influence or advice in our financial
planning business (as at 31 March 2014).
Evolution of funds under management and influence mix (%)
Year end
------- ------- ------- ------- ------- ------- ---------------- -------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
Discretionary
and Managed 37% 39% 42% 43% 43% 48% 39% 43% 48%
Non-Managed Advisory
and Execution
Only 13% 12% 8% 7% 7% 6% 12% 7% 6%
Funds under Influence 50% 48% 51% 50% 50% 46% 48% 50% 46%
------- ------- ------- ------- ------- ------- ------- ------- -------
The acquisition of the Generali team played a key role in the
growth of discretionary and managed assets in our investment
management business unit. The funds under influence, representing
third party client product investments advised on a recurring or
transactional basis by our financial planning business unit, were
GBP1,820 million at year end, reduced from GBP1,851 million at the
beginning of the period through a combination of outflows from
exited financial planners, conversion to discretionary services and
organic movement during the year.
Assets movements in investment management assets (GBP
billion)
Discretionary Non-Managed Advisory
/ Managed / Execution Only
Opening assets (31 March 2013) GBPbn 1,599 277
---------------------------------- ------- -------------- ---------------------
Generali PM (UK) acquisition 219 0
New clients AuM inflows 155 32
Lost clients AuM outflows -105 -76
Market /performance / flows from
existing 24 11
Closing assets (31 March 2014) GBPbn 1,891 245
---------------------------------- ------- -------------- ---------------------
Average AuM GBPbn 1,668 253
The outflows in assets from lost clients was partly influenced
by our decision to close a desk offering private client derivatives
execution and advisory services representing just above GBP40
million in total assets at the beginning of the period.
Revenue sources
Our revenue is earned from a combination of management fees and
commission for investment management; initial advice,
implementation and ongoing service fees and renewal commissions for
financial planning; and from interest margin on client cash
balances. The latter has reduced substantially over the reporting
period - continuing a trend established over the last few years in
a low base rate environment - and now accounts for around GBP0.4
million. This decrease is one of the main drivers in reduction in
average revenue margin on discretionary and managed assets to 145
bps from 149 bps in the first half of this year and 154 bps in
2012/13, together with the addition of larger, direct clients
through the Generali team acquisition. The healthy average revenue
margin on discretionary asset margin is a direct consequence of
both our focus on the affluent market and the provision of both
financial planning and investment management services on a
significant portion of the assets resulting in a greater capture of
the total value chain.
Overall, income margin advanced from 0.75% during the previous
year and in the first half of the current year, to 0.76% (excluding
financial planning initial charges).
Discretionary Non-managed FP Funds Total
/ Managed advisory under influence
/ Execution / Third
only party investments
Fee income on ARAM
assets (incl. FP
Service Agreements) GBPm 15.82 0.24 16.06
Commission income GBPm 7.91 0.92 8.83
FP Initial advice
and implementation
fees GBPm 1.43 1.73 3.16
FuI Service Agreements
and renewal income GBPm 3.07 3.07
Interest GBPm 0.38 0.05 0.43
Total revenue GBPm 25.54 1.21 4.80 31.55
Revenue margin % 1.53% 0.48% 0.26% 0.84%
Revenue margin (excluding
initial) % 1.45% 0.48% 0.17% 0.76%
Strategy and key initiatives
The key tenets of our strategy revolve around:
-- Holistic side-by-side financial planning and investment management to ensure delivery of a whole-of-wealth solution to the client
-- Both bespoke and centralised investment solutions to match
the individual needs of our client base underpinned by strong
central research capabilities
-- Focus on affluent and HNW private clients and SME corporate clients
-- Organic revenue growth through delivery of higher value
services to existing clients and attracting new clients directly,
through referrals or in partnership with professional introducers
and advisors
-- Value-enhancing acquisitions, where there is a strong fit,
ability to integrate and to deliver visible earning-enhancement
-- Client centric and high performance culture, to make sure we
stand by our commitments to our clients
Click on, or paste the following link into your web browser, to
view "Aim: to be our clients' trusted adviser".
http://www.rns-pdf.londonstockexchange.com/rns/1619L_1-2014-7-1.pdf
Key performance indicators
Historically the group has used a number of financial
performance measures to monitor its progress throughout the year.
These financial key performance indicators (KPIs), which were used
for the period under review, are measured and reported to
management on a monthly basis. These include, amongst others,
consolidated and segmental full P&Ls, aged debt position, cash
and capital position overall and against regulatory requirements,
and movements in funds under management and influence.
In addition, other performance indicators used by the group to
monitor its activities in the year under review include:
-- levels of new client business
-- investment performance
-- levels of dealing activity
-- staff training requirements
-- compliance and regulatory issues.
The group continues to review and enhance its management
information (MI) and KPI reporting to further enhance its
monitoring and decision-making capabilities.
A business plan and budgets are prepared for the group each year
and progress against these are monitored throughout the year by the
Group Executive Committee and the Board.
KPI overview
Underlying EBITDA (GBPm)
Six months to: Full year to:
---------------------------------------------------- -------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
-0.3 0.6 0.4 2.4 0.9 2.9 0.3 2.8 3.8
Note: Earnings before interest, tax, depreciation, amortisation,
impairments, exceptional, earn-in and earn-out payments and
share-based payment costs.
Underlying EBITDA Margin (%)
Six months to Full year to:
---------------------------------------------------- -------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
-2% 3% 2% 14% 6% 18% 1% 8% 12%
Note: Underlying EBITDA as a percentage of total group
revenue.
Continuing business revenues (GBPm)
Six months to Full year to:
---------------------------------------------------- -------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
18.4 17.4 15.7 16.9 15.2 16.3 35.7 32.6 31.5
Note: Group revenue excluding businesses disposed or held for
sale
Revenue by type (GBPm)
Six months to Year end
---------------------------------------------------- -------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
Recurring revenue 10.8 10.7 10.9 10.6 10.4 10.8 21.5 21.5 21.1
Dealing commission
and financial planning
upfront advice revenues 7.3 7.0 4.8 6.3 4.8 5.6 14.3 11.1 10.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating costs* by type (GBPm)
Six months to Year end
---------------------------------------------------- -------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Mar-12 Mar-13 Mar-14
------- ------- ------- ------- ------- ------- ------- ------- -------
Staff related
costs (including
incentives) 12.4 11.6 10.3 9.8 9.2 9.0 23.9 20.1 18.2
Other costs 6.0 5.5 5.0 4.7 5.1 4.5 11.5 9.7 9.6
------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total costs 18.4 17.1 15.3 14.5 14.3 13.5 35.5 29.8 27.8
*Excludes exceptional costs and earn-in / earn-out payments;
continuing business; includes staff related costs(recruitment,
health insurance, consultants, training, etc.); continuing
business
Headcount
Total headcount
----------------------------------------------------
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14
------- ------- ------- ------- ------- -------
Revenue generators 114 108 103 79 67 73
Support and others 259 233 219 201 179 179
-------------------- ------- ------- ------- ------- ------- -------
Total 373 341 322 280 246 252
Note: Includes temporary project resources and consultants (FTEs
respectively)
Funds under Management and Influence (GBPbn)
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14
------- ------- ------- ------- ------- -------
Discretionary and Managed
Advisory AUM 1.5 1.6 1.6 1.6 1.6 1.9
ARAM Advisory and Execution
Only AUM 0.5 0.5 0.3 0.3 0.2 0.2
ARFP Funds under Influence 2.0 2.0 1.9 1.9 1.9 1.8
----------------------------- ------- ------- ------- ------- ------- -------
Total 3.9 4.1 3.8 3.7 3.7 4.0
Post year-end events: acquisition of UKWM
In December 2013 we announced the acquisition of the UK Wealth
Management group of companies (UKWM) from a number of entities
connected with Duke Street Capital.
This acquisition was subject and conditional to obtaining
regulatory approval from the FCA. Having obtained approval the
acquisition completed and became unconditional on 4 April 2014.
While not consolidated in the Report and Accounts for the year, the
acquisition represents a significant event and advancement in our
strategy.
Overview of UKWM
With roots tracing back over 25 years, UKWM is a financial
services group offering best in class independent financial
planning, wealth management and employee benefits to personal,
corporate and trustee clients. UKWM operates out of five offices in
Leeds (HQ), Macclesfield, Pontefract, Rugby and York. Post the
acquisition we have decided to move to new premises in Leeds,
consolidating the Leeds and Pontefract office locations into
one.
Financial information
UKWM has approximately GBP1.3 billion of total Assets under
Management and Influence of which GBP0.3 billion were discretionary
Assets under Management and GBP1.0 billion of Funds under Influence
(FUI). Out of UKWM's GBP1.0 billion of FUI, over GBP0.4 billion are
contracted on client service agreements. In 2013 UKWM had total
revenues of GBP8.8 million (of which GBP6.6 million were recurring)
and, on an annualised basis, had breakeven underlying EBITDA. As at
31 March 2013, UKWM had net assets (excluding intangibles) of GBP2
million including GBP1.5 million of cash. However, all assets are
stated pre-acquisition and fair value adjustments.
UKWM divisional breakdown (FY to December 2013)
---------------------------------------------------------------------------------------
Financial Investment Corporate Pensions
planning management solutions administration
------------------ --------------- --------------- --------------- ----------------
AUM/FUI GBP1.0 billion GBP0.3 billion - -
------------------ --------------- --------------- --------------- ----------------
Revenue GBP4.8 million GBP1.8 million GBP1.9 million GBP0.3 million
------------------ --------------- --------------- --------------- ----------------
Recurring revenue GBP3.5 million GBP1.8 million GBP1.1 million GBP0.3 million
------------------ --------------- --------------- --------------- ----------------
Underlying GBP0.1 million
EBITDA
------------------ -------------------------------------------------------------------
Benefits of the acquisition
As referenced in the CEO report, the acquisition adds greater
scale in financial planning and wealth management and enhances the
group's geographic coverage. It also adds an established corporate
business, a strategic area of development for the group.
As a result of the acquisition, the group increases its total
funds under management and influence to over GBP5 billion, of which
GBP2.2 billion discretionary or managed.
We expect to achieve material cost synergies across the combined
group of at least GBP2.25 million on a fully annualised basis. A
full integration plan is being implemented to ensure that synergies
are delivered to target within the calendar year through the
integration of the support structure and platform.
Acquisition consideration and funding
The upfront consideration for the transaction was GBP12.5
million which was paid in April 2014 following completion. A
further deferred consideration of GBP1.75 million is payable in
cash 15 months after completion if recurring revenue is above a
pre-determined level for the 12 months following Completion.
The transaction was funded through a successful placing in
December 2013 to existing and new institutional shareholders of
8.25 million shares at 185 pence per share raising GBP14.9 million
after placing costs.
Risk management
The group reviews its risk management framework routinely in
order to ensure that it meets the business needs and regulatory
requirements of the new economic environment that has now
developed. There is a Group Risk Committee, which has terms of
reference and whose activities are summarised within the Corporate
Governance section of this report. The principal risks that face
the group are described below. These principal risks and
uncertainties have not changed materially since the last Annual
Report.
Financial risks
The principal financial risks that the group faces together with
the policies and procedures for the monitoring and management of
those risks are set out in Note 28 to the consolidated financial
statements, namely:
-- Capital risk management
-- Externally imposed capital requirement
-- Credit risk
-- Foreign currency risk
-- Interest rate risk
-- Market price risk
-- Liquidity risk (including cash flow risk)
Other/operational risks
Financial regulations
The group's operations are subject to financial regulations in
each of the jurisdictions in which it operates. The group conducts
its businesses subject to ongoing regulation and associated
regulatory risks, including the effects of changes in the laws,
regulations, policies, voluntary codes of practice and
interpretations in the UK and the other markets in which it
operates. The group is subject to the risks inherent in all
regulated financial businesses of having insufficient resources to
meet the minimum regulatory capital requirements. In addition,
these minimum regulatory requirements may increase in the future.
Future changes in regulatory, fiscal or other policies are
unpredictable and beyond the control of the group. Alterations to
the regulatory requirements in any other jurisdiction may adversely
affect the group's performance. In addition, any breach of relevant
regulatory requirements may result in regulatory sanction. The
group is exposed to various forms of legal and regulatory risk,
including the risk of acting in breach of legal or regulatory
principles or requirements, any of which could have a negative
impact on its results and/or its relations with its clients.
The group continues to review, test and enhance its systems and
controls framework in order to ensure that they are robust and our
model is compliant and future proof to meet the regulatory
requirements. The compliance teams regularly engage with the
management and staff to ensure the group is kept updated with
regulatory changes. Furthermore, the group management strongly
believes in the virtues of a proactive, transparent and
collaborative engagement with the regulators to mitigate risk and
adapt to future requirements in a changing industry.
Global economic conditions
The group's businesses are subject to inherent risks arising
from general and sector specific economic conditions in the global
markets in which they operate. Since the revenues are tied to the
financial markets, unfavourable developments, such recent turmoil
in the financial sector and slow or negative economic growth rates,
have adversely affected the group's financial performance in the
past and could continue to impact its profitability.
For much of the past six years, the global economy and the
global financial system have been experiencing a period of
significant turbulence and uncertainty and in particular there has
been disruption of the financial markets around the world and
related problems at many large global and UK commercial banks,
investment banks, asset and fund managers, insurance companies and
other financial and related institutions.
A general economic deterioration in the UK and/or other major
economies, including, but not limited to, business and consumer
confidence, unemployment trends, the state of the housing market,
the commercial real estate sector, equity markets, bond markets,
foreign exchange markets, counterparty risk, inflation, the
availability and cost of credit, lower transaction volumes in key
markets, the liquidity of the global financial markets and market
interest rates, could reduce the level of demand for, and supply
of, the group's products and services.
While it is not possible for the group to control global
economic conditions, it manages and mitigates the risk through
review of its strategy, assessment of potential impact of ongoing
economic factors on group's business and, importantly, of its
services and cost base.
Key employees
The success of the group depends upon the support and experience
of its employees and, in particular, senior management, investment
managers and financial advisors. The loss of key employees from the
group could have a material adverse effect on its results or
operations, financial condition, performance or prospects.
The Group faces intense competition from within the financial
services industry and from businesses outside the financial
services industry for qualified employees. The future success of
the Group will depend upon its ability to attract and retain
highly-skilled and qualified personnel. The failure to attract or
retain sufficient numbers of personnel could seriously impede the
group's financial plans and other objectives, and ultimately lead
to a reduction in funds under management.
The group mitigates this risk through a combination of profit
driven incentive structures for key revenue generators, developing
staff internally, fostering an attractive working environment and
looking at effective models to attract new advisers and investment
managers to expand its revenue base.
Client relationships
Should certain key clients elect to reduce or liquidate their
investments managed by the group, this would lead to a material
impact on the financial performance of the group.
The risk is mitigated through diversification - with no single
client or relationship currently accounting for a significant
proportion of the group revenue base - and through continued
emphasis on service delivery to clients.
Political or economic instability
Political or economic instability, terrorist acts, other acts of
war or hostility, natural disasters, geopolitical, pandemic or
other such events and responses to those acts/events may create
economic and political uncertainties, which could have a negative
impact on UK and international economic conditions generally and
more specifically on the business and results of the group in ways
that cannot necessarily be predicted.
While difficult to mitigate the risk overall, the group has
outlined a clearly defined and actionable business continuity and
disaster recovery plan.
Market counterparties
The group may from time to time have exposure to market
counterparties whose creditworthiness or perceived creditworthiness
is deteriorating as a consequence of deterioration of the value of
underlying assets. Although the group tries to limit and manage
direct exposure to market counterparties, indirect exposure may
exist through other financial arrangements.
The risk is mitigated through review of key counterparties and
selection and due diligence on new counterparties.
Asset classes losing appeal
The group manages investments in a range of asset classes,
including UK and Continental European equities and fixed interest.
Net inflows into the group's assets under management are, in part,
determined by the relative attractiveness to investors of the
different asset classes that it manages. In the event of a
prolonged period of weak investment performance from an asset class
as a whole or if a particular asset class goes out of favour with
investors for any other reason, there may be reduced sales and/or
increased redemptions from specific funds represented by that asset
class or relevant institutional mandates may be withdrawn, either
of which could have a material adverse effect on the group's
business, growth prospects, sales, results of operations and/or
financial condition.
The group does not specialise in a single asset class. The risk
is mitigated through the ability to invest in a range of
traditional and alternative asset classes, and investment in funds
across a wide range of assets.
Pressure on margins caused by competition and changes to
distribution channels
The group competes with global, national and local asset
management companies, including banks and other financial services
companies. If the market environment becomes more competitive or
there are changes to the group's distribution channels, there may
be increased pressure on revenue margins.
A failure by the group to compete effectively in this
environment may result in the loss of existing clients and their
business, each of which could have a material adverse effect on the
group's business, growth prospects, sales, results of operations
and/or financial condition.
The risk is mitigated by direct access to clients, minimising
its value chain compression risk. Ultimately, the risk is mitigated
through quality of service together with efficient and cost
effective delivery.
Loss of business reputation or negative publicity
The group is vulnerable to adverse market perception since it
operates in an industry where integrity and customer trust and
confidence are paramount. In addition, any negative publicity
(whether well-founded or not) associated with the business or
operations of the group could result in a loss of clients and/or
mandates by the group. Accordingly, any mismanagement, fraud or
failure to satisfy fiduciary responsibilities, or the negative
publicity resulting from such activities or any allegation of such
activities, could have a material adverse effect on the group's
business, growth prospects, sales, results of operations and/or
financial condition.
The risk is mitigated through strong governance, monitoring and
controls. As an example, the system and operating platform,
compliance and monitoring support elements are an important
component in the group's selection of its operating platform
partners.
Exposure to litigation
Because of the extent and complexity of the regulatory
environment in which the group operates and the types of products
and services that it offers, many aspects of the group's business
are exposed to the substantial risks of litigation. If any
litigation is brought in the future against any member of the
group, it could have a material adverse affect on the group's
business growth prospects, sales, and results of operations and/or
financial condition.
While the group reviews the fit of its insurance cover on a
periodic basis to its current business exposures, it may not
necessarily cover all or any of the claims that clients or others
may bring against the group or may not be adequate to protect it
against all liability in respect of a claim or claims.
Loss of business continuity
The group's business operations, information systems and
processes are vulnerable to damage or interruption from fires,
floods, chemical spillage, power loss, telecommunication failures,
bomb threats, explosions or other forms or terrorist activity and
other natural and man-made disasters. These systems may also be
subject to sabotage, vandalism, theft and similar misconduct. The
same is true of third party providers on which the group depends.
The group's core businesses have in place disaster recovery plans
covering current business requirements. The Board understands that
key suppliers of administration, information technology services
and other back office functions have disaster recovery plans and
business continuity plans. If, however, the disaster recovery plans
of the group or key suppliers are found to be inadequate there
could be an adverse impact on the group's business, growth
prospects, sales, results of operations and/or financial
condition.
Inadequacy of systems and controls
The group's financial and management controls have been reviewed
and updated due to changes to the group's funds under management,
its target market and legal and regulatory requirements affecting
the group. Any disruption in the further development of these
systems or processes, or issues that emerge in relation to their
implementation, may result in additional costs and may negatively
impact the group's ability to execute its strategy and to analyse
in a timely and efficient manner its financial and other business
information, and may ultimately have a material adverse effect on
the group business, growth prospects, sales results of operations
and/or financial condition.
The group's ability to maintain financial controls and provide a
high-quality service to customers depends, in part, on the
efficient and uninterrupted operation of its management information
systems, including its computer systems. Any damage to, or failure
of, its management information systems could result in
interruptions to the group's financial controls and customer
service. Such interruptions could have a material adverse effect on
the group's business, growth prospects, sales, results of
operations and/or financial condition.
This risk is mitigated by developing policies and processes that
identify, measure, monitor and control risks incurred by the group,
maintaining an organisational structure that clearly assigns
responsibility, authority and reporting relationships, ensuring
delegated responsibilities are carried out and monitoring the
adequacy and effectiveness of the internal control system.
Acquisition risk
The group has undertaken a significant number of acquisitions in
the past and two more agreed within this financial year with the
acquisition of Generali Portfolio Management (UK) Limited and UKWM.
Failure to carry out sufficient due diligence, ineffective
warranties and cultural mismatch of new employees could result in
anticipated value to the group not being achieved.
The group is primarily focusing on building on its existing
client base, growing organically and ensuring it has a robust
platform to integrate previous acquisitions, but also providing a
strong and controlled framework to integrate future acquisition.
The management teams manage and mitigate this risk by identifying
external consultancy firms to perform due diligence on specialist
areas, in conjunction with internal subject matter expert
resources, and setting up internal governance structure to review
and assess the findings against the overall fit with the group's
culture, growth ambitions and working practices.
Performance Review
Financial performance
Review in brief
-- GBP3.8 million in underlying EBITDA, 37% growth over previous year.
-- Continued cost discipline, operating cost base reduced by a further 7%.
-- As expected, revenue reduced to GBP31.5 million as we exited
unprofitable revenue generators.
-- Loss before tax from continuing operations reduced to
GBP(2.0) million from GBP(2.5) million in prior year, reflecting
last instalment of Change Management Programme exceptionals in the
first half, now completed, in addition to acquisition related
expenses.
-- We continue to maintain a solid balance sheet position: no
debt and cash at GBP21.4 million (reflecting proceeds from share
placing)
-- Discretionary and managed assets increased to GBP1.9 billion from GBP1.6 billion.
-- Acquisition of UKWM completed after year end takes total
assets under management and influence to GBP5.2 billion and
discretionary and managed assets to GBP2.2 billion and adds around
GBP9 million in revenues.
During the year we delivered strong underlying profitability
growth as we completed the rationalisation of our business and
embarked on organic and non-organic growth initiatives.
Profitability
We are pleased to report that during the year our underlying
EBITDA - earnings before interest, tax, depreciation, amortisation,
exceptional items, earn-in and earn-out payments and share-based
payments - grew by 37% to GBP3.8 million from GBP2.8 million in
2013.
During the year our underlying EBITDA margin increased from 8%
to 12%, with 18% achieved in the second half vs 14% last year.
While the second half and our financial year end coincide with tax
year end and increased activity, the progress has been nevertheless
significant.
Loss before tax after exceptional costs, depreciation and
amortisation reduced to GBP(2.0)million during the year from
GBP(2.5) million.
As previously reported, in April 2013 we disposed of the
non-core SIPP and SASS pension administration business. The
business had been treated as a business held for sale at the end of
last year and not included in continuing results. The sale of the
business resulted in a gain reported in discontinued operations of
GBP0.2 million.
Loss after tax decreased to GBP(1.4) million from GBP(2.1)
million in the previous year.
Controlling the operating cost base
Total underlying operating costs in the continuing business
(excluding exceptionals, depreciation, amortisation and share-based
payments) were GBP27.8 million from the year, a decrease of GBP2
million or 7% from GBP29.8 million in the previous year.
Staff costs have reduced from GBP20.1 million in 2013 to GBP18.2
million on a continuing basis including staff-related costs
(benefits, healthcare, consultancy, recruitment, training). The
reduction has resulted from a combination of the full year impact
of the proactive reduction in unprofitable revenue generators
effected in around the start of the financial year together with
further efficiencies unlocked by the transfer to a single,
outsourced investment management operating platform during the
first half of the financial year, a key component in the increase
of other non-staff operating costs during the year from GBP8.1
million to GBP8.7 million.
2014 2013
Operating Expense GBPm GBPm GBPm
Third party pay-aways (0.9) (1.6)
Fixed staff costs (15.0) (16.4)
Variable staff costs (2.3) (2.9)
Other staff-related costs (0.8) (0.8)
Other operating costs (8.7) (8.1)
Total Operating Expenses (27.8) (29.8)
--------------------------- ------- -------
Note: Excludes depreciation, amortisation, exceptional costs,
earn-in /earn-out payments and share-based payments.
During the year we incurred GBP3.8 million in exceptional costs.
Around GBP2.9 million of those related to the change management
programme and corporate restructuring, which are now complete. The
majority were incurred in the first half and previously reported in
our interim results. A combination of acquisition and lift-out
costs and UKWM early integration costs accounted for most of the
remainder, for a total of c. GBP0.8 million. In addition we made
payments of c. GBP0.4m in relation to revenue generator earn-in and
earn-out agreements based on the value of client relationships
brought or retained to the group.
We continue to maintain a very disciplined approach toward cost
controls and look at opportunities to reduce costs through as we
are looking at investing to support future growth, in particular
through recruitment of new revenue generators and strengthening our
distribution capabilities.
Group headcount stood at 252 at the end of March 2014 including
full-time, part-time and temporary employees (with full time
equivalent permanent employees at 147). This is a further reduction
from 280 at the start of the financial year and 373 in September
2011. At the end of March 2014 the group had 73 revenue generators
operating from 12 locations (excluding UKWM).
Including UKWM, total group employees will increase to around
375. As part of the acquisition and integration of UKWM we have
identified synergies of GBP2.25 million (on a fully annualised
basis) with a target of extracting them by the end of this calendar
year. As a result we are fully focussed on delivery of the
integration.
Revenue performance
Total revenue for the year were GBP31.5 million compared with
GBP32.6 million in the previous year, affected - as previously
flagged - by the full impact of planned exits of unprofitable
revenue generators during the second half of the last financial
year and the first half of the current financial year. In addition,
interest revenue reduced from GBP1 million in 2012/13 to GBP0.4
million in 2013/14.
Revenue in the second half was GBP16.3 million, up from GBP15.2
million in the first half reflecting higher dealing income and
financial planning initial advice fees although in part linked to
seasonality.
Our focus is entirely on delivering profitable growth. The
combination of growth in fee earning assets in the past quarter,
developments in our proposition, a broader service offering partly
as a result of the UKWM acquisition in addition to recruitment of
new revenue generators supports our plans and expectations for
revenue growth.
Funds under management and influence
At 31 March 2014 our total assets under management and influence
stood at GBP4 billion, increasing from GBP3.7 billion at the
beginning of the year. Our primary focus is on increasing
discretionary and managed assets. Through a combination of the
acquisition of Generali Portfolio management (UK) Limited, organic
and market growth our discretionary and managed assets rose to
GBP1.9 billion from GBP1.6 billion at the beginning of the
year.
The acquisition of Generali Portfolio Management (UK) Limited
was completed in January 2014 and added GBP219 million in
discretionary assets. During the year we had gross discretionary
assets inflows from new clients totalling GBP155 million and
outflows from lost clients of GBP(105) million with an additional
GBP24 million from the net impact of market and performance and
asset inflows and withdrawals from existing clients.
Capital and cash position
We continue to maintain a solid balance sheet with virtually no
debt. Our cash position at year end was higher than its natural
position at GBP21.4 million as a result of the proceeds of the
placing carried out in December 2013 to fund the acquisition of
UKWM. The placing of 8.25 million shares raised GBP15.25 million
gross and GBP14.9 million net of placing costs, from a combination
of existing and new institutional investors
After the balance sheet date we completed the acquisition of
UKWM. As a result, a payment for a total of GBP12.5 million was
made in April 2014 covering upfront consideration to the vendors
and certain escrow accounts in relation to the completed deal. The
UKWM acquisition also added an additional GBP1.5 million in cash or
equivalents at completion date.
Regulatory capital requirement for continuing business across
the group at year end was around GBP5 million, with a healthy
buffer being maintained in capital resources underpinning the
requirements.
Outlook
As highlighted in the Strategic Report the key priorities for
the next 12 months that will have a direct impact on the financial
performance of the business are:
-- Integration of UKWM and its advisory and investment proposition
-- Delivery the target synergies of GBP2.25 million within the
planned timescale of calendar year 2014
-- Focus on organic growth - direct, through professional
introducers and through external intermediaries
-- Further recruitment of high quality investment managers and financial advisors
We continue to operate in a sector undergoing significant
transformation. While with change comes challenges we believe the
opportunities - both in the short and medium term - are
significant, and we are pursuing them vigorously on your
behalf.
Governance
Board of directors
Non-executive
Hugh Ward
Non-executive chairman
Hugh Ward has worked in the investment services industry since
1973, holding senior positions with Schroders, Capital House and
Invesco, where he was chief executive of the group's UK and
offshore business, and a member of the Invesco Group Executive
Board.
Hugh has experience leading significant corporate restructuring
and development activities, and currently acts as a non-executive
and a consultant for a number of companies in the investment and
property sectors. As a former chief executive of Invesco UK, and a
key architect of the merger between Invesco and Perpetual, Hugh is
a significant asset to the Ashcourt Rowan group following his
appointment to the board of the group as non-executive
chairman.
Steve Haines
Non-executive director
Steve joined the group in August 2011, having worked in the
asset management sector at Dwyer since 2009. A qualified
accountant, he had previously spent 20 years in the property and
residential development industry, holding a range of board
positions, reflecting general management, operational and financial
responsibilities. He is a member of the Chartered Institute of
Management Accountants, Steve brings a detailed knowledge of
business infrastructure and control systems alongside his broad
commercial experience. Steve is chairman of the group's audit
committee.
James Roberts
Non-executive director
Jim Roberts is a qualified actuary and has nearly 40 years'
experience in the life insurance industry. He spent 26 years at
Skandia Group, including positions as appointed actuary, finance
director and, from 1992 to 2006, group investment director. He has
substantial experience of investment management and in particular
the retail investment market. He is currently a non-executive
director of Sarasin & Partners LLP, which operates a broad
range of institutional, charity, private client and retail
products. He is an adviser to Simply Biz, a broker service provider
and also chairman of the investment committee of Verbatim
Investment Management.
Executive
Jonathan Polin
Group chief executive officer
As group chief executive, Jonathan Polin is responsible to the
Board for the development and delivery of the group strategy.
Jonathan joined the group on 2 September 2011 having previously
been sales and marketing director at Ignis Asset Management. During
Jonathan's time at Ignis he was responsible for building their
third party business in institutional, wholesale and retail markets
in the UK, Europe, Asia and the US. He was also the architect of
the highly-successful joint venture strategy. Jonathan was on the
Board of Ignis and each of the joint venture businesses and
offshore companies.
He began his financial services career with Prudential in 1992,
having spent the previous 12 years in the Army. In 1994 Jonathan
took up the position of managing director UK, European and Middle
Eastern sales at Aberdeen Asset Management. During his tenure he
moved Aberdeen into the No1 slot in the UK retail market and built
the distribution businesses in Europe and the Middle East.
Richard Sinclair MBE
Group chief operating officer
Richard joined Ashcourt Rowan in January 2012 as group chief
operating officer. Previously, he was in telecoms as Ofcom's
delivery director, responsible for the electromagnetic spectrum
required for the London 2012 Games. He was also a member of its
operations board, leadership steering group, and a mentor to
developing leaders. He is a Fellow of the Chartered Institute of
Logistics and Transport.
Earlier, Richard had an exciting career in the British Army,
beginning with a commission into the Scots Guards and including
operations in the Middle East and Central Asia. He was decorated
with an MBE in 2008. He has an MSc from Cranfield University; an
MA, with merit, from Kings College London; and an honours degree in
Immunology, from the University of Glasgow.
Alfio Tagliabue
Group chief financial officer
Alfio is the group chief financial officer, responsible for the
finance function and strategic planning across the group.
Alfio joined the group in January 2012 having spent the previous
12 years as a board level consultant to the investment and wealth
management industry, advising on strategy, corporate development,
corporate transactions, strategic and financial planning, and
operational and organisational issues.
Prior to that, from 1995 to 2000 Alfio was an engagement
director at Mars & Co, an international strategy consultancy,
advising global clients at board level on a wide range of strategic
projects. He started his career in London in 1992 with Frost &
Sullivan, a sector analysis consultancy. An Italian national, Alfio
holds a first class degree in accounting, economics and business
administration from Bocconi University.
Governance
Directors' report
The Directors present their report and the audited financial
statements for the year ended 31 March 2014.
Principal activities
The principal activity of the group is that of providing wealth
management and investment management services to a diverse range of
private clients, charities, trusts and corporate clients.
The chairman's report, the CEO report, the Strategic Report and
the Performance Review including finance review provide a review of
the group's activities during the year, including a consideration
of key performance indicators and risk management policies. They
also provide details of the group's planned future
developments.
Results and dividends
The results of the group for the year show a loss after tax of
GBP1.4 million (2013: GBP2.1 million). No dividends have been paid
or proposed.
Capital structure
The group's share capital is comprised of one class of ordinary
shares of GBP0.2 each. At 31 March 2014, 35,489,566 shares were in
issue (2013: 26,994,487 shares of GBP0.2). The shares carry no
rights to fixed income and each share carries the right to one vote
at general meetings. All shares are fully paid.
There are no specific restrictions within the group's Articles
of Association or Memorandum on the size of a shareholding or on
the transfer of shares which are both covered by the provisions of
the Articles of Association and prevailing legislation. However,
the group is an owner of certain UK Financial Conduct Authority
regulated companies and, as such, there is a requirement upon
"controlling shareholders" to seek permission from the Financial
Conduct Authority for holdings of 10% or more of the group's share
capital.
Voting rights of shares held by the trustees of the group's
Share Incentive Plan (SIP) are not exercised unless the trustee is
directed to vote by the employee SIP participant.
Regarding the appointment and replacement of Directors, the
group is governed by the group's Articles of Association, the
Companies Acts and related legislation. Amendment of the Articles
of Association requires a Special Resolution of shareholders.
Directors and their interests
The Directors who served during the year were:
Hugh Ward
Stephen Haines
James Roberts
Jonathan Polin
Richard Sinclair
Alfio Tagliabue
The beneficial interests of the directors in the shares, share
options and long-term incentives of Ashcourt Rowan plc at 31 March
2014 were:
Ashcourt Rowan plc Beneficial Beneficial
- ordinary shares of holdings at holdings at
GBP0.20p 31 March 2014 31 March 2013
----------------------- --------------- ---------------
Jonathan Polin 231,645 231,645
----------------------- --------------- ---------------
In addition to the above, directors have interest in shares of
the group through the GSOP described in the remuneration report as
follows, provided that the average share price on the 20 days
before 1 September 2016 is above GBP2.50:
Final Share Price
------------------------------------------------------------------------------------------------------------------------
GBP2.50 GBP3.00 GBP3.50 GBP4.00 GBP6.00
------------------------ -------------------- ---------------------- ---------------------- ------------------------
Number % of Number % of Number % of Number % of Number % of
of current of current of current of current of Ordinary current
Ordinary issued Shares issued Ordinary issued Ordinary issued Shares issued
Shares ordinary ordinary Shares ordinary Shares ordinary ordinary
share share share share share
capital capital capital capital capital
----------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- ------------ ----------
Jonathan
Polin 428,753 1.4 750,317 2.5 1,071,882 3.4 1,500,634 4.7 2,143,763 6.4
----------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- ------------ ----------
Alfio
Tagliabue 98,909 0.3 173,091 0.6 247,273 0.8 346,182 1.1 494,545 1.5
----------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- ------------ ----------
Richard
Sinclair 83,636 0.3 146,363 0.5 209,091 0.7 292,727 0.9 418,181 1.2
----------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- ------------ ----------
Corporate and social responsibility
The group is committed to conducting its business in a socially
responsible manner and to respect the needs of employees,
investors, customers, suppliers, regulators and other stakeholders.
The group is also committed to being a responsible employer and to
promoting values, standards and policies designed to assist our
employees in their conduct, working and business relationships.
Group charity partner
The group continues to support its nominated charity partner,
Together for Short Lives. Employee initiatives so far have included
raffles and auctions, fire walking, bake sales, contributions for
dress down days and World Cup sweepstake. We also have a 'Just
Giving' page set up and expect to have other activities throughout
the coming year.
Environment
The most significant impact on the environment resulting from
the group's activities is the emission of greenhouse gases as a
result of running the group's offices, associated travel and the
recycling of waste. The consolidation of some of our offices in
similar locations has helped reduce footprint. The group is also
committed to minimising the amount of travel that its employees
undertake and to recycling as much of the group's waste as
possible. To this end, video conferencing facilities have been set
up in our main offices.
Staff as at 31 March 2014
The group as a whole had 252 staff (excluding three group
non-executive directors) at 31 March 2014, equating to 247 staff on
a full time equivalent (FTE) basis. This compares to 280 for the
previous year.
The group had 89 employees including three executive directors
as at 31 March 2014, compared to 115 the previous year. Three
non-executive directors were also in place at this date. The
group's subsidiary companies had a total 158 employees (154 FTE),
compared to 166 for the previous year. Overall for the group staff
costs and incentives were 55% of revenue during the year (2013:
59%).
Employee involvement
In addition to the charity working group, there are various
group and subsidiary group committees in place. The group CEO and
senior management visit regional offices throughout the year to
give updates.
Working environment
The group is committed to ensuring that we have a working
environment where everyone is treated with dignity and respect.
There are policies in place to ensure that no potential or existing
employee receives less favourable treatment than another on the
grounds of any protected characteristic.
As well as policies and guidance for our employees and workers,
the group expects co-operation from consultants, contractors,
suppliers and others engaged by the group.
Health and safety
The group has a health and safety policy which is also approved
by the subsidiary boards and owned by the subsidiary chief
executive officers. However, all managers have a responsibility to
ensure that a healthy and safe working environment is in place for
all employees. Annual workstation assessments are carried out for
all employees. As the employees work in office environments, there
are no significant areas of risk on which to report.
Charitable and political contributions
No charitable or political donations were made during the
period, although this will change going forward, now that we have a
nominated charity partner.
Supplier payment policy
The group's policy concerning the payment of its trade creditors
is to pay on the basis of the agreed terms established with each
supplier, providing that all terms and conditions have been
complied with and in accordance with the group's financial control
procedures.
The group's average credit period (expressed as creditor days)
during the year ended 31 March 2014 was 31 days (2013: 30
days).
Substantial shareholdings
At 30 March 2014, the issued share capital of the group was
35,489,566ordinary shares of GBP0.2 each (2013: 26,994,487of GBP0.2
each) and the following notification of shareholdings had been
notified to the group as holding 3% or more of the group's share
capital:
Name of holder No of shares % of total
------------------------- ------------- -----------
Polygon Global Partners
LLP 9,267,950 26.11
------------------------- ------------- -----------
Jodi One Trust 4,463,798 12.58
------------------------- ------------- -----------
Fidelity Worldwide
Investment 3,454,671 9.73
------------------------- ------------- -----------
La Galera Corporation 3,422,637 9.64
------------------------- ------------- -----------
River & Mercantile
Asset Management 3,045,135 8.58
------------------------- ------------- -----------
Kestrel Partners LLP 2,820,159 7.95
------------------------- ------------- -----------
Mr Victor Haghani 2,143,193 6.04
------------------------- ------------- -----------
Artemis Fund Managers
Ltd 1,750,000 4.93
------------------------- ------------- -----------
Financial instruments and risk management
The risk management objectives and policies of the group are set
out in the Strategic Report and Note 28 to the consolidated
financial statements.
Post balance sheet events
Post balance sheet events (namely the acquisition of UKWM group
of companies) are set out in the Strategic Report and Note 30 to
the consolidated financial statements.
Directors' qualifying third party indemnity provisions
The group has made qualifying third party indemnity provisions
in favour of the Directors against liability in respect of
proceedings brought by third parties and these remain in force as
at the date of this Directors' Report.
Annual General Meeting
Notice of the Annual General Meeting will be sent to
shareholders with the Annual Report.
It is anticipated that all directors, including the chairman of
the Audit, Remuneration and Risk Committees, will be at the Annual
General Meeting and available to answer questions.
Disclosure of information to auditors
The directors who held office at the date of approval of this
directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the group's
auditors are unaware and each director has taken all the steps that
he/she ought to have taken as a director to make himself/herself
aware of any relevant audit information and to establish that the
group's auditors are aware of that information.
Auditors
BDO LLP have expressed their willingness to continue in office
and a resolution to reappoint them will be proposed at the annual
general meeting in accordance with section 485 of the Companies Act
2006.
By order of the Board
Alfio Tagliabue
Company secretary
1 July 2014
Corporate governance
As an Alternative Investment Market ("AIM") quoted Company,
compliance with the Financial Reporting Council's UK Corporate
Governance Code (the "Code") is not mandatory.
Statement of compliance
The Directors give due regard to the principles set out in The
UK Corporate Governance Code published in September 2012 by the
Financial Reporting Council. They do not need to comply with the
Code. However they have chosen to adopt those principles that are
appropriate given the size and nature of activities of the
group.
The Board considers that the remuneration of Executive Directors
should include a performance related element which is almost
entirely based on the award of GSOP shares or other share-based
incentives as recommended by the Remuneration Committee and details
are set out in the Directors' Report and in the Remuneration
Committee Report.
Board of Directors
The Board of Directors has overall responsibility for the
group.
The Board comprises of a non-executive chairman ("Chairman"), a
group chief executive officer, two non-executive directors and two
further executive directors. The Chairman receives fees as a
non-executive director. The Board is satisfied that it has an
appropriate mix of independence and experience in its non-executive
directors but is aware that it may be necessary in the future to
seek to appoint an additional non-executive director to provide
further specialist knowledge and experience. The roles of Chairman
and group chief executive officer are intended to remain
separate.
The Chairman provides strategic and operational guidance
bringing to bear his extensive experience of the financial services
industry. He also oversees the duties performed by the group chief
executive officer and ensures that they are in line with Board
expectations. The group chief executive officer manages the
day-to-day running and strategic direction of the group in line
with policy decisions given by the Board and shareholder
expectations.
The Board retains full control of the group with day-to-day
operational control delegated by the Board to the executive
directors. The full Board meets bi-monthly and on any other
occasions it considers necessary. During the year there were 19
meetings of the Board of which nine full Board meetings, two
meetings of the Remuneration Committee, six meetings of the Audit
Committee and six meetings of the Group Risk Committee. All full
Board meetings were attended in full by their constituent
directors.
The senior independent director at 31 March 2014 is James
Roberts. The Board considers that Hugh Ward and James Roberts were
independent for the purposes of the Code. Copies of the terms and
conditions of the appointment of non-executive directors are
available on request from the group's registered office.
The Board is responsible for approving interim and annual
financial statements, formulating and monitoring group strategy,
approving financial plans and reviewing performance, as well as
complying with legal, regulatory and corporate governance matters.
There is a schedule of matters reserved for the Board.
Training
Ashcourt Rowan is committed to the training and development of
all staff to ensure professional standards are maintained and
enhanced. All directors are required to dedicate a certain number
of hours to their own training and development. Training and
development includes activities to keep up to date with the group's
specific issues and industry, market and regulatory changes.
Committees of the Board
The Board has three existing standing committees, the Risk
Committee, Audit Committee and the Remuneration Committee. The
Remuneration Committee has a written terms of reference, which was
last reviewed in June 2006 and approved by the Board. The Risk
Committee terms of reference were reviewed and adopted by the Board
on 25 September 2009 and the Audit Committee terms of reference
were revised and adopted by the Board in June 2012. Membership of
the committees is set out below. Copies of the terms of reference
are available on request from the group's registered office and on
the group's website at www.ashcourtrowan.com.
Remuneration Committee
The Remuneration Committee met formally two times to discuss
remuneration and bonus arrangements.
The Remuneration Committee's mandate is to assist the directors
in fulfilling their oversight responsibilities with respect to
developing compensation and human resource policies and developing
and assessing executive management compensation, development and
succession. The Committee is chaired by Hugh Ward and comprises
Steve Haines, James Roberts and Jonathan Polin (group chief
executive officer).
Audit Committee
The Audit Committee was established on 15 June 2006 and meets at
least twice a year. Steve Haines is the Chairman of the Audit
Committee. Other members of the Audit Committee are Hugh Ward and
James Roberts. During the financial year the Audit Committee met
formally on six occasions.
The Audit Committee's mandate is to assist the directors in
fulfilling their responsibilities with respect to the group's
financial statements and other financial information required to be
disclosed by the group to the public, the group's compliance with
legal and regulatory requirements, and the performance of the
group's external auditors. In addition the Audit Committee has
oversight responsibility for the group's Internal Audit function,
which is supported by external specialist auditors, Kingston Smith
Consulting LLP. The Audit Committee meets as required and
specifically to review the Interim Report and Annual Report and to
consider the suitability and monitor the effectiveness of the
internal control processes. The Audit Committee reviews the
findings of the external auditors and reviews accounting policies
and material accounting judgements.
The independence of the auditors is considered by the Audit
Committee. The Audit Committee (with no executive director present)
meets at least once per financial year with the auditors to discuss
independence and objectivity, the Annual Report, any issues
arising, internal control processes and any other appropriate
matters. As well as providing audit related services the auditors
also provide taxation and other professional advice, including
Transaction services. The fees in respect of audit and other
services are disclosed in Note 7 to the group's financial
statements. Fees for non-audit services paid to the auditors and
their associates have been considered and, with the work having
been carried out by a separate team of tax and corporate finance
specialists and there were no subjective judgements involved, the
Audit Committee considers that the objectivity and independence of
the auditors is safeguarded.
The Audit Committee is responsible for reviewing external audit
arrangements and for any recommendation to the Board regarding
change of audit firm. The last audit services contract tender
process was conducted in 2010, which led to the appointment of BDO
as auditors. The Audit Committee plan to undertake an audit
services contract tender process again before the fifth anniversary
of their appointment.
Internal audit
The Board is responsible for establishing and maintaining the
group's system of internal control and for reviewing its
effectiveness. The system of internal control is designed to
manage, rather than eliminate, the risk of failure of the
achievement of business objectives and procedures and can only
provide reasonable but not absolute assurance against material
misstatement or loss. The Audit Committee continues to monitor and
review the effectiveness of the system of internal control and
report to the Board when appropriate with recommendations. During
the financial year ended 31 March 2010 the Audit Committee
recommended, and the Board accepted, that an internal audit
function be created. The group employed Kingston Smith Consulting
LLP to assist the Board in the creation of the internal audit
function and to carry out a number of reviews. Kingston Smith
Consulting LLP reports its findings to the Audit Committee.
The main features of the group's internal control are outlined
below:
-- a control environment exists through the close management of
the business by the executive directors and senior management. The
group has a defined organisational structure with delineated
approval limits. Controls are implemented by the executive
directors and monitored by the Risk Committee and Internal
Audit;
-- the Board has a schedule of matters expressly reserved for
its consideration and the schedule includes acquisitions and
disposals, major capital projects, treasury and risk management
policies and approval of budgets;
-- the group utilises a detailed budgeting and forecasting
process. Detailed budgets are prepared annually by each subsidiary
company, business unit and function before submission to the Board
for approval. Forecasts are updated to reflect changes in the
business and are monitored by the Board including cash flow and
projections. Actual results are monitored against annual budgets in
detail on a monthly basis, with variances highlighted for the
Board;
-- financial risks are identified and evaluated for each major
transaction for consideration by the Board and senior management;
and
-- standard financial control procedures operate throughout the
group to ensure that the assets of the group are safeguarded and
that proper accounting records are maintained.
Risk Committee
The Risk Committee was established on 29 July 2009 and met
formally six times during the financial year. James Roberts is the
Chairman of the Group Risk Committee. The other members of the
Group Risk Committee are Jonathan Polin, group chief executive
officer; Alfio Tagliabue, group chief financial officer; Richard
Sinclair, group chief operating officer; Gaius Jones, CEO of
Ashcourt Rowan Financial Planning, Harry Burnham, CEO of Ashcourt
Rowan Financial Planning, group head of compliance and Niral
Parekh, group head of risk.
The Risk Committee's mandate is to assist the Directors with
identifying all actual and potential material risks to which the
group's businesses are exposed and to assess whether reported risks
fall within the tolerance of the group as determined by the group's
risks and governance policies.
Directors' conflicts of interest
Each director has a duty under the Companies Act 2006 ("the
Act") to avoid a situation where he or she has, or can have, a
direct or indirect interest that conflicts or possibly may conflict
with the group's interests. The group's Articles of Association
permit the Board to authorise conflicts or potential conflicts of
interest. The Board has established procedures for managing and,
where appropriate, authorising any such conflicts or potential
conflicts of interest. It is a recurring agenda item at all Board
meetings and this gives the directors the opportunity to raise at
the beginning of every Board meeting any actual of potential
conflict of interests that they may have on the matters to be
discussed, or to update the Board on any change to a previous
conflict of interest already declared. In deciding whether to
authorise any conflict, the directors must have regard to their
general duties under the CA 2006 and their overriding obligation to
act in a way they consider, in good faith, will be most likely to
promote the group's success. In addition, the directors are able to
impose limits or conditions when giving authorisation to a conflict
or potential conflict of interest if they think this is
appropriate. The authorisation of any conflict matter, and the
terms of any authorisation, may be reviewed by the Board at any
time. The Board believes that the procedures established to deal
with conflicts of interest are operating effectively.
A register of actual or potential conflicts notified and
authorised is reviewed and maintained regularly by the Board.
Relationship with shareholders
The group places great emphasis on the importance of regular
communication with shareholders. The group's website has undergone
a review over the last year and we will continually review this
important method of group information dissemination. The group's
websites will be kept up to date covering all corporate activity.
The group welcomes all shareholders to its Annual General Meeting
with the opportunity to ask questions formally at the meeting or
more informally afterwards. In addition the Chairman, group chief
executive officer and group chief financial officer have met
directly with a variety of existing major shareholders during the
course of the year under review in order to ensure that the Board
as a whole has a well developed understanding of the views of its
major shareholders about the group. The Board also takes into
consideration the views of its advisers, through whom a number of
shareholders are also encouraged to provide feedback.
The group reports formally to shareholders in its Interim Report
and Annual Report setting out details of its activities. In
addition the group keeps shareholders informed of events and
progress through the issue of regulatory news in accordance with
the AIM Rules of the London Stock Exchange. In addition the group
issues trade orientated press releases in order to ensure that
customers and suppliers are kept informed of relevant activities by
Ashcourt Rowan and its subsidiary companies.
Where possible the Annual Report is made available to
shareholders at least 20 business days before the Annual General
Meeting. Directors are required to attend Annual General Meetings
of the group unless unable to do so for personal reasons or due to
pressing commercial commitments. Shareholders are provided with the
opportunity to vote on each separate resolution. The group counts
all proxy votes and will indicate the level of proxies lodged for
each resolution.
Going concern
As disclosed under Note 2 to the financial statements the group
financial statements have been prepared on a going concern basis as
the Directors have a reasonable expectation that the group has
adequate resources to continue in operational existence for the
foreseeable future and at least 12 months from the date of approval
of the accounts.
Other Board issues
The group has appropriate insurance cover in place in respect of
legal action against its directors.
Any director has access to the advice and services of the
company secretary and may seek independent professional advice, if
necessary, at the group's expense.
Governance
Remuneration committee report
Composition and terms of reference
The group's Remuneration Committee is comprised of the
non-executive chairman, Hugh Ward, Steve Haines, James Roberts and
Jonathan Polin, the group CEO. The Committee is chaired by Hugh
Ward.
The purpose of the Remuneration committee is:
-- To ensure its members have the skills and experience
necessary to make sound and independent judgments, with due
attention to risk management.
-- To ensure that the remuneration policy is in line with the
business strategy, objectives, values and long-term interests of
the group.
-- To be able to demonstrate that decisions regarding
remuneration are taken with due attention to the group's financial
situation, future business prospects and the group's ability to
strengthen its capital base.
-- To ensure that the remuneration structure ensures the right
culture is promoted and maintained
-- To propose recommendations to the group Board of Directors on overall remuneration policy.
-- To ensure procedures are clear and documented, and any
potential conflicts of interest managed appropriately.
-- To ensure that remuneration procedures comply with the FCA's
Remuneration Code and associated guidance and to have regard to
other regulatory compliance and effective risk management in its
decision-making.
-- To ensure the implementation of the remuneration policy and
the periodic review of the general principles of the remuneration
policy.
-- To oversee the remuneration of senior officers in the group's
risk, compliance, legal, HR, treasury and internal audit
functions.
-- To review and approve remuneration recommendations that fall
outside of the standard policy such as exceptional guaranteed
bonuses of Code Staff and all basic salaries above GBP100,000,
etc.
The Board retains responsibility for overall remuneration
policy. The Remuneration Committee operates within agreed terms of
reference.
Policy on executive directors' remuneration
Remuneration packages are designed to reward employees and
Executives fairly, whilst remaining within ranges offered by
similar firms within the industry, but without encouraging
excessive business risk or exposure to risk. Our remuneration
policies are created to ensure that the correct cultural behaviours
are enforced and that our people ensure clients interests are held
above our own.
The Remuneration Committee recommends to the Board remuneration
packages by reference to individual performance and uses the
knowledge and experience of the non-executive directors. The
Remuneration Committee has responsibility for recommending any
long-term incentive schemes.
The Board determines whether or not executive directors are
permitted to serve in roles with other companies. Such permission
is only granted where a role is on a strictly limited basis, where
there are no conflicts of interest or competing activities and
providing there is not an adverse impact on the commitments
required to the group.
There are potentially five main elements of the remuneration
package for executive directors and senior employees:
(i) Basic salaries and benefits
Basic salaries are recommended to the Board by the Remuneration
Committee, taking into account the performance of the individual
and the rates for similar positions in comparable companies.
Benefits include death in service insurance, permanent health
insurance and private medical insurance. Benefits are not
pensionable.
(ii) Share Incentive Plan
Ashcourt Rowan operates an authorised group share incentive plan
for employees, whereby the group will match the number of shares
acquired by the employee under the scheme up to a maximum of
GBP1,500 per annum. These matching shares vest after three
years.
(iii) Discretionary bonus
The group operates a discretionary bonus scheme and some awards
were made to employees in line with performance. In parallel to the
discretionary bonus scheme, operating subsidiaries of the group had
formulaic bonus schemes in place during the financial year for
revenue-generating staff based on sharing in a proportion of
revenues, contribution or funds under management.
(iv) Long-term incentive plan (LTIP)
The maximum number of shares available to be awarded under the
plan is limited to 20% of the issued share capital of the group
over the life of the plan. The awards are also conditional upon the
achievement of individual targets by the employee.
The LTIP is overseen by the Remuneration Committee which
recommends to the Board the individual grant of shares to senior
management and executive directors and the quantity of the awards
for other employees of the group, all based on group and personal
performance targets and specifying the terms under which eligible
individuals may be invited to participate.
The total number of shares over which LTIP and deferred share
bonus awards have been made at the beginning and end of the
financial year is as follows:
Deferred share
LTIP awards bonus Total
-------------------------------------- ------------ -------------- ------------
At 31 March 2011 147,890,669 21,689,581 169,580,250
Awards exercised during the
year (14,007,330) (11,991,281) (25,998,611)
Awards forfeited during the
year (82,885,002) (1,408,500) (84,293,502)
At 31 March 2012 (pre-consolidation) 50,998,337 8,289,800 59,288,137
At 31 March 2012 (post consolidation) 509,983 82,898 592,881
Awards exercised during the
year (34,667) (27,292) (61,959)
Awards forfeited during the
year (126,271) (4,702) (130,973)
-------------------------------------- ------------ -------------- ------------
Awarded during the year 803,000 - 803,000
-------------------------------------- ------------ -------------- ------------
At 31 March 2013 1,152,045 50,904 1,202,949
-------------------------------------- ------------ -------------- ------------
Awards exercised during the
year (243,251) (25,753) (269,004)
Awards forfeited during the
year (205,900) (1,670) (207,570)
At 31 March 2014 702,894 23,481 726,375
-------------------------------------- ------------ -------------- ------------
During the year no gains were made by Directors on exercise of
share options (2013:GBP nil) and no money or assets were received
or receivable by the Directors, under long term incentive schemes
in respect of qualifying services (2013: GBPnil).
Growth Securities Ownership Plan
In the previous financial year, the group awarded ordinary
shares to employees of the group under a Growth Securities
Ownership Plan ("GSOP"), in exchange for their continued service to
the group. The number of shares to be awarded is calculated based
on a fixed multiplier, which varies based on the average share
price in the 20 days before the settlement date of 1 September
2016. The maximum potential number of shares to be issued under the
original GSOP award was approximately 4.76 million.
The group has the option to settle the shares in cash or equity,
under the terms and conditions of the Plan. The group has made the
judgement that the shares should be accounted for as equity-settled
share-based payments, which vest on the settlement date, subject to
the share price related vesting conditions described above. The
fair value of these awards is based on the market value at the date
of grant and has been calculated on the likelihood of successful
completion of the vesting conditions and has been charged to the
income statement over the vesting period of the awards. These have
been valued using a Monte Carlo simulation model, with expected
volatility of 37%, dividend yield of 3.1% and risk free rate of
0.5%. The fair value at the grant date calculated using these
assumptions was GBP971,968.
At 31 March 2014, approximately 0.3 million shares have lapsed,
resulting in a approximately 4.4 million maximum potential number
of shares to be issued based on remaining awards at year end. The
fair value at the grant date of the remaining awards based on the
assumptions above is GBP901,809. A charge of GBP275,847 (2013:
GBP19,000) has been recognised in the income statement.
(v) Pensions
The group pays a defined contribution to the pension scheme of
executive directors and employees or may offer a cash alternative
in particular cases. The individual pension schemes are private and
their assets are held separately from those of the group. The group
is required to meet obligations under the Auto-enrolment to Pension
Legislation of certain group companies from 1st May 2014.
Appropriate plans have been put in place for this and we will be
using a Defined Contribution Group Personal Pension Plan with
Standard Life for this purpose.
Salaries and benefits were reviewed between March and June 2013
to cover the year from 1 April 2013 to 31 March 2014. Future
reviews will continue to be on an annual basis, with the next
review expected to be carried out in July 2014 to cover the year
from 1 April 2014 to 31 March 2015.
Service contracts
Executive directors are employed under service contracts
requiring a maximum of 12 months notice by either party. The
non-executive chairman, Hugh Ward, and the non-executive directors,
James Roberts and Steve Haines, received payments under appointment
letters which are terminable by up to 12 months' notice from either
party.
Policy on non-executive directors' remuneration
The chairman and the non-executive directors each receive a fee
for their services. The fee is approved by the Board, mindful of
the time commitment and responsibilities of their roles and of
current market rates for comparable organisations and appointments.
The non-executive directors and the chairman are reimbursed for
travelling and other minor expenses incurred.
The emoluments of the individual directors who served during the
year were as follows:
Salary Compensation Benefits Share based Pension Total
or fees for loss in kind payments GBP GBP
GBP of office GBP GBP
GBP
------------- --------- ------------- --------- ------------ -------- ----------
Executive Directors
--------------------------------------------------------------------------------------
J Polin 350,000 - 1,343 - 35,000 386,343
------------- --------- ------------- --------- ------------ -------- ----------
A Tagliabue 200,000 - - - - 200,000
------------- --------- ------------- --------- ------------ -------- ----------
R Sinclair 200,000 - 1,343 - 20,000 221,343
------------- --------- ------------- --------- ------------ -------- ----------
Non-Executive Directors
--------------------------------------------------------------------------------------
H Ward 100,000 - - - - 100,000
------------- --------- ------------- --------- ------------ -------- ----------
S Haines 50,000 - - - - 50,000
------------- --------- ------------- --------- ------------ -------- ----------
J Roberts 50,000 - - - - 50,000
------------- --------- ------------- --------- ------------ -------- ----------
Total 950,000 - 2,686 - 55,000 1,007,686
------------- --------- ------------- --------- ------------ -------- ----------
In addition to their emoluments, directors received
reimbursement for expenses directly incurred on group business.
Pension contributions are in respect of defined contribution
arrangements.
Hugh Ward
Chairman of the Remuneration Committee
1 July 2014
Governance
Approval of Strategic Report
The strategic report for the group comprises the following
sections of the reports and accounts:
-- Chairman's statement
-- Chief executive's statement
-- Strategic report
-- Performance review: Financial Performance
By order of the Board
Jonathan Polin
Group Chief Executive Officer
1 July 2014
Governance
Statement of directors' responsibilities in respect of the
directors' report and the financial statements.
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the group and Company financial statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the group and Company and of the profit or loss of the
group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the Alternative
Investment Market.
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;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU, subject to any material departures
disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group's
transactions and disclose with reasonable accuracy at any time the
financial position of the group and enable them to ensure that the
financial statements comply with the requirements of 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.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, a directors' report,
directors' remuneration report and corporate governance report that
complies with that law and those regulations.
Website publication
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 group'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 group's website is the responsibility of the directors. The
directors' responsibility also extends to the ongoing integrity of
the financial statements contained therein.
Consolidated income statement
for the year ended 31 March 2014
2014 2013
---------------------------------------------- ------
Note GBP'000s GBP'000s
---------------------------------------------- ------ --------------------- ---------
Continuing operations
Revenue [6] 31,548 32,597
External payaways and revenue generator
costs (9,030) (11,471)
------------------------------------------------------ --------------------- ---------
Gross profit 22,518 21,126
Other administrative expenses (18,739) (18,363)
Amortisation and depreciation (1,290) (2,154)
Share-based payments [26] (349) (96)
Exceptional costs and earn-in and earn-out
payments [7] (4,187) (4,221)
Exceptional receipts [7] 23 1,148
---------------------------------------------- ------ --------------------- ---------
Total administrative expenses (24,542) (23,686)
------------------------------------------------------ --------------------- ---------
Loss from operations [7] (2,024) (2,560)
Finance income [9] 60 62
Finance costs [10] (2) (9)
---------------------------------------------- ------ --------------------- ---------
Loss before tax (1,966) (2,507)
Taxation [11] 291 148
---------------------------------------------- ------ --------------------- ---------
Loss for the year from continuing operations (1,675) (2,359)
Profit for the year from discontinued
operations, net of tax [5] 240 214
---------------------------------------------- ------ --------------------- ---------
Loss for the year attributable to the
equity holders of the parent (1,435) (2,145)
------------------------------------------------------ --------------------- ---------
Loss per share - continuing operations
Basic [12] (5.70)p (8.74)p
-------------------------------------------- ------ -------- ----------
Diluted [12] (5.70)p (8.74)p
-------------------------------------------- ------ -------- ----------
Loss per share - total operations
Basic [12] (4.89)p (7.95)p
-------------------------------------------- ------ -------- ----------
Diluted [12] (4.89)p (7.95)p
-------------------------------------------- ------ -------- ----------
Profit before interest, tax, depreciation,
amortisation, exceptional costs, earn-in
and earn-out payments and share based
payments on a continuing basis 3,779 2,763
---------------------------------------------------- -------- ----------
There was no other comprehensive income in either the current or
prior year.
The loss for the year is the total comprehensive income
attributable to equity holders of the parent and therefore no
statement of comprehensive income has been presented.
The notes set out in the subsequent pages of this report form
part of these financial statements.
Consolidated statement of financial position
as at 31 March 2014
2014 2013
GBP'000s GBP'000s
--------- ---------
Non-current assets
Goodwill [13] 36,409 34,448
Other intangible assets [14] 1,271 1,857
Interest in associate [15] 230 -
Property, plant and equipment [16] 850 1,189
Available-for-sale investments [17] 301 146
----------------------------------------- ------ --------- ---------
Total non-current assets 39,061 37,640
------------------------------------------------- --------- ---------
Current assets
Trade and other receivables [18] 6,441 6,620
Taxation - 60
Deferred tax asset [19] 4 -
Cash and cash equivalents 21,374 8,036
------------------------------------------------- --------- ---------
Total current assets 27,819 14,716
------------------------------------------------- --------- ---------
Assets of a disposal business held for
sale - - 546
------------------------------------------------- --------- ---------
Total assets 66,880 52,902
------------------------------------------------- --------- ---------
Current liabilities
Trade and other payables [20] (5,648) (5,875)
Loans and deferred consideration [21] (614) (30)
Short-term provisions [22] (127) (204)
----------------------------------------- ------ --------- ---------
Total current liabilities (6,389) (6,109)
------------------------------------------------- --------- ---------
Non-current liabilities
Deferred tax liabilities [19] - (161)
Loans and deferred consideration [21] (277) -
Total non-current liabilities (277) (161)
Liabilities of a disposal business held
for sale - (183)
------------------------------------------------- --------- ---------
Total liabilities (6,666) (6,453)
------------------------------------------------- --------- ---------
Net assets 60,214 46,449
------------------------------------------------- --------- ---------
Equity
Share capital [23] 7,098 5,399
Share premium reserve [24] 41,898 28,697
Equity reserve [25] 1,909 1,560
Retained earnings [27] 9,309 10,793
----------------------------------------- ------ --------- ---------
Equity attributable to equity holders
of the parent 60,214 46,449
------------------------------------------------- --------- ---------
The notes set out in the subsequent pages of this report form
part of these financial statements.
J Polin A Tagliabue
Group Chief Executive Officer Group Chief Financial Officer
1 July 2014 1 July2014
Consolidated statement of changes in equity
for the year ended 31 March 2014
Share
Share premium Equity Retained
capital reserve reserve earnings Total
(Note (Note (Note (Note
23) 24) 25) 27)
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2012 5,388 28,697 1,464 12,949 48,498
Total comprehensive income
for the year:
Loss for the year - - - (2,145) (2,145)
Transactions with owners
recorded directly in equity:
Share-based payments [note
26] - - 96 - 96
Placing
Transfer to equity reserve
in respect of shares distributed
by the Employee Benefit
Trust 11 - - (11) -
At 31 March 2013 5,399 28,697 1,560 10,793 46,449
----------------------------------- --------- --------- --------- ---------- ------------------
Total comprehensive income
for the year:
Loss for the year - - - (1,435) (1,435)
Transactions with owners
recorded directly in equity:
Share-based payments [note
26] - - 349 - 349
Placing 1,650 13,201 - - 14,851
Transfer to equity reserve
in respect of shares distributed
by the Employee Benefit
Trust 49 - - (49) -
----------------------------------- --------- --------- --------- ---------- ------------------
At 31 March 2014 7,098 41,898 1,909 9,309 60,214
----------------------------------- --------- --------- --------- ---------- ------------------
Share capital represents the nominal value of shares subscribed
for. The share premium reserve represents the total amount
subscribed for shares in excess of the nominal value, net of costs
and net of amounts reduced on a court sanctioned reduction of the
share premium account with credit to a distributable reserve which
will be able to be applied in any manner in which the Company's
profits available for distribution are able to be applied. The
equity reserve represents the total amount charged, less any
credits, in respect of share-based payments charged to the
statement of comprehensive income. Retained earnings include all
other gains and losses and transactions with owners not recognised
elsewhere.
The notes set out in the subsequent pages of this report form
part of these financial statements.
Consolidated statement of cash flows
for the year ended 31 March 2014
2014 2013
--------------------------------------- -----------
Note GBP'000s GBP'000s
--------------------------------------- ----------- --------- ---------
Operating activities
Loss for the year (1,435) (2,145)
Adjustments for:
Discontinued operations (240) (214)
Depreciation of property, plant
and equipment [16] 704 1,518
Amortisation of intangible assets [14] 586 642
Share-based payments 349 96
Finance income [9] (60) (62)
Finance costs [10] 2 9
Corporation tax credit [11] (291) (148)
--------------------------------------- ----------- --------- ---------
Operating cash outflow before
movements in working capital (385) (304)
Decrease in receivables 177 1,341
(Decrease) in payables (227) (2,234)
(Decrease)/increase in provisions (77) 132
---------------------------------------------------- --------- ---------
Cash outflow from operations (512) (1,065)
Tax received 60 60
Interest received [9] 60 62
Interest paid [10] (2) (9)
--------------------------------------- ----------- --------- ---------
Net cash outflow from operating
activities (394) (952)
---------------------------------------------------- --------- ---------
Investing activities
Purchases of property, plant
and equipment [16] (365) (482)
Proceeds from sale of client
assets (net of costs) [5] 595 353
Purchase of trade assets and
investments [13] [17] (1,119) -
Investment in associate [15] (230) -
--------------------------------------- ----------- --------- ---------
Net cash used in investing activities (1,119) (129)
---------------------------------------------------- --------- ---------
Financing activities
Proceeds of share issues [23] 15,263 -
Costs of share issues [23] (412) -
--------------------------------------- ----------- --------- ---------
Net cash from financing activities 14,851 0
---------------------------------------------------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 13,338 (1,081)
Cash and cash equivalents at
beginning of year 8,036 9,117
---------------------------------------------------- --------- ---------
Cash and cash equivalents at
end of year 21,374 8,036
---------------------------------------------------- --------- ---------
The notes set out in the subsequent pages of this report form
part of these financial statements.
.
Notes to the financial statements
for the year ended 31 March 2014
1. General information
Ashcourt Rowan Plc ("Ashcourt Rowan" or the "Company") is a
company incorporated in the United Kingdom under the Companies Act
2006. The nature of the Ashcourt Rowan Group's ("the Group")
operations and its principal activities are set out in the
Chairman's Report and the Report of the Chief Executive Officer,
Performance review and in the Strategic review.
These financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Group operates.
2. Significant accounting policies
Basis of accounting
Both the parent company financial statements and the Group
financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the European Union ("Adopted IFRSs") and
the Companies Act 2006 applicable to companies reporting under
IFRS. On publishing the parent company financial statements here
together with the Group financial statements, the Company is taking
advantage of the exemption in section 408 of the Companies Act 2006
not to present its individual income statement and related notes
that form a part of these approved financial statements. The
Company reported a loss for the year of GBP4.1 million (2013:
GBP3.5 million).
The financial statements have been prepared on the historical
cost basis except for available-for-sale financial assets which are
included at fair value. The principal accounting policies adopted
are set out below and have been applied consistently to all periods
presented in these financial statements.
New standards and interpretations
None of the new standards effective for the current period have
any material impact to the group. The following new standards have
been adopted in these financial statements, their adoption has not
had any significant impact on the amounts reported in these
financial statements but may have an effect on the Group's future
financial statements:
IFRS 13: Fair Value Measurement: IFRS 13 establishes a single
framework for all fair value measurements when fair value is
required or permitted by IFRS. It does not change when an entity is
required to use fair value, but rather, describes how to measure
fair value under IFRS when it is required or permitted. The
Standard's adoption results in changes to the valuation of the
Group's assets. IFRS 13 is effective for annual periods beginning
on or after 1 January 2013.
IFRS 10: Consolidated Financial Statements: IFRS10 establishes
principles for the preparation and presentation of consolidated
financial statements when a reporting entity controls one or more
investees. The group reviewed the control of its 100% subsidiaries
and 25% associate and concluded it controlled its subsidiaries, as
the parent entity has power over these subsidiaries and uses this,
to control the returns it receives. The group has significant
influence but not control of, associates and therefore these are
not consolidated. There was no change to the number of subsidiaries
the group consolidates following the adoption of IFRS10.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27):
The Amendments provide an exception from the requirements for a
qualifying entity to consolidate its controlled investees and,
instead, requires them to present their investments in subsidiaries
as a net investment that is measured at fair value. The exception
means that investment entities will be able to measure all of their
investments at fair value using the requirements in IFRS.
The following new standard has not been adopted in these
financial statements, the adoption has not had any significant
impact on the amounts reported in these financial statements but
may have an effect on the Group's future financial statements:
IFRS 9 Financial Instruments: IFRS 9 will eventually replace IAS
39 in its entirety. However, the process has been divided into
three main components (classification and measurement; impairment;
and hedge accounting) and it is considered unlikely that the new
standard will be endorsed until all of these components are in
their final form. While the current standard is largely incomplete,
its eventual adoption may result in changes to the classification
and measurement of the Group's financial instruments, including any
impairment thereof.
None of the other new standards, interpretations and amendments
not yet effective are expected to have a material effect on the
Group's future financial statements.
Going concern
The financial statements have been prepared on a going concern
basis which the Directors believe to be appropriate for the
following reasons. At 31 March 2014 the Group reported net current
assets of GBP21.6 million (2013: GBP8.6 million). The Directors
have reviewed profit budgets and cash flow forecasts for the coming
year and expect the Group to strengthen its underlying operating
profitability before exceptional, depreciation, impairment and
amortisation and to produce operating cash flow sufficient to fund
existing activities and the development of the business.
The Directors consider that the Group is sufficiently
diversified and has no over reliance on any one customer or
supplier.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) as of and for the year ended 31 March 2014.
Control is defined as three elements (a) power over an investee;
(b) exposure, or rights, to variable returns from that investee;
and (c) ability to use that power to affect the reporting entity's
returns from the investees.
On acquisition, the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair values. Any
excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill.
The results of subsidiaries acquired during the period are
included in the consolidated income statement from the date that
control commences.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Goodwill
Goodwill represents the excess of the cost of a business
combination over, in the case of business combinations completed
prior to 1 April 2010, the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired and, in the case of business combinations completed on or
after 1 April 2010, the total acquisition date fair value of the
identifiable assets, liabilities and contingent liabilities
acquired.
For business combinations completed prior to 1 April 2010, cost
comprises the fair value of assets given, liabilities assumed and
equity instruments issued, plus any direct costs of acquisition.
Changes in the estimated value of contingent consideration arising
on business combinations completed by this date are treated as an
adjustment to cost and, in consequence, result in a change in the
carrying value of goodwill.
For business combinations completed on or after 1 April 2010,
cost comprised the fair value of assets given, liabilities assumed
and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, re-measured subsequently through profit or loss. For
business combinations completed on or after 1 April 2010, direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with impairment
in carrying value tested at least annually, with any impairment
being charged to the consolidated statement of comprehensive
income. Where the fair value of identifiable assets, liabilities
and contingent liabilities exceeds the fair value of consideration
paid, the excess is credited in full to the consolidated statement
of comprehensive income on the acquisition date.
On disposal of a subsidiary, the amount of goodwill attributable
is included in the determination of the profit or loss on
disposal.
Other intangible assets
Other intangible assets comprise client relationships, unit
trust management and investment trust contracts recognised upon the
acquisition of subsidiaries or through payments to investment
managers and advisors for the introduction and transfer of client
relationships. Such assets are assessed and capitalised when it is
probable that future economic benefits attributable to the assets
will flow to the Group and the cost of the assets can be measured
reliably.
(a) Client relationships and contracts
Externally acquired intangible relating to client relationships
and contracts are initially recognised at cost, including fair
value of any deferred payments. Acquired client relationships as
part of business combination are capitalised at fair value based on
management's estimate of expected future cash flows to be generated
over their expected useful lives. The capitalised amounts are
amortised on a straight line basis over the expected useful lives,
normally estimated to be ten years.
(b) Unit trust and investment trust management contracts
Acquired unit trust management and investment trust contracts
are capitalised at fair value based on management's estimate of the
expected future cash flows that these contracts will generate over
their useful lives. The capitalised amounts are amortised on a
straight line basis over the expected useful lives, estimated to be
ten years or the life of the trust.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation
of assets over their estimated useful lives, using the straight
line method, on the following bases:
Fixtures and equipment 10%-33%
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
Impairment of tangible and intangible assets including
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss. Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset or cash
generating unit for which the estimates of future cash flows have
not been adjusted. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Revenue recognition
Portfolio and other management advisory and service fees are
recognised on a straight line basis over the period the service is
provided. Asset management fees are recognised pro rata over the
period the service is provided.
Dealing commissions are recognised as net amount due on trade
date.
Initial commissions receivable and commission rebates payable
are recognised in the period in which the services are
provided.
Trail and renewal commissions are accounted for on an ongoing
basis when the receipt is virtually certain.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that discounts estimated future cash
receipts through the expected life of the financial asset to that
asset's net carrying amount.
Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established.
Cost of sales
Cost of sales comprises the direct employment costs associated
with front office staff plus any payments to third parties in
respect of revenue share arrangements, accounted for on an accruals
basis.
Leasing
Leases are classified as finance leases when the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating
leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
charges are charged directly against income.
Rentals payable under operating leases are charged to income on
a straight line basis over the term of the relevant lease. Benefits
received and receivable as an incentive to enter into an operating
lease are also spread on a straight line basis over the lease
term.
Profit from operations
Profit from operations represents the result from trading
activities after charging any restructuring costs and aborted
acquisition costs, but before investment income and finance
costs.
Exceptional costs and receipts
Exceptional items are non-recurring items which are either
outside the normal scope of the Group's ordinary activities or by
their nature they could distort the group's underlying annual
earnings. In accordance with IAS 1 Presentation of Financial
Statements) such items are disclosed separately on the face of the
consolidated income statement within the financial statements to
enhance understanding of the entity's financial performance.
Management believe that the combination of identification of
exceptional costs and receipts on the face of consolidated income
statement in conjunction with the more detailed disclosure of the
composition of exception items in Note 7 provide an enhanced
understanding of the underlying performance of the business.
Payments in relation to earn-in and earn-out agreements
Payments in relation to earn-in and earn-out agreements
represent payments to revenue generators joining or leaving the
business based on the value of client relationships brought,
transferred or retained to the group. The payments are charged to
income when paid and are separately disclosed together with other
exceptional costs. Management believe that the separate
identification of payments in relation to earn-in and earn-out
agreements in conjunction with the additional disclosure in Note 7
provide an enhanced understanding of the underlying performance of
the business.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due. Payments made to
state-managed retirement benefit schemes are dealt with as payments
to defined contribution schemes where the Group's obligations under
the schemes are equivalent to those arising in a defined
contribution retirement benefit scheme. The Group does not operate
a defined benefit retirement scheme.
Taxation
The tax charge or credit represents the sum of the tax currently
payable on Group results and deferred tax.
The taxable result differs from net result as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. Any liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the tax result nor the accounting
result.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity.
Classification of financial instruments issued by the
Company
Financial instruments issued by the Company are treated as
equity only to the extent that they meet the following two
conditions:
-- they include no contractual obligations upon the Company to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Company; and
-- where the instrument will or may be settled in the Company's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own
equity instruments or is a derivative that will be settled by the
Company's exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Non-derivative financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair
value and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in profit or loss
when there is objective evidence that the asset is impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible into a known amount of cash and are subject to
an insignificant risk of changes in value.
Available-for-sale investments
These are measured at fair value based on bid prices where there
is an active market and Directors' estimate for unquoted holdings.
Investments in equity investments that do not have a quoted market
price in an active market and whose fair value cannot be reliably
determined are measured at cost.
Borrowings
Interest-bearing loans are recorded on initial recognition at
their fair value and are subsequently measured at amortised cost,
using the effective interest rate method. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis to the income
statement using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
Trade payables
Trade payables are initially measured at their fair value and
are subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded as the
amount of proceeds received, net of direct issue costs.
Provisions
Provisions are recognised when the Group has a present
obligation as the result of a past event, when it is probable that
the Group will be required to settle that obligation. Provisions
are recognised at the Directors' best estimate of the expenditure
required to settle the Group's liability.
Share-based payments
The Company issues equity-settled share-based payments to
certain employees of the Group. Equity-settled share-based payments
are measured at fair value at the date of grant. Where market
related vesting conditions exist the fair value is determined using
the Black-Scholes model at the grant date or a Monte Carlo
simulation model and is expensed on a straight line basis over the
vesting period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non-market based
vesting conditions. Where options that are currently in issue are
modified during the period, the Company recognises the incremental
increase in the fair value of the new options compared to the old
options at the modification date and expenses this increase over
the life of the modified award as well as the original expense.
The valuation models used together with the assumptions used on
expected volatility, risk free rates, expected dividend yields and
expected forfeiture rates are disclosed in Note 26.
The Company issued a warrant to certain advisers for services
provided in a previous period in connection with an acquisition
made. These warrants were measured at fair value in an equity
reserve using the Black-Scholes model.
The Company awarded ordinary shares to employees of the Group
under a Growth Securities Ownership Plan ("GSOP"), in exchange for
their continued service to the Group. The number of shares to be
awarded is calculated based on a fixed multiplier, which varies
based on the average share price in the 20 days before the
settlement date of 1 September 2016.
The Company has issued the option to settle the shares in cash
or equity, under the terms and conditions of the Plan. The Group
has made the judgement that the shares should be accounted for as
equity-settled share-based payments, which vest on the settlement
date, subject to the share price related vesting conditions
described above. The fair value of these awards is based on the
market value at the date of grant and has been calculated on the
likelihood of successful completion of the vesting conditions and
has been charged to the income statement over the vesting period of
the awards. These have been valued using a Monte Carlo simulation
model.
Deferred and contingent consideration
Deferred consideration due in respect of acquisitions, where the
amount due is uncertain and contingent on future events, is
included in provisions at the fair value of the Directors' estimate
of amounts due. Where deferred consideration is a fixed amount this
is recorded initially at fair value and subsequently at amortised
cost in loans and deferred consideration.
Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. All
operating segments' operating results are reviewed regularly by the
Group's CEO to make decisions about resources to be allocated to
the segment and assess its performance, and for which discrete
financial information is available.
Discontinued operations
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operations that has been disposed of or is held for sale,
or is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or
when the operation meets the criteria to be classified as held for
sale, if earlier. When an operation is classified as a discontinued
operation, the comparative statement of comprehensive income is
represented as if the operation had been discontinued from the
start of the comparative period.
3. Critical accounting judgements and key areas of
uncertainty
Critical judgements in applying the Group's accounting
policies
In adopting IFRSs as the basis of selecting and applying
appropriate Group accounting policies management has had regard to
critical judgements and also key sources of estimation uncertainty.
Key sources of critical judgements and estimation uncertainty have
been identified as follows:
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the fair value less costs of sell and the value in use of the
cash-generating units (CGUs) to which goodwill has been allocated.
The value in use calculation requires the entity to estimate the
future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value.
Details of the goodwill in cash-generating units are contained in
Note 13.
Other intangible assets
Acquired client relationships, unit trust management and
investment trust contracts are capitalised on the basis of the net
discounted expected revenues and costs over their estimated lives.
The Directors' estimates are based on historical rates of client
and contract retention and revenue generation. Client relationships
and investment trust management contracts are valued at GBP1.25
million and GBP0.02 million (2013: GBP1.82 million and GBP0.04
million) respectively at the balance sheet date. The Directors'
estimated useful lives for the client relationships and the unit
trust management contracts are normally ten years and for the
investment trust contract five years, being the life of the
contract. Details of the additions and amortisation charges for the
year are included in Note 14.
Provisions
The Directors have estimated provisions in respect of onerous
property leases and potential client compensation, totalling GBP0.1
million (2013: GBP0.2 million), which would be dependent on
achieving certain key performance indicators, based upon
information available at the balance sheet date (see Note 22). In
estimating these provisions the Directors have made key assumptions
regarding the timeframe of the expected cash outflows. For the
onerous lease provision, a discount rate of 5% has been used to
value the expected future cash flows.
Deferred and contingent consideration
The Group estimates deferred consideration receivable at the
balance sheet date is GBP136,000, as shown in note 5, based on
known performance of the business against deferred consideration
metrics for Year 1 deferred consideration, reasonable expectations
about future performance, discounted at a rate reflecting the risk
inherent to the business. The Group prudently estimate that no
further deferred consideration would be payable between year 3 and
5 from completion.
4. Operating segments
At the beginning of the year the Group had three reportable
segments, as described below, which are the Group's strategic
business units. The Pension Administration segment was treated in
previous year report and accounts as a business held for sale and
was sold in April 2013. As a result the Group has two continuing
reportable segments at year end, Investment Management and
Financial Planning.
The strategic business units offer a different mix of products
and services and are managed separately. For each of the strategic
business units the Group's CEO reviews internal management reports
on at least a monthly basis.
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment profit
before tax, as included in the internal management reports that are
reviewed by the Group's CEO. Segment profit is used to measure
performance as management believes that such information is the
most relevant in evaluating the results of certain segments
relative to other entities that operate within these industries.
Inter-segment pricing is determined on an arm's length basis. The
Group has no other operating segments other than those shown
below.
Investment Financial Pension Institutional
Management Planning Administration Management
(continuing) (continuing) (discontinued) (discontinued) Total
-------------------- -------------------- -------------------- --------------------
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
----------------
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
Revenue 22,916 25,442 8,631 7,155 34 687 - - 31,581 33,284
Inter-segment (3,177) (4,633) 3,177 4,843 - (210) - - - -
Total revenue 19,739 20,809 11,808 11,998 34 477 - - 31,581 33,284
---------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
External
Payaways
and Revenue
Generators
Costs (4,110) (4,909) (4,920) (6,562) - (3) - - (9,030) (11,474)
---------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
Gross profit 15,629 15,900 6,888 5,436 34 474 - - 22,551 21,810
Administration
Expenses (9,755) (8,909) (7,143) (7,263) (46) (412) - - (16,944) (16,584)
Share Based
Payments (75) (38) (37) (19) - - - - (112) (57)
Exceptionals (118) (254) (67) 20 376 (190) - 192 191 (232)
Amortisation &
Depreciation (494) (500) (549) (549) - (6) - - (1,043) (1,055)
Total
administrative
expenses (10,442) (9,701) (7,796) (7,811) 330 (608) - 192 (17,908) (17,928)
---------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
Operating
profit 5,187 6,199 (908) (2,375) 364 (134) - 192 4,643 3,882
Finance income 40 45 1 5 2 7 - - 43 57
Finance expense (2) (2) - (6) - - - - (2) (8)
Management
charges
payable (1,096) (1,686) (495) (542) - (65) - - (1,591) (2,293)
Reportable
segment
(loss)/profit
before tax 4,129 4,556 (1,402) (2,918) 366 (192) - 192 3,093 1,638
---------------- --------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
Segment assets 40,444 46,761
Segment
liabilities (12,749) (10,063)
---------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------------------- ---------------------------
Reconciliations of reportable segment revenues, profit or
loss
2014 2013
GBP'000s GBP'000s
------------------------------------------- ---------------- ---------
Revenues
Total revenue for reportable segments 31,581 33,284
Less revenue from discontinued operations (34) (687)
---------------------------------------------------- ------- ---------
Consolidated revenue from continuing operations 31,548 32,597
---------------------------------------------------- ------- ---------
2014 2013
GBP'000s GBP'000s
------------------------------------------ ------------------- -----------
Total administrative expenses
Total administrative expenses for reportable
segments (17,908) (17,928)
Reconciliation of unallocated items:
Amortisation and depreciation 1,043 1,055
Head office costs and costs of parent company (7,347) (7,229)
Administrative expenses for discontinued
operations (330) 416
-------------------------------------------------- ----------- -----------
Consolidated total administrative expenses
for continuing operations (24,542) (23,686)
-------------------------------------------------- ----------- -----------
2014 2013
-----------------------------------------
GBP'000s GBP'000s
----------------------------------------- --------- ---------
Profit or loss before tax
Total profit before tax for reportable
segments 3,093 1,638
Reconciliation of unallocated amounts:
Management fees paid to parent 1,591 2,293
Head office costs and costs of parent
company (5,802) (7,013)
Amortisation and depreciation (245) 400
Share-based payments (237) (39)
Less profit before tax on discontinued
segments (Note 5) (366) 214
----------------------------------------- --------- ---------
Consolidated loss before tax (1,966) (2,507)
----------------------------------------- --------- ---------
Reportable Adjustments
segment relating Consolidated
total to parent totals
GBP'000s GBP'000s GBP'000s
----------------------------------------------- ------------- --------------
Other material items 2014
Investment income - continuing 43 17 60
Investment income - discontinued 2 - 2
Finance expense - continuing (2) - (2)
Amortisation and depreciation -
continuing (1,043) (247) (1,290)
------------------------------------- -------- ------------- --------------
Reportable Adjustments
segment relating Consolidated
total to parent totals
GBP'000s GBP'000s GBP'000s
---------------------------------------------- ---------- ----------- ------------
Other material items 2013
Investment income - continuing 50 12 62
Investment income - discontinued 7 - 7
Finance expense - continuing (8) (1) (9)
Amortisation and depreciation - continuing (1,049) (1,105) (2,154)
Amortisation and depreciation - discontinued (6) - (6)
---------------------------------------------- ---------- ----------- ------------
2014 2013
--------------------------------------
GBP'000s GBP'000s
-------------------------------------- --------- ---------
Reconciliation of total assets
Total assets for reportable segments 40,444 46,761
Elimination of intra segment loans (4,300) (2,119)
Unallocated assets 30,736 8,260
-------------------------------------- --------- ---------
Consolidated total assets 66,880 52,902
-------------------------------------- --------- ---------
Unallocated assets represent goodwill, other intangibles assets,
cash and trade and other receivables held by the parent.
2014 2013
-------------------------------------------
GBP'000s GBP'000s
------------------------------------------- --------- ---------
Reconciliation of total liabilities
Total liabilities for reportable segments (12,749) (10,063)
Elimination of intra segment loans 5,336 1,020
Unallocated liabilities 747 2,590
------------------------------------------- --------- ---------
Consolidated total liabilities (6,666) (6,453)
------------------------------------------- --------- ---------
Unallocated liabilities represent trade and other payables due
by the parent.
Reconciliation of fixed asset additions
Total additions for reportable segments - -
Additions in parent 365 482
----------------------------------------- ---- ----
Consolidated fixed asset additions 365 482
----------------------------------------- ---- ----
5. Discontinued operations
On 22 April 2013, the Group entered into an agreement to sell
the business, intangible client relation assets and certain working
capital assets of its wholly-owned subsidiary Ashcourt Rowan
Administration Limited, carrying out personal pension
administration. In addition the Group entered on the same date into
an agreement to sell its wholly-owned subsidiaries Ashcourt Rowan
Pension Trustee Limited and Robinson Gear Management Services
Limited, carrying out trustee services for personal pension
administration. The transactions completed on 22 April 2013.
The business disposed has been treated as a non-continuing
business. The consideration for the subsidiaries and business
disposed has been agreed as a combination of cash consideration at
closing, the buyer assuming a level of liabilities for post deal
costs and negative net working capital transferred and two tranches
of contingent deferred consideration over a two and five year
period respectively.
The maximum consideration due for the disposal is as
follows:
GBP'000's
Cash consideration at closing* 700
Contingent deferred consideration at 12 and
24 months after completion 300
Contingent deferred consideration between year
3 and 5 from completion 325
Maximum Total Consideration 1,325
------------------------------------------------ ----------
The Group estimates the fair value of the deferred consideration
receivable at the balance sheet date is GBP136,000, as shown below,
based on known performance of the business against deferred
consideration metrics for Year 1 deferred consideration, reasonable
expectations about future performance, discounted at a rate
reflecting the risk inherent to the business. The Group estimates
that no further deferred consideration would be payable between
year 3 and 5 from completion.
*The consideration received was GBP595,000 net of costs.
GBP'000's
Contingent deferred consideration at 12 months
after completion 86
Contingent deferred consideration at 24 months
after completion 50
Contingent deferred consideration between year -
3 and 5 from completion
Estimated Deferred Consideration 136
------------------------------------------------ ----------
The business disposed was treated as held for sale at 31 March
2013 and as such treated as a non-continuing business.
Capital of the business disposed at 22 April 2013;
GBP'000s
Goodwill (see note 13) 388
Intangibles (see note 14) 23
Trade and other receivables 135
Trade and other receivables 91
Trade and other payables (158)
Provisions (112)
---------------------------------------------------- ---------
Net assets 232
---------------------------------------------------- ---------
Summary of profit after tax for discontinued operations:
2014 2013
GBP'000s GBP'000s
Ashcourt Rowan Administration Limited profit/ (loss) before tax 366 (192)
Tax charge (126) 4
Elimination of intergroup cost of sales - 211
Net deferred consideration credit for EPIC Asset Management Limited - 192
Other adjustment - (1)
------------------------------------------------------------------------- ---------- ----------
Profit for the year from discontinued operations, net of tax 240 214
------------------------------------------------------------------------- ---------- ----------
Profit per share - discontinued operations
Basic 0.81p 0.79p
------------------------------------------------------------------------ ---------- --------------
Diluted 0.81p 0.79p
------------------------------------------------------------------------ ---------- --------------
The profit before tax includes the gain on sale for the business
disposed and the previous period loss before tax includes trading
results and provisions.
6. Revenue
2014 2013
GBP'000s GBP'000s
---------------------- --------- ---------
Continuing operations
Investment management 19,739 25,442
Financial planning 11,809 7,155
---------------------- --------- ---------
31,548 32,597
---------------------- --------- ---------
No material revenue from continuing operations was generated
outside of the UK.
2014 2013
GBP'000s GBP'000s
------------------------ --------- ---------
Discontinued operations
Pension Administration 34 687
------------------------ --------- ---------
7. Loss from operations
Loss from continuing operations has been arrived at after
charging:
2014 2013
GBP'000s GBP'000s
----------------------------------------------- --------- ---------
Depreciation of property, plant and equipment
(see Note 16) 704 1,518
Staff costs (see Note 8) 17,188 19,122
Auditors' remuneration (below) 110 128
Amortisation of intangible assets (see Note
14) 586 636
Payments in relation to earn-in and earn-out
agreements (next page) 410 -
Exceptional costs (next page) 3,777 4,221
Exceptional receipts (next page) (23) (1,148)
----------------------------------------------- --------- ---------
2014 2013
GBP'000s GBP'000s
-------------------------------------------------- --------- ---------
Annual audit fee in respect of current financial
year:
Audit of these financial statements 25 25
Audit of subsidiaries pursuant to legislation 83 103
-------------------------------------------------- --------- ---------
108 128
Review of interim financial information 14 12
Audit of discontinued operations (12) (12)
-------------------------------------------------- --------- ---------
110 128
-------------------------------------------------- --------- ---------
2014 2013
-----------------------------------------------------------
GBP'000s GBP'000s
----------------------------------------------------------- ---------- --------------
Tax compliance services 40 26
VAT partial exemption review (see net exceptional
receipts) - 185
Corporate finance - transaction related services 43 -
Reporting on Client assets 20 -
----------------------------------------------------------- ---------- --------------
103 211
----------------------------------------------------------- ---------- --------------
2014 2013
GBP'000's GBP'000s
------------------------------------------------------ ---------- ---------
Exceptional costs
Change management Programme:
Operating Model 1,024 1,053
ICT Project 180 330
Asset Management 34 357
Financial Planning 245 300
Governance & Controls 478 930
Corporate Restructuring 887 378
Irrecoverable VAT on projects 60 166
Other exceptional costs
Acquisitions and lift out costs 615 -
UKWM Integration / Restructuring 164 -
Regulatory Fines - 412
Occupancy restructuring costs 23 82
FSCS levy - 130
Prior Year Bad Debts 3 33
Compensation Payments & Provisions 64 50
------------------------------------------------- -------------- ----------
Exceptional costs 3,777 4,221
Payments in relation to earn-in and earn-out
agreements 410 -
Total exceptional costs and earn-in and
earn-out payments 4,187 4,221
------------------------------------------------- -------------- ----------
Net proceeds from Walker Crips agreement - 371
Irrecoverable VAT credit relating to
2011/12* - 727
Gains from restructuring of introducer
relationship 23 -
Reversal of unused provisions brought
forward - 50
Total exceptional receipts 23 1,148
------------------------------------------------- -------------- ----------
Net exceptional costs 4,164 3,073
------------------------------------------------- -------------- ----------
* 2013: Includes GBP185,000 BDO professional fees in respect
of VAT partial exemption review.
Payments in relation to earn-in and earn-out agreements
represent payments to certain investment managers and advisers
based on revenue from client relationships bought, transferred or
retained to the group. The payments have been charged to income
when paid and are separately disclosed in the table above.
During the year a total of GBP410,000 (2013:GBPnil) has been
charged to the income statement for payments in relation to earn-in
and earn-out agreements.
8. Staff costs, including Directors' remuneration
The average monthly number of employees (including Executive Directors) was:
Continuing Discontinued
----------------------------------------------------------
operations operations Total
Number Number Number
---------------------------------------------------------- ---------------- --------------- -------
Year ended 31 March 2014
Administration staff 172 - 172
Fund managers and investment advisers 70 - 70
Directors and other managers 13 - 13
---------------------------------------------------------- ---------------- --------------- -------
255 - 255
---------------------------------------------------------- ---------------- --------------- -------
Continuing Discontinued
---------------------------------------
operations operations Total
Number Number Number
--------------------------------------- ----------- ------------- -------
Year ended 31 March 2013
Administration staff 204 4 208
Fund managers and investment advisers 92 - 92
Directors and other managers 11 - 11
--------------------------------------- ----------- ------------- -------
307 4 311
--------------------------------------- ----------- ------------- -------
Their aggregate remuneration comprised:
2014 2013
GBP'000s GBP'000s
-------------------------------------------------- ------------------ -------------------
Continuing operations
Wages and salaries 14,596 16,702
Social security costs 1,561 1,589
Other pension costs paid to defined contribution
arrangements 682 735
Share-based payments 349 96
-------------------------------------------------- ------------------ -------------------
17,188 19,122
-------------------------------------------------- ------------------ -------------------
The average staff numbers have reduced in 2014 as a result of
continuing cost reduction initiatives, restructuring, and
simplification of the operation of the company including the
planned exit of a number of revenue generators and their support
staff.
Key management personnel are considered to be the Directors.
Aggregate Directors' emoluments included above comprised:
2014 2013
-----------------------
GBP'000s GBP'000s
----------------------- --------- -------------------
Emoluments 950 967
Benefits in kind 3 5
Pension contributions 55 55
Share-based payments - -
----------------------- --------- -------------------
1,008 1,027
----------------------- --------- -------------------
The emoluments and pension contributions for the highest paid
Director were GBP351,000 and GBP35,000 respectively (2013:
GBP352,000 and GBP30,000).
9. Finance income
2014 2013
GBP'000s GBP'000s
------------------------------------ --------------------- ---------
Interest cash and cash equivalents 60 62
------------------------------------ --------------------- ---------
10. Finance costs
2014 2013
GBP'000s GBP'000s
------------------- -------------------- ---------
Interest on loans 2 9
------------------- -------------------- ---------
11. Taxation
2014 2013
GBP'000s GBP'000s
---------------------------------------------- --------- ---------
Current tax credit/(charge) 167 (4)
Under provision in prior periods (41) -
---------------------------------------------- --------- ---------
126 (4)
Deferred tax credit (see Note 19) 165 152
---------------------------------------------- --------- ---------
Total tax credit on continuing operations 291 148
Current tax on discontinued operations (Note
5) (126) 4
165 152
---------------------------------------------- --------- ---------
Corporation tax is calculated at 23% (2013: 24%) of the
estimated assessable result for the year. The current tax credit
for the year can be reconciled to the result per the income
statement as follows:
2014 2013
GBP'000s GBP'000s
Loss on continuing operations before tax in
the year (1,966) (2,507)
---------------------------------------------- -------- -----------
Tax credit at 23% (2013: 24%) thereon 452 602
Expenses not deductible for tax (352) (274)
Other allowances 76 (340)
Losses utilised/carried forward (9) 8
Under provision in prior periods (41) -
---------------------------------------------- -------- -----------
126 (4)
---------------------------------------------- -------- -----------
12. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
2014 2013
----------------------------------------------------
GBP'000s GBP'000s
---------------------------------------------------- ----------- -----------
Loss on continuing operations for the purposes
of basic and diluted loss per share on continuing
operations (1,675) (2,359)
Profit on discontinued operations 240 214
---------------------------------------------------- ----------- -----------
Loss for the purposes of basic and diluted
loss per share being loss attributable to equity
holders of the parent (1,435) (2,145)
---------------------------------------------------- ----------- -----------
2014 2013
----------------------------------------------------
Number Number
---------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of fully diluted earnings
per share 29,388,814 26,980,368
---------------------------------------------------- ----------- -----------
The denominator for the purposes of calculating basic and
diluted earnings per share has been adjusted to reflect the share
issues which took place in the year. In the current and prior year
the potential ordinary shares under the options and long-term
incentive plan would have the effect of reducing the loss per share
and therefore are anti-dilutive. The total number of shares over
which awards have been made but have not yet been issued is 726,374
(2013: 1,222,949). In addition, the Company made awards in March
2013 under a Growth Securities Ownership Plan. Up to around 4.4
million shares could be issued under the plan awards if the maximum
vesting conditions (GBP6/share in the 20 days before the settlement
date of 1 September 2016) are met. Further detail is included in
Note 26.
13. Goodwill
GBP'000s
------------------------------- ---------
Cost
As at 31 March 2012 34,836
Goodwill on disposal (Note 5) (388)
------------------------------- ---------
As at 31 March 2013 34,448
Additions 1,961
------------------------------- ---------
As at 31 March 2014 36,409
------------------------------- ---------
On 13 January 2014, the Group completed the purchase of the
business and assets of Generali Portfolio Management (UK) Limited.
The initial consideration paid was GBP1.1m with deferred
consideration of a maximum of GBP1 million payable over a two year
period based on clients assets transferred and retained. The Group
has estimated a total of GBP0.861 million in deferred consideration
will be payable over a two year period based on prudent client
retention and risk-adjusted discount rates and the amount has been
provisionally capitalised as goodwill (with a corresponding
provision) and is included in the GBP1.961 million additions for
the year. Completion accounts are being finalised by management,
including review and confirmation of apportionment of consideration
paid between intangible value of client relationship and
goodwill.
Goodwill arising in a business combination is allocated to the
cash-generating unit (CGU) which is expected to benefit from the
acquisition. The carrying amount of goodwill has been allocated as
follows:
2014 2013
GBP'000s GBP'000s
----------------------- ------------------- ------------------
Investment Management 24,685 22,724
Financial Planning 11,724 11,724
Total 36,409 34,448
----------------------- ------------------- ------------------
Goodwill in Pension Administration CGU had been included as an
asset held for disposal as at 31 March 2013 (see note 5).
The Group tests for impairment in the period of acquisition and
annually thereafter unless there are indications that goodwill may
be impaired such that earlier assessment is required.
The recoverable amounts of CGUs have been based on value in use
calculations. The Group also tests the carrying value of each CGU
against fair value less cost of sale. Both value-in-use and fair
value less cost to sell estimations result in amounts higher than
the carrying value of goodwill for each of the Group's continuing
CGUs.
The key assumptions used in respect of value in use calculations
are those regarding growth rates and anticipated changes to
revenues and costs during the period covered by the calculations.
Changes to revenue and costs are based upon management's
expectation. The Group prepares its budget annually for each CGU
and five-year cash flow forecasts are derived there from and
thereafter extrapolates using a terminal growth rate of 0% (2013:
0%), which management considers conservative against industry
average long-term growth rates.
Management estimates discount rates using pre-tax rates which
reflect current market estimates of the time value of money and
risks specific to the CGUs. The rate used to discount the forecast
cash flows from all CGUs is 12% (2013: 11.25%). This rate is also
broadly similar to rates which management has observed in use by
other groups operating in the wealth management sector.
The carrying amount of goodwill at the balance sheet date was
GBP36.4 million (2013: GBP34.44 million).
As the Director's estimate of value-in-use for each continuing
CGU is higher than fair value less cost to sell, the recoverable
amount for the purpose of final impairment testing was determined
on the basis of value-in-use.
The excess of recoverable amount over carrying value of goodwill
and intangible assets for continuing CGUs is estimated as
follows:
31 March 2014 (Continuing CGUs) GBP'000s
----------------------------------------------------------------------------------------------
Carrying Value of CGU* Recoverable Amount 2012/13 Impairment Excess over Carrying
(Value in Use) Charge Value
---------------------- ---------------------- ------------------ ------------------------ ------------------------
Investment Management 27,201 53,190 - 25,989
Financial Planning 12,266 18,447 - 6,181
---------------------- ---------------------- ------------------ ------------------------ ------------------------
* Includes Goodwill, Intangibles, net fixed assets and items of net working capital of the
CGU required to support future cash flows.
A number of sensitivities were carried out to test level at
which an impairment charge would need to be recognised, supporting
the conclusion that no impairments should be made. Key
sensitivities are as follows:
Sensitivities: Value required to result in Impairment (tested
individually)
------------------------------------------------------------------------
Value in Use: Key Assumptions Used Investment Management Financial Planning
------------------------------------ ------ ----------------------------------- -----------------------------------
Discount Rate 12% 23.2% 17.6%
Terminal Value 0% na - prudent assumption
Recurring revenue growth in years 2 5% pa 0% pa 3% pa
to 5 (including market growth)
Cost base growth 3% 9.1% pa 5.3% pa
------------------------------------ ------ ----------------------------------- -----------------------------------
In addition in case of the above sensitivity threshold values
being surpassed, fair value less cost to sell would have to reduce
to a level below carrying value.
The key assumptions used in arriving at a fair value less cost
of sale are those around valuations based on earnings and revenue
multiples and values based on assets under management. These have
been arrived at by looking at market valuations of similar
businesses. Management has used a range of metrics resulting in an
average of 2.5x 2013/14 revenue, 2% of discretionary assets under
management and 0.75% of assets under advice, 10.7x 2013/14
Underlying EBITDA (if above zero), 13.1x 2013/14 Budget Underlying
EBITDA (if above zero) to arrive at an assessment of fair
value.
We have tested the sensitivity of the fair value less cost to
sell to individual valuation metrics and concluded that overall
valuation is not significantly dependent on any single metric.
Valuation metrics and multiples used would have to reduce by (46)%
in Investment Management and (52)% in Financial Planning for fair
value less cost to sell to fall below carrying value.
As a result of the above no impairments have been made during
the year (2013: GBPnil) based upon the Directors' review.
14. Other intangible assets
Acquired Acquired Acquired Acquired
client client relationships unit trust investment
relationships management management
and contracts contracts contracts
Investment Financial Pension Investment
Management Planning Administration Management Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------- --------------- --------------------- ---------------- ------------ ---------
At 31 March 2012 3,561 2,152 62 147 5,922
Disposal of business
held for sale (62) (62)
---------------------- --------------- --------------------- ---------------- ------------ ---------
At 31 March 2013 3,561 2,152 - 147 5,860
At 31 March 2014 3,561 2,152 - 147 5,860
---------------------- --------------- --------------------- ---------------- ------------ ---------
Amortisation
At 31 March 2012 2,091 1,180 33 96 3,400
Charge for the year 406 215 6 15 642
Disposal (39) (39)
---------------------- --------------- --------------------- ---------------- ------------ ---------
At 31 March 2013 2,497 1,395 - 111 4,003
Charge for the year 356 215 - 15 586
---------------------- --------------- --------------------- ---------------- ------------ ---------
At 31 March 2014 2,853 1,610 - 126 4,589
---------------------- --------------- --------------------- ---------------- ------------ ---------
Carrying amount
At 31 March 2014 708 542 - 21 1,271
---------------------- --------------- --------------------- ---------------- ------------ ---------
At 31 March 2013 1,064 757 - 36 1,857
---------------------- --------------- --------------------- ---------------- ------------ ---------
Acquired client relationships, acquired unit trust management
contracts and acquired investment trust management contracts are
amortised over their estimated useful lives, normally ten
years.
Estimates of total remaining economic life of intangible assets
for amortisation purposes are as follows:
Acquired client relationships - between 2 and 7 years
Acquired investment trust management contracts - two years
Under IFRS 3 management have 12 months to determine if there are
any intangible assets that are separately identifiable from the
goodwill capitalised. At the date of approval of these financial
statements, the allocation of the purchase price to other
identifiable assets and liabilities has not been completed, so no
amounts have been allocated to these.
15. Interest in associate
On 11 October 2013, the group invested GBP230,000 into a newly
formed associate, Ashcourt Rowan Investment Management LLP. The
investment represents a 25% stake in the business.
The Group does not have control of the company but exercises
significant influence by virtue of its influence on decisions. The
Group does not control the associate and therefore does not
consolidate.
The movement in the Group's investment in the associate is as
follows:
2014 2013
--------------------
GBP'000s GBP'000s
-------------------- --------- ---------
At 1 April 2013 - -
Addition 230 -
Share of profit - -
As at 31 March 2014 230 -
-------------------- --------- ---------
The results of the associate and the assets and liabilities at
31 March 2014, are as follows:
Assets Liabilities Revenue Profit % held
Country of
Name incorporation GBP'000's GBP'000's GBP'000's GBP'000's
------------------------ ---------------- ---------- ------------ ---------- ---------- -------
Ashcourt Rowan
Investment Management England and
LLP Wales 58 21 43 21 25%
------------------------ ---------------- ---------- ------------ ---------- ---------- -------
Assets are shown net of partners' drawings which are underpinned
during the launch phase but include amounts repayable under certain
conditions.
16. Property, plant and equipment
Fixtures
-------------------------------
and
equipment
GBP'000s
------------------------------- ----------
Cost
At 31 March 2012 5,501
Additions 482
------------------------------- ----------
At 31 March 2013 5,983
Additions 365
------------------------------- ----------
At 31 March 2014 6,348
------------------------------- ----------
Depreciation and impairment
At 31 March 2012 3,276
Charge for the year 1,518
At 31 March 2013 4,794
Charge for the year 704
------------------------------- ----------
At 31 March 2014 5,498
------------------------------- ----------
Carrying amount
------------------------------- ----------
At 31 March 2014 850
------------------------------- ----------
At 31 March 2013 1,189
------------------------------- ----------
At 31 March 2012 2,225
------------------------------- ----------
17. Available-for-sale investments
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
Level 3 - inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
The available for sale investments held by the Group are level
three investments and are as follows:
2014 2013
---------------------------------
GBP'000s GBP'000s
--------------------------------- --------- ---------
Included in non-current assets:
Equity investments 146 146
Additions in the period 155 -
--------------------------------- --------- ---------
301 146
--------------------------------- --------- ---------
During the year there were no transfers between level 1 and
level 2 valuation methods and no transfers into or out of level 3
valuation method.
These investments are held at the Directors' estimate of fair
value and relate to an investment of a 4.17% privately owned
financial services company for which there is no observable market
data. The valuation has been based the Directors' review of the
investment's publicly available financial data and on discussions
with the investment's management. The effect of fair value changes
during the year is not considered significant. The Group has a
4.17% holding.
Additions include a total amount of GBP135,957 due in respect of
expected deferred consideration for the sale of the Pension
administration business. Out of that total, an amount of GBP49,890
is receivable in more than a year (See note 5).
18. Trade and other receivables
2014 2013
----------------------------------------
GBP'000s GBP'000s
---------------------------------------- ------------------- ---------
Trade and other receivables
Client receivables 1,974 1,419
Prepayments and accrued income 2,702 4,722
Other receivables 1,765 479
---------------------------------------- ------------------- ---------
6,441 6,620
---------------------------------------- ------------------- ---------
Allowance is made for estimated irrecoverable amounts from trade
receivables of GBP46,000 (2013: GBP67,000). The Directors consider
that the carrying amount of trade and other receivables
approximates to their fair values.
Bank balances and cash comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates to their
fair value.
Financial risk management
The financial risk management objectives and policies of the
Group and related disclosures are set out in the Strategy Review
and Note 28.
19. Deferred tax
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
At the balance sheet date, excess management expenses and tax
losses available for carry forward are approximately GBP5.5 million
(2013: GBP5.6 million). No deferred tax asset has been recognised
in respect of the losses due to the unpredictability of future
profit streams in the companies where the losses reside. Such
losses may be carried forward indefinitely, the deferred tax amount
not recognised are GBP1.2m (2013: GBP0.9m).
On
-------------------------------------
On share-based
acquisitions payments Total
GBP'000s GBP'000s GBP'000s
------------------------------------- ------------- ------------ ---------
At 31 March 2012 668 (355) 313
Arising on share-based payments:
Continuing operations - (4) (4)
Released in the year (see Note 11):
Continuing operations (148) - (148)
------------------------------------- ------------- ------------ ---------
At 31 March 2013 520 (359) 161
Arising on share-based payments:
Continuing operations - (42) (42)
Released in the year (see Note 11):
Continuing operations (123) - (123)
------------------------------------- ------------- ------------ ---------
At 31 March 2014 397 (401) (4)
------------------------------------- ------------- ------------ ---------
20. Trade and other payables
2014 2013
--------------------------
GBP'000s GBP'000s
-------------------------- ------------------- ---------
Trade and other payables 5,648 5,875
-------------------------- ------------------- ---------
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
21. Loans and deferred consideration
Loans and deferred consideration have arisen in connection with
various acquisitions as follows:
GBP'000s
---------------------------------- ---------
At 31 March 2014
Subordinated loans 30
Deferred consideration (see note
13) 584
---------------------------------- ---------
Current liabilities 614
---------------------------------- ---------
Deferred consideration (see note
13) 277
Long term liabilities 277
---------------------------------- ---------
At 31 March 2013
Subordinated loans 30
Within one year 30
---------------------------------- ---------
As referenced in Note 13, deferred consideration payable include
the estimated fair value of future payments in connection with the
acquisition of the trade and business of Generali Portfolio
Management (UK) Limited. The total estimated fair present value of
the deferred consideration payable is GBP861,000 in total of which
GBP584,000 payable within 12 months of the balance sheet date and a
further estimated GBP272,000 payable in the first calendar quarter
of 2016.
22. Provisions
Potential
Client Surplus
---------------------------------
Compensation leasehold
property
payments costs Total
GBP'000s GBP'000s GBP'000s
--------------------------------- ------------- ---------- ---------
At 31 March 2012 - 72 72
Increase/(reduction)
in provision 162 (30) 132
--------------------------------- ------------- ---------- ---------
At 31 March 2013 162 42 204
Utilisation of provision (53) (28) (81)
Increase/(reduction)
in provision - 4 4
--------------------------------- ------------- ---------- ---------
At 31 March 2014 109 18 127
--------------------------------- ------------- ---------- ---------
2014 2013
---------------------------------
GBP'000s GBP'000s
--------------------------------- ------------- ---------- ---------
Included in current liabilities 127 204
Included in non-current
liabilities - -
--------------------------------- ------------- ---------- ---------
127 204
--------------------------------- ------------- ---------- ---------
The provision in respect of surplus leasehold assets reflects
management's best estimate of the liability arising from onerous
lease obligations in respect of leasehold property interests
acquired on the acquisition of subsidiaries in the period ended 31
March 2006.
Client compensation payments reflect management's best estimate
of the liability arising from a number of known potential
compensation payments
23. Share capital
2014 2013
GBP'000s GBP'000s
-------------------------------------------------------------- --------- ---------
Issued and fully paid:
35,489,566 (2013: 26,994,486) ordinary shares of GBP0.2 each 7,098 5,399
-------------------------------------------------------------- --------- ---------
During the year the Company issued shares on the under-noted
dates in the following amounts:
Nominal
value
Number of shares
of shares issued
issued GBP'000s
---------------------------------------------------------------------------------------------- ---------- ----------
As at 31 March 2013 26,994,486 5,399
Syndicate Employee Benefit Trust - issued at GBP0.2 each (GBP0.002 pre-consolidation) 23 April
2013 34,843 7
Syndicate Employee Benefit Trust - issued at GBP0.2 each (GBP0.002 pre-consolidation) 20
December
2013 76,345 15
Syndicate Employee Benefit Trust - issued at GBP0.2 each (GBP0.002 pre-consolidation) 25
February
2014 133,892 27
Share placing - issued at GBP1.85 each 18 December 2013 8,250,000 1,650
As at 31 March 2014 35,489,566 7,098
Nominal
value
of shares
issued
Number of shares issued GBP'000s
As at 31 March 2012 26,938,473 5,388
Syndicate Employee Benefit Trust - issued at GBP0.2 each (GBP0.002
pre-consolidation) 56,013 11
At 31 March 2013 26,994,486 5,399
The shares acquired by the Syndicate EBT were distributed to
staff under the long-term incentive plan during the year. At the
year end the EBT held no shares in the Company.
The Company has one class of ordinary shares which carries no
right to fixed income.
Management of the Company's capital is discussed in the Risk
Management section of the Directors' Report and in Note 28.
On the 18 December 2013, the Group conducted a placing of 8.25
million shares at 185p, raising GBP15.26 million (before expenses).
The placing price represents a discount of 2.4 per cent. to the
closing mid-market price of 189.5p per Ordinary Share as at 12
December 2013 (being the latest practicable date prior to the date
of the announcement). The placing was conducted to fund an
acquisition of the UK Wealth Management group, with the Group
entering into a conditional share purchase agreement with Duke
Street General Partner Limited ("Duke Street GP Limited") and
certain Duke Street LLP funds of which Duke Street GP Limited is
the general partner, to acquire UKWM. The acquisition completed on
4 April 2014 (see Strategic Report and note 30).
24. Share premium reserve
Share
premium
GBP'000s
---------
At 31 March 2013 28,697
Placing 13,201
At 31 March 2014 41,898
25. Equity reserve
Equity
reserve
GBP'000s
At 31 March 2012 1,464
Share-based payments - Options -
Share-based payments - Long Term Incentive 77
Share-based payments - GSOP 19
Forfeited Long Term Incentive awards
Shares issued to Employee Benefit Trust (11)
Transfer from retained earnings 11
At 31 March 2013 1,560
Share-based payments - Long Term Incentive 73
Share-based payments - GSOP 276
Forfeited Long Term Incentive awards
Shares issued to Employee Benefit Trust (49)
Transfer from retained earnings 49
At 31 March 2014 1,909
26. Share-based payments
(a) Options
On 16 December 2008 employees and Directors released their
entitlement to 35,000 options over the Company's shares due to the
fact that the options were out of the money and unlikely ever to be
in the money. These options were replaced on 18 December 2008, for
no gain or loss in the income statement, by options over 35,000
shares which have been valued under the Black-Scholes model and
accounted for as equity-settled share-based payments in the year to
31 March 2009. The inputs to the valuation of this issue are:
Weighted average share price GBP0.0875
Weighted average exercise price GBP0.12
Expected volatility 30%
Expected life 4 years
Risk-free rate 2.63%
Expected dividends -
The Company has established an unauthorised and an authorised
share option scheme. The authorised scheme received HM Revenue and
Customs approval on 9 November 2006. For each award the exercise
price is not less than the market value of the shares at the date
of grant. The vesting period for each award is three years and
options are settled by an allotment of shares to individuals.
If the options remain unexercised after a period of ten years
from the date of award, the options expire. Furthermore, options
are forfeited if the employee leaves the Group before the options
vest. Employees who are deemed "good leavers" are entitled to
exercise their option for a period of six months after they
leave.
The following share options granted under the scheme were in
place at 31 March 2014:
Option price Number of
Date option granted per share options
18 December 2008 post-consolidation GBP12.00 20,000
The number and weighted average exercise price (WAEP) of share
options outstanding are as follows:
WAEP
Number (pence)
At 31 March 2013 12,000 GBP12.00
Forfeited during the year (3,000) GBP12.00
Outstanding at 31 March 2014 9,000 GBP12.00
These options all expire if unexercised by 8 December 2018.
(b) Long Term Incentive Plan
On 3 December 2009 the Company awarded 485,000 ordinary shares
(post consolidation) to employees of the Group under a long-term
incentive plan. These shares are accounted for as equity-settled
share-based payments and vest in equal instalments on the first
second and third anniversaries of the award date, subject to
certain performance related vesting conditions. A further 37,000
shares were awarded on 2 March 2010. These also vest in equal
instalments on the first, second and third anniversaries of the
award date subject to certain performance related vesting
conditions. The exercise price for these awards is GBPnil per
share.
The fair value of these awards is based on the market value at
the date of grant and has been calculated on the likelihood of
successful completion of the vesting conditions and has been
charged to the income statement over the vesting period of the
awards. The market value at the grant date was 2.15p per share.
These awards, if unexercised, expire in three equal amounts on 3
December 2020, 2021 and 2022.
On 1 October 2010 the Company awarded 61,500 ordinary shares to
employees of the Group under the long-term incentive plan. These
shares are accounted for as equity-settled share-based payments and
vest on the third anniversaries of the award date, subject to
certain performance related vesting conditions. These awards if
unexercised expire on 1 October 2023. The fair value of these
awards is based on the market value at the date of grant and has
been calculated on the likelihood of successful completion of the
vesting conditions and has been charged to the income statement
over the vesting period of the awards. The market value at the
grant date was 1.68p per share.
A further 41,000 shares were awarded on 1 March 2011. These vest
in equal instalments on the first, second and third anniversaries
of the award date subject to certain performance and share price
related vesting conditions. The exercise price for these awards is
GBPnil per share. These awards, if unexercised, expire on in three
equal amounts on 1 March 2022, 2023 and 2024.
These have been valued using a Monte Carlo simulation.
On 21 December 2012 the Group awarded 803,000 ordinary shares to
employees of the Group under the long-term incentive plan. These
shares are accounted for as equity-settled share-based payments and
vest on the third anniversaries of the award date, subject to
certain performance related vesting conditions. These awards, if
unexercised, expire on 21 December 2015. The fair value of these
awards is based on the market value at the date of grant and has
been calculated on the likelihood of successful completion of the
vesting conditions and has been charged to the income statement
over the vesting period of the awards. These have been valued using
a Monte Carlo simulation model, with expected volatility of 31%,
dividend yield of 3.1% and risk free rate of 0.5%. The fair value
at the grant date calculated using these assumptions is 26.4p per
share.
During the year awards of 139,000 shares were forfeited by
employees. The exercise price for these awards is GBPnil per share.
Awards over 21,000 shares were exercised during the year and shares
issued to the employees concerned.
(c) Deferred share bonus
At 31 March 2010 the Company had also provided for a deferred
bonus to be awarded to staff for the year. The bonus would take the
form of an equity-settled deferred award of shares to be issued in
August 2011. Awards over 232,000 shares were made.
The Directors estimated the fair value at the grant date based
on the market value of the shares awarded (2.02p per share)
adjusted to take into account an estimate of options likely to vest
based on continued employment. This amount has been charged to the
income statement over the period from 1 April 2009 and 31 March
2011, consistent with the service period attached to the awards.
The awards were actually made in August 2010. The exercise price
for these awards is GBPnil per share.
The total number of shares over which LTIP and deferred share
bonus awards have been made at the beginning and end of the
financial year is as follows:
LTIP awards Deferred share bonus Total
At 31 March 2012 509,983 82,898 592,881
Awards exercised during the year (34,667) (27,292) (61,959)
Awards forfeited during the year (126,271) (4,702) (130,973)
Awarded during the year 803,000 - 803,000
At 31 March 2013 1,152,045 50,904 1,202,949
Awards exercised during the year (243,251) (25,753) (269,004)
Awards forfeited during the year (205,900) (1,670) (207,570)
At 31 March 2014 702,894 23,481 726,375
A charge of GBP73,000(2013: GBP77,000) has been recognised in
the income statement. The balance on the equity reserve represents
amounts provided in respect of share-based payments.
d) Growth Securities Ownership Plan
On 6 March 2013 the Company awarded ordinary shares to employees
of the Group under a Growth Securities Ownership Plan ("GSOP"), in
exchange for their continued service to the Group. The number of
shares to be awarded is calculated based on a fixed multiplier,
which varies based on the average share price in the 20 days before
the settlement date of 1 September 2016. The maximum potential
number of shares to be issued under the original GSOP award was
approximately 4.76 million.
The Group has the option to settle the shares in cash or equity,
under the terms and conditions of the Plan. The Group has made the
judgement that the shares should be accounted for as equity-settled
share-based payments, which vest on the settlement date, subject to
the share price related vesting conditions described above. The
fair value of these awards is based on the market value at the date
of grant and has been calculated on the likelihood of successful
completion of the vesting conditions and has been charged to the
income statement over the vesting period of the awards. These have
been valued using a Monte Carlo simulation model, with expected
volatility of 37%, dividend yield of 3.1% and risk free rate of
0.5%. The fair value at the grant date calculated using these
assumptions was GBP971,968.
At 31 March 2014, approximately 0.3 million shares have lapsed,
resulting in a approximately 4.4 million maximum potential number
of shares to be issued based on remaining awards at year end. The
fair value at the grant date of the remaining awards based on the
assumptions above is GBP901,809. A charge of GBP275,847 (2013:
GBP19,000) has been recognised in the income statement.
e) Share Incentive Plan
Ashcourt Rowan operates an authorised Group share incentive plan
for employees, whereby the Group will match the number of shares
acquired by the employee under the scheme up to a maximum of
GBP1,500 per annum. These matching shares vest after three
years.
The costs of purchasing any matching shares are spread over the
three years following each purchase and recorded in overheads. A
charge of GBP73,226 has been recognised in the income statement
(2013: GBP73,092)
27. Retained earnings
GBP'000s
At 31 March 2012 12,949
Loss for the year (2,145)
Transfer to equity reserve (11)
At 31 March 2013 10,793
Loss for the year (1,435)
Transfer to equity reserve (49)
At 31 March 2014 9,309
28. Risk management
Exposure to credit risk, market risk (which combines foreign
currency risk, interest rate risk and market price risk) and
liquidity risk arises in the normal course of the Group's business.
For details of the risks of the Company see Note 44.
Capital risk management
The Group manages its capital through continuous review of the
total regulatory capital requirements of its regulated subsidiaries
which is reported monthly to the Board. The Group and each
regulated entity have been in compliance with their regulatory
capital requirements at all times during the year. The Group is
funded by total equity of GBP60.2 million (2013: GBP46.4
million).
Externally imposed capital requirements
The Group has subsidiaries that are supervised in the UK by the
Financial Conduct Authority FCA). The regulated subsidiary
companies submit quarterly returns to the FCA relating to capital
adequacy. The Group submits a return at the half year and year end
setting out the Group's position in relation to the FCA's
requirements on a consolidated basis but has been granted a waiver
to these requirements until September 2014. Throughout the year the
Group held significant surplus capital over the regulatory
requirements. At 31 March 2014 the total regulatory capital
requirement across the Group was GBP5 million and the Group had an
aggregate surplus of GBP1.95 million across all regulated
entities.
Credit risk
The credit risk to the Group is limited to the non-payment of
investment management fees, commissions earned but not received,
cash at banks and investments. At the balance sheet date there were
no significant concentrations of credit risk external to the
Group.
Management has a credit policy in place and the exposure to
credit risk is monitored on an ongoing basis. The Group does not
require collateral in respect of financial assets because for the
majority of client accounts the Group has the right to deduct its
management fees from the client's investment portfolio. The
historical incidence of bad debts has been very isolated and
infrequent.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by
international credit-rating agencies.
At the balance sheet date the Group had the following credit
risk exposures:
2014 2013 2013
Carrying Maximum Carrying Maximum
value exposure value exposure
GBP'000s GBP'000s GBP'000s GBP'000s
Cash and cash equivalents 21,374 21,374 8,036 8,036
Client receivables 1,974 1,974 1,419 1,419
Prepayments and accrued income 2,702 2,702 4,722 4,722
Other receivables 1,765 1,765 479 479
27,815 27,815 14,656 14,656
The amounts in the above table are based on the carrying value
of all accounts. The Group has other receivables that are not
subject to credit risk.
The Board monitors the utilisation of the credit limits
regularly and at the reporting date does not expect any losses from
non-performance by the counterparties.
The following table represents the aged breakdown of client
receivables as at the balance sheet date which are past their due
date, but not deemed to be impaired:
2014 2013
Bad debt Bad debt
Gross provisions Gross provisions
GBP'000s GBP'000s GBP'000s GBP'000s
< 60 days 19 - 228 -
60-180 days 25 - 79 -
180-360 days 78 (5) 45 -
> 360 days 44 (41) 100 (67)
166 (46) 452 (67)
Foreign currency risk
The Group is exposed to foreign currency risk on cash balances
that are denominated in a currency other than sterling. The
currencies giving rise to this risk are primarily US dollars and
euros.
In respect of other monetary assets and liabilities held in
currencies other than sterling, the Group ensures that the net
exposure is kept to an acceptable level, by buying or selling
foreign currencies at spot rates where necessary to address
short-term imbalances.
The significant majority of the Group's clients are invoiced in
sterling and the Group only maintains a small float of cash in
foreign currencies. Therefore, the Group's currency risk is minimal
and accordingly no sensitivity analysis has been presented.
Interest rate risk
The Group's exposure to interest rate risk on financial assets
is mitigated by placing surplus funds on fixed deposit for various
levels of maturity. The interest rates obtained are market rates
which are typically linked to base rate. Typically, cash is held on
deposit for no longer then 90 days. All cash balances at the year
end were held on call deposit. The Group also has interest-bearing
financial liabilities with floating interest rates.
Management deems interest rate risk immaterial at the current
time given its funding position and does not actively manage this
risk. At the balance sheet date, the Group held GBP21 million
(2013: GBP8 million) in cash and cash equivalents on which interest
is earned and had GBPnil (2012: GBPnil) payable in loans and
deferred consideration on which interest is paid with floating
rates of interest.
An increase of 50 basis points in interest rates at the balance
sheet date would increase the interest payable on floating rate
interest bearing liabilities held at the balance sheet date by
GBPnil per annum net of tax (2013: GBPnil), assuming a corporation
tax rate of 23% (2013: 24%).
An increase of 50 basis points in interest rates at the balance
sheet date would increase interest receivable on cash and cash
equivalents held at the balance sheet date by GBP82,300 per annum
(2013: GBP30,530) net of tax, assuming a corporation tax rate of
23% (2013: 24%).
Market price risk
Equity prices are governed by markets in which such equities are
traded. The construction of equity portfolios for funds which the
Group acts as Manager is driven by the investment objectives of
each fund and consequently market risk cannot be fully mitigated.
There were no principal stock positions at the balance sheet date.
As a result management deems market price risk to be immaterial to
the balance sheet solidity of the company although a marked
decrease in market prices could affect the level of fee earned on
client accounts and therefore the Group consolidated revenue
position.
Liquidity risk
Liquidity risk is the risk that the Group does not have
sufficient financial resources to meet its obligations when they
fall due or will have to do so at excessive cost. This risk can
arise from mismatches in the timing of cash flows relating to
assets, liabilities and off-balance sheet instruments. The Group
monitors liquidity risk taking into account cash balances held and
levels of borrowing in addition to the requirements imposed by the
Financial Conduct Authority on the Group's regulated
subsidiaries.
Non-derivative cash flows
The table below presents the cash flows receivable and payable
by the Group under non-derivative financial assets and liabilities
by remaining contractual maturities at the balance sheet date. The
amounts disclosed in the table are the contractual, undiscounted
cash flows whereas the Group manages inherent liquidity risk on
expected undiscounted cash flows.
The net liquidity positions in the table below relate to cash flows on contractual obligations
existing at the balance sheet date. They do not take account of any cash flows generated from
profits on normal trading activities.
On demand < 3 months 3-12 months 1-5 years > 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2014
Assets
Cash and cash equivalents 21,374 - - - -
Client receivables - 1,974 - - -
Other financial assets 4,417 - - 50 -
Total financial assets 25,791 1,974 - 50 -
Liabilities
Trade and other payables - (5,648) - - -
Total financial liabilities - (5,648) - - -
Net liquidity surplus/(deficit) 25,791 (3,674) - 50 -
On demand < 3 months 3-12 months 1-5 years > 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2013
Assets
Cash and cash equivalents 8,036 - - - -
Client receivables - 1,419 - - -
Other financial assets 4,722 - - - -
Total financial assets 12,758 1,419 - - -
Liabilities
Trade and other payables - (5,875) - - -
Total financial liabilities - (5,875) - - -
Net liquidity surplus/(deficit) 12,758 (4,456) - - -
Fair values
Estimation of fair values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the table.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the notional amount is deemed to reflect the fair value. All
other receivables/payables greater than one year are discounted at
base rate to determine the fair value.
29. Operating lease arrangements
2014 2013
GBP'000s GBP'000s
---------------------------------------------------------------------------------- --------- ---------
Minimum lease payments under operating leases recognised in expenses for the year 760 955
---------------------------------------------------------------------------------- --------- ---------
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
2014 2013
GBP'000s GBP'000s
--------------------------------------- --------- ---------
Within one year 743 595
In the second to fifth years inclusive 1,644 1,594
After five years 228 -
--------------------------------------- --------- ---------
2,615 2,189
--------------------------------------- --------- ---------
Operating lease payments represent rentals payable by the Group
for certain of its office properties. Leases were negotiated for an
average term of seven years and rentals are fixed for an average of
three years.
30. Post balance sheet events
On 4 April 2014, the Group completed its acquisition of UK
Wealth Management Limited (UKWM) group of companies having obtained
Financial Conduct Authority (FCA) Change of Control approval for
the transaction. Initial consideration for the transaction of
GBP12.5 million was paid in April 2014 (part of which in escrow
accounts), with a further maximum deferred consideration payment of
up to GBP1.75m becoming payable after 15 months from completion
(July 2015) subject to meeting or exceeding certain conditions,
primarily linked to recurring revenue performance. The acquisition
was funded through a placing of shares in December 2013 (see Note
23).
This acquisition increases the Group's nationwide footprint to
17 offices and its assets to over GBP5 billion, of which GBP2.2
billion is discretionary and managed. (See strategic report for
further information).
The value of UKWM net assets acquired, excluding value of
intangibles, investments and funding balances removed as a result
of the acquisition on 31 March 2014 is summarised in the table
below. Fair value review and completion accounts are in the process
of being compiled and could change the completion net assets.
GBP'000s
Tangible fixed assets 596
Cash and cash equivalents 1,473
Other Current assets 1,819
Current Liabilities (1,889)
UKWM Net acquired assets excluding intangibles
at 31 March 2014 1,999
31. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Company and its
subsidiaries are disclosed in the Company's separate financial
statements (see Note 43).
Company statement of financial position
as at 31 March 2014
Note 2014 2013
GBP'000s GBP'000s
Non-current assets
Property, plant and equipment [34] 837 1,133
[35,
Investments in subsidiaries 36] 25,113 24,999
Investment in associate [37] 230 -
Trade investments 19 -
Due from Group companies [43] 19,888 19,974
---------------------------------------
Total non-current assets 46,087 46,106
-----------------------------------------------
Current assets
Trade and other receivables [38] 1,916 2,283
Due from Group companies [43] 4,257 329
Taxation 1,041 672
Cash and cash equivalents 8,622 289
-----------------------------------------------
Total current assets 15,836 3,573
-----------------------------------------------
Total assets 61,923 49,679
-----------------------------------------------
Current liabilities
Other payables [39] (3,628) (3,276)
Due to Group companies [43] (2,092) (1,358)
---------------------------------------
Total current liabilities (5,720) (4,634)
-----------------------------------------------
Total liabilities (5,720) (4,634)
-----------------------------------------------
Net assets 56,203 45,045
-----------------------------------------------
Equity
Share capital [40] 7,098 5,399
Share premium account [40] 41,898 28,697
Equity reserve [41] 1,909 1,560
Retained earnings [42] 5,298 9,389
---------------------------------------
Equity attributable to equity holders
of the parent 56,203 45,045
-----------------------------------------------
The financial statements were approved by the Board of Directors
and authorised for issue on 1 July 2014. They were signed on its
behalf by:
J Polin A Tagliabue
Group Chief Executive Officer Group Chief Financial Officer
Company statement of changes in equity
for the year ended 31 March 2014
Share
Share premium Equity Retained
capital reserve reserve earnings
(Note (Note (Note (Note
23) 24) 25) 42) Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2012 5,388 28,697 1,464 12,864 48,413
Total comprehensive income
for the year:
Loss for the year - - - (3,475) (3,475)
Transactions with owners
recorded directly in equity:
Share-based payments - - 96 - 96
Issues of shares to Employee
Benefit Trust 11 - - - 11
At 31 March 2013 5,399 28,697 1,560 9,389 45,045
Total comprehensive income
for the year:
Loss for the year - - - (4,091) (4,091)
Transactions with owners
recorded directly in equity:
Issues of shares to Employee
Benefit Trust 49 - - - 49
Share-based payments - - 349 - 349
Issue new share placing 1,650 13,201 - - 14,851
-------- ---------
At 31 March 2014 7,098 41,898 1,909 5,298 56,203
-------- ---------
Share capital represents the nominal value of shares subscribed
for. The share premium reserve represents the total amount
subscribed for shares in excess of the nominal value. The equity
reserve represents the total amount charged, less any credits, in
respect of share-based payments charged to the statement of
comprehensive income. Retained earnings include all other gains and
losses and transactions with owners not recognised elsewhere.
Company statement of cash flows
for the year ended 31 March 2014
2014 2013
GBP'000s GBP'000s
Loss for the year (4,091) (3,475)
Adjustments for:
Amortisation and depreciation 661 1,467
Share-based payment expense 235 33
Investment income (14) (11)
Sale of subsidiary - (192)
Corporation tax (credit)/charge and group
relief (991) (672)
(4,200) (2,850)
Decrease/(increase) in other receivables 416 (1,683)
(Decrease)/increase in other creditors
and accruals 352 695
Tax and group relief received 622 -
Net cash from/(used in) operating activities (2,810) (3,838)
Investing activities
Interest income 14 11
Trade investment (19) -
Purchases of property, plant and equipment (365) (482)
Sale of subsidiaries - 353
(Loans to)/repaid by Group companies (3,108) 7
Investment in associate (230) -
-
Net cash (used in)/from investing activities (3,708) (111)
Financing activities
Proceeds of share issues 15,263 -
Costs of share issue (412) -
Net cash from financing activities 14,851 -
Net increase in cash and cash equivalents 8,333 (3,949)
Cash and cash equivalents at beginning
of year 289 4,238
Cash and cash equivalents at end of year 8,622 289
Notes to the financial statements continued
for the year ended 31 March 2014
32. Significant accounting policies
The separate financial statements of the Company are presented
as required by the Companies Act 2006. As permitted by that Act,
the separate financial statements have been prepared in accordance
with IFRSs as adopted by the EU as applied in accordance with the
provisions of the Companies Act 2006. Advantage has been taken of
section 408 of the Companies Act 2006 and a Company only income
statement is not presented.
The financial statements have been prepared on the historical
cost basis. The principal accounting policies adopted are the same
as those set out in Note 2 to the consolidated financial statements
except as noted below.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment, plus the fair value of
share-based payments attributable to employees of the Company's
subsidiary companies.
Share-based payments
The Company issues equity-settled and cash-settled share-based
payments to certain employees of the Company and the Group. Equity
settled share-based payments are measured at fair value at the date
of grant. The fair value is determined using the Black-Scholes
model at the grant date and in respect of employees of the Company
is expensed on a straight line basis over the vesting period, based
on the Group's estimate of shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions. For
share-based payments in respect of employees of other Group
companies the fair value is added to the cost of investment in
those Group companies on a straight line basis.
The valuation models used together with the assumptions used on
expected volatility, risk-free rates, expected dividend yields and
expected forfeiture rates are disclosed in Note 26.
The Company awarded ordinary shares to employees of the Group
under a Growth Securities Ownership Plan ("GSOP"), in exchange for
their continued service to the Group. The number of shares to be
awarded is calculated based on a fixed multiplier, which varies
based on the average share price in the 20 days before the
settlement date of 1 September 2016.
The Company has issued the option to settle the shares in cash
or equity, under the terms and conditions of the Plan. The Group
has made the judgement that the shares should be accounted for as
equity-settled share-based payments, which vest on the settlement
date, subject to the share price related vesting conditions
described above. The fair value of these awards is based on the
market value at the date of grant and has been calculated on the
likelihood of successful completion of the vesting conditions and
has been charged to the income statement over the vesting period of
the awards. These have been valued using a Monte Carlo simulation
model.
Intra-group balances
Amounts due from Group undertakings are classified as loans and
receivables and are initially recorded at fair value and are
subsequently recorded at amortised cost under the effective
interest method.
Amounts due to Group undertakings are classified as financial
liabilities measured at amortised cost. They are initially recorded
at fair value and subsequently recorded at amortised cost under the
effective interest method.
33. Loss from operations
The auditors' remuneration for audit services to the Company was
GBP25,000 (2013: GBP25,000).
Other significant charges include, exceptional costs of GBP2.4
million (2013: GBP2.6m) and depreciation GBP0.7million (2013:
GBP1.5million).
34. Property plant and equipment
Fixtures
and
equipment
GBP'000s
Cost
At 31 March 2012 3,816
Additions 482
Disposals (59)
At 31 March 2013 4,239
Additions 365
At 31 March 2014 4,604
Depreciation and impairment
At 31 March 2012 1,698
Charge for the year 1,467
Disposals (59)
At 31 March 2013 3,106
Charge for the year 661
At 31 March 2014 3,767
Carrying amount
At 31 March 2014 837
At 31 March 2013 1,133
At 31 March 2012 2,118
35. Subsidiaries
Ashcourt Holdings Limited (formerly Ashcourt Holdings plc) and
Savoy Asset Management Limited (formerly Savoy Asset Management
Plc) are the only directly wholly owned subsidiaries of the
Company. Details of the Company's subsidiaries at 31 March 2014 are
as follows:
Proportion Proportion
of voting of power
interest held
Name of subsidiary Place of incorporation ownership and operation % %
Ashcourt Holdings Limited UK 100 100
Wholly owned by Ashcourt Holdings Limited:
Ashcourt Rowan Asset Management Limited UK 100 100
Ashcourt Investment Advisers Limited UK 100 100
Ashcourt Rowan Administration Limited UK 100 100
Ashcourt Rowan Financial Planning Limited UK 100 100
Ashcourt Nominees Limited UK 100 100
Ashcourt Rowan Pension Trustees Limited UK 100 100
Ashcourt Nominees No 2 Limited UK 100 100
Investment Management Holdings Limited UK 100 100
Rowan & Company Capital Management Limited UK 100 100
Paragon Trustees Limited UK 100 100
Savoy Investment Management Limited UK 100 100
Savoy Asset Management Limited UK 100 100
Wholly owned by Savoy Asset Management
Limited:
Guildhall Investments Limited UK 100 100
St Pauls Nominees Limited UK 100 100
36. Investments in subsidiaries
GBP'000s
At 31 March 2012 24,936
Capital contribution on share-based payments 63
At 31 March 2013 24,999
Capital contribution on share-based payments 114
At 31 March 2014 25,113
The investments in subsidiaries are made up as follows:
2014 2013
GBP'000s GBP'000s
Ashcourt Holdings Limited 16,563 16,449
Savoy Asset Management Limited 8,550 8,550
25,113 24,999
37. Investment in associate
On 11 October 2013, the company invested GBP230,000 into a newly
formed associate, Ashcourt Rowan Investment Management LLP. The
investment represents a 25% stake in the business.
The movement in the company's investment in the associate is as
follows:
2014 2013
---------------------------------------------
GBP'000s GBP'000s
---------------------------------------------
At 1 April 2013 - -
Addition 230 -
Share of profit - -
As at 31 March 2014 230 -
---------------------------------------------
38. Financial assets
At the balance sheet date, amounts due from Group companies
include amounts receivable from Group companies of GBP24.1 million
(2013: GBP20.3 million), principally loaned for the financing of
acquisitions. Group receivables of GBP6,000 (2013: GBP329,000) are
due within one year in respect of management charges. Other
receivables were GBP1.9 million (2013: GBP2.3m) as at the year end
date.
Cash and cash equivalents
These comprise cash held by the Company and short-term bank
deposits with an original maturity of three months or less. The
carrying amount of these assets approximates their fair value.
39. Financial liabilities
2014 2013
GBP'000s GBP'000s
Other payables comprise:
Other creditors and accruals 3,628 3,276
The Directors consider that the carrying amount of other
creditors approximates to their fair value.
At the balance sheet date, amounts due to Group companies were
GBP2,092,000 (2013: GBP1,358,000).
40. Share capital, share premium account
The movements on these items are disclosed in Notes 23 and 24 to
the financial statements.
41. Equity reserve
2014 2013
GBP'000s GBP'000s
As at 1 April 1,560 1,524
Share based payment 349 96
Transfer to retained earnings - (60)
As at 31 March 1,909 1,560
42. Retained profit
2014 2013
GBP'000s GBP'000s
As at 1 April 9,389 12,804
Loss for the year (4,091) (3,475)
Transfer from equity reserve - 60
As at 31 March 5,298 9,389
43. Related party transactions
The Company charged management fees to its subsidiaries of
GBP1,591,000 (2013: GBP2,293,000).
At the balance sheet date, amounts due from Group companies
include amounts receivable from Group companies of GBP24.1 million
(2013: GBP20.3 million), principally loaned for the financing of
acquisitions.
2014 2013
Amounts due from group companies GBP'000s GBP'000s
Savoy Asset Management Ltd 1,358 1,339
Ashcourt Holdings Ltd 18,530 18,635
19,888 19,974
Ashcourt Rowan Financial Planning Ltd 4,257 245
Savoy Investment Management Ltd - 73
Ashcourt Rowan Administration Ltd - 11
4,257 329
24,145 20,303
At the balance sheet date, amounts due to Group companies were
GBP2.09 million (2013: GBP1.36 million).
2014 2013
Amounts due to group companies GBP'000s GBP'000s
Investment Management Holdings Ltd 1,251 1,237
Ashcourt Rowan Administration Ltd 552 -
Ashcourt Rowan Asset Management Ltd 289 121
2,092 1,358
44. Risk management
Exposure to credit risk, market risk (which combines foreign
currency risk, interest rate risk and market price risk) and
liquidity risk arises in the normal course of the Company's
business.
Credit risk
The credit risk to the Company is limited to the amounts owed by
subsidiary companies and cash at banks. At the balance sheet date
there were no significant concentrations of credit risk and no
amounts were overdue.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by
international credit-rating agencies.
At the balance sheet date the Company had the following credit
risk exposures:
2014 2013
Included in current assets GBP'000s GBP'000s
Cash and cash equivalents 8,622 289
Due from Group companies 4,257 329
Other debtors 1,916 2,283
14,795 2,901
2014 2013
Included in non-current assets GBP'000s GBP'000s
Due from Group companies 19,888 19,974
The amounts in the above table are based on the carrying value
of all accounts.
Foreign currency risk
The Company has no material exposure to foreign exchange
risk.
Interest rate risk
The Company's exposure to interest rate risk on financial assets
is mitigated by placing surplus funds on fixed deposit for various
levels of maturity. The interest rates obtained are market rates
which are typically linked to base rate. Typically, cash is held on
deposit for no longer 90 days. All cash balances at the year end
were held on call deposit. The Company also has interest-bearing
financial liabilities with floating interest rates.
Management deems interest rate risk immaterial and does not
actively manage this risk. At the balance sheet date, the Company
held GBP8,622,000 (2012: GBP289,000) in cash and cash equivalents
on which interest is earned and had GBPnil (2013: GBPnil) payable
in loans and deferred consideration on which interest is paid with
floating rates of interest.
Market price risk
Management considers the market price risk to the Company to be
immaterial.
Liquidity risk
Liquidity risk is the risk that the Company does not have
sufficient financial resources to meet its obligations when they
fall due or will have to do so at excessive cost. This risk can
arise from mismatches in the timing of cash flows relating to
assets, liabilities and off-balance sheet instruments. The Company
monitors liquidity risk taking into account cash balances held and
levels of borrowing.
Non-derivative cash flows
The table below presents the cash flows receivable and payable
by the Company under non-derivative financial assets and
liabilities by remaining contractual maturities at the balance
sheet date. The amounts disclosed in the table are the contractual,
undiscounted cash flows whereas the Company manages inherent
liquidity risk on expected undiscounted cash flows.
The net liquidity positions in the table below, relate to cash
flows on contractual obligations existing at the balance sheet
date. They do not take account of any cash flows generated from
profits on normal trading activities or dividends and loans
received from subsidiary companies.
On demand < 3 months 3-12 months 1-5 years > 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2014
Assets
Cash and cash equivalents 8,622 - - - -
Due from Group companies - - 4,257 19,888 -
Total financial assets 8,622 - 4,257 19,888 -
Liabilities
Trade payables - (3,628) - - -
Due to subsidiaries - (2,092) - - -
Total financial liabilities - (5,720) - - -
Net liquidity surplus/(deficit) 8,622 (5,720) 4,257 19,888 -
On demand < 3 months 3-12 months 1-5 years > 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------
As at 31 March 2013
Assets
Cash and cash equivalents 289 - - - -
Due from Group companies - - 329 19,974 -
----------
Total financial assets 289 - 329 19,974 -
----------
Liabilities
Trade payables - (3,276) - - -
Due to subsidiaries - (1,358) - - -
----------
Total financial liabilities - (4,634) - - -
----------
Net liquidity surplus/(deficit) 289 (4,634) 329 19,974 -
----------
Estimation of fair values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the notional amount is deemed to reflect the fair value. All
other receivables/payables greater than one year are discounted at
base rate to determine the fair value.
Officers and professional advisers
Current Directors
Hugh Ward, Non-Executive Chairman
Jonathan Polin, Chief Executive Officer
Alfio Tagliabue, Chief Financial Officer
Richard Sinclair, Chief Operating Officer
Steve Haines, Non-Executive Director
James Roberts, Non-Executive Director
Secretary
Alfio Tagliabue
60 Queen Victoria Street
London EC4N 4TR
Registered office
60 Queen Victoria Street
London EC4N 4TR
Bankers
The Royal Bank of Scotland
Corporate Banking
9th Floor
280 Bishopsgate
London EC2M 4RB
Website
www.ashcourtrowan.com
Registrars
Computershare Investor Services
The Pavilions
Bridgwater Road
Bristol BA13 8AE
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Nominated adviser and brokers
Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET
Financial adviser and broker
Cantor Fitzgerald
One America Square
17 Crosswall
London
EC3N 2LS
Lawyers
CMS Cameron McKenna
Mitre House
160 Aldersgate Street
London
EC1A 4DD
This information is provided by RNS
The company news service from the London Stock Exchange
END
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