TIDMHW.
RNS Number : 5796C
Harwood Wealth Management Group PLC
23 January 2018
23 January 2018
Harwood Wealth Management Group PLC
("HWMG", the "Company", or the "Group")
Full year results for the year ended 31 October 2017
Harwood Wealth Management Group (AIM:HW.), a leading UK-based
financial planning and discretionary wealth management business, is
pleased to announce its audited results for the year ended 31
October 2017. The Group continues to pursue its strategy of
acquisitive and organic growth and the 2017 results show very
positive progress in revenue, assets under management and adjusted
EBITDA*.
Financial highlights:
-- Assets under influence (AUI) up 81% to GBP3.8bn (2016:
GBP2.1bn)
-- Revenue up 123% to GBP25.9m (2016: GBP11.6m) with the
newly acquired Network Direct contributing GBP9.8m of
this
-- Gross margin of 43% (2016: 61%). Gross margin excluding
Network Direct (a structurally lower margin business)
was 65%
-- Profit after tax of GBP0.7m (2016: GBP0.1m)
-- Adjusted EBITDA* is up 59% to GBP4.3m (2016: GBP2.7m)
-- Net cash generated by operations of GBP3.7m (2016: GBP2.4m)
and total cash balances at the period end of GBP19.0m
(2016: GBP10.5m)
-- Seven acquisitions completed during the period for an
aggregate consideration of GBP2.3m
-- Successful placing in April 2017 raising GBP10.0m after
expenses to continue the Group's acquisition strategy
*Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation and exceptional costs. It is a non-IFRS
measure which the Group uses to assess its performance and it is
also commonly used as a performance measure by market
commentators.
Commenting, Peter Mann, Chairman, said:
"Harwood has reported another strong year of progress, driven by
both organic growth and the contributions of acquisitions,
underpinning the strategy of strong financial services advice
revenues, good quality investment performance and increasing
assets, and completing further acquisitions.
"The Group is highly cash generative and I am pleased to
announce that we are recommending the payment of a final dividend
of 2.24 pence per share subject to shareholder approval at the
Company Annual General meeting on the 18 April 2018. The final
dividend will be paid on 11 May 2018 to shareholders on the
register at the close of business on 27 April 2018.
"Overall, the progress made since the Company's IPO in March
2016 indicates a strong outlook for the next financial year."
For further information please contact:
Harwood Wealth Management Group plc +44 (0) 2393 552004
Neil Dunkley, Joint Chief Executive Officer
Alan Durrant, Joint Chief Executive Officer
N+1 Singer Advisory LLP +44 (0)20 7496 3000
(Nominated Adviser and Broker)
Alex Price / James Hopton / Alex Laughton-Scott
Alma PR +44 (0)20 8004 4218
Josh Royston / Rebecca Sanders-Hewitt / Susie Hudson
Website
www.harwoodwealth.co.uk
Chairman's statement
I am delighted to report another set of strong results, and look
forward to building on our success.
Another successful year
I am pleased to say that, once again, the Group has performed
ahead of expectations, and in the manner we said we would - by
consistent execution of our strategy: strong financial services
advice revenues, good quality investment performance and increasing
assets, and further acquisitions.
I would particularly like to draw attention to the acquisition
of Network Direct Limited ("NDL"). Not only did this bring a
different geographical footprint to where Harwood has focused its
activity, but, as the name implies, it is a network, which offers a
different delivery structure for the Group. The network is
responsible for the advice given by the advisers, who are
registered individuals. They are often not employed, however, the
network has a regulatory responsibility. The acquisition of NDL has
diversified our route to market and has also widened the number of
advisers to whom we can offer our centralised investment processes
and in-house investment solutions.
In April 2017, the Company returned to the market to complete a
secondary fundraise, raising GBP10.0m after expenses. We were
delighted that this was well received by existing and new
investors, and we raised the full amount anticipated. As
communicated, we are deploying the proceeds by buying businesses
that will generate revenue across our various offerings.
Favourable market drivers
This is a good time to be in the business of giving regulated
financial advice, as there has been a favourable flow of regulation
from both the government and the industry regulator. Since the
introduction of pension liberalisation, we are seeing individuals
be more creative and thinking more about their retirement funds.
Previously, there were limited advice opportunities once the
individual had purchased their mandatory annuity, but the pension
freedoms have given the opportunity for a longer term and more
intimate relationship with clients. For example, if you are buying
an income draw down product where you're drawing down from your
pension pot every year, there is almost a mandatory series of
advice points.
The markets have also been buoyant, which is good for us as a
business that derives a portion of our income from assets under
management. Another trend has been the ongoing shift from defined
benefit to defined contribution schemes. Some firms are heavily
involved in that area, but we are choosing to participate
judiciously in that market, in line with our risk appetite and
clear governance frameworks. Moving a customer's pension pot from
one environment to another is a major decision, and needs a high
quality, rigorous and sustainable process such as ours. We do not
expose ourselves to unnecessary risk, so we are availing ourselves
of the opportunity but in a manner that the industry regulator
would wish to see. Our advisers have the freedom to express
themselves, but within very clear parameters around matching our
sensible and well governed appetite for risk.
We have had a relatively interesting regulatory environment this
past year with further things on the horizon. There is increased
regulatory focus on value and transparency to the end client, and
we believe we have robust processes and structures in both of these
areas. Regarding the outcome of the FCA's Asset Management Market
Study, the general consensus is that, for active management, there
may be slight downward pressure on investment management margins.
Certain larger asset managers have already made alterations to
their pricing structure, which is positive for customer outcomes.
This should make financial products and advice more affordable and
therefore accessible to more people, which will benefit the
Company. The other side to the argument is that it will push
individuals towards passive products, which is also beneficial to
the Company as we have passive products in our offerings. The
regulator is now moving on to look into platforms. This is
currently a work in progress so the outcome is unknown, but it's
not unreasonable to assume that this will benefit customers in one
way or another. We use platforms, so if there are benefits to
customers then we stand to benefit there too.
MiFID II came into force in January 2018, and we have made sure
that we comply with the procedural and disclosure changes required.
As we outsource the business of fund management and also the
business of platforms, the principal effect is on our suppliers,
although we do have to be cognisant of how the regulations apply to
us and make sure that we are compliant and that we work with
companies that are also compliant. There is also the General Data
Protection Regulation (GDPR), which is a requirement for
individuals to have a better grasp of the data held about them by
third party institutions, which has the potential to also impact
procedures.
With regard to technological changes, these affect us to the
degree that advancements should increase efficiency in fund
management, from which we would benefit. We have reached a scale
that we are an important client for the people we do business with,
therefore if they differentiate their service propositions, they
differentiate in our favour. We keep a close eye on automated
wealth managers (robo-advisers), but it is currently too early in
its development stage for us to commit significant capital.
The Harwood difference
We do what we say we're going to do. What makes Harwood a good
aggregator in the market? We apply rigorous standards - it's a
readily repeatable formula that we repeat readily! We know what
return we need from a business, we know how to integrate a business
into our systems and processes, and we know how to treat their
customers fairly. We do this almost metronomically making it the
DNA of our business. When we develop new offerings or services, we
do it at the right time, for the right reason.
Harwood is a well governed institutionalised business that
grows, but yet maintains that entrepreneurial, small business
culture. It has a very unusual blend of the disciplines of an
institutional business, while at the same time retaining the feel
of a family business. Our staff and our advisers see us as a
trusted partner, almost as a family. It's ingrained in the psyche
and the culture, from Board level and throughout the Group. We are
very much about customer, client, people centricity. It's just
intuitive. We pay a fair market rate for businesses, and I would
think that a high proportion of the firms that join us do so
because of the people. We tend to align ourselves with likeminded
businesses, and, when we choose not to acquire a business, often
it's around cultural as well as financial fit.
As a Board, we are very active in the business and marketplace.
I meet with clients and speak with potential new clients
frequently. Christopher Mills is a seasoned investor and talks to
the investment community daily. Paul Tuson is very in touch with
the finances of the business.
A progressive dividend
In line with our progressive dividend policy, we paid an interim
dividend of 1.00 pence per share, and the Board will be
recommending a final dividend of 2.24 pence per ordinary share,
subject to shareholder approval at the Annual General Meeting on 18
April 2018. The final dividend will be paid on 11 May 2018 to
shareholders on the register at the close of business on 27 April
2018 bringing the full year dividend pay-out to 3.24 pence.
Well positioned for future growth
I wish to thank our shareholders for their continued support,
and management, staff and advice partners for another successful
year.
As ever, there are uncertainties ahead, with Brexit and its
potential ramifications on the financial services sector a
particularly difficult area to predict. However, uncertainty tends
to drive the need for financial advice, and as we look to the year
ahead and beyond, we remain confident that our simple, proven
strategy will continue to provide plentiful opportunity for
profitable organic and acquisitive growth.
Peter Mann
Chairman
Joint CEOs' statement
We delivered our strategy ahead of expectations, and the
acquisition of Network Direct and GBP10m fund raise give us a sound
platform for growth.
We have achieved a pleasing set of results this year. Revenue
grew by 123% to GBP25.9m (2016: GBP11.6m), and we generated GBP4.3m
of adjusted EBITDA (2016: GBP2.7m). As of 31 October 2017, our
assets under influence (AUI) were GBP3.8bn (31 October 2016:
GBP2.1bn).
Performance against strategy: growth from acquisitions
Looking back at the year, we have continued to execute our
simple, proven business model: acquire businesses, raise capital to
redeploy, integrate acquisitions and provide a good and reliable
service to all of our stakeholders, whether shareholders,
employees, partner advisers or clients. We are good at what we do,
and are operating in a good space in terms of the fragmentation of
the market, with regulatory demands serving to favour
consolidation.
April 2017 saw a successful placing of 6,954,000 new ordinary
shares at a price of 150 pence per share, raising GBP10.0m net of
expenses to allow us to continue to pursue our acquisition-focused
strategy. We made seven acquisitions during the year, the most
notable being that of Network Direct Limited (NDL), which was
acquired in February 2017 for an aggregate consideration of
GBP0.9m. Adding approximately GBP1bn in AUI, the scale of the
acquisition was unprecedented for the Group, and NDL's services
provided to a network of appointed representatives have brought a
new strategic dimension to Harwood, upon which we can build. We now
have access to a far greater number of financial advisers, to whom
we can speak about the investment solutions that we can offer - via
them - to their clients. Building these relationships also
positions us well should some of these financial advisers wish to
sell their businesses in future.
Our main focus over the months since we acquired Network Direct
has been to work closely with their advisers to understand their
needs, and we have designed an investment solution accordingly.
Rather than pushing an existing product at them, we involved
Network Direct members in designing a product that they wanted to
offer to their clients, that perhaps wasn't available
elsewhere.
Although we are keen to benefit from efficiencies of scale where
possible, we have structured the product suite to meet the
individual needs of the individual businesses. It isn't about one
size fits all. Where a particular type of adviser believes they
need a particular type of product, that's fine and the investment
management business is built on a modular basis. We already have
all of the ingredients to meet different needs, with very little or
no additional cost or work required. By offering solutions to meet
the genuine wants and needs of clients, we make it easier for the
adviser to understand and recommend to the client, easier for us to
manage and there is far less chance of the client having an
unsatisfactory outcome further down the line, because they have
something that is right for them from the start.
The size of the prospective acquisitions we are looking at is
getting larger, and a positive consequence of the IPO and our
strong performance is that more businesses approach us meaning that
our acquisition pipeline is very healthy. We are used to making
acquisitions and are skilled at doing this. Vendors know we have
the systems and processes in place, the financial ability to pay
any upfront consideration and the reassurance that we can satisfy
our obligations for any deferred payment we put in place.
Different vendors have different reasons for selling their
businesses, but they know their clients will be looked after and
see us as a good cultural fit.
Performance against strategy: organic growth
Our organic growth is underpinned by the ongoing need for the
professional management of client assets, given structural factors
such as the aging population and pension freedoms, now that
consumers are no longer required to buy an annuity their needs have
become more bespoke and complex and the requirement for advice also
continues over a longer period.
The discretionary fund management business has had a successful
year, with some good mandate wins. We are not trying to compete
with the mass multi manager market, which is very well served.
Instead we take a similar approach to how we deal with our internal
clients. We show them the ingredients and work with them to develop
a genuine partnership, by building a range of portfolios, a range
of solutions, a range of funds that meets exactly the needs of
their business. We sit down with the partners of the business and
ask them what the fees need to look like, what the investment
strategy needs to look like and what the margins need to look like.
There are very few firms operating in that space as most design a
product then go out to try to sell it. When we win mandates they
tend to be sizeable, and our established cost base allows us to
benefit from operating leverage.
Performance against strategy: efficiency in operations
When we think about operations, we think about how we can make
these more efficient and more robust for the next stage of growth.
We seek to put in place robust platforms on which we can build, and
outsource to specialist providers where this is not a core
activity.
For example, rather than having internal custody of client
assets, which is a low margin and complex undertaking, we have
outsourced this to a specialist provider, AJ Bell. We have largely
completed the transition from holding client assets on our in-house
administration onto the AJ Bell platform, and now have the
potential to add new revenue streams to that platform.
As part of our on-going operational reviews, we also
renegotiated a large contract with an IT provider that will
generate economies of scale as we grow, and transferred our desktop
IT to Microsoft 365 as this is more secure as well as more
efficient.
Market environment
The last 12 months have been interesting politically, yet equity
and bond markets have behaved very resiliently over that period.
Our own investment performance is testimony to the fact that we
don't take bold asset allocation decisions based on which way
politics and economies may go, rather we build portfolios that aim
to deliver to their objectives and those of the clients over the
long term, and that approach has stood us in good stead.
In terms of the regulatory landscape, MiFID II brings widespread
changes to some areas of financial markets. Having spent much time
looking at the potential impact on our business, we believe that
the implications are minor compared with the impact on firms
involved with stockbroking or direct securities, for example. We
have to pay for a small amount of investment research, but this is
not a material figure. The level of reporting will be onerous for
some firms, but we believe this will be much less onerous for us.
It is fair to say that some of the practical implications will
remain unclear though, even after MiFID II's implementation.
Although they were introduced previously, last year saw the
first significant take-up of pension freedoms. These reforms have
unquestionably led to more complicated client needs and we have
gained new business as a result with greater numbers of clients
seeking advice, about an asset size that is typically larger and
over a longer period of time than when they were forced to buy an
annuity.
The FCA published a report on the consolidation and acquisition
of client banks. As a result of this we have reviewed our
acquisition processes, and recruited additional resource into our
acquisition team to enhance our activity in respect of client
communication and treating customers fairly.
The FCA's Asset Management Review came out in May. Following an
internal review, we do not feel there are significant implications
for our business. Also coming up is the Senior Managers and
Certification regime change. This is at consultation stage, but the
sector anticipates that in the last quarter of 2018 there will be a
change to removing some controlled functions to a new regime of
senior management roles and responsibilities.
Outlook
We have delivered against all three elements of our growth
strategy - with existing clients, new clients and via acquisition -
and all have contributed to our results. Our performance is
testament to the expertise and strong relationships of our advice
partners and our valued colleagues, whom we wish to thank.
Looking forward, in the context of what might happen to markets
in light of external factors such as Brexit, we are in the
fortunate position of being paid to deal with confusing things. One
of the elements that drives customers to us and to our sector is
that things are confusing, and change constantly to become yet more
confusing. We know that there will be changes in forthcoming
budgets to various elements, and that those will create a need for
more advice.
In short, we see plenty of opportunity to continue working to
our proven strategy, we have a robust pipeline of potential
acquisitions and continue to seek additional advisers to join the
Group to serve our growing client base. Coupled with our strong
financial position and efficient operating model, we are confident
that we will continue to deliver profitable growth.
Financial review
Assets under influence (AUI) and assets under management
(AUM)
We are pleased to report that the Group's total AUI has shown
very strong growth of 81% to GBP3.8bn (2016: GBP2.1bn). This
includes approximately GBP1bn from the acquisition of Network
Direct Ltd (NDL) that was completed in February 2017.
AUM (a component of AUI) increased by an impressive 71% to
GBP1.2bn (2016: GBP0.7bn). The discretionary fund management
business, Wellian Investment Solutions, performed strongly and
increased its AUM to GBP627m (2016: GBP284m) including winning new
mandates from third party businesses. The advised investment
management business, IMS Capital, increased its AUM to GBP587m
(2016: GBP409m) representing the capture of assets previously
external to the Group (a key element to the Group's strategy).
Revenue
Group revenue for the financial year ended 31 October 2017
increased by 123% (2016: 47%) to GBP25.9m (2016: GBP11.6m). As a
result of following the Group's strategy the revenue growth derives
from the following:
-- the full-year effect of acquisitions that were completed in the 2016 financial year
-- the partial effect of acquisitions completed in this financial year
-- the growth in assets under management (as highlighted above)
-- new business derived from newly acquired and existing client portfolios
-- the increase in the number of financial advisers
-- any movement in market asset values
2017 2016
Source of revenues GBP'ms GBP'ms
Financial Planning 12.9 9.5
Investment Management 3.2 2.1
Network 9.8 -
25.9 11.6
======= =======
All areas of the Group reported year on year growth in revenue.
Investment Management showed strong growth of 52% as a direct
result of the increased assets under management highlighted above.
Financial Planning revenues increased by 36% as a result of
acquisitions and organic growth. The acquisition of Network Direct
in February contributed GBP9.8m to this year's revenue.
2017 2016
Source of gross profits and margin GBP'ms % GBP'ms %
Financial Planning 7.4 57 5.2 55
Investment Management 3.0 94 1.9 90
Network 0.8 8 - -
11.2 43 7.1 61
======= === ======= ===
The gross margin reduced to 43% (2016: 61%). There was a four
percentage point increase in the Investment Management business as
a result of economies of scale and a two percentage point increase
in the Financial Planning business as a result of the mix of
acquisitions and new business. As in the previous year, there were
no material changes to individual financial adviser commission
arrangements. The addition of the newly acquired Network Direct
business lowered the Group's weighted average gross margin as their
margin was 8%. Overall gross profit grew by 58% to GBP11.2m (2016:
GBP7.1m) and was more than double the 2015 result.
Administrative expenses
The total administrative expenses of the business increased to
GBP9.4m (2016: GBP6.3m). The previous year included GBP0.3m of
exceptional costs mainly associated with the IPO and the additional
running costs associated with being a publicly listed company.
Amortisation increased by 63% to GBP2.6m (2016: GBP1.6m).
Administrative expenses excluding amortisation and exceptional
items were GBP6.8m (2016: GBP4.4m) and represents 26% of revenue
(2016: 38%) reflecting both economies of scale as the overall
business grows and the impact of the acquisition of Network
Direct.
Taxation
The current corporation tax charge for the period was GBP0.8m
(2016: GBP0.5m). This was an effective tax rate of 18% (2016: 17%)
compared with adjusted EBITDA as GBP0.5m of amortisation was an
allowable expense against taxable profits as it related to asset
acquisitions completed prior to July 2015.
Profitability
Profit before tax for the period was GBP1.2m (2016: GBP0.4m)
after nil exceptional costs (2016: GBP0.3m), and GBP2.6m (2016:
GBP1.6m) of depreciation and amortisation costs.
Adjusted EBITDA (adjusted to exclude exceptional costs)
Adjusted EBITDA for the period was GBP4.3m, an increase of 59%
over the previous period (2016: GBP2.7m). As a consequence of the
Group's accelerated acquisition growth strategy, amortisation costs
increased significantly to GBP2.6m (2016: GBP1.6m) as did finance
costs to GBP0.6m (2016: GBP0.5m).
Earnings per share
Basic and diluted earnings per share for the year ended 31
October 2017 was 1.19 pence (2015: 0.24 pence) based on a weighted
average of 59,323,130 shares (2016: 49,242,615).
Adjusted EBITDA per share
The adjusted EBITDA per share, for the year ended 31 October
2017, was 7.28 pence (2016: 5.55 pence).
Dividends
The Board is proposing a final dividend of 2.24 pence per
ordinary share for 2017, which is subject to shareholder approval
at the AGM on 18 April 2018 and will be paid to shareholders on 11
May 2018 based on the register of shareholders at close of business
on 27 April 2018 bringing the full year dividend pay-out to 3.24
pence.
Financial advisers and staff headcount
The number of financial advisers (employed, self-employed, and
members of the network services business) increased by 96 to 179
(2016: 83). The acquisition of NDL added 89 network services
members. Ten new advisers joined the financial planning business
this year with four retirees and network services added one new
adviser since February.
Staff headcount grew to 120 (2016: 92) incorporating 17 staff
from the Network Direct transaction.
Acquisitions
The Group completed seven acquisitions during the period of
which two were share acquisitions and five were asset acquisitions.
The total aggregate consideration of GBP2.3m comprises GBP1.6m paid
in cash on completion and discounted deferred consideration of
GBP0.7m. In addition, the provisional value of acquisitions
accounted for in the prior year were revised, resulting in a net
increase in the total consideration for these acquisitions of
GBP0.3m and an equivalent increase in deferred consideration and
deferred tax liabilities.
Cash position
The Group had cash balances of GBP19.0m at 31 October (2016:
GBP10.5m). Net cash generated by operations in the period increased
by 54% to GBP3.7m (2016: GBP2.4m). Net cash generated from
financing activities in the period was GBP8.7m (2016: GBP8.6m),
derived from the net proceeds from the issue of shares of GBP10.0m
less the final 2016 dividend payment of GBP1.3m. The net cash used
in investing activities was GBP4.0m (2016: GBP4.4m).
The Group had discounted deferred consideration commitments of
GBP4.3m at 31 October (2016: GBP5.4m).
Financial position
The Group has generated strong cashflow from operations which is
expected to continue into 2018. These cashflows, together with
available cash, ensure the Group is in a robust financial position
from which to continue its strategy to grow the business both
organically and through acquisition in the next trading period.
Events after the reporting date
Acquisition of Finance For Life Limited
On 3 November 2017 the Company acquired the entire share capital
of Finance For Life Ltd for a total consideration of GBP0.9m of
which GBP0.5m was paid on completion, with the balance based on
future revenue over the next two years.
2017 Interim dividend
On 10 November 2017 the Company paid an interim dividend of 1.00
pence per ordinary share based on the register of shareholders at
close of business on 27 October 2017 totalling GBP0.6m.
Acquisition of the business and assets of Peter John Vickery
On 7 November 2017 the Group agreed to buy the financial
advisory business carried on by Peter John Vickery. Following an
initial payment of GBP0.1m the transaction completed on 12 December
2017. In addition, further amounts totalling GBP0.06m are to be
paid on the first and second anniversaries of completion contingent
upon results.
Acquisition of Anthony Harding & Partners Ltd
On 10 January 2018 the Company acquired the entire share capital
of Anthony Harding & Partners Ltd for a total consideration of
GBP1.1m of which GBP0.6m was paid on completion, with the balance
based on future revenue over the next two years.
Current trading
Early indications are that the new financial year has started
well. AUI is encouraging and together with the current market asset
values and the events after the reporting date (highlighted above),
this reinforces the confidence expressed earlier by the
Chairman.
Consolidated Statement of Comprehensive Income
2017 2016
Note GBP'000s GBP'000s
Revenue 25,885 11,605
Cost of sales (14,719) (4,513)
Gross profit 11,166 7,092
Administrative expenses (9,410) (5,940)
Exceptional items 4 - (336)
Operating profit 1,756 816
Investment income 19 18
Finance costs (577) (463)
Profit before taxation 1,198 371
Income tax expense 5 (492) (253)
Total comprehensive income for the period attributable to equity owners of the parent 706 118
========= =========
pence pence
Earnings per share
Basic and fully diluted 7 1.19 0.24
Consolidated Statement of Financial Position
2017 2016
GBP'000s GBP'000s
Non-current assets
Intangible assets 15,033 14,749
Property, plant and equipment 24 20
15,057 14,769
Current assets
Trade and other receivables 1,075 621
Cash and cash equivalents 18,959 10,526
20,034 11,147
Total assets 35,091 25,916
--------- ---------
Current liabilities
Trade and other payables 5,160 3,879
Accruals and deferred income 1,284 341
Current tax liabilities 474 882
6,918 5,102
--------- ---------
Net current assets 13,116 6,045
--------- ---------
Non-current liabilities
Trade and other payables 252 2,219
Deferred tax liabilities 1,161 1,266
1,413 3,485
--------- ---------
Total liabilities 8,331 8,587
--------- ---------
Net assets 26,760 17,329
========= =========
Equity
Called up share capital 156 139
Share premium account 25,500 15,541
Retained earnings 1,104 1,649
Equity attributable to the owners of the parent 26,760 17,329
========= =========
Consolidated Statement of Changes in Equity
Attributable to the owners of the parent
---------------------------------------------
Share
Share premium Retained
capital account earnings Total
GBP'000s GBP'000s GBP'000s GBP'000s
Balance at 1 November 2015 100 3,979 1,885 5,964
-------------- -------------- ------------- ---------
Year ended 31 October 2016:
Profit and total comprehensive income for the year - - 118 118
-------------- -------------- ------------- ---------
Issue of share capital 39 12,558 - 12,597
Dividends - - (354) (354)
Costs of share issue - (996) - (996)
Total transactions with owners recognised directly in
equity 39 11,562 (354) 11,247
-------------- -------------- ------------- ---------
Balance at 31 October 2016 139 15,541 1,649 17,329
-------------- -------------- ------------- ---------
Year ended 31 October 2017:
Profit and total comprehensive income for the year - - 706 706
-------------- -------------- ------------- ---------
Issue of share capital 17 10,414 - 10,431
Dividends - - (1,251) (1,251)
Cost of share issue - (455) - (455)
Total transactions with owners recognised directly in
equity 17 9,959 (1,251) 8,725
-------------- -------------- ------------- ---------
Balance at 31 October 2017 156 25,500 1,104 26,760
-------------- -------------- ------------- ---------
Consolidated Statement of Cash Flows
2017 2016
GBP'000s GBP'000s
Cash flows from operating activities
Profit before income tax 1,198 371
Non-cash adjustments
Depreciation and amortisation 2,563 1,581
Net finance costs 558 445
Working capital adjustments
(Increase) in trade and other receivables (316) (12)
Increase in trade and other payables 917 78
Cash inflow from operating activities 4,920 2,463
Income tax paid (1,212) (63)
Interest paid - -
Net cash generated by operations 3,708 2,400
--------- ---------
Investing activities
Purchase of intangible assets (1,690) (3,601)
Interest received 19 18
Acquisition of subsidiaries net of cash acquired (2,317) (802)
Purchase of tangible assets (12) -
Net cash used in investing activities (4,000) (4,385)
--------- ---------
Financing activities
Proceeds from issue of shares (net of costs) 9,976 8,974
Repayment of borrowings - (12)
Dividends paid (1,251) (354)
Net cash generated from financing activities 8,725 8,608
--------- ---------
Net increase in cash and cash equivalents 8,433 6,623
Cash and equivalents at beginning of year 10,526 3,903
Cash and equivalents at end of year 18,959 10,526
--------- ---------
Notes to the financial information
1. General Information
Harwood Wealth Management Group plc is a public limited
liability company incorporated and domiciled in England and Wales.
The Group's business activities are principally the provision of
financial advice, investment management and network services. The
address of the registered office is 5 Lancer House Hussar Court,
Westside View, Waterlooville, Hampshire, PO7 7SE. The company is
listed on the AIM market of the London Stock Exchange.
The preliminary financial information does not constitute full
accounts within the meaning of section 434 of the Companies Act
2006 but is derived from accounts for the years ended 31 October
2017 and 31 October 2016. The figures for the year ended 31 October
2017 are audited. The preliminary announcement is prepared on the
same basis as set out in the statutory accounts for the year ended
31 October 2017. Those accounts, upon which the auditors issued an
unqualified opinion, did not include a reference to any matters to
which the auditors drew attention by way of emphasis, without
qualifying their report, and made no statement under section 498(2)
or (3) of the Companies Act 2006, will be delivered to the
Registrar of Companies following the Annual General Meeting.
Statutory accounts for the year ended 31 October 2016 have been
filed with the Registrar of Companies. The auditor's report on
those accounts was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis,
without qualifying their report, and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), as adopted by the European Union (EU), this
announcement does not in itself contain sufficient information to
comply with IFRSs.
2. Significant Accounting Policies
Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, the
financial position of the Group, its cash flows and liquidity
position are set out in the Chairman's statement. Based on this
assessment, the directors have, at the time of approving the
financial statements, a reasonable expectation that the company has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements
Basis of consolidation
These consolidated financial statements consolidate the
financial statements of the Company and its subsidiary undertakings
as at 31 October 2017. Subsidiaries are fully consolidated from the
date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date that such
control may cease. The financial statements of the subsidiaries are
prepared for the same reporting period as the parent company, using
consistent accounting policies.
3. Segmental Analysis
The Board of Directors is considered to be the chief operating
decision making body for the Group. The Board has determined that
there are three operating segments based on reports reviewed by the
Board that are used to make strategic decisions. The total revenue
for the Group for the period has been derived from its principal
activity wholly undertaken in the United Kingdom.
4. Exceptional costs
There were no exceptional costs in the year (2016: GBP0.3m). The
2016 total comprised mainly the non-recurring costs associated with
the listing on AIM in that year.
5. Taxation
An analysis of the income tax charge is detailed below:
2017 2016
GBP'000s GBP'000s
Current tax
Current year taxation 769 463
Adjustments in respect of prior periods - 81
Total current tax charge 769 544
Deferred tax
Origination and reversal of temporary differences (210) (271)
Effect of change in tax rate (67) (20)
(277) (291)
Total tax charge 492 253
========== ==========
The charge for the year can be reconciled to the profit per income statement as follows:
2017 2016
GBP'000s GBP'000s
Profit before taxation 1,198 371
---------- ----------
Expected tax charge based on a corporation tax rate of 20% - 74
Expected tax charge based on a corporation tax rate of 19.4% 232 -
Expenses not deductible in determining taxable profit 260 179
Tax charge for the period 492 253
---------- ----------
6. Business combinations
In the period the Group completed the acquisitions of the entire
share capital of Network Direct Ltd (NDL) and WT Financial Ltd (WT
Fin) for a total consideration of GBP1.2m. The assets and
liabilities acquired were as follows:
NDL WT Fin Total
GBP'000s GBP'000s GBP'000s
Acquired client portfolios - 371 371
Adviser relationships 315 - 315
Tangible assets 3 - 3
Receivables 125 14 139
Cash & equivalents 262 4 266
Payables (493) (18) (511)
Deferred tax (53) (63) (116)
159 308 467
The business combination has been recognised as follows:
Cash on completion 900 176 1,076
Contingent cash consideration - 132 132
900 308 1,208
Net assets acquired as above (159) (308) (467)
Goodwill arising 741 - 741
--------- --------- ---------
Goodwill arising from the acquisitions is the difference between
the fair value of consideration, less the fair value of the
separable assets and liabilities acquired. The initial accounting
has not yet been completed in respect of all acquisitions and
therefore the fair values are provisional.
In addition, five acquired client portfolios have been purchased
in the period for a consideration of GBP1.1m, payable in cash on
completion (GBP0.6m) and the balance (GBP0.5m) on deferred
terms.
7. Earnings per share
On 19 April 2017 6,954,000 ordinary shares of 0.25 pence each
were issued at a placing price of 150 pence per share.
Basic earnings per share are calculated using a weighted average
number of shares of 59,323,130 for the period (2016: 49,242,615).
Adjusted EBITDA has been shown as it is a common metric used by the
market to monitor similar businesses.
2017 2016
GBP'000s GBP'000s
Net Profit 706 118
Income tax 492 253
Net finance expense 558 445
Depreciation 11 9
Amortisation 2,552 1,572
Exceptional items - 336
Adjusted EBITDA 4,319 2,733
Basic adjusted EBITDA per share - pence 7.28 5.55
Statutory EPS - pence 1.19 0.24
8. Dividends
All Ordinary Shares carry equal dividend rights. As a holding
company, the ability of the Group to pay dividends will principally
depend upon dividends paid to it by its operating subsidiaries. The
Board has recommended a final dividend of 2.24 pence per share
subject to shareholder approval at the Company Annual General
meeting on the 18 April 2018. The final dividend will be paid on
the 11 May 2018 to shareholders on the register at the close of
business on 27 April 2018.
9. Events after the reporting date
Acquisition of Finance For Life Limited
On 3 November 2017 the Company acquired the entire share capital
of Finance For Life Ltd for a total consideration of GBP0.9m of
which GBP0.5m was paid on completion, with the balance based on
future revenue over the next two years.
2017 Interim dividend
On 10 November 2017 the Company paid an interim dividend of 1.00
pence per ordinary share based on the register of shareholders at
close of business on 27 October 2017 totalling GBP0.6m.
Acquisition of the business and assets of Peter John Vickery
On 7 November 2017 the Group agreed to buy the financial
advisory business carried on by Peter John Vickery. Following an
initial payment of GBP0.1m the transaction completed on 12 December
2017. In addition, further amounts totalling GBP0.06m are to be
paid on the first and second anniversaries of completion contingent
upon results.
Acquisition of Anthony Harding & Partners Ltd
On 10 January 2018 the Company acquired the entire share capital
of Anthony Harding & Partners Ltd for a total consideration of
GBP1.1m of which GBP0.6m was paid on completion, with the balance
based on future revenue over the next two years.
10. Annual General Meeting
The Annual General Meeting will be held on the 18 April 2018 at
3.00pm at the office of Harwood Capital LLP at 6 Stratton Street
London W1J 8LD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKBDNABKDBDB
(END) Dow Jones Newswires
January 23, 2018 02:00 ET (07:00 GMT)
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