ASHCOURT ROWAN PLC: INTERIM RESULTS FOR SIX MONTHS ENDED 30 SEPTEMBER 2014
26 November 2014
Ashcourt Rowan plc (AIM:ARP.L), the UK wealth management group, today announces its interim results for the six months ended 30 September 2014.
Commenting, Jonathan Polin, Group chief executive officer, said:
"The first half of our financial year has been another positive one of delivering on our objectives, driving our greater underlying profitability and building on the strong platform we have created over the last three years. We have delivered on the integration of UKWM ahead of time and have identified greater synergies than previously anticipated. Underlying EBITDA has doubled from the same period last year to £1.9 million and I am particularly pleased with the 19% increase in funds under management we achieved during the first half. We are beginning to see increasing signs of organic growth and believe that we are well positioned for the second half of the year.
"As the Group returns to profitability, the Board recognises the importance of a dividend to ordinary shareholders and will look to review its position at year end in March 2015."
· More than doubling underlying EBITDA1 profitability to £1.9 million from £0.9 million in the same period last year.
· Discretionary and managed assets of £2.3 billion, a 40% increase on September last year and 19% increase during the period, boosted by UKWM acquisition.
· Total assets under management and influence of £5.3 billion up from £4.0 billion in March 2014.
· Revenue increased to £19.9 million from £15.2 million in same period last year. Significantly higher recurring revenues more than offset a weak environment for dealing commissions.
· Integration of UKWM largely complete and realised synergies to meet and exceed £2.25 million target on a full year run-rate basis.
· UKWM integration and transaction costs of £1.5 million in first half, to be completed within cost guidance previously given (£2 million). No other significant exceptional costs except for expensed revenue generator earn-in and earn-out costs.
· Loss after tax for continuing business reduced to £(0.7) million from £(2.4) million in the same period last year.
· No debt, and cash of £10.1 million, increased from £7.0 million at 30 September 2013.
· Outlook for continued profit growth in second half, mindful of market environment.
· Board will actively review dividend position at year end.
(£ million unless specified)
|
Six months ended 30 Sept 2014 |
Six months ended 30 Sept 2013 |
Full year 31 March 2014 |
Revenue |
19.9 |
15.2 |
31.5 |
Underlying EBITDA1 |
1.88 |
0.87 |
3.78 |
EBITDA after exceptionals2 |
0.3 |
(1.5) |
0.0 |
Loss before tax |
(0.7) |
(2.5) |
(2.0) |
EPS (continuing operations - pence per share) |
(1.88) p |
(8.82) p |
(5.70) p |
Underlying EBITDA margin |
9% |
6% |
12% |
1 Profit (Loss) before interest, tax, depreciation, amortisation and impairments, exceptional, earn-in and earn-out payments and share-based payment costs on a continuing basis.
2 Profit (Loss) before interest, tax, depreciation, amortisation and impairments, earn-in and earn-out payments and share based payment costs on a continuing basis.
This Interim Review Release was approved by the directors on 25 November 2014.
The financial information presented herein does not amount to full statutory accounts within the meaning of Section 435 of the Companies Act 2006 and has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board. The annual report and financial statements for the year ending 31 March 2014 have been filed with the Registrar of Companies. The independent auditors' report on the annual report and financial statements for 2014 was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
-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, Rugby, Salisbury, St Andrews, Winchester and York.
For further information please contact:
Cantor Fitzgerald Europe (nominated adviser and broker)
Rishi Zaveri / Rick Thompson
Tel: 020 7894 7667
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
· More than doubling underlying EBITDA1 profitability to £1.9 million from £0.9 million in the same period last year.
· Discretionary and managed assets of £2.3 billion, a 40% increase on September last year and 19% increase during the period, primarily boosted by UKWM acquisition.
· Total assets under management and influence of £5.3 billion up from £4.0 billion in March 2014.
· Revenue increased to £19.9 million from £15.2 million in same period last year. Significantly higher recurring revenues more than offset a weak environment for dealing commissions.
· Integration of UKWM largely complete and realised synergies to meet and exceed £2.25 million target on a full year run-rate basis.
· UKWM integration and transaction costs of £1.5 million in first half, to be completed within cost guidance previously given (£2 million). No other significant exceptional costs except for expensed revenue generator earn-in and earn-out costs.
· Loss after tax for continuing business reduced to £(0.7) million from £(2.4) million in the same period last year.
· No debt, and cash of £10.1 million, increased from £7.0 million at 30 September 2013.
· Outlook for continued profit growth in second half, whilst mindful of market environment.
· Board will actively review dividend position at year end.
Total funds under management (FUM) and Influence (FUI) |
|
Operating cost base3 |
||||
H1 2014: |
£5.3bn |
43% |
|
H1 2014: |
£18.1m |
27% |
H1 2013: |
£3.7bn |
|
H1 2013: |
£14.3m |
||
|
|
|
|
|
|
|
Discretionary and managed funds (FUM) |
|
Underlying EBITDA margin |
||||
H1 2014: |
£2.3bn |
40% |
|
H1 2014: |
9% |
3% |
H1 2013: |
£1.6bn |
|
H1 2013: |
6% |
||
|
|
|
|
|
|
|
Underlying EBITDA |
|
Basic earnings per share |
||||
H1 2014: |
£1.88m |
117% |
|
H1 2014: |
(1.88)p |
+6.94p |
H1 2013: |
£0.87m |
|
H1 2013: |
(8.82)p |
||
|
|
|
|
|
|
|
Revenue |
|
Basic adjusted EPS4 |
||||
H1 2014: |
£19.9m |
31% |
|
H1 2014: |
4.13p |
+1.97p |
H1 2013: |
£15.2m |
|
H1 2013: |
2.16p |
|
Six months ended 30 Sept 2014 |
Six months ended 30 Sept 2013 |
Full year 31 March 2014 |
Revenue |
19.9 |
15.2 |
31.5 |
Underlying EBITDA1 |
1.88 |
0.87 |
3.78 |
EBITDA after exceptionals2 |
0.3 |
(1.5) |
0.0 |
Loss before tax |
(0.7) |
(2.5) |
(2.0) |
EPS (continuing operations - pence per share) |
(1.88) p |
(8.82) p |
(5.70) p |
Underlying EBITDA margin |
9% |
6% |
12% |
1 Profit (Loss) before interest, tax, depreciation, amortisation and impairments, exceptional, earn-in and earn-out payments and share-based payment costs on a continuing basis.
2 Profit (Loss) before interest, tax, depreciation, amortisation and impairments, earn-in and earn-out payments and share-based payment costs on a continuing basis.
3 Before interest, tax, depreciation, amortisation, impairments, exceptional, earn-in and earn out payments and share-based payment costs
4 Adjusted to exclude integration and earn-in/earn-out exceptionals (net of estimated tax impact), share based payment costs and amortisation of acquired intangibles on a continuing basis
Key Performance Indicators
Underlying EBITDA £m |
|
|
|
Six Months to: |
Full Year to: |
|
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Continuing Business |
|
|
|
-0.3 |
0.4 |
0.9 |
1.9 |
|
0.3 |
2.8 |
3.8 |
Note: Profit (Loss) before interest, tax, depreciation, amortisation, impairments, exceptional, earn-in and earn-out payments and share-based payments |
Underlying EBITDA Margin |
|
|
|
Six Months to |
Full Year to: |
|
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Continuing Business |
|
|
|
-2% |
2% |
6% |
9% |
|
1% |
8% |
12% |
Note: Underlying EBITDA as a percentage of total group revenue |
Revenue £m |
|
|
|
Six Months to |
Year end |
|
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Continuing Business |
|
|
|
18.0 |
15.7 |
15.2 |
19.9 |
|
35.7 |
32.6 |
31.5 |
Revenue by Type (Continuing Business) £m |
|
|
|
|
|
||||||
|
|
|
|
Six Months to |
Year end |
|
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Recurring Revenue* |
|
|
|
10.7 |
10.9 |
10.4 |
15.3 |
|
21.4 |
21.5 |
21.1 |
Dealing Commission and Financial Planning upfront advice |
7.3 |
4.8 |
4.8 |
4.6 |
|
14.3 |
11.1 |
10.4 |
|||
Continuing Business |
18.0 |
15.7 |
15.2 |
19.9 |
|
35.7 |
32.6 |
31.5 |
* Includes all revenues except non-recurring Financial Planning advice and implementation fees
Underlying Cost Base Development* - Continuing Business |
|
||||||||||
|
|
|
|
Six Months to |
Year end |
|
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Staff costs (including incentives) |
12.4 |
10.3 |
9.2 |
11.4 |
|
23.9 |
20.1 |
18.2 |
|||
Other costs |
|
|
|
6.0 |
5.0 |
5.1 |
6.7 |
|
11.5 |
9.7 |
9.6 |
Total Costs |
|
|
|
18.4 |
15.3 |
14.3 |
18.1 |
|
35.4 |
29.8 |
27.8 |
* Excludes exceptionals, earn-in and earn-out costs and share based payments |
Headcount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total HeadCount |
|
|
|
||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
|
|
|
Revenue Generators |
|
|
|
114 |
103 |
67 |
115 |
|
|
|
|
Support and Others |
|
|
|
259 |
219 |
179 |
241 |
|
|
|
|
Total |
|
|
|
373 |
322 |
246 |
356 |
|
|||
Note: Includes temporary project resources and consultants |
Funds under management and Influence £bn |
|
|
|||||||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
|||
Discretionary and Managed Advisory FUM |
1.5 |
1.6 |
1.6 |
2.3 |
|
||||||
Investment Management Advisory and Execution Only |
0.5 |
0.3 |
0.2 |
0.2 |
|
||||||
Financial Planning Funds under Influence |
1.9 |
1.9 |
1.9 |
2.8 |
|
||||||
Total |
|
|
|
3.9 |
3.8 |
3.7 |
5.3 |
|
|||
|
FUM/FUI Breakdown (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months to |
|
Year end |
|||||
|
|
|
|
Sep-11 |
Sep-12 |
Sep-13 |
Sep-14 |
|
Mar-12 |
Mar-13 |
Mar-14 |
Discretionary and Managed Advisory |
37% |
42% |
43% |
43% |
|
40% |
43% |
48% |
|||
Non-Managed Advisory and Execution Only |
13% |
8% |
7% |
4% |
|
12% |
7% |
6% |
|||
Financial Planning Funds under Influence |
|
|
|
50% |
50% |
50% |
53% |
|
48% |
50% |
46% |
|
|
|
|
100% |
100% |
100% |
100% |
|
100% |
100% |
100% |
Movements in Discretionary and Managed funds (£ million) |
|||
|
|
6 months to 30 September 2014 |
6 months to 30 September 2013 |
|
|
|
|
Opening FUM |
£m
|
1,891 |
1,599 |
|
|
|
|
UKWM acquisition |
|
315 |
|
New clients FUM inflows |
|
78 |
65 |
Lost clients FUM outflows |
|
-52 |
-54 |
Market /performance/flows from existing clients |
|
23 |
-4 |
|
|
|
|
Closing FUM |
£m |
2,255 |
1,607 |
Average FUM |
£m |
2,250 |
1,603 |
The first half of our financial year has been another positive one of delivering on our objectives, increasing underlying profitability and building on the strong platform that we have developed and honed over the last three years. A major validation of these achievements has been the smooth integration of the UKWM business which was completed at the beginning of this reporting period on 4 April following regulatory approval. Following completion of the acquisition, the main focus of activity during the first half has been the integration of the UKWM business into the enlarged Ashcourt Rowan Group. We set ourselves the task of integrating the two businesses by the end of the calendar year and to have realised or identified the £2.25 million of synergies that we promised at the time of the transaction. Both of these latter goals were met ahead of time and synergies realised or identified have been greater than we outlined. We have identified additional synergies, most of which have already been implemented, which now means that we will achieve £2.3 million or more.
I am pleased with the ability of our team to complete the integration so swiftly, which will allow us to see the impact of the synergies in our second half.
In addition, I am happy to say that underlying EBITDA has doubled from the same period last year to £1.9 million. Recurring revenues have increased and funds under management have grown by 19%. I am therefore pleased that, for the third year running, your management team is delivering on its plans and we remain on track to deliver further profit growth in the second half.
The further improvement in underlying EBITDA is a direct result of the benefits that have arisen from the restructure of the company by this management team. The fact that during a significant integration project we have, for the second year running, doubled underlying EBITDA demonstrates the operational leverage now built into the company and that the business has dealt with its legacy issues and is a fully integrated, focused, and robust financial services group.
Revenues for the Group, post the acquisition of UKWM, rose to £19.9 million in our first half. More pleasing though is the further rise in recurring revenues, above our budget target, to £15.3 million during the period. This means that our recurring revenues are now 77% of total revenues for the Group - the highest figure to date. This continued increase in recurring revenues is paramount for the delivery of shareholder value. In terms of new business, discretionary assets increased by £364 million since the end of March, primarily due to the positive impact of the UKWM deal. In addition, we are beginning to see encouraging signs of improving organic growth.
Our financial planning division has rolled out an improved client proposition to all Ashcourt Rowan advisers, including our new colleagues who joined from UKWM. This has resulted in an increase in our average case size in front end advice and implementation fees, rising to c. £3,050 in the six months to September 2014 from c. £2,475 in the same period last year. The new proposition gives clients the option for a range of new services in addition to our basic proposition and we believe enhances our offering to clients and introduces greater potential for cross selling opportunities.
In addition, September was our financial planning division's best performing month this in the period under review. We have seen the fruits of the hard work, by all, come through towards the end of the first half which augurs well for our second half. This is a recurring theme in our business where, mainly due to the fiscal requirements, our second half is always materially stronger than the first.
The financial planning division has also hired six new financial planners and I am pleased with their quality. They have started well and will, we expect, continue to deliver new revenues and profitability to the Group. We will continue to hire quality individuals as we can access them, but we will not lower our standards in terms of competence and culture.
We have made good progress with our exclusive arrangements with Care UK for the provision of financial planning services to their new and existing care home clients and we are seeing increased business coming from the seminar programmes being run for Care UK potential clients. We have also forged an alliance with KBS, a corporate finance business specialising in the sale of private companies, to deliver holistic financial advice and investment solutions post sale for their clients across the UK.
In addition, our project to transition our clients from trail commission to ongoing service agreements progresses well. To date, over £510 million of financial planning third party assets under influence have been secured onto service agreements.
We continue to grow and improve the quality of our network of professional introducers to help deliver quality leads resulting in our mutual clients receiving the very best holistic advice.
Our asset management division has continued to grow its assets under management and I am delighted with the number of new investment managers wanting to join your company. Andre Girault and Tim Dickens, both previously at HSBC Private Bank, joined us during the first half and will be putting significant efforts into growing their client base. In addition, we will shortly announce another team who will be joining us after Christmas. Our recruitment drive for these managers, under Harry Burnham's leadership, continues to gather pace.
It is particularly pleasing to see that our investment returns continue to deliver for our clients. This half year we have again achieved returns ahead of benchmark for our core mandates. Producing consistent outcomes and underlying performance is critical for us and our clients, and I am delighted that, yet again, the team has achieved this.
Our new integrated Figaro platform has been operative for more than a year and the recent client valuation run was completed more quickly and with more detail than ever before. Together with greater flexibility in front end tools, this allows us to be ready to assimilate further non organic growth opportunities and has been material to the success of the team moves we have competed so far.
The UKWM purchase brought us a well-formed Corporate Solutions business and will allow us to take advantage of the corporate pensions market more effectively. Ashcourt Rowan Corporate Solutions will help us to further maximise the opportunity afforded by the proposed momentous changes to pension legislation announced by the Chancellor earlier this year. These changes will be the greatest driver of growth within our industry and will most likely deliver additional significant opportunities to all financial planning businesses.
We have now completed two acquisitions and two disposals since March 2013 and have built a much more robust and effective operating platform. We continue to keep abreast of all non-organic opportunities and evaluate a number of them. It remains our aim to be at the forefront of the consolidation that continues to happen in the sector. We believe that, in order to deliver continued shareholder value and continually improve our customer outcomes, we need greater scale. During the second half of the year and beyond, we will continue to explore and, where appropriate, exploit these opportunities. Your management team has proven its ability to interpret transactions and execute them. However, we will execute only when we find something that meets our criteria, creates scale and leverage and ultimately client benefits and shareholder value.
I consider ourselves fortunate to have grappled at the beginning of my tenure with a raft of regulatory issues that required detailed attention and rectification. As shareholders are aware we completed that process some 18 months ago. However, we remain committed to ensuring that we continually monitor and check our progress and behaviours against the benchmarks we have set ourselves and ultimately against client outcomes.
We have seen a change to the structure of our Board, which was announced earlier in this reporting period. Steve Haines joined the executive team as our head of governance and to give wider commercial experience to my executive team. As a result, he stood down from his non-executive board position. Steve had been a non-executive director for the last three years, joining the business at the same time as myself and working very closely with me in the early days.
At the same time, Richard Sinclair, previously our chief operating officer, has left the Board and the company to further his career in the telecommunications industry. Richard has been a stalwart supporter of our business and drove through the necessary changes to our ICT infrastructure. On behalf of the Board, I would like to thank Richard for all his hard work, particularly with regard to the hugely complex task of migrating our asset management business from three different platforms to one outsourced solution, the Figaro system.
We are completing a project to search for a new non-executive with an aim to appoint in the New Year.
In July, the Remuneration Committee took the decision to make further awards with our GSOP and LTIP incentive plans, following the acquisition of UKWM, to incentivise new joiners to the Group and to provide further incentive to existing staff. While these awards have not been made to date, we expect them to be finalised during the second half.
This half has been a strong and successful time for your company; finalising the purchase of UKWM, delivering the integration into our Group, and achieving greater synergies than announced ahead of schedule. Notwithstanding the volatile market environment, we are therefore well positioned to deliver another successful final half to the financial year. This half of the year has been an important stepping stone for the company. Looking back to the business we took over in September 2011, there has been a remarkable turnaround which could not have been achieved without supreme effort of our staff and a huge amount of support from our shareholders. I look forward to reporting a successful completion of our financial year end in March 2015 and continuing to play a key consolidation role in the currently fragmented wealth management industry.
With that in mind, the Board recognises the importance of paying dividends and will review its position at year end, taking into account distributable profit, buffer over capital requirements and growth investment opportunities ahead.
Jonathan Polin
Group Chief Executive
25 November 2014
During the six months to September 2014 the Group delivered Underlying EBITDA (profit before interest, tax, depreciation, amortisation, integration and exceptional costs, costs linked to revenue generator earn-in and earn-out agreements and share base payments on a continuing basis) of £1.884 million, more than doubling the £0.868 million achieved in the same period last year. This was driven by a combination of growth in client assets - both organically and as a result of the acquisition of UKWM - and continued control on costs. The full year Underlying EBITDA to March 2014 was £3.8 million, reflecting a stronger revenue profile in the second half and in particular in the last quarter that coincides with the tax year end and resultant activity.
The Adjusted Profit Before Tax (Profit Before Tax on a continuing basis adjusted for amortisation, integration and exceptional costs, costs linked to revenue generator earn-in and earn-out agreements and share based payment costs) in the period grew to £1.6 million from £0.6 million in the same period last year. The earnings per share adjusted to exclude integration and earn-in/earn-out exceptionals, share based payment costs and amortisation of acquired intangibles on a continuing basis were 4.13 pence (4.06 pence diluted on the basis of share awards with performance conditions met on 30 September 2014) while the loss per share was (1.88) pence, a marked improvement on (8.82) pence in the same period last year.
Loss before tax reduced to £(0.7) million, impacted principally by the one-off costs relating to the integration of UKWM. This is, however, a marked improvement over £(2.5) million loss in the six months to September 2013.
One-off UKWM integration costs were £1.2 million in the first half (in addition to £0.3 million in completion and post completion one-off transaction costs) and are expected to remain within guidance provided at time of acquisition (£2 million). Of particular note for the prospect of returning the business to full after tax profitability, we had no material exceptional costs in the first half of this financial year except for the above UKWM related transaction and integration costs and cost related to earn-in and earn-outs of revenue generator teams, which are expensed rather than capitalised.
Loss after tax for continuing operations was £(0.7) million during the period, reduced from £(2.4) million in the same period in 2013/14.
The acquisition of the UKWM Group completed on 4 April 2014. While a summary overview of the acquired business and expected impact was included in our annual report for the year ended 31 March 2014, this interim report consolidates all activities and financial performance of the UKWM Group. Immediately after completion we aligned both the management and the reporting of the UKWM activities within the existing Ashcourt Rowan financial planning and investment management segments with the addition of a Corporate Solution unit.
In August we completed the disposal of the SIPP (Self Invested Pension Plan) and SSAS (Small Self-Administered Scheme) administration business we acquired through the UKWM deal. Similarly to the previous Group SIPP and SSAS disposal in 2013, the business was subscale, accounting for less than 1% of our revenue, and would have required significant investment to develop. We however strongly believe in the pension opportunity and are focused on expanding advice and investment solutions to fully capture it rather than focus on personal scheme administration. The consideration for the disposal was £275k upfront and up to £80k in contingent deferred consideration payable based on revenue retained in the sold business.
Total funds under management and influence at the end of September 2014 were £5.3 billion, up from £3.7 billion at September 2013 and £4 billion at the end of March 2014, mainly as a result of the acquisition of UKWM.
Managed and discretionary assets, the key drivers of the Group's management fee income, stood at £2.3 billion at 30 September 2014 up from £1.6 billion in September 2013 and £1.9 billion 31 March 2014, a 40% growth year on year and 19% in the period.
While the increase during the period was mainly driven by the addition of the UKWM discretionary and managed book of business, organic inflows from new clients increased during the six months to September 2014 to £78 million from £65 million in the first half of last year. Outflows from lost clients stood at around £52 million, marginally down from £54 million in the first half of last year and the combination of new net assets from existing clients and market movement contributed a positive £22 million.
As at the end of September 2014, over £510 million of our third party Funds under Influence have been signed to ongoing service agreements. During the period ongoing service agreements on third party assets grew by around £40 million, with an additional £28 million of assets our clients opted to transfer into discretionary services.
In the first half of the year we generated just under £19.9 million in revenue, an increase of £4.8 million on the £15.2 million achieved in the first half of the previous year.
While this benefitted from the addition of the UKWM business, particularly pleasing in the first half was the increase in recurring revenues which totalled £15.3 million. This increase was ahead of expectations and significantly higher than in the six months to September 2013 (£10.4 million, or £13.7 million if UKWM recurring revenues in the same period last year are included) and in the six months to March 2014 (£10.7 million).
The overall result was achieved in spite of weaker than expected dealing activity within the investment management business, reflective of market conditions, and one-off initial advice and implementation revenue in financial planning. The latter was to some extent impacted by UKWM integration and re-launch of our proposition across our enlarged advisor population, a process that has now concluded. As a result, the total upfront advice and dealing activity revenue was £4.6 million, down from £4.8 million last year or £5.8 million if UKWM new business revenue in the same period last year is included.
As commented in more detail in the report of the Group chief executive officer, during the first half of the period we focused on a rapid integration of UKWM and delivering the cost synergies and efficiencies targeted. We are pleased to report that the total synergy saving to be achieved stands at over £2.3 million, in excess of the total £2.25 million annualised run-rate target and the majority of those have now been secured or executed, with a resulting benefit on our expected cost base in the second half of the current financial year.
In parallel to the delivery of integration synergies we have continued to maintain a strong focus on cost management and aimed to identify and extract further efficiencies and reprice or remove unprofitable activities.
As the result of the above, underlying operating costs in the period were £18.1 million (excluding exceptionals, shared based payments, amortisation and depreciation), against £14.3 million last year (and a total of £18.6 million if UKWM operating are included in the same period last year).
Operating Expense £m |
|
Six months to: |
|
|
|
Sept 2014 |
Sept 2013 |
|
|
£m |
£m |
Third party pay-aways |
|
(0.6) |
(0.6) |
Fixed staff costs |
|
(9.7) |
(7.7) |
Variable staff costs |
|
(1.4) |
(1.0) |
Other staff-related costs |
|
(0.3) |
(0.5) |
Other operating costs |
|
(6.1) |
(4.5) |
|
|
|
|
Total Operating Expenses |
|
(18.1) |
(14.3) |
Note: Excludes depreciation, amortisation, exceptional costs, earn-in/earn-out payments and share-based payments. |
We continue however to invest to drive further revenue growth. In the period we added a new investment management team and a number of new financial planners that we expect will contribute to delivering top-line growth in the second half of the year.
Headcount increased to 376 at the beginning of the period as a result of the addition of UKWM and reduced to 356 heads by September end, or 339 when looked on a Full Time Equivalent basis excluding temporary project consultants and resources. Both numbers include a number of staff under notice at the end of September.
The Group continues to maintain a solid balance sheet with no external financing debt and a healthy cash position. At 30th September 2014 total net assets stood at £59.6 million. In the past, the Group has grown through a number of acquisitions, including the acquisition of UKWM during the period resulting in a combination of significant goodwill and intangible assets and investments recorded on its balance sheet. Excluding goodwill, intangible assets and available for sale investments, the net assets of the Group amounted to £8.9 million (2013: £8.5 million) with cash or equivalents of £10.1 million (2013: £7 million).
At the end of September the regulatory capital requirement across the Group's regulated entities was £5 million.
Revenue Sources £m |
|||||||
|
|
Managed |
Non-Managed Advisory/ Execution Only |
Financial Planning Funds under influence / Third party Assets |
Corporate Solutions |
|
Total |
|
|
|
|
|
|
|
|
Closing Assets (30th Sept 2014) |
£m |
2,255 |
223 |
2,780 |
62 |
|
5,320 |
Average FUM / FUI |
£m |
2,250 |
235 |
2,783 |
61 |
|
5,329 |
|
|
|
|
|
|
|
|
Revenues £m |
|
|
|
|
|
|
|
Fee income on Investment FUM (including Financial Planning Service Agreements) |
|
11.2 |
0.2 |
- |
0.0 |
|
11.4 |
Commission income |
|
2.7 |
0.2 |
- |
- |
|
2.9 |
Financial Planning initial advice and implementation fees |
|
0.5 |
- |
1.3 |
0.4 |
|
2.2 |
FUI Service Agreements and renewal income |
|
- |
- |
2.4 |
0.8 |
|
3.2 |
Interest |
|
0.2 |
0.0 |
- |
- |
|
0.2 |
|
|
|
|
|
|
|
|
Total Revenue |
£m |
14.6 |
0.4 |
3.7 |
1.2 |
|
19.9 |
|
|
|
|
|
|
|
|
Revenue margin* |
% |
1.30% |
0.33% |
0.27% |
nm** |
|
0.75% |
Revenue margin excluding Initial advice fees* |
% |
1.25% |
0.33% |
0.18% |
nm** |
|
0.67% |
Management/Custody Fee revenue margin* |
% |
1.00% |
0.11% |
- |
nm** |
|
nm** |
*revenue divided by relevant average FUM or FUI during the period ** not meaningful as revenue figure not related to the value of assets |
INDEPENDENT REVIEW REPORT TO ASHCOURT ROWAN PLC
We have been engaged by the group to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated cash flow statement, the consolidated statement of changes in equity and the related explanatory notes that have been reviewed. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the group's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility is to express to the group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our report has been prepared in accordance with the terms of our engagement to assist the group in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
London
United Kingdom
25 November 2014
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
|
Consolidated statement of comprehensive incomeSix Months Ended 30 September 2014
|
||||
Note |
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
|
||
|
|
|
|
|
|
Revenue |
3 |
19,940 |
15,175 |
|
|
External payaways and revenue generator costs |
|
(5,976) |
(4,660) |
|
|
|
|
|
|
|
|
Gross profit |
|
13,964 |
10,515 |
|
|
|
|
|
|
|
|
Other administrative expenses |
|
(12,129) |
(9,647) |
|
|
Amortisation and depreciation |
|
(558) |
(771) |
|
|
Share-based payments |
|
(90) |
(199) |
|
|
Exceptional costs and earn-in and earn-out payments |
5 |
(1,997) |
(2,379) |
|
|
|
|
|
|
|
|
Operating loss |
|
(810) |
(2,481) |
|
|
|
|
|
|
|
|
Share of profit of associate |
|
49 |
- |
|
|
Finance income |
|
26 |
29 |
|
|
Finance costs |
|
(11) |
(1) |
|
|
|
|
|
|
|
|
Loss before tax |
|
(746) |
(2,453) |
|
|
|
|
|
|
|
|
Income tax expense |
|
80 |
72 |
|
|
|
|
|
|
|
|
Loss for the period from continuing operations |
6 |
(666) |
(2,381) |
|
|
|
|
|
|
|
|
Profit for the period from discontinued operations, net of tax |
7 |
10 |
238 |
|
|
|
|
|
|
|
|
Loss for the period attributable to the equity holders of the parent |
|
(656) |
(2,143) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - continuing operations |
|
|
|
|
|
Basic and diluted |
|
(1.88)p |
(8.82)p |
|
|
|
|
|
|
|
|
Loss per share - total operations |
|
|
|
|
|
Basic and diluted |
|
(1.85)p |
(7.94)p |
|
|
|
|
|
|
|
|
Note: profit before interest, tax, depreciation, amortisation, exceptional costs, earn-in and earn-out payments and share based payments on a continuing basis
|
|
1,884 |
868 |
|
|
Consolidated statement of financial position
As at 30 September 2014
|
30 September 2014 (unaudited) |
31 March 2014 (audited) £'000s |
|
Non-current assets |
|
|
|
Property, plant and equipment |
|
1,321 |
850 |
Goodwill |
|
49,218 |
36,409 |
Other intangible assets |
|
978 |
1,271 |
Investment in associate |
|
354 |
230 |
Investment in joint venture |
|
8 |
- |
Available-for-sale investments |
|
168 |
301 |
|
|
|
|
Total non-current assets |
|
52,047 |
39,061 |
|
|
|
|
Current assets |
|
|
|
Trade and other receivables |
|
6,526 |
6,441 |
Current tax receivable |
|
68 |
- |
Deferred tax asset |
|
482 |
4 |
Cash and cash equivalents |
|
10,116 |
21,374 |
|
|
|
|
Total current assets |
|
17,192 |
27,819 |
|
|
|
|
Total assets |
|
69,239 |
66,880 |
|
|
|
|
Non-current liabilities |
|
|
|
Deferred consideration |
|
(277) |
(277) |
|
|
|
|
Total non-current liabilities |
|
(277) |
(277) |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
|
(6,896) |
(5,648) |
Deferred consideration |
|
(2,241) |
(614) |
Provisions |
|
(177) |
(127) |
|
|
|
|
Total current liabilities |
|
(9,314) |
(6,389) |
|
|
|
|
Total liabilities |
|
(9,591) |
(6,666) |
|
|
|
|
Net assets |
|
59,648 |
60,214 |
|
|
|
|
Equity |
|
|
|
Share capital |
|
7,098 |
7,098 |
Share premium |
|
41,898 |
41,898 |
Equity reserve |
|
1,999 |
1,909 |
Retained earnings |
|
8,653 |
9,309 |
|
|
|
|
Equity attributable to equity holders of the parent |
|
59,648 |
60,214 |
|
|
|
|
Consolidated statement of changes in equity |
|
|
|
||||
As at 30 September 2014 |
|
|
|
|
|
|
|
|
Share Capital £'000s |
Share Premium £'000s |
Equity Reserve £'000s |
Retained Earnings £'000s |
Total
£'000s |
|
|
|
|
|
|
|
|
|
|
At 31 March 2013 |
5,399 |
28,697 |
1,560 |
10,793 |
46,449 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period: |
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(2,143) |
(2,143) |
|
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
Share-based payments |
- |
- |
199 |
- |
199 |
|
|
Transfer of shares distributed by Employee Benefit Trust |
7 |
- |
- |
(7) |
- |
|
|
|
|
|
|
|
- |
||
At 30 September 2013 |
5,406 |
28,697 |
1,759 |
8,643 |
44,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2014 |
7,098 |
41,898 |
1,909 |
9,309 |
60,214
|
|
|
Total comprehensive income for the period: |
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(656) |
(656) |
|
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
Share-based payments |
- |
- |
90 |
- |
90 |
|
|
|
|
|
|
|
|
|
|
At 30 September 2014 |
7,098 |
41,898 |
1,999 |
8,653 |
59,648 |
|
|
|
|
|
|
|
|
||
Share capital represents the nominal value of shares subscribed for. Share premium 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.
Consolidated cashflow statementSix months ended 30 September 2014 |
|
|
|
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
Operating activities: |
|
|
Loss for the period |
(656) |
(2,143) |
Adjustments for: |
|
|
Profit from discontinued operations |
(10) |
(238) |
Depreciation of property, plant and equipment |
265 |
478 |
Amortisation of intangible assets |
293 |
293 |
Share based payments |
90 |
199 |
Share of profit of associate |
(49) |
- |
Finance income |
(26) |
(29) |
Finance costs |
11 |
1 |
Corporation tax credit |
(80) |
(72) |
|
|
|
Operating cash outflow before movements in working capital |
(162) |
(1,511) |
Decrease in receivables |
728 |
814 |
Decrease in payables |
(564) |
(770) |
Increase in provisions |
50 |
- |
|
|
|
Cash inflow/(outflow) from operations |
52 |
(1,467) |
Tax received |
- |
60 |
Interest received |
26 |
29 |
Interest paid |
(11) |
(1) |
|
|
|
Cash inflow/(outflow) from operating activities |
67 |
(1,379) |
|
|
|
Investing activities |
|
|
Purchases of property, plant and equipment |
(487) |
(271) |
Proceeds from disposal of discontinued operations (net of cash disposed of) |
275 |
601 |
Additions to available-for-sale investments |
(3) |
(19) |
Additions to investments in associate |
(76) |
- |
Acquisition of subsidiaries, net of cash acquired |
(11,034) |
- |
|
|
|
Net cash (outflow)/inflow from investing activities |
(11,325) |
311 |
|
|
|
Net cash decrease in cash and cash equivalents |
(11,258) |
(1,068) |
Cash and cash equivalents at beginning of period |
21,374 |
8,036 |
|
|
|
Cash and cash equivalents at end of period |
10,116 |
6,968 |
|
|
|
Six months ended 30 September 2014
Basis of preparation
As permitted by AIM rules for Companies, IAS 34, 'Interim Financial Reporting' has not been applied in this interim report.
The accounting policies are in accordance with the recognition and measurement principles of International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board as endorsed for use in the European Union, and these policies are disclosed in the Financial Statements for the year ended 31 March 2014.
The financial information in this interim report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Annual Report and Financial Statements for 2014 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2014 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2014.
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 30 September 2014 the Group reported net current assets of £7.9 million (30 March 2014: £21.4 million), reduced as a result of upfront cash consideration to UKWM (£12.5 million) and defined consideration contingent liability. 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 costs, 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.
External payaways and revenue generator costs
External payaways and revenue generator costs comprises the direct employment costs associated with front office revenue generating staff plus any payments to third parties in respect of revenue share arrangements, accounted for on an accruals basis.
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 statement of comprehensive income within the financial statements to enhance understanding of the Group's financial performance.
Management believe that the combination of identification of exceptional costs and receipts on the face of consolidated statement of comprehensive income in conjunction with the more detailed disclosure of the composition of exception items in Note 4 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 4 provide an enhanced understanding of the underlying performance of the business.
At the beginning of the year the Group had two reportable segments, Investment Management and Financial Planning, which are the Group's strategic business units. On 4 April 2014, the Group acquired the UK Wealth Management group of companies ('UKWM') which consisted of reportable segments for Investment Management, Financial Planning, Pension Administration and an additional segment, Corporate Solutions (Note 6). The Pension Administration segment was subsequently sold on 11 August 2014 and has been treated as discontinued operations in these financial statements (Note 7). As a result the Group has three continuing reportable segments at the period end, Investment Management, Financial Planning and Corporate Solutions.
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, Jonathan Polin, and the Group Executive Committee who are the Chief Operating Decision Makers (CODM). 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 Management |
Financial Planning |
Pension Administration |
Corporate Solutions |
Total |
Total |
||||
|
|
|
|
|
(Discontinued) |
(Discontinued) |
|
|
|
|
|
30.9.14 |
30.9.13 |
30.9.14 |
30.9.13 |
30.9.14 |
30.9.13 |
30.9.14 |
30.9.13 |
30.9.14 |
30.9.13 |
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
Revenue |
12,025 |
11,295 |
6,662 |
3,880 |
128 |
38 |
1,231 |
- |
20,046 |
15,213 |
Inter-segment revenues |
(1,350) |
(1,738) |
1,347 |
1,738 |
- |
- |
3 |
- |
- |
- |
Total Revenue |
10,675 |
9,557 |
8,009 |
5,618 |
128 |
38 |
1,234 |
- |
20,046 |
15,213 |
|
|
|
|
|
|
|
|
|
|
|
External payaways and revenue generator costs |
(2,448) |
(2,145) |
(2,981) |
(2,515) |
(2) |
(2) |
(547) |
- |
(5,978) |
(4,662) |
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
8,227 |
7,412 |
5,028 |
3,103 |
126 |
36 |
687 |
- |
14,068 |
10,551 |
|
|
|
|
|
|
|
|
|
|
|
Direct support costs |
(3,546) |
(5,073) |
(2,575) |
(3,657) |
(117) |
(34) |
(414) |
- |
(6,652) |
(8,764) |
|
|
|
|
|
|
|
|
|
|
|
Segment Contribution |
4,681 |
2,339 |
2,453 |
(554) |
9 |
2 |
273 |
- |
7,416 |
1,787 |
|
|
|
|
|
|
|
|
|
|
|
Recharges and overheads |
(2,634) |
(648) |
(2,486) |
(189) |
- |
- |
(410) |
- |
(5,530) |
(837) |
|
|
|
|
|
|
|
|
|
|
|
Underlying EBITDA |
2,047 |
1,691 |
(33) |
(743) |
9 |
2 |
(137) |
- |
1,886 |
950 |
|
|
|
|
|
|
|
|
|
|
|
Amortisation and depreciation |
(255) |
(247) |
(276) |
(274) |
- |
- |
- |
- |
(531) |
(521) |
Share based payments |
(26) |
(51) |
(14) |
(25) |
- |
- |
- |
- |
(40) |
(76) |
Exceptionals |
5 |
(96) |
(5) |
- |
1 |
(359) |
- |
- |
1 |
(455) |
Finance income |
18 |
23 |
1 |
1 |
- |
1 |
- |
- |
19 |
25 |
Finance expense |
(6) |
(1) |
- |
- |
- |
- |
- |
- |
(6) |
(1) |
Profit before Tax |
1,783 |
1,319 |
(327) |
(1,041) |
10 |
(356) |
(137) |
- |
1,329 |
(78) |
Reconciliations of reportable segment revenues, other administrative expenses and profit or loss |
|
|
Revenues |
|
|
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
|
Total revenue for reportable segments |
20,046 |
15,213 |
Unallocated revenue for holding companies |
22 |
- |
Less: revenue from discontinued operations |
(128) |
(38) |
Consolidated revenue for continuing operations |
19,940 |
15,175 |
|
|
|
Total other administrative expenses |
|
|
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
|
Total direct support costs for reportable segments |
6,652 |
8,764 |
Total recharges and overheads for reportable segments |
5,530 |
837 |
Unallocated administrative expenses for head office and parent company |
64 |
80 |
Less: other administrative expenses incurred by discontinued operations |
(117) |
(34) |
Consolidated total administrative expenses for continuing operations |
12,129 |
9,647 |
|
|
|
Profit/(loss) before tax |
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
Total profit/(loss) before tax for reportable segments |
1,329 |
(78) |
Reconciliation of unallocated amounts: |
|
|
Head office costs and costs of parent company |
(41) |
(79) |
Amortisation and depreciation |
(27) |
(249) |
Exceptional costs (including earn-in and earn-out costs) |
(1,998) |
(1,689) |
Share-based payments |
(50) |
(124) |
Finance income |
7 |
4 |
Finance expense |
(5) |
- |
Share of profit of associate |
49 |
- |
Less: profit before tax from discontinued operations |
(10) |
(238) |
Consolidated loss before tax for continuing operations |
(746) |
(2,453) |
Exceptional Costs |
Six months ended 30 September 2014 (unaudited) £'000s |
Six months ended 30 September 2013 (unaudited) £'000s |
Year ended 31 March 2014 (audited) £'000s |
|
|
|
|
Change Management Programme |
|
|
|
Operating model |
12 |
892 |
1,024 |
ICT Project |
- |
158 |
180 |
Asset Management |
- |
34 |
34 |
Financial Planning |
- |
39 |
245 |
Governance & controls |
- |
225 |
478 |
Corporate restructuring and redundancies |
(14) |
553 |
887 |
Irrecoverable VAT on projects |
16 |
38 |
60 |
|
|
|
|
Other Exceptional Costs |
|
|
|
Acquisition and lift out costs |
326 |
265 |
615 |
UKWM integration |
1,236 |
- |
164 |
Occupancy restructuring costs |
- |
79 |
23 |
Compensation payments and provisions for impairment of trade receivables |
- |
96 |
67 |
|
|
|
|
Total Exceptional Costs |
1,576 |
2,379 |
3,777 |
Payments in relation to earn-in and earn-out agreements |
421 |
- |
410 |
|
__________ _ |
___________ |
__________ |
|
1,997 |
2,379 |
4,187 |
Exceptional Receipts |
|
|
|
Gains from the restructuring of introducer relationships |
- |
- |
23 |
|
|
|
|
Total Exceptional Receipts |
- |
- |
23 |
|
____________ |
____________ |
___________ |
Net Exceptional Costs |
1,997 |
2,379 |
4,164 |
|
|
|
|
Note: Ashcourt Rowan's Change Management Programme was completed prior to March 2014. Exceptional costs relating to Change Management Programme in the period represent residual costs that were incurred in the six months to 30 September 2014.
5. Goodwill
|
|
|
£'000s |
Cost |
|
|
|
As at 31 March 2013 |
|
|
34,448 |
Additions through acquisition |
|
|
1,961 |
As at 31 March 2014 |
|
|
36,409 |
Additions through acquisition (note 6) |
|
|
13,152 |
Disposal (note 7) |
|
|
(343) |
As at 30 September 2014 |
|
|
49,218 |
On 4 April 2014, the Group completed its acquisition of 100% of UKWM group of companies having obtained Financial Conduct Authority (FCA) Change of Control approval for the transaction (see note 6 for full details of the transaction).
Goodwill has been included at the reporting date as follows: |
|
|
£'000s |
Cash consideration at completion |
12,507 |
Contingent deferred consideration payable 15 months after completion |
1,627 |
Fair value of net assets acquired at 4 April 2014 |
(982) |
Goodwill (note 6) |
13,152 |
On 11 August 2014, the Group completed the sale of its Self Invested Personal Pension and Small Self Administered Scheme businesses acquired on 4 April 2014 with UKWM to City Trustees, a subsidiary of Mattioli Woods (see note 7).
The amount of goodwill disposed of £343,000 at the reporting date has been provisionally assessed based upon the fair value of the net assets of the businesses disposed and the fair value of the consideration and deferred consideration receivable. The amount of goodwill disposed of at the reporting date is provisional and a final valuation will be completed and reported in the consolidated financial statements as at 31 March 2015.
6. Business combinations
On 4 April 2014, the Group completed its acquisition of 100% of UKWM group of companies having obtained Financial Conduct Authority (FCA) Change of Control approval for the transaction.
UKWM is a financial services group that offered independent financial planning, wealth management and employee benefits to personal, corporate and trustee clients. UKWM operated out of five offices in Leeds (HQ), Macclesfield, Pontefract, Rugby and York. Post acquisition the group has consolidated the Leeds and Pontefract locations into one and relocated the Leeds office to new premises.
At completion, this acquisition increased the Group's nationwide footprint to 17 offices (since reduced to 16 through the combination of Leeds and Pontefract offices) and its FUM to over £5 billion, of which £2.2 billion was discretionary and managed (since increased to £2.3 billion).
Details of the fair value of UKWM identifiable assets and liabilities acquired, excluding value of intangibles removed as a result of the acquisition on 4 April 2014 is summarised below:
|
|
|
Fair Value |
|
|
|
£'000s |
Property, plant and equipment |
|
|
256 |
Trade and other receivables |
|
|
1,066 |
Cash and cash equivalents |
|
|
1,473 |
Trade and other payables |
|
|
(1,813) |
UKWM Net acquired assets excluding intangibles at 4 April 2014 |
|
|
982 |
The maximum consideration payable:
|
£'000s |
Cash consideration at completion |
12,507 |
Contingent deferred consideration payable 15 months after completion |
1,750 |
|
|
Maximum Total Consideration |
14,257 |
The Group's estimate of deferred consideration payable at the reporting date is £1,627,000, as shown below, based on known performance of the business against deferred consideration metrics for Year 1 deferred consideration and reasonable expectations about future performance, discounted at a rate reflecting the risk inherent to the business.
|
£'000s |
Contingent deferred consideration payable 15 months after completion |
1,627
|
Estimated Deferred Consideration |
1,627 |
Goodwill is included at the reporting date as follows: |
|
|
£'000s |
Cash consideration at completion |
12,507 |
Contingent deferred consideration payable 15 months after completion |
1,627 |
Fair value of net assets acquired at 4 April 2014 |
(982) |
Goodwill (note 5) |
13,152 |
6. Business combinations (continued)
The maximum deferred consideration of £1,750,000 is payable 15 months after completion and is subject to meeting or exceeding certain conditions, primarily linked to recurring revenue performance.
Given that conditions are currently being met as run rate recurring revenue of the business acquired currently exceeds the threshold set, the full amount of deferred consideration is likely to be payable and £1,627,000 has been recognised at fair value in the draft completion accounts, discounted at a rate of 6% reflecting the risk inherent to the business.
Acquisition costs of £326,000 (31.03.14: £301,000) arose during the period as a result of the transaction, these have been recognised as part of exceptional costs (note 4) in the statement of comprehensive income.
Goodwill has been recognised on the basis of the draft completion accounts of the UKWM Group of companies, the apportionment of goodwill and the final assessment of acquired net assets, including client intangibles and the apportionment of Cash Generating Units (CGU's) will be completed for inclusion in the final report and accounts at 31 March 2015.
The estimated CGU's, fair value of net assets acquired excluding intangibles as at 4 April 2014 is as follows:
|
£'000s |
|
Asset management |
675 |
|
Financial planning |
617 |
|
Pension administration |
65 |
|
Corporate services |
198 |
|
Central and holding |
(573) |
|
UKWM Net acquired assets excluding intangibles at 4 April 2014 |
982 |
|
The results of the UKWM Group of companies included within the consolidated statement of comprehensive income for the six months ended 30 September 2014 are as follows:
|
£'000s |
Revenue |
5,110 |
Cost of sales |
(1,457)
|
Gross profit |
3,653 |
Administrative expenses |
(3,555) |
Depreciation |
(32) |
Operating profit |
66 |
Finance income |
5 |
Finance costs |
(5) |
Profit for the period from continuing operations |
66 |
Profit for the period from discontinued operations |
11 |
Profit for the period |
77 |
|
|
The above trading figures contain an element of integration into the existing CGU's of the group and as a result potentially not fully reflective of the business acquired.
6. Business combinations (continued)
The annual audited results of the UKWM group of companies for the year ended 31 December 2013 (the last full financial year prior to acquisition), excluding UK GAAP goodwill amortisation and group finance costs (linked to previous ownership and financing structure and no longer relevant after acquisition), prior to acquisition are as follows:
|
£'000s |
Revenue |
8,802 |
Cost of sales |
(4,517)
|
Gross profit |
4,285 |
Administrative expenses |
(4,446) |
Depreciation |
(109) |
Operating profit |
(270) |
Finance income |
2 |
Finance costs |
(15) |
Profit before tax for the period from continuing operations |
(283) |
|
|
|
|
7. Discontinued operations
On 11 August 2014, the Group completed the sale of its Self Invested Personal Pension and Small Self Administered Scheme businesses acquired on 4 April 2014 with UKWM (see note 6) to City Trustees, a subsidiary of Mattioli Woods. The sale comprised of the trade and certain working capital of its wholly-owned subsidiary Pensions Administration Limited, carrying out personal pension administration. In addition, on the same date, the Group completed the sale of its wholly-owned subsidiaries Acomb Trustees Limited, Simmonds Ford Trustees Limited and Ropergate Trustees Limited, also acquired with UKWM (note 6), carrying out trustee services for personal pension administration.
The consideration for the subsidiaries and business disposed has been agreed as a combination of cash consideration at completion, 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 year period.
The maximum consideration due for the disposal is as follows:
|
£'000s |
Cash consideration at completion |
275 |
Contingent deferred consideration at 12 months after completion |
40 |
Contingent deferred consideration at 24 months after completion |
40 |
Maximum Total Consideration |
355 |
The Group estimate of deferred consideration receivable at the reporting date is £53,000, as shown below, based on known performance of the business against deferred consideration metrics for Year 1 deferred consideration and reasonable expectations about future performance, discounted at a rate reflecting the risk inherent to the business.
|
£'000s |
Contingent deferred consideration at 12 months after completion |
33
|
Contingent deferred consideration at 24 months after completion |
20
|
Estimated Deferred Consideration |
53 |
7. Discontinued operations (continued)
The directors are unable to complete final fair valuations for the identifiable assets and liabilities disposed at the date of these financial statements, the fair values of the assets and liabilities disposed will be finalised during the twelve months following completion and updated fair values will be presented in the consolidated financial statements at 31 March 2015.
The directors' estimate the fair values of the net assets of the business disposed at 11 August 2014 as follows: |
|
|
£'000s |
Goodwill (note 5) |
343 |
Trade and other receivables |
147 |
Trade and other payables |
(162) |
|
|
Net assets |
328 |
The business disposed has been treated as discontinued operations, there are no comparative interim figures for the operations disposed as they formed part of the Group of companies acquired during the period as detailed in note 6.
Summary of profit after tax for discontinued operations:
|
Six months ended 30 September |
Six months ended 30 September |
|
2014 (unaudited) £'000s |
2013 (unaudited) £'000s |
||
|
|
|
|
Profit/(loss) for the period from discontinued operations |
|
|
|
Pensions Administration Limited |
11 |
- |
|
Ashcourt Administration Limited |
(1) |
4 |
|
Net gain on sale of discontinued operations |
- |
234 |
|
|
|
|
|
|
|
|
|
|
Total Profit from discontinued operations |
10 |
238 |
|
|
|
|
Current Directors
Hugh Ward, Non-Executive Chairman
Jonathan Polin, Chief Executive Officer
Alfio Tagliabue, Chief Financial Officer
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 broker
Cantor Fitzgerald
One Churchill Place
London
E14 5RB
Lawyers
CMS Cameron McKenna
Mitre House
160 Aldersgate Street
London
EC1A 4DD
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