TIDMARP
RNS Number : 1694H
Ashcourt Rowan PLC
09 July 2012
ASHCOURT ROWAN PLC
9 July 2012
PRELIMINARY GROUP AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH
2012
Financial Year Highlights - A year of significant change and
considerable progress
-- Strengthened Board and leadership team
-- Full year underlying EBITDA* GBP0.45m and reverses the first half loss
-- Positive revenue growth year on year, up 4% to GBP36.4m
-- Total assets under management and influence GBP4.1bn on a restated basis
-- Discretionary assets under management of GBP1.6bn with positive net flows
-- On track cost savings with run rate already reduced by GBP4.1m per annum
-- Solid financial position - no material debt and net tangible
assets of GBP11.5m of which GBP9.1m cash
-- Migration from revenue to profit share based remuneration
Key Priorities going forward
-- Single operating platform to unlock further savings
-- Target EBITDA margin aligned to peer group by Full Year 2013/14
-- Aim to achieve profitable and positive underlying cashflow generation from base line budget
-- Change Management Programme investment to be covered by
existing and generated free cash resources
-- Maintain cost discipline to achieve run rate cost savings of GBP5.2m
-- Cofunds outsourced advisory platform live from 16 July 2012
-- Moving to fully compliant RDR model by September 2012
-- Book consolidation and selective recruitment opportunities
Kenneth West, Non Executive Chairman stated: "The advent of RDR
and the continuing economic uncertainty will inevitably mean that
only the best wealth managers will prosper and I am convinced that
Ashcourt Rowan will be a significant winner and consolidator in
this exciting sector."
Jonathan Polin, Group Chief Executive Officer commented: "In
transforming our business, we have moved with pace, determination
and passion to create a leading integrated wealth management
business. Every aspect of our business has either undergone change,
or is currently being changed. For a lasting positive impact, we
are focusing on systems and processes but also ensuring a
transition in our culture. I am delighted with our achievements,
the quality of decisions we have taken, and the team we have
assembled to drive through what is effectively a re-birth of your
company. I remain focused on the continuing transformation of the
business and it is my aim, therefore, to ensure that your company
is well-placed, well-resourced and has the intellectual capital to
become one of the leading integrated wealth management businesses
in the country. I am pleased that we have delivered on our target
to deliver positive underlying EBITDA for the year, I look forward
to reporting further progress in the near future."
For further information please contact:
Ashcourt Rowan plc
Jonathan Polin, CEO +44 (0)20 7871 7373
Canaccord Genuity Limited
Martin Green / Bruce Garrow +44 (0)20 7523 8350
Six months
31 March ended 30 September 31 March
FINANCIAL STATISTICS - CONTINUING OPERATIONS 2012 2011 2011
------------------------------------------------ ---------- ------------------- ----------
Funds under management & influence GBP4.08bn GBP3.93bn GBP4.46bn
(restated from September 2011***)
Revenue GBP36.40m GBP18.38m GBP35.11m
Underlying EBITDA: Profit before interest, GBP0.45m GBP(0.18)m GBP0.96m
tax, depreciation, amortisation, impairments,
exceptional and share based payment
costs**
Loss before interest, tax, depreciation, GBP(0.82)m GBP(0.63)m GBP(2.32)m
amortisation and impairments
Loss before tax GBP(2.32)m GBP(1.31)m GBP(5.75)m
EPS (Continuing Operations, post consolidation) (10.4)p (6.8)p (28.7)p
------------------------------------------------ ---------- ------------------- ----------
* Profit before interest, tax, depreciation, amortisation,
impairments, share based payments and exceptional costs**
** Exceptional costs include redundancy (GBP0.77m), Change
Management Programme and other restructuring cost of a
non-recurring nature (GBP0.37m net of release of accrued
provisions) and FSCS exception interim charges (GBP0.12m)
*** Fund under Influence (FuI) restated at September 2011
following a detailed review resulting in reducing total FUI by
around GBP315 million
Other Key Performance Indicators
Mar-10 Mar-11 Mar-12
----------- ------- ---------
Revenue GBPm 29.11 35.11 36.40
----------- ------- ---------
Underlying EBITDA GBPm
2011/12 Total 0.45
6 months to September 2011 (0.23)
-------
6 months to March 2012 0.68
-------
Mar-10 Mar-11 Sep-11* Mar-12
------- --------- -------- --------------
Funds Under Management and Influence
GBPbn* 3.45 4.46 3.93 4.08
------- --------- -------- --------------
*Note: Fund Under Influence restated at September 2011, reducing
funds by GBP315m
Mar-10 Mar-11 Sep-11 Mar-12
----------- --------- -------- -------
Discretionary and Managed Advisory
FuM GBPbn 1.56 1.66 1.46 1.62
----------- --------- -------- -------
AuM Breakdown (Continuing Mar-11 Sep-11 Mar-12
Operations)
------- ------- -------
Discretionary and Managed
Advisory 37% 37% 39%
------- ------- -------
Non-Managed Advisory 7% 8% 8%
------- ------- -------
Execution Only 3% 4% 4%
------- ------- -------
Funds under Influence 53% 50% 48%
------- ------- -------
Cost Efficiencies GBPm
Target Cost Efficiencies 5.2
Achieved (reflected in April 2012
run-rate) 4.1
-----
Indentified and being completed 0.8
-----
Total Headcount FTE*
------------------------- -------
Mar-12
Headcount Apr-11 Oct-11 Mar-12 FTE
Revenue Generators 116 114 108 107
------- ------- ------- -------
Support and Others 257 259 233 223
------- ------- ------- -------
Total 373 373 341 330
Note: Includes project temporary resources
* Full Time Equivalent
Revenue by Type GBPm 2010/11 2011/12 Change
%
-------- --------
Asset Management 26.6 26.6 0%
-------- --------
Financial Planning 10.6 12.5 18%
-------- --------
Pension Administration 0.6 0.7 13%
-------- --------
Intra-Group Adjustment (2.6) (3.3)
-------- --------
Total* 35.1 36.4 4%
* Note: Discrepancy between total and subtotal due to
rounding
CHAIRMAN'S REPORT
I am pleased to report the results of your Company for the 12
months ended 31 March 2012.
The past year, and the last 6 months in particular, have been
transformational for Ashcourt Rowan and I am delighted to report
considerable progress in the key areas we set out as targets and as
positive drivers to providing a firmer financial footing.
Although I am pleased to report that revenue for the year was up
from GBP35.1 million in 2011 to GBP36.4 million for this financial
year, what is most encouraging is the positive underlying EBITDA
profit of GBP0.4 million for the year, which reversed a trend of
deteriorating profitability during the first half of the financial
year. This performance contributed to a reduced operating loss,
which, after one-off costs and depreciation and amortisation was
GBP2.4 million compared with GBP5.9 million in 2011.
The Group's loss before tax for continuing operations for the
year to 31 March 2012 was GBP2.3 million (2011: GBP5.75 million)
and the Group's loss after tax including discontinued operations
was GBP2.6 million (2011: GBP16.77 million). The basic loss per
share also narrowed, falling from (92.91) pence per share to a
(12.39) pence per share loss in the year under review.
These results, whilst clearly short of what we are seeking to
achieve in the longer term, are very encouraging as they arise as a
result of a great deal of change within the Group. Led by your new
Chief Executive, Jonathan Polin and a high quality management team,
many of whom are also new to the Group, an extensive, well-planned
and executed Change Management Programme has been positively
affecting the performance of the Group and will, I believe, deliver
long term benefits to shareholders, as well as to clients.
As part of this programme we have also been reviewing every
aspect of our business including our Funds Under Management (FUM)
and Advice. Following a review of our Funds Under Influence (FUI)
we restated our reported assets at our Interim results in September
as being GBP3.93 billion in total with GBP1.49 billion in
discretionary and managed assets. I am pleased to note that as at
31 March 2012, FUM and influence have increased during the second
half of the year, from that restated figure, to GBP4.1 billion
(2011: GBP4.46 billion before restatement) of which GBP1.6 billion
in discretionary and managed assets. I am also pleased to report
that the Group delivered net inflows in funds under management of
GBP44m despite the pressures of implementing a significant Change
Management Programme.
As I stated in the Interim Report in September, the Group
undertook an institutional fundraising in December 2011 and I am
pleased to report that we conducted a successful placing of new
ordinary shares raising GBP8.5 million from existing and new
shareholders. I would like to thank all shareholders for their
continuing support and this placing demonstrates their backing for
the strategic direction of the Group. It also ensures we are well
capitalised and able to invest in the move to a single integrated
operating platform and to drive future growth.
Your CEO, Jonathan Polin, has been instrumental in setting the
strategy and driving the change necessary to meet our objectives.
As you will read in his report, we set out 5 target levers for
success including focusing on reducing costs, moving remuneration
from a revenue share to a profit-based remuneration, and achieving
run-rate profitability by the year end. I am delighted that a
significant percentage of the targets have been achieved. I believe
all will be achieved by the calendar year-end.
We set out to reduce our annualised cost base by some GBP5.2
million and, as at 31 March 2012, we have achieved a reduction in
run-rate costs of GBP4.1 million with further initiatives being
implemented that will deliver an additional GBP0.8 million. The
remainder of the costs savings will be dependent on the
implementation of a single operating platform and the integration
of the Asset Management companies, Savoy and ARAM, into a single
operating unit, a project that is also well on track to successful
completion.
During the period under review, we continued to strengthen our
management team and, following the appointment of Jonathan Polin,
we welcomed, as Group Chief Financial Officer, Alfio Tagliabue.
Alfio knows our business extremely well as he advised the Board, as
an external consultant, on the development of the strategy prior to
joining us in January 2012. In addition, we have been joined by
Richard Sinclair, MBE, as our new Chief Operating Officer.
Richard's distinguished career in the army and then latterly as
Ofcom's Delivery Director responsible for the electromagnetic
spectrum required for the London 2012 Olympic Games means he is
well suited to create, manage and deliver our critical Change
Management Programme.
As Chief Executive of Ashcourt Rowan Financial Planning, Chris
Williams, has joined us and, having instigated a new board
structure for this business to be announced shortly, I am also
delighted that Jim Roberts has accepted our offer to Chair the
Financial Planning business. Jim's experience as a founder of
Skandia (UK) and as Head of all investment functions at Skandia,
coupled with his deep knowledge of the advice sector, will be of
great benefit to this business.
Christopher Jeffreys has been appointed Chief Executive of the
enlarged Ashcourt Rowan Asset Management business and, again, we
are putting in place a new board to be announced shortly. I am
equally delighted that Hugh Ward, a newly appointed non-executive
Director of the Group, has accepted our offer to Chair the
business. Hugh's experience as a former CEO of Invesco UK, and the
architect of the merger between Invesco and Perpetual, will be a
significant benefit to the business.
I would also like to welcome David Esfandi who has been
appointed Managing Director of Asset Management. He brings a wealth
of experience from Deutsche Bank and Goldman Sachs in redefining
our investment proposition. He will be working closely with Toni
Meadows, who has joined the Group as Chief Investment Officer
(CIO). Toni's experience at Close Asset Management and Close Wealth
is already paying dividends as we roll out our new research product
and investment proposition across the Group.
These appointments, in key positions, demonstrate our commitment
to transforming your Company and the team brings a mix of energy,
innovation, passion and exceptional skills which will allow us to
carry out our strategy and to provide a strong and growing return
to our shareholders.
We have much to do, but I believe we have the management team
and financial structure to achieve it. We must also, in the process
of transforming our business and our culture, never forget that we
are, as a business, defined by our clients. At the root of all the
changes is fundamentally the desire to provide a better quality of
service and to attract the best quality of client. The market for
wealth management is changing and, for the client, I believe it is
changing for the better. The advent of RDR and the continuing
economic uncertainty will inevitably mean that only the best wealth
managers will prosper and I am convinced that Ashcourt Rowan will
be a significant winner and consolidator in this exciting
sector.
Once again, however, I would like to recognise the levels of
commitment, time and effort by many people across our Group. It has
not been an easy year and whenever a company does go through a
cultural change there are inevitably adjustments to be made. I
therefore thank all our staff for their effort and loyalty and
their continuing focus on ensuring we grow and prosper. Finally, I
would like to thank all our new clients for asking us to help guide
them and for all our longer-standing clients for continuing to
believe in the quality of our advice and services.
Kenneth West
Chairman
6 July 2012
CHIEF EXECUTIVE'S REPORT
"In transforming our business, we are moving with pace,
determination and passion to create a leading integrated wealth
management business."
Jonathan Polin, Group Chief Executive
I am delighted to be writing this, my first annual Chief
Executive's Report for Ashcourt Rowan plc. When I wrote my Interim
report in September 2011 I had been in the post for 9 weeks. Then,
I made a number of observations about what was needed to transform
our business; to make it fit for advising our clients effectively,
fit to face the changing business and regulatory environment and
fit to provide growing returns to shareholders. I am comfortable
with my initial prognosis but I have also found other areas where
change is needed.
In transforming our business, we have moved with pace,
determination and passion to create a leading integrated wealth
management business. Every aspect of our business has either
undergone change, or is currently being changed. For a lasting
positive impact, we are focusing on systems and processes but also
ensuring a transition in our culture. I am delighted with our
achievements, the quality of decisions we have taken, and the team
we have assembled to drive through what is effectively a re-birth
of your company.
I believe absolutely in the value of integrating investment
management and financial planning skills to offer our clients a
straightforward but comprehensive wealth management solution. To be
effective however, client solutions must be built around a central
core of strong governance and compliance structures and supported
by an institutionally robust methodology and systems.
I remain focused on the continuing transformation of the
business and it is my aim, therefore, to ensure that your company
is well-placed, well-resourced and has the intellectual capital to
become one of the leading integrated wealth management businesses
in the country.
Achievements and progress
I am pleased with our achievements driven by our Change
Management Programme (CMP). In September 2011 I outlined five short
term levers for success that we would complete by December
2012.
After 8 months, I am happy to report the following progress
against each target lever:
1. Reduce cost base by GBP5.2 million
On an annualised basis, we have achieved GBP4.1 million of cost
savings with a further GBP0.8 million to feed through in the first
half of our 2012/13 financial year from initiatives being
completed. We are ahead of schedule in our cost savings and moving
to an outsourced asset management platform in December will ensure
we will have achieved our target.
2. Ensure our revenue generators' remuneration moves from a
revenue share to profit-based remuneration
We converted our revenue generating employees to profit-based
remuneration across our Asset Management and Financial Planning
businesses.
This has been central to establishing profitability and I would
like to thank our staff for their understanding and acceptance of
this requirement and I am indebted to them for their loyalty and
pragmatism.
3. Achieve run rate profitability by 30th March 2012
The company achieved month-on-month profitability in the last
quarter of the financial year. Achieving a positive underlying
EBITDA figure of GBP0.45 million for the year under review provides
confidence that an increased positive underlying EBITDA is
achievable in the financial year ending March 2013. Although for
the year 2012/2013 there will be significant one-off costs from our
investment in the operating platform, as previously outlined, this
will deliver sustainable long-term profitability for your company.
I am pleased with the speed of this turnaround resulting from our
rapid and effective actions but stringent cost controls will
continue to be at the top of my management team's agenda.
Creating the optimum size of our operation resulted in staff
redundancies with staff numbers reducing from 373 in September to
319 in June 2012. This is always a difficult and painful exercise,
but has been an imperative.
4. Integration of our FUI on to a wider platform and re-pricing
our existing book of business by March 2014.
Our Advisory Operating Platform, provided by Cofunds, is due to
go live at the end of August 2012, giving our clients, who form
part of our Funds Under Influence, choices in how we look after
them. These cover our full advice service, guided light, that
allows clients to dip in and out of advice as they see as
appropriate for their needs, and self directed execution only
investment offerings. In addition, we have launched our RDR pricing
model and will be operating this model for all new business from
1(st) September. We will migrate our existing business to the new
pricing model over the next 12 months. This goes further than
current RDR requirements but the transparency and clarity it
demonstrates to clients will have its own reward.
5. Operating Platform
Richard will detail in his report our progress on the strategic
imperative of outsourcing our asset management operating platform
to one specialist provider. This will allow the business to
concentrate on its core area of manufacturing and ensure that our
fund managers have the modern portfolio tools and systems they
require. In addition it will deliver scalability to meet our growth
plans and the leverage to ensure when acquisitions are made
significant synergies can be created to deliver enhanced
shareholder returns.
Strategy
We provide solutions across the high net worth, mass affluent
and direct-to-consumer sectors, but our core market will remain the
mass affluent sector; the fastest growing sector.
Our strategy is simple: we will provide a straightforward and
comprehensive solution for all our clients' wealth-related
requirements. Central to our proposition is the combination of
robust institutional quality research and investment skills and
capabilities, demonstrably enhanced by the intellectual capital of
the Group. We provide solutions across the high net worth, mass
affluent and direct-to-consumer sectors, but our core market will
remain the mass affluent sector; the fastest growing sector.
We will fully integrate our asset management business, merging
Savoy and Ashcourt Rowan Asset Management ("ARAM") under the ARAM
brand. We have been operating these two businesses as one since
April 2012 and will complete the transfer of clients and their
assets by 1st October 2012. Our 108 asset managers and financial
planners will use the same central advice platforms ensuring that
the solutions and customer experiences are of the same high
standards regardless of who is looking after them.
By the end of August 2012 we will have our Advisory Operating
Platform in place that will allow our clients the choice of service
levels. Clients will be able to access our research, best advice
lists and take advantage of our scale pricing.
We will introduce a central marketing and client acquisition
programme across the Group later in the year. In addition, we will
review our brand and, in examining the manner in which our clients
wish to interact with the company, seek improvements and
enhancements.
I have been heartened by the number and quality of people who
want to join us which I believe is due to the growing perception of
Ashcourt Rowan as a robust, well-managed, progressive business.
Where it fits our strategy we will add teams across our geographic
network or indeed open offices in strategic locations where the
group has no presence.
The current environment represents a huge opportunity for our
Group to acquire businesses and over the course of the next 12
months we will be reviewing options and seeking opportunities to
make acquisitions.
Key Market Opportunities
I believe wealth management to be the most exciting and
interesting sub-sector within financial services. Regulatory
demands can only be met by those with strong balance sheets and a
real desire to change outmoded, unacceptable working practices.
This undoubtedly will lead to continuing consolidation in the
market.
Only by underpinning personal service with institutional levels
of infrastructure and support will we ensure that clients are
getting the most suitable advice backed up by strong governance,
and robust intellectual capital. Scale leads to more effective
pricing and the ability to achieve significant cost reductions from
providers which can be passed on to the client. For too long this
sector has been full of subscale, life-style businesses but the
market is changing.
Key to securing a growing share of this market is to have
multiple entry points for clients and to give different client
types alternative ways of engaging. I do not believe that you can
offer good holistic planning advice without also having the means
to create robust investment solutions. I see the most successful
scale players in this sector developing both disciplines to satisfy
client needs.
The opportunity for a business with the right model to create
significant shareholder value is considerable and we are in one of
the few areas in this sector, and across the wider economy, where
there are real opportunities for significant double digit
returns.
Asset Management Business Update
Key Metrics to be included
Our asset management business had a successful year in 2011/12,
consolidating on 2010/11 overall revenues but with a greater
proportion of management fees and recurring revenues. During the
year we had net inflows of GBP44 million, with stronger performance
during the second half of the year with fund under management
increasing by GBP165 million from GBP1.95 billion at the end of
September to GBP2.12 billion at the end of March. Total gross flows
during the year stood at GBP245 million.
At the end of this reporting period we started managing the
Savoy and ARAM operations as a single business under the ARAM
banner. Once the process of transferring clients and their assets
to ARAM is complete, Savoy will cease to be actively operated and
will be de-regulated.
I am delighted that Christopher Jeffreys has accepted my offer
to become the Chief Executive of the enlarged ARAM business. We
have put in place a new Board and I am equally delighted that Hugh
Ward, a non-executive Director of the Group, has accepted my offer
to Chair the business. In addition, in February Toni Meadows joined
as Chief Investment Officer (CIO) for the Group. David Esfandi,
whom I am pleased to welcome, will be Christopher Jeffreys' deputy
and is working closely with Toni on our investment proposition.
We are actively growing our asset management business and are in
talks with a number of managers to join us. The new vibrant,
product offering we have to offer is gaining attention across the
industry.
As outlined above we are currently in the process of selecting a
third party Retail Operating Platform for our asset management
business, delivering modern tools for our managers, greater
scalability and reliability of our investment management
administration. We aim to start our transition to the new platform
in Autumn and to complete the process by the end of this financial
year.
Our Asset Management business has a new purpose and direction
and is challenging our competitors successfully both in our
acquisition of direct clients but also by being the outsourced
investment solution of choice for a number of IFAs.
Financial Planning Business
Our Financial Planning business has undergone fundamental change
over the second half of the period. Overall, it has been a
successful year for this division and I am pleased by the
improvements made to our client proposition and our readiness for
RDR. The Group will have over 90% of our adviser through level 4
qualification threshold by the end of August. We will be rolling
out our RDR proposition to clients and operating within an RDR
environment from 1 September this year. Revenues are up against
2010 / 11 from GBP10.6 million to GBP12.5 million, a growth of 18%
year on year.
The focus has been on developing and introducing a suitable RDR
proposition, developing our platform, re-training our advisers and
developing robust and sustainable processes to ensure suitability
of our advice.
As part of my review of the Group Governance Structure, I am
delighted that Chris Williams has accepted my offer to become Chief
Executive of Ashcourt Rowan Financial Planning, and we have
instigated a new Board structure for this business. I am also
delighted that Jim Roberts has accepted my offer to Chair the
business.
The next few years will be challenging times for the advice
sector in the UK following the implementation of RDR. I believe
that we are extremely well-placed to navigate these challenges. We
have completed the intellectual challenge of developing a robust
strategy, we have the quality of advisers able to adapt and have
trained and prepared well. Our shareholders can be reassured that
we are in best possible position to succeed.
Jonathan Polin
Group Chief Executive Officer 6 July 2012
BUSINESS AND FINANCIAL REVIEW
Note: The Financial Review review should be read in conjunction
with the financial statements and the notes thereto set out
below.
Review in Brief
As has been stated earlier, the second half of the year under
review has been one of considerable change which, although still a
work in progress, has demonstrated significant benefits to the
Group, both financially and structurally.
Critical to the success to date has been the clear focus on the
five short term levers for success and then the creation and
management of a clearly defined Change Management Programme (CMP).
As a result of the successful placing in December 2011, the
business is in a solid financial position from which to build a
Group able to build and deliver value to shareholders.
We have seen Revenue increase to GBP36.4 million and,
importantly, we have seen a positive, underlying EBITDA figure (of
GBP0.4 million) which has reversed a first half declining trend. In
addition, our aggressive cost reduction plans are on track to meet
or exceed our target of GBP5.2 million in annualised run-rate
savings during 2012 -13.
These are pleasing milestones in a process that has started
exceptionally well but still has some distance to go. In support of
the strategy and the continuing implementation of the CMP, we are
committed to ensuring that costs savings in particular are
maintained and that all areas of our business continue to adhere to
the mantra of cost control and careful management.
Our progress, especially in the second half of this year,
provides very solid foundations to develop our growth strategy,
both organically and non-organically, and ultimately deliver
attractive returns to our shareholders.
Revenue
I am pleased to report that the Group's revenue for the year to
31 March 2012 grew to GBP36.4 million (2011: GBP35.1 million) in
respect of continuing operations. The Group derives its revenue
from provision of financial and investment management services to
private individuals and institutions.
Profitability
The Group achieved positive Underlying EBITDA (profit before
interest, tax, depreciation and amortisation and exceptional costs)
of GBP0.4 million for the year to 31 March 2012, reversing a trend
of deteriorating profitability during the first three quarters of
the financial year. The full year positive Underlying EBITDA result
compares with a loss of GBP0.2 million for the six months to
September 2011, a result arising from a combination of stronger
activity, positive funds under management inflows in combination
with the cost reduction programme which is starting to reduce the
cost base.
This is a key metric for shareholders and management as it shows
the immediate benefits of our approach, both to cost savings in
general but also to restructuring the business and focusing on
revenue initiatives, and is an indication of the business as being
more effectively and efficiently managed. It is testimony to a
well-thought out and well-executed set of priorities and processes
- a philosophy that we intend to maintain in future years.
After one-off costs (GBP1.3 million, primarily restructuring
costs and Change Management Programme - CMP - investment),
depreciation and amortisation the Group's operating loss from
continuing operations for the year to 31 March 2012 was GBP2.4
million (2011: GBP5.9 million).
The Group's loss before tax for continuing operations for the
year to 31 March 2012 was GBP2.3 million (2011: GBP5.75 million).
This loss is after an impairment charge of GBPnil (31 March 2011:
GBP1.5million) on the Goodwill and other intangible assets of the
Group.
The Group's loss after tax including discontinued operations was
GBP2.6 million (2011: GBP16.77 million)
The basic loss per share including discontinued operations for
the year to 31 March 2012 was 12.39 pence (2011: 92.91 pence),
while the basic loss per share for continuing operations for the
period was 10.39 pence (2011: 28.73 pence)
Funds under Management and Advice
The Group's total funds under management and influence stood at
GBP4.1 billion at 31 March 2012, of which GBP1.6 billion was
discretionary and managed advisory assets.
A detailed review of the Funds Under Influence (FUI) resulted in
a restatement announced with the Interim Results at 30 September
2011. After the restatement, reported assets at 30 September 2011
were GBP3.93 billion in total and GBP1.49 billion in discretionary
and managed assets. Funds under management and influence at 31
March 2011 were GBP4.46 billion (before restatement).
In the six months since the restatement of assets at the end of
September 2011 total funds under management and influence grew by
GBP147 million, or 4%, and discretionary and managed advisory
assets grew by GBP160 million, or 11%.
Significant progress is being made in better understanding,
analysing and segmenting our existing client base. This effort is
critical to support new initiatives and delivering the right
investment and service proposition to clients at the right
price.
Capital Structure and Funding
The Group is pleased to report that it conducted a successful
placing of new ordinary shares in December 2011 raising GBP8.5
million from existing and new shareholders. The placing is a
testament of shareholders' support for the strategic direction of
the Group and ensures that the Group is well capitalised and able
to invest to support the move to a single integrated operating
platform and to drive future growth.
On 5 December 2011, the Company initiated a consolidation of
existing ordinary shares of GBP0.002 into new ordinary shares of
GBP0.2. Every 100 existing ordinary shares held by shareholders
were consolidated into one new ordinary share of GBP0.2. Following
the consolidation the Group's share capital at 31 March 2012
comprised 26,938,473 (31 March 2011: 1,810,748,627 shares of
GBP0.002) ordinary shares of GBP0.2 each issued and fully paid for
cash.
At 31 March 2012, the Group had net assets of GBP48.5 million
including total cash balances of GBP9.1 million. Total net cash
increase during the year was GBP3.5 million, with an operating cash
outflow of GBP(0.8)m after exceptional and CMP expenditure (before
movement in working capital).
The total regulatory capital requirement across the Group's
regulated entities at 31 March 2012 was GBP5.3 million with a
capital resource surplus across all regulated entities of GBP2.2
million and a cash balance of GBP4.5m outside of regulated
entities.
Cost Saving and Efficiency Programme
During the course of the financial year the Group has embarked
on a cost reduction programme designed to support the Group's
return to profitability, strengthen its resilience for changing
market conditions and ensure the Group can confidently continue to
invest in its critical CMP.
The target objective for the cost saving programme was to
deliver GBP5.2 million in annualised cost savings. I am pleased to
report that at the beginning of April 2012 we had completed
initiatives delivering annualised cost savings of GBP4.1 million
with further initiatives being completed that will deliver a
further GBP0.8 million in annualised savings during the first half
of our next financial year (2012/13).
The key components in cost savings achieved or being completed
are as follows:
-- Headcount reduction c. (40% of total)
-- Financial Planning and Investment manager incentive model restructuring (40% of total)
-- Purchasing and others (14%)
-- Premises rationalisation (6%)
Part of the remainder of the planned cost savings is dependent
on successful implementation of a single operating platform and the
integration of the asset management companies, Savoy and ARAM and
we are confident we will be able to meet and exceed the planned
cost savings before the end of the 2012/13 financial year.
The progress on the cost efficiency programme allows the Group
to more confidently invest in:
-- Strengthening our research and central investment capability
-- Selective recruitment and acquisition of investment management and financial planning teams
-- Providing robust, scalable operating platforms, for advisory and investment management
Alfio Tagliabue
Group Chief Financial Officer
6 July 2012
BUSINESS REVIEW (CONTINUED) AND OPERATIONS REVIEW
"The aim is nothing less than a long term cultural change to
ensure growth and profitability".
Managing the Transformation of our business
In our CEO's report, Jonathan clearly articulated our strategy
and it is my role to help deliver it. I lead a Change Management
Program which will continue to affect a fundamental and lasting
change in how we manage our business; the processes that underpin
the Group's activities; and the robustness of how we advise, report
and communicate. The aim is nothing less than a long term cultural
change to ensure continued growth and profitability.
On my arrival, it quickly become apparent, having reviewed
earlier planned projects, that delivery of the 5 levers required a
remodelled comprehensive Change Management Programme (CMP). This is
a plan of work to address our underpinning ICT needs; simplify our
operations support; and establish controls and governance at the
heart of our business. The CMP will be a major factor in ensuring
the future success of our revenue generation across the Group.
Whilst not technically in scope of the CMP, its continued
success relies on re-energising the intrinsic support of our core
functions; the effectiveness of our facilities; our procurement
processes; and, most importantly, developing our people into
effective "agents of change", principally through our invigorated
communications activities. These initiatives are therefore very
closely tracked and reported below.
I am proud to report that the CMP is well advanced. It continues
to gain in tempo. It has delivered on a significant percentage of
its objectives. We have recruited a great team of specialist
Delivery staff, using a tightly-costed resource plan. We operate
under the close and rigorous control of a focussed CMP Steering
Group, which also includes the Group CEO, CFO and Project
Directors. Equally important to the continued success is the
significant time, zeal and expertise committed by all of our senior
staff and employees, who are on the march to achieve this
transformation. We have also invested in good advice, guidance and
auditing expertise from Ernst & Young. This has been focussed
on RDR, the Operating Model and Controls and Governance programme,
and has further reduced our integration risk, whilst providing a
handrail to best practice.
Financial Planning
Within our Financial Planning business, the objective is to
offer clients the most suitable products and levels of service,
tailored to their requirements. We have identified and appointed
the market-leading Advisory Operating Platform provider, Cofunds,
to deliver improved choice. This platform will enable clients to
manage all their financial assets in one place, in a fully RDR
compliant manner.
On target to launch the platform in September 2012, we have
commenced the training processes on it for all our advisers. This
initiative has been reinforced by investment in centralised support
systems, ensuring client's suitability for investments. Other
supporting initiatives include incorporation of specialist advice
on RDR, development of associated suitability tools and delivery of
a centralised para-planning team.
Asset Management
The development of a single Asset Management business is
proceeding well. The integration of Savoy and ARAM is managed by a
dedicated and experienced team, to ensure this complex task is
delivered to plan and on time. We have been, de facto, operating
these two businesses as one since April 2012 and propose to
transfer our Savoy clients' assets into ARAM by 1(st) October 2012.
Clients will receive new Terms of Business and Fee Schedule - all
of which are assured as RDR compliant. We have also created a
powerful Research Centre to provide high-calibre investment advice.
But, most importantly, integration is the catalyst for a
streamlined, consistent, lower cost, and more efficient
service.
Very excitingly, the impending confirmation of our new Operating
Platform solution will signal the beginning of the implementation
of a new Asset Management Operating Model. This model will provide
our clients with a consistent and robust system of institutional
standard to support their needs. It will also provide a centralised
process of ensuring that our investment managers can access and
provide the same high quality information and investment service to
clients, wherever they are physically or metaphorically in the
investment process. The system will underpin a Customer
Relationship Management platform, which is under development, to
support prospecting and service delivery. The model will enable
clients to view all their investments via a single web-portal.
The Operating Model development has been conducted by a
disciplined, thorough analysis and evaluation of our needs; and a
rigorous selection of the possible providers, who had the
horsepower to deliver such a powerful system. Whilst we will remain
considered throughout, we have set a demanding pace with our
delivery schedule and expect to go live on the new Operating
Platform for new business by the end of 2012, with most existing
clients being migrated from legacy systems in 2013.
Controls and Governance
In the current economic environment, and within the forthcoming
RDR framework, we have a huge opportunity to differentiate our
offering by placing controls, compliance and governance at the
centre of our change agenda. We have focused heavily on ensuring
our systems and approach to this area not only meet all future
demands but exceed them. The outputs of the Controls and Governance
Project are constantly feeding the designs of other projects. We
have again, been working closely with Ernst & Young who have
reviewed all our proposals to ensure we deliver best practice in
this critical activity.
Operations Restructure
In anticipation of the products of the CMP, and in keeping with
our approach of centralising systems whilst upgrading our service
offering to clients, the core Operations team, have examined all of
their activity. We have implemented some fundamental changes to the
way we work and how we support our clients and investment
professionals. We have created a centrally operated model to
support our Financial Planning Advisers and Corporate teams, whilst
we continue planning to create a refined middle office function
that will support the entire Group. This will be finessed over the
next 6 months. It is my strongly held belief that these
efficiencies will not only benefit clients but also will increase
capacity for our advisors to seek new business.
ICT
On arrival, I also examined the state of our ICT estate. Earlier
acquisitions had not been fully integrated, and the previous lack
of a consistent ICT approach had led to the growth of an
inefficient and outdated infrastructure backbone. Given the
underpinning relationship ICT plays to the outputs of the CMP, as
well as business as usual, remedial action on our ICT has been a
key deliverable. We have consolidated and cut the number of servers
in half, making the system easier to manage, reducing costs and our
environmental impact. We have consolidated our data storage and
disaster recovery sites, into two bespoke Level 3 sites. We are
also nearing completion of the migration of our data into a secure
virtual cloud. This has had a pleasing impact on administration,
availability, costs and security. We have also launched a central
Helpdesk facility. The addition of highly skilled staff will
improve the ICT migration towards a technology enabled business,
commensurate with the omnipresent and voracious information demands
of our clients and staff alike.
Communications
In any complex project such as the CMP, ensuring that all the
staff understand the objectives, the benefits to them and their
clients, as well as what they need to do to contribute is crucial
to success. Our internal communications initiatives have therefore
featured strongly. We created and produced two all-staff Roadshows,
where questions were encouraged and information exchanged. We
delivered a series of Away Days for subject matter experts, and we
sponsored local workshops to help inform and educate staff. We have
increased our communication capabilities by installing an Intranet
to publish news of planned changes. The CEO created an Advisory
Council to help inform his decision making and to collectively
resolve key issues as they arise. The feedback suggests that our
dedicated staff is better empowered than ever to produce the
fundamental change we must deliver together.
Equally, our external communications have a major role to play.
Reflecting our approach to centralising many of the key operational
activities, we are creating a central Communications function to
help us present a consistent Ashcourt Rowan message. We are
planning improvements in both traditional and digital media, to
support the acquisition of new clients and to communicate with
existing clients and other stakeholders on the improvements we have
delivered.
Costs and Procurement
We have taken the cost saving agenda to heart and contributed
significantly to the Group's cost reduction targets, whilst also
funding accelerated delivery of key initiatives by prioritising
spend and targeting waste. The objective has been to save costs but
also to improve how we present ourselves to clients and prospective
talented new employees. We have delivered short term focussed and
incentivised cost reduction programmes. Examples include targeting
information system costs, developing new procurement processes and
inhibiting inefficient local purchasing. We are amalgamating 3
offices in the North West into a new Manchester office. We have
refurbished the client areas within the Queen Victoria Street
office in London, consolidated our two Bournemouth offices into one
and closed two other offices. We have simultaneously reduced the
number of suppliers and improved supplier management, creating a
smaller number of key partners. These are not just in-year cost
initiatives. They will develop into continuing efficiencies in the
medium and future terms.
Outlook
We have achieved a great deal this year and the CMP has been
highly effective in helping the Group operate its 5 levers for
success. The underlying objective is to improve the services we
provide to clients and to attract new clients, whilst providing a
platform for expansion. Soon, we will have one operating model for
an integrated Asset Management business that can easily integrate
larger inflows of assets. Our Financial Planning business will soon
have further tools to support clients' investment objectives,
including the delivery of our own advisory platform. The supporting
ICT will be run from stable secure data centres, with the highest
specification disaster recovery systems in place. This will help to
provide clients and investment professionals with a wide-range and
consistent Ashcourt Rowan service that will be available, very
nearly, at all hours.
Finally, I would like to mention the Core Functions, Operations
and CMP teams for their exceptional work, long hours, and
dedication in helping to move the Group forward so quickly. Whilst
there is plenty more to be done, the progress noted within this
Report is testimony to their effort and commitment - thank you.
Richard Sinclair
Group Chief Operating Officer
6 July 2012
BOARD OF DIRECTORS
Non-Executive Chairman
Kenneth West - after serving as an army officer he spent 15
years with Reuters, the financial services information group,
latterly as Managing Director of the Middle East and Africa. He now
runs the investment advisory group, Kenneth West Associates, and
has successfully developed a number of companies with international
trading interests in Europe, the Middle East and the United States
in the high technology, natural resources and service sectors.
Kenneth also serves as an adviser to certain AIM traded finance and
investment companies. He became a non-executive Director in March
2006 and was appointed Chairman in August 2011. Kenneth is also
chairman of Ashcourt Rowan's Remuneration Committee. He is Chairman
of the loss adjusting company, GAB Robins Holdings UK Limited and
the AIM listed telecoms company, Norcon Plc.
Non-Executive Director
James Roberts - 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, and MGM Advantage, a mutual life assurance
company specialising in the annuity market. He is an adviser to
Simply Biz, a broker service provider and also Chairman of the
Investment Committees of Verbatim Investment Management and
Insynergy Investment Management.
Non-Executive Director
Steve Haines - Steve joined the company in August 2011, having
worked in the Asset Management sector at Dwyer since 2009. A
qualified accountant, he had previously spent twenty 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 the Chairman of Ashcourt
Rowan's Audit Committee.
Group Chief Executive
Jonathan Polin - As Group Chief Executive, Jonathan Polin is
responsible to the Board for the development and delivery of the
Group Strategy. Jonathan joined the company 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, 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.
Group Chief Financial Officer
Alfio Tagliabue - 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
11 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.
Group Chief Operating Officer
Richard Sinclair MBE - Richard Sinclair joined Ashcourt Rowan in
January 2012 as Group Chief Operations 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 their 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 included
operations in the Middle East and Central Asia. He was decorated
with an MBE in 2008. He has a MSc from Cranfield University; an MA,
with merit, from Kings College London; and an Honours degree in
Immunology, from Glasgow University.
PERFORMANCE MONITORING AND REVIEW OF KEY RISKS
Key Performance Indicators
Historically the Group has used a number of financial
performance measures to monitor its achievements 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 fund 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;
-- client satisfaction.
The Group has started a comprehensive review of its Management
Information and KPIs to ensure it continues to enhance its ability
to monitor its activity and to support decision making.
A business plan and budgets are prepared for the Group each year
and progress against these is monitored throughout the year by the
Board.
Risk Management
The Group has reviewed its risk management framework 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:
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.
Non Financial Risks
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. Unfavourable developments, such as
the ongoing difficulties in the financial sector and slow or
negative economic growth rates have already adversely affected the
Group's financial performance and could continue to cause its
profitability to decline.
Over the majority of the past 4 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 not possible for the Group to control global economic
conditions it mitigates the risk through review of its strategy 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 and fund
managers. 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 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 the
employee risk through a combination of profit driven incentives
structure for key revenue generators, developing staff internally,
fostering an attractive working environment and looking at
effective models to attract new advisors and asset 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 is 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.
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 where 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. As part of its
Change Management Programme the Group has put specific emphasis on
a Control and Governance stream to ensure our controls are robust
and our model is compliant and future proof, in particular with
reference to changes following the introduction of RDR. 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.
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 maintains Business Continuity and
Disaster Recovery plans.
Market counterparties
The Group may from time to time have exposure to market
counterparties whose credit worthiness or perceived credit
worthiness 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 Group
may also be exposed to the credit risk of the counterparties with
respect to payments under derivative instruments. Failure by
counterparty to make payments due under a derivative instrument may
reduce the Group's income and adversely affect its results. 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 investment funds 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 ability to invest in a
range of traditional and alternative asset classes and investment
in funds investing 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 through 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. The system and operating
platform compliance and monitoring support elements are an
important component in the Group selection of its operating
platform partner/s.
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.
The Group maintains insurance although 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.
Further strengthening of overall systems, governance and
controls is central to the Change Management Programme initiated
during the financial year.
Acquisition risk
The Group has undertaken a significant number of acquisitions in
the past with 11 acquisitions having been completed since September
2005 when Ashcourt Rowan was admitted to AIM. 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.
DIRECTORS' REPORT
The Directors present their report and the audited financial
statements for the year ended 31 March 2012.
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 institutions.
The Chairman's Report, the CEO Report, the Finance Review,
Operations Report and the Business Review provide a review of the
Group's activities during the year, including a consideration of
key performance indicators and risk management policies. The CEO
Report also provides details of some of the Group's planned future
developments.
Results and dividends
The results of the Group for the year show a loss after tax of
GBP2.6 million (2011: GBP16.77 million). No dividends have been
paid or proposed.
Capital Structure
The Company's share capital is comprised of one class of
ordinary shares of GBP0.2 each. At 31 March 2012, 26,938,473 shares
were in issue (2011: 1,810,748,627 share of GBP0.002). 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 Company'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 Company is an owner of certain UK Financial Services Authority
regulated companies and, as such, there is a requirement upon
'controlling shareholders' to seek permission from the Financial
Services Authority for holdings of 10% or more of the Company's
share capital.
Voting rights of shares held by the trustees of the Company'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
Company is governed by the Company'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 at the date of this report are listed and their
biographies provided in subsequent sections below.
The Directors who served during the year were:
Kenneth West
Mark Cheshire (resigned 17 August 2011)
Peter Dew (resigned 31 July 2011)
Neil Hale (resigned 15 December 2011)
Jeremy Rance (resigned 15 December 2011)
Ranil Perera (resigned 1 April 2012)
Jonathan Polin (appointed 2 September 2011)
Stephen Haines (appointed 5 August 2011)
Alfio Tagliabue (appointed 9 January 2012)
James Roberts (appointed 10 January 2012)
Richard Sinclair (appointed 1 April 2012)
The beneficial interests of the Directors in the shares, share
options and long-term incentives of Ashcourt Rowan plc at 31 March
2012 were:
Ashcourt Rowan plc Beneficial Holdings Beneficial Holdings
- Ordinary Shares at at
of GBP0.2 31 March 2012
31 March 2011
Jonathan Polin 200,000 -
Kenneth West 42,000 -
Ranil Perera 5,000 -
Details of options held by the Directors in the Company as at 31
March 2012 are set out below:
Option Date from
31 March Exercise which exercisable
2012 price Expiry date
Kenneth West
Unapproved (post consolidation) 2,000 GBP12 19/12/2011 19/12/2018
Other than the above, no Director had any interest in the shares
of the Company or any other Group company at 31 March 2012.
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.
Communications
Employee communications are key and always a challenge for
companies with multiple sites and offices. The Group's new
management structures, with dedicated regional and area management,
have facilitated communication and the Group now has an experienced
Communications Manager and Communications team. In addition to
regular email updates, a monthly management briefing is
disseminated via all managers through team meetings. Plans are also
underway to introduce regular webinars and interviews with senior
management.
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 Group is committed to minimizing the amount
of travel that its employees undertake and to recycling as much of
the Group's waste as possible.
Employees
As at 31 March 2012, the Company employed 46 people (31 March
2011: 44 people), including two Executive and four non-Executive
Directors. The Group's subsidiary companies employed a total of 294
persons as of 31 March 2012 (31 March 2011: 327 people). The group
as a whole employed 340 people as of 31 March 2012 (31 March 2011:
371 people). On a Full Time Equivalent basis at 31 March 2012 the
Group's subsidiaries employed a total of 283 FTEs (Total Group
FTEs: 323) .
Overall for the Group staff costs and incentives were 64.3% of
revenue during the year (2011: 68%).
We need to plan carefully for the success and future growth of
our business. Key to this strategy is our ability to recruit and
retain high quality staff. Reward structures were reviewed during
the year, and further work is being carried out to develop
additional long term incentive schemes.
All our managers are fully focussed on developing their staff as
a key element in the growth of the business. Currently our main
focus is to ensure that all our staff affected by the Retail
Distribution Review (RDR) gain all the additional formal
qualifications and learning required and have made very good
progress towards this.
Employee involvement
The Group recognises the value of communication with employees
at all levels, particularly as its offices are located across the
UK. Various cross-company committees are formed for a variety of
projects and visits to the various office locations are
encouraged.
The Advisory Council established by the new Group CEO during the
financial year brings together staff representatives as an
additional forum to foster two-way communication between the Group,
its Senior Management and its staff.
Equal Opportunities and Dignity at Work
The Group is an equal opportunities employer and is committed to
equal opportunities in its employment and recruitment practices.
The Group's Equal Opportunities and Dignity at Work Policy ensures
that no potential or existing employee or worker receives less
favourable treatment than another on the grounds of their age, sex,
gender reassignment, pregnancy, maternity, race (which includes
colour, nationality, and ethnic or national origins), sexual
orientation, religion or belief, or if someone is married or is in
a civil partnership.
The Equal Opportunities and Dignity at Work Policy applies to
all workers and the Group also aims to encourage 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. As the employees work in office environments, there
are no significant areas of risk on which to report.
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 2012 was 40 days (2011: 36
days).
Charitable and political contributions
No charitable or political donations were made during the
period.
Substantial shareholdings
At 31 March 2012, the issued share capital of the Company was
26,938,473 ordinary shares of GBP0.2 each (2011: Pre consolidation
1,804,015,296 of GBP0.002 each) and the following notification of
shareholdings had been notified to the Company as holding 3 per
cent or more of the Company's share capital:
% of
Name of Holder No of shares Total
------------------------------- ------------- -------
Jodi One Trust 4,463,798 16.57
ACP Octagon Ltd 4,030,831 14.96
La Galera Corporation 3,422,637 12.71
Artemis Investment Management
LLP 1,940,000 7.20
Henderson 1,854,646 6.88
Kestrel Partners LLP 1,679,490 6.23
Al Bateen Investment Company
LLP 1,644,916 6.11
UBS AG London 1,500,000 5.57
Citigroup Global Markets UK 1,114,260 4.14
Man Securities Inc 1,032,433 3.83
Financial Instruments and Risk Management
The risk management objectives and policies of the Group are set
out in note 28 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.
Reduction in Share Premium Account
On 22 February 2012 the Company was granted an order by the High
Court of Justice confirming the approval for the Company to reduce
the amount of the share premium account by GBP50 million.
In accordance with the order, the amount of the share premium
account so reduced and has been credited as 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.
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 Company'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 Company's auditors are aware of that information.
Auditors
BDO LLP were re-appointed as auditors during the year and a
resolution to re-appoint them under section 489 of the Companies
Act 2006 will be proposed at the next Annual General Meeting.
By order of the Board
Alfio Tagliabue
Company Secretary
6 July 2012
CORPORATE GOVERNANCE
As an AIM quoted company, compliance with the Financial
Reporting Council's UK Corporate Governance Code (the "Code") is
not mandatory. However, the Board is committed to maintaining
appropriate standards of corporate governance and has adopted a
"comply or explain" approach as has been recommended within the
2008 edition of the Code and the 2010 update.
Statement of compliance
The Board considers that given the size and nature of its
activities it does not intend to comply with the Code in respect of
certain items listed below. This is considered by the Board to be
reasonable and does not compromise the overall principles of
corporate governance which the Board strongly supports:
-- The Remuneration Committee, in deciding on remuneration at
its annual review, takes into account the performance of the Group
as a whole and that of the individual Directors. However, the
nature of this performance evaluation is not specified in the
Annual Report (Code A.6.1)).
-- Where the Board permits the Executive Directors to serve in
roles with other companies, as long as they do not compromise the
individual's ability to perform those services to the Group, the
earnings from such roles are not disclosed to the Board nor paid to
the Group (Code B.1.4).
-- The Board has not created a Nominations Committee (Code B.2.1
and B.2.4) as it believes that with the current number or directors
being relatively small, the full Board should be included in the
process for making Board appointments. The recommendations within
the Code regarding the appointment of new directors to the Board
(Code B.2.2, B.2.3 and B.3.1) are complied with by the Board.
-- Shareholders have not previously been invited to specifically
approve all new long-term incentive schemes and significant changes
to existing schemes (Code D.2.4).
The Board considers that the remuneration of Executive Directors
should include a performance related element which is almost
entirely based on the award of Long Term Incentive Plan 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 in subsequent sections.
Board of Directors
The Board of Directors has overall responsibility for the
Group.
The Board comprises a Non-Executive Chairman ("Chairman"), a
Group Chief Executive, three Non-Executive Directors (one retired
with effect from 1 April 2012) and two further Executive Directors.
The Chairman has share options in the Company and also receive
fees, as disclosed in the Remuneration Committee report . 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 near future to seek to appoint an additional
Non-Executive Director to provide certain specialist knowledge and
experience. The roles of Chairman and Chief Executive are intended
to remain separate.
The Chairman provides strategic and operational guidance
bringing to bear his extensive experience of the fund management
industry. He also oversees the duties performed by the Group Chief
Executive and ensures that they are in line with Board
expectations. The Group Chief Executive manages the day-to-day
running and strategic direction of the company 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 24
meetings of the Board of which 7 full Board meetings, 6 meetings of
the Remuneration Committee, 8 meetings of the Audit Committee and 7
meetings of the Group Risk Committee. All full meetings were fully
attended by their constituent Directors.
The senior independent director is Kenneth West. The Board
considers that Kenneth West and James Roberts were independent for
the purposes of the Code. With regards to Kenneth West, he was an
executive director of the Company until March 2006 and was awarded
share options over ordinary shares in the Company as a result of
this role, as disclosed in the Remuneration Committee report
detailed below. However the Board has concluded that the very low
monetary value of this award means that this award does not impact
upon Kenneth West's independence. Copies of the terms and
conditions of the appointment of non-executive directors are
available from the office of the Group Chief Executive Officer at
60 Queen Victoria Street London EC4N 4TR.
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.
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 development and to keep them up to date with
Ashcourt Rowan 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
Audit and Remuneration Committees have written terms of reference,
which were last reviewed in June 2006 and approved by the Board.
The Risk Committee was formed more recently and its terms of
reference were reviewed and adopted by the Board on 25 September
2009. Membership of the committees is set out below. Copies of the
terms of reference for all three committees are available from the
office of the Group Chief Executive Officer at 60 Queen Victoria
Street, London EC4N 4TR and are set out in the Group's website at
www.ashcourtrowan.com
Remuneration Committee
The Remuneration Committee met formally six times to discuss
remuneration and bonus arrangements. The Remuneration Committee's
report is set out below in a subsequent section of this report.
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 Kenneth West and comprises
Steve Haines and Jonathan Polin (Group CEO) both appointed on 2(nd)
September 2011.
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 Kenneth West
(previously Chairman of the committee), Jonathan Polin. Alfio
Tagliabue and Jim Roberts were appointed to the Committee after the
end of the financial year. During the financial year the Audit
Committee met formally on eight occasions.
The Audit Committee's mandate is to assist the directors in
fulfilling their responsibilities with respect to the Company's
financial statements and other financial information required to be
disclosed by the Company to the public, the Company's compliance
with legal and regulatory requirements, and the performance of the
Company's external auditor. In addition the Audit Committee has
oversight responsibility for the Group's Internal Audit function,
which is supported by an external specialist auditor, 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. 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 are not deemed to be of such significance to them as
to impair their independence and therefore the Audit Committee
considers that the objectivity and independence of the auditors is
safeguarded.
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. In order to expedite the creation of such a
function the Group has employed a third party consultant to assist
the Board in the creation of the internal audit function and to
carry out a number of reviews. This arrangement has continued with
the internal audit work being carried out by the third party
consultancy firm, reporting its findings to the Audit Committee.
The responses of the Audit Committee to the reports submitted to
date have been varied, depending upon the findings reported.
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.
-- 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 7 times during the financial year. James Roberts is the
Chairman of the Group Risk Committee having taken over from Ranil
Perera on 22 February 2012. The other participant in the Group Risk
Committee are Jonathan Polin, Group CEO, Alfio Tagliabue, Group
Chief Financial Officer, Richard Sinclair, Group Chief Operating
Officer, Mark Smith, Group Head of Compliance, Christopher
Jeffries, Director of Asset Management and CEO of Savoy.
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.
Conflicts of interest
A 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
Company's interests. The Act allows the Board to authorise a
Director's conflict or potential conflict of interest where the
Articles of Association contain a provision to this effect and also
allows the Articles of Association to contain other provisions for
dealing with Directors' conflicts of interest to avoid a breach of
duty. Shareholders approved the necessary changes to the Company's
Articles of Association at the Annual General Meeting on 25
September 2008.
A register of actual or potential conflicts notified and
authorised is reviewed and maintained regularly by the Board.
Relationship with shareholders
The Company places great emphasis on the importance of regular
communication with shareholders. The Group's website has undergone
extensive 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 Company 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 advisors, 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 working days before the Annual General
Meeting. Directors are required to attend Annual General Meetings
of the Company 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 Company
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 operational existence for the
foreseeable future.
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.
REMUNERATION COMMITTEE REPORT
Composition and Terms of Reference
The Group's Remuneration Committee comprises the non-executive
Chairman, Kenneth West, Steve Haines and Jonathan Polin, the Group
CEO. The Committee is chaired by Kenneth West.
The purpose of the Remuneration Committee is to ensure that the
Executive Directors and other Senior Executives are fairly rewarded
for their individual contribution to the overall performance of the
Company. The Committee considers and recommends to the Board the
remuneration of the Executive Directors and is kept informed of the
remuneration packages of senior staff and invited to comment on
them.
The Board retains responsibility for overall remuneration
policy. The Remuneration Committee operates within agreed terms of
reference.
Policy on Executive Directors' remuneration
Executive remuneration packages are designed to attract and
retain executives of the necessary skill and calibre to run the
Company successfully but avoiding paying more than is necessary.
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 in kind
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 in kind include death in service insurance, permanent
health insurance and private medical insurance. Benefits in kind
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 awards were
made to employees in line with the Group High Performance Culture
Review System. In parallel to the discretionary bonus scheme,
operating subsidiaries of the Group had during the financial year
formulaic bonus schemes in place 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 Company
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.
No new awards under the LTIP were made during the financial year
ended 31 March 2012.
Shares awarded in previous years under the LTIP were deferred
for up to three years from the date of award. Each award has
individually set performance criteria attached which must be met
before the deferred shares vest. The LTIP awards made to Directors
are disclosed within the Directors' report above.
(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.
Salaries and benefits were reviewed between March and June 2011
to cover the year from 1 April 2011 to 31 March 2012 and in June
2012 to cover the year from 1 April 2012 to 31 March 2013. Future
reviews will continue to be on an annual basis.
Service contracts
Executive Directors are employed under service contracts
requiring a maximum of 12 months notice by either party. The
Non-Executive Chairman, Kenneth West, and the Non-Executive
Directors, James Roberts and Steve Haines receive payments under
appointment letters which are terminable by up to twelve 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:
Compensation Share-
Salary for loss Benefits based
or fees of office In kind payments Pension Total
Executive Directors GBP GBP GBP GBP GBP GBP
J Polin** 202,820 - 1,212 - 20,282 224,314
A Tagliabue***** 46,410 - - - 46,410
R Sinclair** - - - - - -
J Rance*
(resigned 15 December
2011) 130,449 100,000 635 12,776 243,860
M Cheshire*
(resigned 17 August
2011) 248,092 224,702 1,435 - - 474,229
N Hale*
(resigned 15 December
2011) 103,333 - 1,012 - 10,870 115,215
Non-Executive Directors
P Dew* (resigned
31 July 2011) 26,667 - - - - 26,667
R Perera***
(resigned from 1
April 2012) 47,092 - - - - 47,092
K West**** 76,667 - - - - 76,667
S Haines** 41,154 - - - - 41,154
J Roberts** 11,290 - - - - 11,290
Total 933,974 324,702 4,294 - 43,928 1,306,898
* For period to resignation from the Ashcourt Rowan plc Board of Directors
** For period from appointment to Ashcourt Rowan plc Board
*** The fees for Ranil Perera were paid to Regulation and Risk Limited
**** The fees for Kenneth West were paid to Fernshaw Development Group Limited
***** For period from appointment to Ashcourt Rowan plc Board on
9th January 2012. During the year prior to his employment with the
Group and appointment as a Director Alfio Tagliabue provided
consulting services to the Group for which fees were paid to
Katalsys Limited
In addition to their emoluments, Directors received
reimbursement for expenses directly incurred on Group business.
Pension contributions are in respect of defined contribution
arrangements.
Kenneth West
Chairman of the Remuneration Committee
6 July 2012
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 European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company 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 company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
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 company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ASHCOURT ROWAN
PLC
We have audited the financial statements of Ashcourt Rowan Plc
for the year ended 31 March 2012 which comprise the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated and company statements of financial
position, the consolidated and company statements of changes in
equity, the consolidated and company statements of cash flow and
the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and the parent company's affairs as at 31
March 2012 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the directors' report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Neil Fung-On (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
Date 6 July 2012
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated income statement 2012 2011
Year ended 31 March 2012 Note GBP'000s GBP'000s
Continuing operations
Revenue 6 36,397 35,111
Cost of sales (15,819) (14,865)
Gross profit 20,578 20,246
Other Administrative expenses (20,133) (19,281)
Goodwill amortisation - (1,500)
Amortisation and depreciation (1,445) (1,825)
Share based payments (95) (273)
Exceptional costs (1,265) (3,286)
Total administrative expenses (22,938) (26,165)
Loss from operations 7 (2,360) (5,919)
Finance income 9 32 49
Other gains and losses 10 26 136
Finance costs 11 (18) (17)
Loss before tax (2,320) (5,751)
12 &
Taxation 19 138 564
Loss for the year from continuing
operations (2,182) (5,187)
Loss for the year from discontinued
operations, net of tax 5 (422) (11,584)
Loss for the year attributable
to the equity holders of the
parent (2,604) (16,771)
Loss per share - continuing
operations
Post share consolidation
Basic 13 (10.39)p (28.73)p
Diluted 13 (10.39)p (28.73)p
Loss per share - total operations
Post share consolidation
Basic 13 (12.39)p (92.91)p
Diluted 13 (12.39)p (92.91)p
The loss per share for 2011 has been restated following the
consolidation of the share capital during the year (see note
23).
Note: Profit before interest,
tax, depreciation, amortisation,
exceptional and share based
payment costs 445 965
The notes set out in the subsequent pages form part of these
financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME 2012 2011
FOR YEAR ENDED 31 MARCH 2012 GBP'000s GBP'000s
Loss for the year (2,604) (16,771)
Other comprehensive income:
Unrealised currency (loss)/gain recognised
directly in equity - -
Total comprehensive income for the
year (2,604) (16,771)
Attributable to:
Equity holders of the Parent (2,604) (16,771)
The notes set out in the subsequent pages of this report form
part of these financial statements
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION 2012 2011
AS AT 31 MARCH 2012 Note GBP'000s GBP'000s
Non-current assets
Goodwill 14 34,836 34,836
Other intangible assets 15 2,522 3,114
Property, plant and equipment 16 2,225 1,828
Available-for-sale investments 17 146 146
Total non-current assets 39,729 39,924
Current assets
Trade and other receivables 18 8,238 8,310
Taxation 120 81
Cash and cash equivalents 9,117 5,286
17,475 13,677
Assets of a disposal group held
for sale 5 - 1,073
Total current assets 17,475 14,750
Total assets 57,204 54,674
Current liabilities
Trade and other payables 20 (8,291) (10,311)
Loans and deferred consideration 21 (30) (130)
Short-term provisions 22 (30) (25)
(8,351) (10,466)
Liabilities of a disposal group
held for sale 5 - (548)
Total current liabilities (8,351) (11,014)
Non-current liabilities
Deferred tax liabilities 19 (313) (454)
Long-term provisions 22 (42) (74)
Total non-current liabilities (355) (528)
Total liabilities (8,706) (11,542)
Net assets 48,498 43,132
Equity
Share capital 23 5,388 3,621
Share premium account 24 28,697 72,522
Equity reserve 25 1,464 1,369
Retained earnings 27 12,949 (34,380)
Equity attributable to equity
holders of the parent 48,498 43,132
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
6 July 2012 6 July 2012
CONSOLIDATED STATEMENT OF Share
CHANGES IN EQUITY Share Premium Equity Retained Total
FOR THE YEAR ENDED 31 MARCH Capital Reserve Reserve Earnings
2012 (Note (Note (Note (Note
23) 24) 25) 27) GBP'000s
GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2010 3,608 72,522 935 (17,596) 59,469
Loss for the period - - - (16,771) (16,771)
Share-based payments - - 434 - 434
Transfer of shares distributed
by the Employee Benefit
Trust 13 - - (13) -
At 31 March 2011 3,621 72,522 1,369 (34,380) 43,132
Total comprehensive income
for the year:
Loss for the year - - - (2,604) (2,604)
Transactions with owners
recorded directly in equity:
Share-based payments - - 95 - 95
Transfer to equity reserve
in respect of shares distributed
by the Employee Benefit
Trust 67 - - (67) -
Issue of shares from placing
(net of costs) 1,700 6,175 - - 7,875
Share premium reduction - (50,000) - 50,000 -
At 31 March 2012 5,388 28,697 1,464 12,949 48,498
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 subsequent pages of this report form part
of these financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2012
2012 2011
Operating activities Note GBP'000s GBP'000s
Loss for the year (2,182) (5,187)
Adjustments for:
Depreciation of property, plant
and equipment 7 853 1,233
Amortisation of intangible assets 7 592 592
Impairment of goodwill and intangible
assets - 1,500
Share based payment expense 95 274
Discount on repayment of deferred
consideration 10 - (136)
Finance income 9 (32) (49)
Other gains and losses 10 (26) -
Finance costs 11 18 17
Corporation tax (credit)/expense 12 (138) (564)
Operating cash outflow before movements
in working capital (820) (2,320)
Decrease/(Increase) in receivables 713 (1,144)
(Decrease)/Increase in payables (2,568) 2,884
Decrease in provisions (27) (86)
Cash outflow from operations (2,702) (666)
Tax received 60 80
Interest received 9 32 49
Interest paid 11 (18) (17)
Discontinued operations - 699
Net cash (outflow)/inflow from operating
activities (2,628) 145
Investing activities
Purchases of property, plant and
equipment 16 (1,252) (2,080)
Sales of subsidiaries (90) 879
Cash balance transferred on sale
of subsidiary (320) -
Proceeds from liquidation of investment 10 26 -
Net cash used in investing activities (1,636) (1,201)
Financing activities
Proceeds of share issues 23 8,500 -
Costs of share issues 24 (625) -
Repayments of loans and payments of deferred
consideration (100) (869)
Net cash from financing activities 7,775 (869)
Net increase/(decrease) in cash and cash
equivalents 3,511 (1,925)
Cash and cash equivalents at beginning
of year 5,606 7,531
Cash and cash equivalents at end of year 9,117 5,606
The notes set out in subsequent pages of this report form part
of these financial statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH
2012
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 address of the registered office is given at the end of
this report. The nature of the Ashcourt Rowan Group's ("the Group")
operations and its principal activities are set out in the
Chairman's report above and the CEO's report, Finance review,
Operations report and in the business review above.
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 s408 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 GBP0.25m (2011: GBP15.79m).
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
The following new standards have not been applied in these
financial statements, will or 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.
- IFRS 10: Consolidated Financial Statements: establishes
principles for the preparation and presentation of consolidated
nancial statements when a reporting entity controls one or more
investees. The standard was published to deal with divergence in
practice when applying IAS 27 Consolidated and Separate Financial
Statements and SIC-12 Consolidation-Special Purpose Entities. The
Standards eventual adoption is unlikely to result in changes to the
preparation and presentation of the Group's financial subsidiaries,
associates or Limited Partnerships.
- 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
Standards adoption result in changes to the valuation of the
Group's assets. IFRS 13 is effective for annual periods beginning
on or after 1 January 2013.
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 2012 the Group reported net current
assets of GBP9.2 million (2011: net current assets of GBP3.7
million). The Directors have reviewed profit budgets and cash flow
forecasts for the coming year and expect the Group to strengthen
its operating profitability before exceptional, depreciation,
impairment and amortisation and to produce operating cash flow
sufficient to fund the Business Transformation investments being
carried out by the Group to move to its target operating model.
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) made up to 31 March 2012. Control is achieved
where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities.
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 any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
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 and unit
trust management and investment trust contracts recognised upon the
acquisition of subsidiaries. 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
Acquired client relationships 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, 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 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 (cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a re-valued amount, in
which case the impairment loss is treated as a revaluation
decrease.
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 over the period that the service is provided.
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.
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 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.
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 included at fair value 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 re-presented 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 sale 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 cash generating units are
contained in note 14.
The key assumptions used in arriving at a fair value less cost
of sale are those around valuations based on earnings multiples and
values based on assets under management. These have been arrived at
by looking at market valuations of similar businesses. Management
have used a range of multiples resulting in an average of 7.3x
2011/12 EBITDA, 5.9x 2012/13 Budget EBITDA, 1.4x 2011/12 revenue
and 1.8% of assets under management to arrive at a fair value.
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 annual budget and five-year
cash flow forecasts derived therefrom and thereafter extrapolates
using a terminal growth rate of 0% (2011: 3%), which management
consider 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 CGU's. The rate used to discount the forecast
cash flows from all CGU's is 11% (2011: 11%). 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 GBP34.84 million (2011: GBP34.84 million). No impairments
have been made during the year (2011: GBP11.12 million)
based upon the Directors' review.
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 relationship,
unit trust management and investment trust contracts are valued at
GBP2.47 million, GBP0.05 million and GBPnil (2011: GBP3.05 million,
GBP0.07 million and GBPnil million) respectively at the balance
sheet. The Directors' estimated useful lives for the client
relationships and the unit trust management contracts are ten
years, and for the investment trust contract five years, being the
life of the contract.
Provisions
The Directors have estimated provisions in respect of onerous
property leases and contingent deferred consideration, totalling
GBP0.1 million (2011: GBP0.1 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.
4. OPERATING SEGMENTS
During the year the Group had three reportable segments, as
described below, which are the Group's strategic business units.
The strategic business units (2011: four reportable segments) 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. The following summary describes the operations in each of
the Group's reportable segments:
Ashcourt Rowan Group - Wealth management and financial planning
services
EPIC (Discontinued) - Institutional investment management
Savoy - Wealth management services
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 listed
above.
During the year EPIC was sold (see note 30) this operating
segments has been treated as discontinued operations in these
financial statements.
Ashcourt Rowan Savoy EPIC Syndicate C.I. Total
(Continuing) (Continuing) (Discontinued) Ltd (Discontinued)
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
External
revenues 30,004 27,912 6,393 7,199 165 3,294 - 1,623 36,562 40,028
Inter-segment
revenues - 50 - - - 69 - - 119
Total revenue 30,004 27,962 6,393 7,199 165 3,363 - 1,623 36,562 40,147
External cost
of sales (13,393) (12,080) (2,426) (2,784) (101) (1,280) - (908) (15,920) (17,052)
Inter-segment
cost of sales - - - - - - (119) - (119)
Total cost of
sales (13,393) (12,080) (2,426) (2,784) (101) (1,280) - (1,027) (15,920) (17,171)
Gross Profit 16,611 15,882 3,967 4,415 64 2,083 - 596 20,642 22,976
Administrative
expenses (13,966) (13,221) (3,836) (3,970) (177) (2,195) - (714) (17,979) (20,100)
Share-based
payments (56) (175) (51) (114) - (161) - - (107) (450)
Depreciation
and
amortisation (1,132) (1,241) (13) (303) - (3) - - (1,145) (1,547)
Total
administrative
expenses (15,154) (14,637) (3,900) (4,387) (177) (2,359) - (714) (19,231) (22,097)
Operating
profit 1,457 1,245 67 28 (113) (276) - (118) 1,411 879
Finance income 22 45 - - - 1 - - 22 46
Finance expense (11) (16) (6) (1) - (4) - (1) (17) (22)
Other gains &
losses - 118 35 - (309) (50) - (548) (274) (480)
Group
management
charges (2,746) (1,632) (686) (646) - (306) - (135) (3,432) (2,719)
Reportable
segment
(loss)/profit
before tax (1,278) (240) (590) (619) (422) (635) - (802) (2,290) (2,296)
========== ========== =========== ========== ========= ========== ========= ========== ========= =========
Segment assets 35,379 36,490 3,268 5,080 - 4,436 - - 38,647 46,006
========== ========== =========== ========== ========= ========== ========= ========== ========= =========
Segment
liabilities (27,282) (26,458) (1,127) (2,516) - (548) - - (28,409) (29,522)
========== ========== =========== ========== ========= ========== ========= ========== ========= =========
Fixed Asset
additions 19 145 1 10 - - - - 20 155
----------------- ---------- ---------- ----------- ---------- --------- ---------- --------- ---------- --------- ---------
Reconciliations of reportable segment revenues, profit or
loss
2012 2011
GBP'000s GBP'000s
Revenues
Total revenue for reportable
segments 36,562 40,147
Less intra-segment revenue - (119)
Less revenue from discontinuing
operations (165) (4,917)
Consolidated revenue from continuing
operations 36,397 35,111
Intra segment revenue relates to management fees paid by
Syndicate CI (Zenith) to Ashcourt Rowan and EPIC in respect of
investment management services provided to the Zenith offshore
funds.
2012 2011
GBP'000s GBP'000s
Other administrative expenses
Total administrative expenses for
reportable segments (19,231) (22,097)
Less unallocated items:
Amortisation and depreciation 1,145 1,547
Head office costs and costs of parent
company (2,225) (1,805)
Add administrative expenses for
discontinuing operations 178 3,074
Consolidated other administrative
expenses for continuing operations (20,133) (19,281)
2012 2011
GBP'000s GBP'000s
Profit or loss before tax
Total loss before tax for reportable
segments (2,290) (2,296)
Unallocated amounts:
Management fees paid to parent 3,432 2,719
Head office costs and costs of
parent company (2,225) (1,805)
Amortisation and depreciation (1,445) (1,825)
Impairment of goodwill - (13,406)
Impairment of other intangible
assets - (607)
Share based payments 95 273
Loss on disposal of subsidiary (309) (1,778)
Contingent deferred consideration
not payable - 136
Add back Intra-group gains and
losses - 486
Investment income - 4
Add loss before tax on discontinuing
segments (note 5) 422 12,348
Consolidated loss before tax (2,320) (5,751)
Reportable Adjustments
segment relating to Consolidated
total parent totals
GBP'000s GBP'000s GBP'000s
Other material items 2012
Investment income - continuing 22 10 32
Investment income - discontinued - -
(note 5) -
Finance expense - continuing (17) (1) (18)
Finance expense - discontinued
(note 5) - -
Amortisation and depreciation
- continuing (1,145) (300) (1,445)
Amortisation and depreciation
- discontinued - - -
Reportable Adjustments
Segment relating to Consolidated
Total parent totals
GBP'000s GBP'000s GBP'000s
Other material items 2011
Investment income - continuing 45 4 49
Investment income - discontinued
(note 5) 1 - 1
Finance expense - continuing (17) - (17)
Finance expense - discontinued
(note 5) (5) - (5)
Amortisation and depreciation
- continuing (1,544) (281) (1,825)
Amortisation and depreciation
- discontinued (3) - (3)
2012 2011
GBP'000s GBP'000s
Reconciliation of total assets
Total assets for reportable segments 38,647 46,006
Elimination of intra segment loans (1,323) (5,589)
Unallocated assets 19,880 14,257
Consolidated total assets 57,204 54,674
Unallocated assets represent goodwill, other intangibles assets,
cash and trade and other receivables held by the parent.
Reconciliation of total liabilities
Total liabilities for reportable
segments (28,409) (29,442)
Elimination of intra segment loans 20,275 21,116
Unallocated liabilities (572) (3,216)
Consolidated total liabilities (8,706) (11,542)
Unallocated liabilities represent trade and other payables due
by the parent.
Reconciliation of fixed asset additions
Total additions for reportable
segments 20 155
Additions in parent 1,232 1,925
Consolidated fixed asset additions 1,252 2,080
5. DISCONTINUED OPERATIONS
On 27 April 2011 the Company entered into an agreement to
dispose of its institutional investment management business, EPIC
(see note 30) which at 31 March 2011 had been classified as held
for sale. The results of the discontinued operations are as follows
(2011: The results include the disposal of Syndicate Asset
Management C.I. Limited):
2012 2011
GBP'000s GBP'000s
Revenue (note 6) 165 4,917
Expense (278) (5,261)
Loss from operating activities (113) (344)
Investment income - 1
Finance costs - (5)
Loss on sale of discontinued operation
(note 30) (309) (1,778)
Impairment of discontinued operation held
for sale - (10,222)
Loss before tax (422) (12,348)
Taxation - 97
Deferred tax - 667
Loss for the period (422) (11,584)
Basic (loss) per share (post consolidation) (2)p (64)p
Tax on discontinued operations:
Current tax credit - 110
Under provision in prior periods - (13)
- 97
Deferred tax credit (see note 19) - 667
Total tax credit - 764
Corporation tax is calculated at 26% (2011: 28%) of the
estimated assessable result for the year. The current charge for
the year can be reconciled to the result per the income statement
as follows:
2012 2011
GBP'000s GBP'000s
Loss before tax in the year (422) (12,348)
Tax charge at 26% (2011: 28%) thereon 110 3,457
Expenses not deductible for tax (81) (3,122)
Other allowances - 3
Losses utilised/carried forward (29) (3)
Foreign tax adjustments - (225)
Under provision in prior periods - (13)
Deferred tax - 667
- 764
Cash flows (used in)/from discontinued
operation
Net cash used in operating activities (113) 699
Net cash from investing activities - -
Net cash from financing activities - -
Net Cash from/(used in) discontinued operation (113) 699
Asset of disposal group held for sale
2012 2011
GBP'000s GBP'000s
Client receivables - 81
Prepayments and accrued income - 556
Other receivables - 116
- 753
Cash and cash equivalents - 320
Total assets - 1,073
Liabilities of disposal group held for sale
2012 2011
GBP'000s GBP'000s
Trade and other payables - 548
6. Revenue
2012 2011
GBP'000s GBP'000s
Continuing operations
Wealth management and financial planning
services 36,397 35,111
No material revenue from continuing operations was generated
outside of the UK.
2012 2011
GBP'000s GBP'000s
Discontinuing operations
Wealth management services - 2,220
Institutional fund management 165 2,697
165 4,917
No material revenue was generated outside of the UK and the
Channel Islands. The total revenue generated in the Channel Islands
was GBPnil (2011: GBP1,623,000)
7. LOSS/PROFIT from operations
Loss/profit from operations has been arrived at after
charging:
Continuing Discontinued
Operations Operations Total
GBP'000s GBP'000s GBP'000s
Year ended 31 March 2012
Depreciation of property, plant
and equipment (see note 16) 853 - 853
Staff costs (see note 8) 23,408 - 23,408
Auditors' remuneration (see below) 128 - 128
Settlement of cancelled software
contract (188) - (188)
Financial Services Compensation
Scheme levy 124 - 124
Amortisation of intangible assets
(see note 15) 592 - 592
Continuing Discontinued
Operations Operations Total
GBP'000s GBP'000s GBP'000s
Year ended 31 March 2011
Depreciation of property, plant
and equipment (see note 16) 1,233 3 1,236
Staff costs (see note 8) 21,811 2,077 23,888
Auditors' remuneration (see below) 139 11 150
Settlement of cancelled software
contract 1,000 - 1,000
Financial Services Compensation
Scheme levy 825 - 825
Loss on disposal of subsidiary
(note 30) - 1,778 1,778
Impairment of goodwill 1,500 9,621 11,121
Impairment of other intangible
assets - 607 607
Amortisation of intangible assets
(see note 15) 592 - 592
The analysis of Auditors' remuneration 2012 2011
is as follows: GBP'000s GBP'000s
Annual audit fee in respect of current
financial year:
Audit of these financial statements 25 22
Audit of subsidiaries pursuant to legislation 103 117
128 139
Audit of discontinued operations - 11
128 150
Fees payable to the Company's Auditor and their associates for
other services to the Group are as follows:
2012 2011
GBP'000s GBP'000s
Tax services 15 16
Other services 12 20
27 36
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 2012
Administration staff 249 1 250
Fund managers and investment
advisers 95 - 95
Directors and other managers 18 - 18
362 1 363
Continuing Discontinued
Operations Operations Total
Number Number Number
Year ended 31 March 2011
Administration staff 238 5 243
Fund managers and investment
advisers 78 7 85
Directors and other managers 17 3 20
333 15 348
Their aggregate remuneration comprised:
Continuing Discontinued
Operations Operations Total
GBP'000s GBP'000s GBP'000s
Year ended 31 March 2012
Wages and salaries 20,106 - 20,106
Social security costs 2,300 - 2,300
Other pension costs paid to defined
contribution arrangements 907 - 907
Share-based payments 95 - 95
23,408 - 23,408
Continuing Discontinued
Operations Operations Total
GBP'000s GBP'000s GBP'000s
Year ended 31 March 2011
Wages and salaries 18,510 1,454 19,964
Social security costs 2,170 187 2,357
Other pension costs paid to defined
contribution arrangements 858 275 1,133
Share-based payments 273 161 434
21,811 2,077 23,888
The average staff numbers have increased in 2012 as a result of
the acquisition of the Co-op
Banks IFA business in October 2010, average numbers reflected in
2011 only represent 5 months
of total staff numbers.
Aggregate Directors' emoluments included 2012 2011
above comprised: GBP'000s GBP'000s
Emoluments 938 1,092
Pension contributions 44 56
Share-based payments - 74
Compensation for loss of office 325 -
1,307 1,222
The emoluments and pension contribution for the highest paid
Director were GBP474,229 and GBP0 respectively (2011: GBP550,815
and GBP38,625).
9. FINANCE Income
2012 2011
GBP'000s GBP'000s
Interest on cash and cash equivalents 32 49
10. Other gains and (Losses)
2012 2011
GBP'000s GBP'000s
Proceeds from liquidation of investment 26 -
Contingent deferred consideration not payable
* - 136
26 136
* Deferred consideration on the acquisition of the Pagan Osborne
business and Burfield businesses in 2008 which is no longer payable
due to turnover and funds under management targets not being
met.
11. Finance costs
2012 2011
GBP'000s GBP'000s
Interest on loans 18 17
12. Taxation
2012 2011
GBP'000s GBP'000s
Current tax - (110)
Over provision in prior periods (3) 400
(3) 290
Deferred tax credit (see note 19) 141 274
Total tax credit on continuing operations 138 564
Current tax on discontinued operations
(note 5) - 97
Deferred tax on discontinued operations
(note 5) - 667
138 1,328
Corporation tax is calculated at 26% (2011: 28%) of the
estimated assessable result for the year. The current charge for
the year can be reconciled to the result per the income statement
as follows:
2012 2011
GBP'000s GBP'000s
Loss on continuing operations before tax
in the year (2,320) (5,751)
Tax credit at 26% (2011: 28%) thereon 603 1,611
Expenses not deductible for tax (235) (1,070)
Other allowances (222) (151)
Losses utilised/carried forward (146) (500)
Foreign tax adjustments - -
Under provision in prior periods (3) 400
Deferred tax movement 141 274
138 564
13. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
2012 2011
GBP'000s GBP'000s
Loss on continuing operations for the purposes
of basic and diluted loss per share on
continuing operations (2,182) (5,187)
(Loss)/profit on discontinued operations (422) (11,584)
Loss for the purposes of basic and diluted
loss per share being loss attributable
to equity holders of the parent (2,604) (16,771)
2012 2011
Number Number
Post consolidation (see note 23)
-------------------- ------------
Weighted average number of ordinary
shares for the purposes of fully
diluted earnings per share 21,015,794 18,050,484
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 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 640,165 (2011:
1,715,803).
The weighted average number of shares and EPS calculations have
been restated for 2011 to reflect the share consolidation which
took place during the year (see note 23).
14. Goodwill
GBP'000s
Cost
As at 31 March 2010 46,576
Disposal of Syndicate C.I. (619)
Impairment of goodwill (2010-11)
EPIC (9,621)
Savoy (1,500)
As at 31 March 2011 and 2012 34,836
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:
2012 2011
GBP'000s GBP'000s
Ashcourt - a single CGU 27,412 27,412
Savoy - a single CGU 7,424 7,424
EPIC - a single CGU - -
Total 34,836 34,836
The Company completed its disposal of EPIC during the year (see
note 30).
Ashcourt and Savoy both provide wealth management services to
private clients, trusts charities and pension funds.
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 CGU's are derived from the higher of fair
value less cost of sale and value-in-use calculations. The key
assumptions used are set out in note 3.There have been no
impairments of the CGU's during the year.
15. Other intangible assets
Acquired
Acquired Investment
Acquired unit trust trust
client management management
relationships contracts contracts Total
GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2010 6,419 3,251 442 10,112
Disposal - (3,104) - (3,104)
At 31 March 2011 6,419 147 442 7,008
Disposal (644) - (442) (1,086)
At 31 March 2012 5,775 147 - 5,922
Amortisation
At 31 March 2010 2,354 1,583 275 4,212
Charge for the year 577 15 - 592
Impairment losses -
discontinued 440 - 167 607
Disposal - (1,517) - (1,517)
At 31 March 2011 3,371 81 442 3,894
Charge for the year 577 15 - 592
Disposal (644) - (442) (1,086)
At 31 March 2012 3,304 96 - 3,400
Carrying amount
At 31 March 2012 2,471 51 - 2,522
At 31 March 2011 3,048 66 - 3,114
The Group has no contractual commitments for its intangible
assets in both the current and prior period. The recognition of
acquired intangible assets in the period resulted from the
acquisitions as described in notes 14. Acquired client
relationships and acquired unit trust management contracts are
amortised over their estimated useful lives, being ten years.
Estimates of total remaining useful economic life of intangible
assets for amortisation purposes are as are as follows:
Acquired client relationships 5 years
Acquired unit trust management contracts 4 years
16. Property, plant and equipment
Fixtures
and
equipment
GBP'000s
Cost
At 31 March 2010 3,092
Additions 2,080
Disposals (660)
At 31 March 2011 4,512
Additions 1,252
Disposals (263)
At 31 March 2012 5,501
Depreciation and impairment
At 31 March 2010 2,108
Charge for the year - continuing 1,233
Charge for the year - discontinued 3
On disposals (660)
At 31 March 2011 2,684
Charge for the year - continuing 853
Charge for the year - discontinued -
On disposals (261)
At 31 March 2012 3,276
Carrying amount
At 31 March 2012 2,225
At 31 March 2011 1,828
At 31 March 2010 984
The carrying amount of the Group's fixtures and equipment
includes an amount of GBPnil (2011: GBPnil) in respect of assets
held under finance leases.
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:
2012 2011
GBP'000s GBP'000s
Included in non-current assets:
Equity investments 146 146
146 146
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 4.17%, in a 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 publically 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.
18. TRADE AND OTHER RECEIVABLES
2012 2011
GBP'000s GBP'000s
Trade and other receivables
Client receivables 1,870 2,939
Prepayments and accrued income 6,146 4,869
Other receivables 222 502
8,238 8,310
Allowance is made for estimated irrecoverable amounts from trade
receivables of GBP64,000 (2011: GBP21,000). The Directors consider
that the carrying amount of trade and other receivables
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 Business 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 GBP4.3 million
(2011: GBP4.9 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 net deferred tax liability comprises temporary timing
differences arising from the fair value of non-goodwill intangible
assets (see note 15) arising on the acquisition of subsidiaries,
net of the deferred tax asset on timing differences arising on the
charge on share-based payments. The net liability is made up as
follows:
On
On share-based
acquisitions payments Total
GBP'000s GBP'000s GBP'000s
At 31 March 2010 1,659 (264) 1,395
Arising on share based payments
- Continuing operations - (42) (42)
- Discontinued operations - (53) (53)
Released in the year (see
note 12)
- Continuing operations (232) - (232)
- Discontinued operations (614) - (614)
At 31 March 2011 813 (359) 454
Arising on share based payments:
- Continuing operations - 4 4
- Discontinued operations - - -
Released in the year (see
notes 12)
- Continuing operations (145) - (145)
- Discontinued operations - - -
At 31 March 2012 668 (355) 313
20. trade and other payables
2012 2011
GBP'000s GBP'000s
Trade and other payables 8,291 10,311
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:
Deferred Sub-ordinated
consideration Loan notes loans Total
31 March 2012 GBP'000s GBP'000s GBP'000s GBP'000s
Burfield & Partners
(note a) - - - -
Other (notes b and
c) - - 30 30
- - 30 30
Repayable as follows:
Within one year - - 30 30
Amounts due for settlement
after one year - - - -
Deferred Sub-ordinated
consideration Loan notes loans Total
31 March 2011 GBP'000s GBP'000s GBP'000s GBP'000s
Burfield & Partners
(note a) 69 - - 69
Other (notes b and
c) - 29 32 61
69 29 32 130
Repayable as follows:
Within one year 69 29 32 130
69 29 32 130
Less: Amounts due within
one year (69) (29) (32) (130)
Amounts due for settlement
after one year - - - -
(a) On 29 February 2008Investment Management Holdings Limited
acquired 100% of the issued share capital of Burfield and Partners
Asset Management Limited. Consideration included minimum deferred
consideration of GBP100,000 to a maximum of GBP275,000 based on 71%
of revenue arising post acquisition. The deferred consideration is
payable over the period from the date of acquisition to 31 March
2011. The amount outstanding at 31 March 2011 is GBPnil (2010:
GBP69,000).
(b) The unsecured loan notes carry interest at the rate of 7.25%
per annum and are redeemable in whole or in part at the
note-holders' option on 30 April 2007 or on any 30 April or 31
October, up to and including 30 April 2010.
(c) The subordinated loan is repayable on demand and carries
interest at a fixed rate of 7.5% per annum.
22. Provisions
Surplus leasehold Contingent
property costs deferred consideration Total
GBP'000s GBP'000s GBP'000s
At 31 March 2010 184 218 402
Increase/(reduction) in
provision (85) (218) (303)
At 31 March 2011 99 - 99
Increase/(reduction) in
provision (27) - (27)
At 31 March 2012 72 - 72
2012 2011
GBP'000s GBP'000s
Included in current liabilities 30 25
Included in non-current
liabilities 42 74
72 99
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.
23. Share capital
2012 2011
GBP'000s GBP'000s
Issued and fully paid:
26,938,473 (2011: 18,107,487)
(pre consolidation 1,810,748,627) ordinary
shares of GBP0.2 each 5,388 3,621
On 5 December 2011, the Company undertook a consolidation of
existing ordinary shares of GBP0.002 into new ordinary shares of
GBP0.2. Every 100 existing ordinary shares held by Shareholders
were consolidated into one new ordinary share of GBP0.2.
On 5 December 2011, the Company issued 8,500,000 placing shares
at 100p per placing share raising GBP7.8m (net of expenses and at
post consolidation value).
During the year the Company issued shares on the under-noted
dates in the following amounts:
Number of Number of Nominal Proceeds
shares issued shares issued value of share
pre consolidation post consolidation of shares issue
issued
Syndicate Employee Benefit GBP'000s GBP'000s
Trust - issued at GBP0.2
each (GBP0.002 pre consolidation)
1 June 2011 17,033,333 170,333 34 34
7 October 2011 8,697,789 86,978 17 17
1 February 2012 47,438 10 10
29 March 2012 26,237 5 5
New placing - issued at GBP1.00
each on 5 December 2011 net
of expenses 8,500,000 1,700 7,875
8,830,986 1,766 7,941
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 Director's Report and in Note 28.
Share capital
GBP'000s
At 31 March 2010 3,608
Issue of equity shares 13
At 31 March 2011 3,621
Issue of equity shares 67
New share placing 1,700
At 31 March 2012 5,388
24. Share premium RESERVE
Share premium
GBP'000s
At 31 March 2010 and at 31 March
2011 72,522
Issue of equity shares 6,175
Reduction of share premium (50,000)
At 31 March 2012 28,697
On 22 February 2012, the Company was granted approval by
the High Court of Justice to
reduce the amount of the share premium account by GBP50million
to be credited as a distributable
reserve (as noted in the Director's report).
25. Equity reserve
Equity
reserve
GBP'000s
At 31 March 2010 935
Share-based payments - Options (255)
Share-based payments - Long Term
Incentive 592
Share-based payments - Deferred
share bonus 201
Forfeited Long Term Incentive awards (104)
Shares issued to Employee Benefit
Trust (13)
Transfer from retain earnings 13
At 31 March 2011 1,369
Share-based payments - Options (30)
Share-based payments - Long Term
Incentive 303
Share-based payments - Deferred
share bonus -
Forfeited Long Term Incentive awards (146)
Forfeited Deferred share bonus
awards (32)
Shares issued to Employee Benefit
Trust (67)
Transfer from retain earnings 67
At 31 March 2012 1,464
26. SHARE-BASED PAYMENTS
(a) Options
On 16 December 2008 employees and Directors released their
entitlement to 3,500,000 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
3,500,000 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 greater 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 2012:
Date option granted Option Price Number of
Per share Options
18 December 2008 pre consolidation 12.0p 2,000,000
18 December 2008 post consolidation GBP12.00 20,000
The number and weighted average exercise price ("WAEP") of share
options outstanding are as follows:
Number WAEP
(pence)
Outstanding at 31 March 2011 2,000,000 12.00
Forfeited during the year (275,000) 12.00
Outstanding at 31 March 2012 pre consolidation 1,725,000 12.00
Outstanding at 31 March 2012 post 17,250 GBP12.00
consolidation
These options all expire if unexercised by 8 December 2018
(b) Long Term Incentive Plan
On 3 December 2009 the Company awarded 48.5 million ordinary
shares 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 million 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 61.5 million 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 million 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.
During the year awards over 82.88 million (pre-consolidation)
shares were forfeited by employees. The exercise price for these
awards is GBPnil per share. Awards over 14 million
(pre-consolidation) 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 23.2 million shares (pre-consolidation)
were made in 2010/11. No new awards were issued during the
financial year. The Directors estimated the fair value at the grant
date based on the market value of the shares awarded (2.02p per
share pre-consolidation) 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:
Deferred
LTIP Awards share bonus Total
At 31 March 2010 85,500,000 - 85,500,000
Awards issued during the year 102,481,000 23,223,581 125,704,581
Awards exercised during the year (6,733,331) - (6,733,331)
Awards forfeited during the year (33,357,000) (1,534,000) (34,891,000)
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
A charge of GBP95,000 (2011: GBP434,000) has been recognised in
the income statement. The balance on the equity reserve represents
amounts provided in respect of share-based payments.
27. Retained EARNINGS/(deficit)
GBP'000s
At 31 March 2010 (17,596)
Loss for the year (16,771)
Transfer to equity reserve (13)
At 31 March 2011 (34,380)
Loss for the year (2,604)
Transfer to equity reserve (67)
Transfer of share premium 50,000
At 31 March 2012 12,949
On 22 February 2012, the Company was granted approval by the
High Court of Justice to reduce
the amount of the share premium account by GBP50 million to
be credited as a distributable reserve.
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 42.
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 GBP48.5 million (2011: GBP43.1
million)
Externally imposed capital requirements
The Group contains subsidiaries that are supervised in the UK by
the Financial Services Authority ("FSA"). The regulated subsidiary
companies submit quarterly returns to the FSA 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 FSA'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 2012 the total regulatory capital
requirement across the Group was GBP5.3 million and the Group had
an aggregate surplus of GBP2.2 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:
2012 2012 2011 2011
Carrying value Maximum Carrying Maximum
GBP'000s exposure value exposure
GBP'000s GBP'000s GBP'000s
Cash and cash equivalents 9,117 9,117 5,286 5,286
Client receivables 1,870 1,870 2,939 2,939
Other debtors 222 222 502 502
Accrued income 5,007 5,007 4,517 4,517
Assets held for discontinuing
operations (note 5) - - 1,073 1,073
16,216 16,216 14,317 14,317
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.
Cash and cash equivalents
A significant amount is held with the following
institutions:
Rating at Balance Rating at Balance
31 March at 31 March 31 March at 31 March
2012 2012 2011 2011
Royal Bank of Scotland
Group A2 8,878 Aa3 4,742
Other financial institutions - 238 - 541
Other cash amounts - 1 - 3
9,117 5,286
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:
2012 2011
GBP'000s GBP'000s
Bad Debt Bad Debt
Gross Provisions Gross Provisions
< 60 days 286 - 107 -
60 - 180 days 23 - 134 -
180 - 360 days 53 - 59 4
> 360 days 80 64 45 17
442 64 345 21
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 U.S. 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 hasinterest-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 Group
held GBP9.1 million (2011: GBP5.6 million) in cash and cash
equivalents on which interest is earned and had GBPnil (2011:
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, (2011: GBPnil) assuming a corporation
tax rate of 26% (2010: 28%).
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 GBP45,000 per annum
(2011: GBP20,000) net of tax, assuming a corporation tax rate of
26% (2011: 28%).
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.
Management deems market price risk to be immaterial.
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 Services 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 1 - 5
GBP'000 GBP'000 months years > 5 years
GBP'000 GBP'000 GBP'000
As at 31 March 2012
Assets
Cash and cash equivalents 9,117 - - - -
Client receivables - 1,870 - - -
Other financial assets 222 - - - -
Total financial assets 9,339 1,870 - - -
Liabilities
Trade and other payables - 8,291 - - -
Total financial liabilities - 8,291 - - -
Net liquidity surplus/(deficit) 9,339 (6,421) - - -
On demand < 3 months 3 - 12 1 - 5
GBP'000 GBP'000 months years > 5 years
GBP'000 GBP'000 GBP'000
As at 31 March 2011
Assets
Cash and cash equivalents 5,286 - - - -
Client receivables 711 2,228 - - -
Other financial assets 583 - - - -
Assets held in discontinued
operation 320 753 - - -
Total financial assets 6,900 2,981 - - -
Liabilities
Trade and other payables - 10,311 - - -
Loan note commitments 92 - - - -
Liabilities held
in discontinued operations - 548 - - -
Total financial liabilities 92 10,859 - - -
Net liquidity surplus/(deficit) 6,808 (7,878) - - -
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
2012 2011
GBP'000s GBP'000s
Minimum lease payments under operating
leases recognised in income for the year 1,033 1,046
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:
2012 2011
GBP'000s GBP'000s
Within one year 923 1,008
In the second to fifth years inclusive 622 1,675
After five years 2,411 280
3,956 2,963
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. DISPOSAL OF SUBSIDIARY
On 27 April 2011 the Company entered into an agreement to sell
of its wholly-owned subsidiary company, EPIC Investment Partners
Limited and its wholly owned subsidiary EPIC Asset Management
Limited, subject to Financial Services Authority approval. At the
31 March 2011 a GBP40,000 non-refundable deposit had been received
for the business and costs of GBP27,000 had been incurred in
respect of the sale. The accrued deferred consideration as at 31
March 2012 is GBP170,000 (Total maximum deferred consideration due
GBP500,000).The transaction completed on 16 May 2011 and the
details of the received and accrued consideration due are as
follows:
Total
GBP'000s
Cash consideration on completion 255
Less costs of sale (332)
Net cash consideration (paid)/received (77)
Contingent deferred consideration accrued 170
Total consideration accrued/received 93
The contingent deferred consideration is due 12 months after
completion and is contingent on the value of funds under management
of EPIC at that time.
The book values, at the disposal date,
of assets disposed of were as follows:
Property, plant and equipment 3
Trade and other receivables 663
Cash and cash equivalents 375
Trade and other payables (639)
Net assets on disposal 402
Loss on sale of subsidiary (309)
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 41).
Remuneration of key management personnel
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below in aggregate for each of
the categories specified in International Accounting Standard 24
Related Party Disclosures. Further information about the
remuneration of individual Directors is provided in the
Remuneration Committee report.
2012 2011
GBP'000s GBP'000s
Short-term employee benefits 1,263 1,064
Other long-term benefits 44 84
Share-based payments - 74
1,307 1,222
COMPANY STATEMENT OF FINANCIAL
POSITION 2012 2011
AS AT 31 MARCH 2012 Note GBP'000s GBP'000s
Non-current assets
Property, plant and equipment 35 2,118 1,643
Investments in subsidiaries 36 24,936 24,829
Due from group companies 20,276 18,466
Total non-current assets 47,330 44,938
Current assets
Other receivables 757 1,063
Due from group companies - -
Cash and cash equivalents 4,238 88
4,995 1,151
Investment held for sale - 1,270
Total current assets 4,995 2,421
Total assets 52,325 47,359
Current liabilities
Other payables 38 (2,589) (3,802)
Due to group companies (1,323) (2,932)
Total current liabilities (3,912) (6,734)
Total liabilities (3,912) (6,734)
Net assets 48,413 40,625
Equity
Share capital 39 5,388 3,621
Share premium account 39 28,697 72,522
Equity reserve 39 1,464 1,369
Retained earnings 40 12,864 (36,887)
Equity attributable to equity
holders of the parent 48,413 40,625
The financial statements were approved by the Board of Directors
and authorised for issue on 2 July 2012.They were signed on its
behalf by:
J Polin A Tagliabue
Group Chief Executive Officer Group Chief Financial Officer
COMPANY STATEMENT OF CHANGES Share
IN EQUITY Share Premium Equity Retained Total
Capital Reserve Reserve Earnings
FOR THE YEAR ENDED 31 (Note (Note (Note (Note
MARCH 2012 23) 24) 25) 42) GBP'000s
GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2010 3,608 72,522 935 (21,097) 55,968
Total comprehensive income
for the year:
Loss for the year - - - (15,790) (15,790)
Transactions with owners
recorded directly in equity:
Share-based payments - - 434 - 434
Issues of shares to Employee
Benefit Trust 13 - - - 13
At 31 March 2011 3,621 72,522 1,369 (36,887) 40,625
Total comprehensive income
for the year:
Loss for the year - - - (249) (249)
Transactions with owners
recorded directly in equity:
Share-based payments - - 95 - 95
Issues of shares to Employee
Benefit Trust 67 - - - 67
Share premium reduction - (50,000) - 50,000 -
Issue new share placing 1,700 6,175 - - 7,875
At 31 March 2012 5,388 28,697 1,464 12,864 48,413
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 2012 2011
FOR THE YEAR ENDED 31 MARCH 2012 GBP'000s GBP'000s
Loss for the year (249) (15,790)
Adjustments for:
Depreciation of property, plant and equipment 757 737
Share based payment expense (12) (16)
Investment income (10) (3)
Impairment of investments in subsidiaries - 11,733
Other gains and losses (93) (550)
Loss on sale of subsidiary - 1,374
Dividends received from subsidiary company. - (200)
Corporation tax (credit)/charge and group
relief (180) 56
213 (2,659)
Decrease/(increase) in other and group
receivables (234) (513)
(Decrease)/increase in other creditors
and accruals (978) 2,264
Tax and group relief received 102 194
Net cash from/(used in) operating activities (897) (714)
Investing activities
Interest income 10 3
Dividends received from subsidiary companies - 200
Purchases of property, plant and equipment (1,232) (1,925)
Proceeds on sale of subsidiary (90) 867
Proceeds on liquidation of investment 26 -
(Loans to)/repaid by Group companies (1,609) 1,564
Net cash (used in)/from investing activities (2,895) 709
Financing activities
Proceeds of share issues 8,567 13
Costs of share issue (625) -
Net cash from financing activities 7,942 13
Net increase in cash and cash equivalents 4,150 8
Cash and cash equivalents at beginning
of year 88 80
Cash and cash equivalents at end of year 4,238 88
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH
2012
32. Significant accounting policies - the Company
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
s408 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.
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 Company
The auditors' remuneration for audit services to the Company was
GBP25,000 (2011: GBP22,000).
Other significant charges include, impairments of investments in
subsidiaries of GBPnil (2011: GBP11,746,000) and loss on sale of
subsidiary of GBPnil (2011: GBP826,000)
34. Subsidiaries
Ashcourt Holdings Limited (formerly Ashcourt Holdings plc),
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 2012 are
as follows:
Place of incorporation
ownership Proportion Proportion
and operation of voting of
Name of subsidiary interest power held
% %
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
Robinson Gear (Management
Services) Limited UK 100 100
Independent Financial Solutions
Group 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
PO Nominees 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 Asset Management Limited UK 100 100
Wholly owned by Savoy Asset
Management Limited:
Savoy Investment Management
Limited UK 100 100
Guildhall Investments Limited UK 100 100
St Pauls Nominees Limited UK 100 100
35. property plant and equipment - the company
Fixtures
and
equipment
GBP'000s
Cost
At 31 March 2010 659
Additions 1,925
At 31 March 2011 2,584
Additions 1,232
At 31 March 2012 3,816
Depreciation and impairment
At 31 March 2010 204
Charge for the year 737
At 31 March 2011 941
Charge for the year 757
At 31 March 2012 1,698
Carrying amount
At 31 March 2012 2,118
At 31 March 2011 1,643
At 31 March 2010 455
36. INVESTMENTs in subsidiaries
GBP'000s
At 31 March 2010 39,634
Capital contribution on share-based
payments 451
Sale of SAM C.I. (2,240)
Impairment of Savoy (1,500)
Impairment of EPIC (10,246)
Transferred EPIC to investments
held for sale (1,270)
At 31 March 2011 24,829
Capital contribution on share-based
payments 107
At 31 March 2012 24,936
The investments in subsidiaries are made up as follows:
2012 2011
GBP'000s GBP'000s
Ashcourt Holdings Limited 16,408 16,352
Savoy Asset Management Limited 8,528 8,477
24,936 24,829
37. Financial assets - the Company
At the balance sheet date, amounts due from Group companies
include amounts receivable from Group companies of GBP20.2 million
(2011: GBP18.5 million), principally loaned for the financing of
acquisitions. Group receivables of GBPnil (2011: GBPnil) are due
within one year in respect of management charges. Other receivables
GBP180,000 (2011: GBP240,000).
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.
38. Financial liabilities - the Company
2012 2011
Other payables comprise: GBP'000s GBP'000s
Other creditors and accruals 2,589 3,802
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
GBP1,323,000 (2011: GBP2,932,000).
39. Share capital, share premium account and equity reserve
The movements on these items are disclosed in notes 23, 24 and
25 to the financial statements.
40. ReTAINED EARNINGS/(DEFICIT) - THE COMPANY
2012 2011
GBP'000s GBP'000s
As at 1 April (36,887) (21,097)
Loss for the year (261) (15,790)
Reduction in share premium 50,000 -
As at 31 March 12,852 (36,887)
41. Related party transactions
The Company charged management fees to its subsidiaries of
GBP3,432,000 (2011: GBP2,719,000).
At the balance sheet date, amounts due from Group companies
include amounts receivable from Group companies of GBP20.2 million
(2011: GBP18.5 million), principally loaned for the financing of
acquisitions.
At the balance sheet date, amounts due to Group companies were
GBP1,323,000 (2011: GBP2,932,000).
42. 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:
Included in current assets:
2012 2011
GBP'000s GBP'000s
Cash and cash equivalents 4,238 88
Due from Group companies - -
Other debtors 757 1,063
4,995 1,151
Included in non-current assets:
2012 2011
GBP'000s GBP'000s
Due from Group companies 20,276 18,466
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 GBP4,238,000 (2011: GBP88,000) in cash and cash equivalents on
which interest is earned and had GBPnil (2011: 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 3 - 12 1 - 5
GBP'000 months months years > 5 years
GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March
2012
Assets
Cash and cash equivalents
4,238 - - - -
Due from group
companies - - - 20,276
Total financial
assets 4,238 - - 20,276 -
Liabilities
Trade payables - (2,589) - - -
Due to subsidiaries (1,323) - - - -
Total financial
liabilities (1,323) (2,589) - - -
Net liquidity surplus/(deficit) 2,915 (2,589) - 20,276 -
On demand < 3 months 3 - 12 1 - 5 > 5 years
GBP'000 GBP'000 months years GBP'000
GBP'000 GBP'000
As at 31 March
2011
Assets
Cash and cash equivalents
88 - - - -
Due from subsidiaries - - - 18,466 -
Total financial
assets 88 - - 18,466 -
Liabilities
Trade payables - (3,802) - - -
Due to subsidiaries (2,932) - - - -
Total financial
liabilities (2,932) (3,802) - - -
Net liquidity surplus/(deficit) (2,844) (3,802) - 18,466 -
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 Registrars
Kenneth West, Non-Executive Computershare Investor
Chairman Services
Jonathan Polin, Group Chief The Pavillions
Executive
Alfio Tagliabue, Chief Financial Bridgewater Road
Officer
Richard Sinclair, Chief Operating Bristol
Officer
Steve Haines, Non-Executive BA13 8AE
Jim Roberts, Non-Executive
Auditors
Secretary BDO LLP
Alfio Tagliabue 55 Baker Street
60 Queen Victoria Street London W1U 7EU
London EC4N 4TR
Nominated Adviser & Brokers
Registered Office Canaccord Genuity Limited
60 Queen Victoria Street 88 Wood Street
London EC4N 4TR London EC2V 6QR
Bankers Lawyers
The Royal Bank of Scotland Memery Crystal LLP
Corporate Banking 44 Southampton Buildings
9(th) Floor London WC2A 1AP
280 Bishopsgate
London EC2M 4RB
Website
www.ashcourtrowan.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBSBRUBABRAR
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