TIDMARP
RNS Number : 9960X
Ashcourt Rowan PLC
26 November 2014
ASHCOURT ROWAN PLC: INTERIM RESULTS FOR SIX MONTHS ENDED 30
SEPTEMBER 2014
26 November 2014
Delivering on our potential
Ashcourt Rowan plc (AIM:ARP.L), the UK wealth management group,
today announces its interim results for the six months ended 30
September 2014.
Commenting, Jonathan Polin, Group chief executive officer,
said:
"The first half of our financial year has been another positive
one of delivering on our objectives, driving our greater underlying
profitability and building on the strong platform we have created
over the last three years. We have delivered on the integration of
UKWM ahead of time and have identified greater synergies than
previously anticipated. Underlying EBITDA has doubled from the same
period last year to GBP1.9 million and I am particularly pleased
with the 19% increase in funds under management we achieved during
the first half. We are beginning to see increasing signs of organic
growth and believe that we are well positioned for the second half
of the year.
"As the Group returns to profitability, the Board recognises the
importance of a dividend to ordinary shareholders and will look to
review its position at year end in March 2015."
Operational and financial highlights
-- More than doubling underlying EBITDA(1) profitability to
GBP1.9 million from GBP0.9 million in the same period last
year.
-- Discretionary and managed assets of GBP2.3 billion, a 40%
increase on September last year and 19% increase during the period,
boosted by UKWM acquisition.
-- Total assets under management and influence of GBP5.3 billion
up from GBP4.0 billion in March 2014.
-- Revenue increased to GBP19.9 million from GBP15.2 million in
same period last year. Significantly higher recurring revenues more
than offset a weak environment for dealing commissions.
-- Integration of UKWM largely complete and realised synergies
to meet and exceed GBP2.25 million target on a full year run-rate
basis.
-- UKWM integration and transaction costs of GBP1.5 million in
first half, to be completed within cost guidance previously given
(GBP2 million). No other significant exceptional costs except for
expensed revenue generator earn-in and earn-out costs.
-- Loss after tax for continuing business reduced to GBP(0.7)
million from GBP(2.4) million in the same period last year.
-- No debt, and cash of GBP10.1 million, increased from GBP7.0 million at 30 September 2013.
-- Outlook for continued profit growth in second half, mindful of market environment.
-- Board will actively review dividend position at year end.
Financial overview - continuing operations
(GBP million unless specified)
Six months Six months Full
ended ended year
30 Sept 30 Sept 31 March
2014 2013 2014
------------------------------ ----------- ----------- ----------
Revenue 19.9 15.2 31.5
------------------------------ ----------- ----------- ----------
Underlying EBITDA(1) 1.88 0.87 3.78
------------------------------ ----------- ----------- ----------
EBITDA after exceptionals(2) 0.3 (1.5) 0.0
------------------------------ ----------- ----------- ----------
Loss before tax (0.7) (2.5) (2.0)
------------------------------ ----------- ----------- ----------
EPS (continuing operations (1.88) (8.82) (5.70)
- pence per share) p p p
------------------------------ ----------- ----------- ----------
Underlying EBITDA
margin 9% 6% 12%
------------------------------ ----------- ----------- ----------
(1) Profit (Loss) before interest, tax, depreciation,
amortisation and impairments, exceptional, earn-in and earn-out
payments and share-based payment costs on a continuing basis.
(2) Profit (Loss) before interest, tax, depreciation,
amortisation and impairments, earn-in and earn-out payments and
share based payment costs on a continuing basis.
Nature of Announcement
This Interim Review Release was approved by the directors on 25
November 2014.
The financial information presented herein does not amount to
full statutory accounts within the meaning of Section 435 of the
Companies Act 2006 and has neither been audited nor reviewed
pursuant to guidance issued by the Auditing Practices Board. The
annual report and financial statements for the year ending 31 March
2014 have been filed with the Registrar of Companies. The
independent auditors' report on the annual report and financial
statements for 2014 was unqualified, did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying the report, and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
-Ends-
About Ashcourt Rowan plc
Ashcourt Rowan plc provides a range of expert, integrated wealth
management and employee benefits consultancy services for
individuals, families, charities and trusts, business owners and
employers.
Its financial planners, investment managers and consultants
deliver services to clients on a face-to-face basis nationally,
supported by dedicated technical departments in London and
Leeds.
Headquartered in the City of London, Ashcourt Rowan has offices
in Bath, Bournemouth, Brighton, Cambridge, Chelmsford, Exeter,
Leeds, Macclesfield, Maidstone, Manchester, Rugby, Salisbury, St
Andrews, Winchester and York.
www.ashcourtrowan.com
For further information please contact:
Cantor Fitzgerald Europe (nominated adviser and broker)
Rishi Zaveri / Rick Thompson
Tel: 020 7894 7667
Maitland
Marina Burton/ Daniel Yea
Tel: 020 7379 5151
Email: ashcourtrowan@maitland.co.uk
Ashcourt Rowan
Katy Moore, marketing manager - communications
Tel: 020 7871 7252
Email: katymoore@ashcourtrowan.com
Highlights
-- More than doubling underlying EBITDA(1) profitability to
GBP1.9 million from GBP0.9 million in the same period last
year.
-- Discretionary and managed assets of GBP2.3 billion, a 40%
increase on September last year and 19% increase during the period,
primarily boosted by UKWM acquisition.
-- Total assets under management and influence of GBP5.3 billion
up from GBP4.0 billion in March 2014.
-- Revenue increased to GBP19.9 million from GBP15.2 million in
same period last year. Significantly higher recurring revenues more
than offset a weak environment for dealing commissions.
-- Integration of UKWM largely complete and realised synergies
to meet and exceed GBP2.25 million target on a full year run-rate
basis.
-- UKWM integration and transaction costs of GBP1.5 million in
first half, to be completed within cost guidance previously given
(GBP2 million). No other significant exceptional costs except for
expensed revenue generator earn-in and earn-out costs.
-- Loss after tax for continuing business reduced to GBP(0.7)
million from GBP(2.4) million in the same period last year.
-- No debt, and cash of GBP10.1 million, increased from GBP7.0 million at 30 September 2013.
-- Outlook for continued profit growth in second half, whilst mindful of market environment.
-- Board will actively review dividend position at year end.
Key performance indicators summary
Total funds under management Operating cost base(3)
(FUM) and Influence (FUI)
-----------------------------
H1 2014: GBP5.3bn 43% H1 2014: GBP18.1m 27%
------------- ------------ ------ --------- --------- -------
H1 2013: GBP3.7bn H1 2013: GBP14.3m
------------- ------------ ------ --------- --------- -------
Discretionary and managed Underlying EBITDA margin
funds (FUM)
-----------------------------
H1 2014: GBP2.3bn 40% H1 2014: 9% 3%
------------- ------------ ------ --------- --------- -------
H1 2013: GBP1.6bn H1 2013: 6%
------------- ------------ ------ --------- --------- -------
Underlying EBITDA Basic earnings per share
-----------------------------
H1 2014: GBP1.88m 117% H1 2014: (1.88)p +6.94p
------------- ------------ ------ --------- --------- -------
H1 2013: GBP0.87m H1 2013: (8.82)p
------------- ------------ ------ --------- --------- -------
Revenue Basic adjusted EPS(4)
-----------------------------
H1 2014: GBP19.9m 31% H1 2014: 4.13p +1.97p
------------- ------------ ------ --------- --------- -------
H1 2013: GBP15.2m H1 2013: 2.16p
------------- ------------ ------ --------- --------- -------
Financial overview - continuing operations (GBP million unless
specified)
Six months Six months Full
ended ended year
30 Sept 30 Sept 31 March
2014 2013 2014
------------------------------ ----------- ----------- ----------
Revenue 19.9 15.2 31.5
------------------------------ ----------- ----------- ----------
Underlying EBITDA(1) 1.88 0.87 3.78
------------------------------ ----------- ----------- ----------
EBITDA after exceptionals(2) 0.3 (1.5) 0.0
------------------------------ ----------- ----------- ----------
Loss before tax (0.7) (2.5) (2.0)
------------------------------ ----------- ----------- ----------
EPS (continuing operations (1.88) (8.82) (5.70)
- pence per share) p p p
------------------------------ ----------- ----------- ----------
Underlying EBITDA
margin 9% 6% 12%
------------------------------ ----------- ----------- ----------
(1) Profit (Loss) before interest, tax, depreciation,
amortisation and impairments, exceptional, earn-in and earn-out
payments and share-based payment costs on a continuing basis.
(2) Profit (Loss) before interest, tax, depreciation,
amortisation and impairments, earn-in and earn-out payments and
share-based payment costs on a continuing basis.
(3) Before interest, tax, depreciation, amortisation,
impairments, exceptional, earn-in and earn out payments and
share-based payment costs
(4) Adjusted to exclude integration and earn-in/earn-out
exceptionals (net of estimated tax impact), share based payment
costs and amortisation of acquired intangibles on a continuing
basis
Key Performance Indicators
Underlying EBITDA Six Months to: Full Year
GBPm to:
------------------------------ -------------- ------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Continuing Business -0.3 0.4 0.9 1.9 0.3 2.8 3.8
------ ------ ------ ------ ------ ------ ------
Note: Profit (Loss) before interest, tax,
depreciation, amortisation, impairments,
exceptional, earn-in and earn-out payments
and share-based payments
Underlying EBITDA Six Months to Full Year
Margin to:
------------------------------ -------------- ------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Continuing Business -2% 2% 6% 9% 1% 8% 12%
------ ------ ------ ------ ------ ------ ------
Note: Underlying EBITDA as a percentage of
total group revenue
Revenue GBPm Six Months to Year end
------------------------------ -------------- ------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Continuing Business 18.0 15.7 15.2 19.9 35.7 32.6 31.5
------ ------ ------ ------ ------ ------ ------
Revenue by Type (Continuing
Business) GBPm
------ ------ ------ ------
Six Months to Year end
------------------------------ -------------- ------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Recurring Revenue* 10.7 10.9 10.4 15.3 21.4 21.5 21.1
Dealing Commission
and Financial Planning
upfront advice 7.3 4.8 4.8 4.6 14.3 11.1 10.4
------ ------ ------ ------ ------ ------ ------
Continuing Business 18.0 15.7 15.2 19.9 35.7 32.6 31.5
------ ------ ------ ------ ------ ------ ------
* Includes all revenues except non-recurring Financial Planning
advice and implementation fees
Underlying Cost Base Development* - Continuing
Business
------
Six Months to Year end
------------------------------ -------------- ------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Staff costs (including
incentives) 12.4 10.3 9.2 11.4 23.9 20.1 18.2
Other costs 6.0 5.0 5.1 6.7 11.5 9.7 9.6
------ ------ ------ ------ ------ ------ ------
Total Costs 18.4 15.3 14.3 18.1 35.4 29.8 27.8
------ ------ ------ ------ ------ ------ ------
* Excludes exceptionals, earn-in and earn-out
costs and share based payments
Headcount
------ ------ ------ ------
Total HeadCount
------------------------------
Sep-11 Sep-12 Sep-13 Sep-14
------ ------ ------ ------
Revenue Generators 114 103 67 115
Support and Others 259 219 179 241
------ ------ ------ ------
Total 373 322 246 356
------ ------ ------ ------
Note: Includes temporary project resources
and consultants
Funds under management and
Influence GBPbn
------
Sep-11 Sep-12 Sep-13 Sep-14
------ ------ ------ ------
Discretionary and
Managed Advisory
FUM 1.5 1.6 1.6 2.3
Investment Management
Advisory and Execution
Only 0.5 0.3 0.2 0.2
Financial Planning
Funds under Influence 1.9 1.9 1.9 2.8
------ ------ ------ ------
Total 3.9 3.8 3.7 5.3
------ ------ ------ ------
FUM/FUI Breakdown
(%)
------ ------ ------ ------ ------ ------ ------
Six months Year end
to
------------------------------ ----------------------
Sep-11 Sep-12 Sep-13 Sep-14 Mar-12 Mar-13 Mar-14
------ ------ ------ ------ ------ ------ ------
Discretionary and
Managed Advisory 37% 42% 43% 43% 40% 43% 48%
Non-Managed Advisory
and Execution Only 13% 8% 7% 4% 12% 7% 6%
Financial Planning
Funds under Influence 50% 50% 50% 53% 48% 50% 46%
------ ------ ------ ------ ------ ------ ------
100% 100% 100% 100% 100% 100% 100%
Movements in Discretionary and Managed funds (GBP million)
6 months to 30 September 2014 6 months to 30 September 2013
Opening FUM GBPm 1,891 1,599
---------------------------------------------- ------ ------------------------------ ------------------------------
UKWM acquisition 315
New clients FUM inflows 78 65
Lost clients FUM outflows -52 -54
Market /performance/flows from existing clients 23 -4
Closing FUM GBPm 2,255 1,607
---------------------------------------------- ------ ------------------------------ ------------------------------
Average FUM GBPm 2,250 1,603
Report of the Group chief executive officer
The first half of our financial year has been another positive
one of delivering on our objectives, increasing underlying
profitability and building on the strong platform that we have
developed and honed over the last three years. A major validation
of these achievements has been the smooth integration of the UKWM
business which was completed at the beginning of this reporting
period on 4 April following regulatory approval. Following
completion of the acquisition, the main focus of activity during
the first half has been the integration of the UKWM business into
the enlarged Ashcourt Rowan Group. We set ourselves the task of
integrating the two businesses by the end of the calendar year and
to have realised or identified the GBP2.25 million of synergies
that we promised at the time of the transaction. Both of these
latter goals were met ahead of time and synergies realised or
identified have been greater than we outlined. We have identified
additional synergies, most of which have already been implemented,
which now means that we will achieve GBP2.3 million or more.
I am pleased with the ability of our team to complete the
integration so swiftly, which will allow us to see the impact of
the synergies in our second half.
In addition, I am happy to say that underlying EBITDA has
doubled from the same period last year to GBP1.9 million. Recurring
revenues have increased and funds under management have grown by
19%. I am therefore pleased that, for the third year running, your
management team is delivering on its plans and we remain on track
to deliver further profit growth in the second half.
Financial
The further improvement in underlying EBITDA is a direct result
of the benefits that have arisen from the restructure of the
company by this management team. The fact that during a significant
integration project we have, for the second year running, doubled
underlying EBITDA demonstrates the operational leverage now built
into the company and that the business has dealt with its legacy
issues and is a fully integrated, focused, and robust financial
services group.
Revenues for the Group, post the acquisition of UKWM, rose to
GBP19.9 million in our first half. More pleasing though is the
further rise in recurring revenues, above our budget target, to
GBP15.3 million during the period. This means that our recurring
revenues are now 77% of total revenues for the Group - the highest
figure to date. This continued increase in recurring revenues is
paramount for the delivery of shareholder value. In terms of new
business, discretionary assets increased by GBP364 million since
the end of March, primarily due to the positive impact of the UKWM
deal. In addition, we are beginning to see encouraging signs of
improving organic growth.
Organic growth
Our financial planning division has rolled out an improved
client proposition to all Ashcourt Rowan advisers, including our
new colleagues who joined from UKWM. This has resulted in an
increase in our average case size in front end advice and
implementation fees, rising to c. GBP3,050 in the six months to
September 2014 from c. GBP2,475 in the same period last year. The
new proposition gives clients the option for a range of new
services in addition to our basic proposition and we believe
enhances our offering to clients and introduces greater potential
for cross selling opportunities.
In addition, September was our financial planning division's
best performing month this in the period under review. We have seen
the fruits of the hard work, by all, come through towards the end
of the first half which augurs well for our second half. This is a
recurring theme in our business where, mainly due to the fiscal
requirements, our second half is always materially stronger than
the first.
The financial planning division has also hired six new financial
planners and I am pleased with their quality. They have started
well and will, we expect, continue to deliver new revenues and
profitability to the Group. We will continue to hire quality
individuals as we can access them, but we will not lower our
standards in terms of competence and culture.
We have made good progress with our exclusive arrangements with
Care UK for the provision of financial planning services to their
new and existing care home clients and we are seeing increased
business coming from the seminar programmes being run for Care UK
potential clients. We have also forged an alliance with KBS, a
corporate finance business specialising in the sale of private
companies, to deliver holistic financial advice and investment
solutions post sale for their clients across the UK.
In addition, our project to transition our clients from trail
commission to ongoing service agreements progresses well. To date,
over GBP510 million of financial planning third party assets under
influence have been secured onto service agreements.
We continue to grow and improve the quality of our network of
professional introducers to help deliver quality leads resulting in
our mutual clients receiving the very best holistic advice.
Our asset management division has continued to grow its assets
under management and I am delighted with the number of new
investment managers wanting to join your company. Andre Girault and
Tim Dickens, both previously at HSBC Private Bank, joined us during
the first half and will be putting significant efforts into growing
their client base. In addition, we will shortly announce another
team who will be joining us after Christmas. Our recruitment drive
for these managers, under Harry Burnham's leadership, continues to
gather pace.
It is particularly pleasing to see that our investment returns
continue to deliver for our clients. This half year we have again
achieved returns ahead of benchmark for our core mandates.
Producing consistent outcomes and underlying performance is
critical for us and our clients, and I am delighted that, yet
again, the team has achieved this.
Our new integrated Figaro platform has been operative for more
than a year and the recent client valuation run was completed more
quickly and with more detail than ever before. Together with
greater flexibility in front end tools, this allows us to be ready
to assimilate further non organic growth opportunities and has been
material to the success of the team moves we have competed so
far.
The UKWM purchase brought us a well-formed Corporate Solutions
business and will allow us to take advantage of the corporate
pensions market more effectively. Ashcourt Rowan Corporate
Solutions will help us to further maximise the opportunity afforded
by the proposed momentous changes to pension legislation announced
by the Chancellor earlier this year. These changes will be the
greatest driver of growth within our industry and will most likely
deliver additional significant opportunities to all financial
planning businesses.
Non-organic growth
We have now completed two acquisitions and two disposals since
March 2013 and have built a much more robust and effective
operating platform. We continue to keep abreast of all non-organic
opportunities and evaluate a number of them. It remains our aim to
be at the forefront of the consolidation that continues to happen
in the sector. We believe that, in order to deliver continued
shareholder value and continually improve our customer outcomes, we
need greater scale. During the second half of the year and beyond,
we will continue to explore and, where appropriate, exploit these
opportunities. Your management team has proven its ability to
interpret transactions and execute them. However, we will execute
only when we find something that meets our criteria, creates scale
and leverage and ultimately client benefits and shareholder
value.
Regulation and governance
I consider ourselves fortunate to have grappled at the beginning
of my tenure with a raft of regulatory issues that required
detailed attention and rectification. As shareholders are aware we
completed that process some 18 months ago. However, we remain
committed to ensuring that we continually monitor and check our
progress and behaviours against the benchmarks we have set
ourselves and ultimately against client outcomes.
We have seen a change to the structure of our Board, which was
announced earlier in this reporting period. Steve Haines joined the
executive team as our head of governance and to give wider
commercial experience to my executive team. As a result, he stood
down from his non-executive board position. Steve had been a
non-executive director for the last three years, joining the
business at the same time as myself and working very closely with
me in the early days.
At the same time, Richard Sinclair, previously our chief
operating officer, has left the Board and the company to further
his career in the telecommunications industry. Richard has been a
stalwart supporter of our business and drove through the necessary
changes to our ICT infrastructure. On behalf of the Board, I would
like to thank Richard for all his hard work, particularly with
regard to the hugely complex task of migrating our asset management
business from three different platforms to one outsourced solution,
the Figaro system.
We are completing a project to search for a new non-executive
with an aim to appoint in the New Year.
In July, the Remuneration Committee took the decision to make
further awards with our GSOP and LTIP incentive plans, following
the acquisition of UKWM, to incentivise new joiners to the Group
and to provide further incentive to existing staff. While these
awards have not been made to date, we expect them to be finalised
during the second half.
Summary
This half has been a strong and successful time for your
company; finalising the purchase of UKWM, delivering the
integration into our Group, and achieving greater synergies than
announced ahead of schedule. Notwithstanding the volatile market
environment, we are therefore well positioned to deliver another
successful final half to the financial year. This half of the year
has been an important stepping stone for the company. Looking back
to the business we took over in September 2011, there has been a
remarkable turnaround which could not have been achieved without
supreme effort of our staff and a huge amount of support from our
shareholders. I look forward to reporting a successful completion
of our financial year end in March 2015 and continuing to play a
key consolidation role in the currently fragmented wealth
management industry.
With that in mind, the Board recognises the importance of paying
dividends and will review its position at year end, taking into
account distributable profit, buffer over capital requirements and
growth investment opportunities ahead.
Jonathan Polin
Group Chief Executive
25 November 2014
Finance Report
Underlying profitability
During the six months to September 2014 the Group delivered
Underlying EBITDA (profit before interest, tax, depreciation,
amortisation, integration and exceptional costs, costs linked to
revenue generator earn-in and earn-out agreements and share base
payments on a continuing basis) of GBP1.884 million, more than
doubling the GBP0.868 million achieved in the same period last
year. This was driven by a combination of growth in client assets -
both organically and as a result of the acquisition of UKWM - and
continued control on costs. The full year Underlying EBITDA to
March 2014 was GBP3.8 million, reflecting a stronger revenue
profile in the second half and in particular in the last quarter
that coincides with the tax year end and resultant activity.
The Adjusted Profit Before Tax (Profit Before Tax on a
continuing basis adjusted for amortisation, integration and
exceptional costs, costs linked to revenue generator earn-in and
earn-out agreements and share based payment costs) in the period
grew to GBP1.6 million from GBP0.6 million in the same period last
year. The earnings per share adjusted to exclude integration and
earn-in/earn-out exceptionals, share based payment costs and
amortisation of acquired intangibles on a continuing basis were
4.13 pence (4.06 pence diluted on the basis of share awards with
performance conditions met on 30 September 2014) while the loss per
share was (1.88) pence, a marked improvement on (8.82) pence in the
same period last year.
Loss before tax reduced to GBP(0.7) million, impacted
principally by the one-off costs relating to the integration of
UKWM. This is, however, a marked improvement over GBP(2.5) million
loss in the six months to September 2013.
One-off UKWM integration costs were GBP1.2 million in the first
half (in addition to GBP0.3 million in completion and post
completion one-off transaction costs) and are expected to remain
within guidance provided at time of acquisition (GBP2 million). Of
particular note for the prospect of returning the business to full
after tax profitability, we had no material exceptional costs in
the first half of this financial year except for the above UKWM
related transaction and integration costs and cost related to
earn-in and earn-outs of revenue generator teams, which are
expensed rather than capitalised.
Loss after tax for continuing operations was GBP(0.7) million
during the period, reduced from GBP(2.4) million in the same period
in 2013/14.
Non-organic activity
The acquisition of the UKWM Group completed on 4 April 2014.
While a summary overview of the acquired business and expected
impact was included in our annual report for the year ended 31
March 2014, this interim report consolidates all activities and
financial performance of the UKWM Group. Immediately after
completion we aligned both the management and the reporting of the
UKWM activities within the existing Ashcourt Rowan financial
planning and investment management segments with the addition of a
Corporate Solution unit.
In August we completed the disposal of the SIPP (Self Invested
Pension Plan) and SSAS (Small Self-Administered Scheme)
administration business we acquired through the UKWM deal.
Similarly to the previous Group SIPP and SSAS disposal in 2013, the
business was subscale, accounting for less than 1% of our revenue,
and would have required significant investment to develop. We
however strongly believe in the pension opportunity and are focused
on expanding advice and investment solutions to fully capture it
rather than focus on personal scheme administration. The
consideration for the disposal was GBP275k upfront and up to GBP80k
in contingent deferred consideration payable based on revenue
retained in the sold business.
Funds under management and influence
Total funds under management and influence at the end of
September 2014 were GBP5.3 billion, up from GBP3.7 billion at
September 2013 and GBP4 billion at the end of March 2014, mainly as
a result of the acquisition of UKWM.
Managed and discretionary assets, the key drivers of the Group's
management fee income, stood at GBP2.3 billion at 30 September 2014
up from GBP1.6 billion in September 2013 and GBP1.9 billion 31
March 2014, a 40% growth year on year and 19% in the period.
While the increase during the period was mainly driven by the
addition of the UKWM discretionary and managed book of business,
organic inflows from new clients increased during the six months to
September 2014 to GBP78 million from GBP65 million in the first
half of last year. Outflows from lost clients stood at around GBP52
million, marginally down from GBP54 million in the first half of
last year and the combination of new net assets from existing
clients and market movement contributed a positive GBP22
million.
As at the end of September 2014, over GBP510 million of our
third party Funds under Influence have been signed to ongoing
service agreements. During the period ongoing service agreements on
third party assets grew by around GBP40 million, with an additional
GBP28 million of assets our clients opted to transfer into
discretionary services.
Revenue
In the first half of the year we generated just under GBP19.9
million in revenue, an increase of GBP4.8 million on the GBP15.2
million achieved in the first half of the previous year.
While this benefitted from the addition of the UKWM business,
particularly pleasing in the first half was the increase in
recurring revenues which totalled GBP15.3 million. This increase
was ahead of expectations and significantly higher than in the six
months to September 2013 (GBP10.4 million, or GBP13.7 million if
UKWM recurring revenues in the same period last year are included)
and in the six months to March 2014 (GBP10.7 million).
The overall result was achieved in spite of weaker than expected
dealing activity within the investment management business,
reflective of market conditions, and one-off initial advice and
implementation revenue in financial planning. The latter was to
some extent impacted by UKWM integration and re-launch of our
proposition across our enlarged advisor population, a process that
has now concluded. As a result, the total upfront advice and
dealing activity revenue was GBP4.6 million, down from GBP4.8
million last year or GBP5.8 million if UKWM new business revenue in
the same period last year is included.
Operating costs and UKWM integration synergies
As commented in more detail in the report of the Group chief
executive officer, during the first half of the period we focused
on a rapid integration of UKWM and delivering the cost synergies
and efficiencies targeted. We are pleased to report that the total
synergy saving to be achieved stands at over GBP2.3 million, in
excess of the total GBP2.25 million annualised run-rate target and
the majority of those have now been secured or executed, with a
resulting benefit on our expected cost base in the second half of
the current financial year.
In parallel to the delivery of integration synergies we have
continued to maintain a strong focus on cost management and aimed
to identify and extract further efficiencies and reprice or remove
unprofitable activities.
As the result of the above, underlying operating costs in the
period were GBP18.1 million (excluding exceptionals, shared based
payments, amortisation and depreciation), against GBP14.3 million
last year (and a total of GBP18.6 million if UKWM operating are
included in the same period last year).
Operating Expense GBPm Six months to:
Sept 2014 Sept 2013
GBPm GBPm
Third party pay-aways (0.6) (0.6)
Fixed staff costs (9.7) (7.7)
Variable staff costs (1.4) (1.0)
Other staff-related costs (0.3) (0.5)
Other operating costs (6.1) (4.5)
Total Operating Expenses (18.1) (14.3)
---------------------------------- ------------ -----------
Note: Excludes depreciation, amortisation, exceptional
costs, earn-in/earn-out payments and share-based
payments.
We continue however to invest to drive further revenue growth.
In the period we added a new investment management team and a
number of new financial planners that we expect will contribute to
delivering top-line growth in the second half of the year.
Headcount increased to 376 at the beginning of the period as a
result of the addition of UKWM and reduced to 356 heads by
September end, or 339 when looked on a Full Time Equivalent basis
excluding temporary project consultants and resources. Both numbers
include a number of staff under notice at the end of September.
Balance sheet and cash flow
The Group continues to maintain a solid balance sheet with no
external financing debt and a healthy cash position. At 30th
September 2014 total net assets stood at GBP59.6 million. In the
past, the Group has grown through a number of acquisitions,
including the acquisition of UKWM during the period resulting in a
combination of significant goodwill and intangible assets and
investments recorded on its balance sheet. Excluding goodwill,
intangible assets and available for sale investments, the net
assets of the Group amounted to GBP8.9 million (2013: GBP8.5
million) with cash or equivalents of GBP10.1 million (2013: GBP7
million).
At the end of September the regulatory capital requirement
across the Group's regulated entities was GBP5 million.
Revenue Sources GBPm
Managed Non-Managed Financial Corporate Total
Advisory/ Planning Solutions
Execution Funds
Only under
influence
/ Third
party
Assets
Closing Assets
(30th Sept 2014) GBPm 2,255 223 2,780 62 5,320
----------------------- ------ -------- ------------ ----------- ----------- ------
Average FUM
/ FUI GBPm 2,250 235 2,783 61 5,329
Revenues GBPm
Fee income on
Investment FUM
(including Financial
Planning Service
Agreements) 11.2 0.2 - 0.0 11.4
Commission income 2.7 0.2 - - 2.9
Financial Planning
initial advice
and implementation
fees 0.5 - 1.3 0.4 2.2
FUI Service
Agreements and
renewal income - - 2.4 0.8 3.2
Interest 0.2 0.0 - - 0.2
Total Revenue GBPm 14.6 0.4 3.7 1.2 19.9
----------------------- ------ -------- ------------ ----------- ----------- ------
Revenue margin* % 1.30% 0.33% 0.27% nm** 0.75%
Revenue margin
excluding Initial
advice fees* % 1.25% 0.33% 0.18% nm** 0.67%
Management/Custody
Fee revenue
margin* % 1.00% 0.11% - nm** nm**
*revenue divided by relevant average FUM or
FUI during the period
** not meaningful as revenue figure not related
to the value of assets
INDEPENDENT REVIEW REPORT TO ASHCOURT ROWAN PLC
Introduction
We have been engaged by the group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 September 2014 which comprises the consolidated
statement of comprehensive income, the consolidated statement of
financial position, the consolidated cash flow statement, the
consolidated statement of changes in equity and the related
explanatory notes that have been reviewed. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the group's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the group a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our report has been prepared
in accordance with the terms of our engagement to assist the group
in meeting the requirements of the rules of the London Stock
Exchange for companies trading securities on AIM and for no other
purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of
and for the purpose of our terms of engagement or has been
expressly authorised to do so by our prior written consent. Save as
above, we do not accept responsibility for this report to any other
person or for any other purpose and we hereby expressly disclaim
any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2014 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
London
United Kingdom
25 November 2014
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
Six Months Ended 30 September 2014
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
Note GBP'000s GBP'000s
Revenue 3 19,940 15,175
External payaways
and revenue generator
costs (5,976) (4,660)
Gross profit 13,964 10,515
Other administrative
expenses (12,129) (9,647)
Amortisation and
depreciation (558) (771)
Share-based payments (90) (199)
Exceptional costs
and earn-in and
earn-out payments 5 (1,997) (2,379)
Operating loss (810) (2,481)
Share of profit
of associate 49 -
Finance income 26 29
Finance costs (11) (1)
Loss before tax (746) (2,453)
Income tax expense 80 72
Loss for the period
from continuing
operations 6 (666) (2,381)
Profit for the period
from discontinued
operations, net
of tax 7 10 238
Loss for the period
attributable to
the equity holders
of the parent (656) (2,143)
Loss per share -
continuing operations
Basic and diluted (1.88)p (8.82)p
Loss per share -
total operations
Basic and diluted (1.85)p (7.94)p
Note: profit before
interest, tax, depreciation,
amortisation, exceptional
costs, earn-in and
earn-out payments
and share based
payments on a continuing
basis 1,884 868
============= ==============
Consolidated statement of financial position
As at 30 September 2014
30 September 31 March
2014 2014
(unaudited) (audited)
GBP'000s GBP'000s
Non-current assets
Property, plant and equipment 1,321 850
Goodwill 49,218 36,409
Other intangible assets 978 1,271
Investment in associate 354 230
Investment in joint venture 8 -
Available-for-sale investments 168 301
Total non-current assets 52,047 39,061
Current assets
Trade and other receivables 6,526 6,441
Current tax receivable 68 -
Deferred tax asset 482 4
Cash and cash equivalents 10,116 21,374
Total current assets 17,192 27,819
Total assets 69,239 66,880
Non-current liabilities
Deferred consideration (277) (277)
Total non-current liabilities (277) (277)
Current liabilities
Trade and other payables (6,896) (5,648)
Deferred consideration (2,241) (614)
Provisions (177) (127)
Total current liabilities (9,314) (6,389)
Total liabilities (9,591) (6,666)
Net assets 59,648 60,214
Equity
Share capital 7,098 7,098
Share premium 41,898 41,898
Equity reserve 1,999 1,909
Retained earnings 8,653 9,309
Equity attributable to equity
holders of the parent 59,648 60,214
Consolidated statement of changes
in equity
As at 30 September
2014
Share Share Equity Retained Total
Capital Premium Reserve Earnings
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
At 31 March 2013 5,399 28,697 1,560 10,793 46,449
Total comprehensive
income for the
period:
Loss for the period - - - (2,143) (2,143)
Transactions with
owners recorded
directly in equity:
Share-based payments - - 199 - 199
Transfer of shares
distributed by
Employee Benefit
Trust 7 - - (7) -
-
----------- ----------- ----------- ----------- --------------
At 30 September
2013 5,406 28,697 1,759 8,643 44,505
At 31 March 2014 7,098 41,898 1,909 9,309 60,214
Total comprehensive
income for the
period:
Loss for the period - - - (656) (656)
Transactions with
owners recorded
directly in equity:
Share-based payments - - 90 - 90
At 30 September
2014 7,098 41,898 1,999 8,653 59,648
Share capital represents the nominal value of shares subscribed
for. Share premium represents the total amount subscribed for
shares in excess of the nominal value. The equity reserve
represents the total amount charged, less any credits, in respect
of share-based payments charged to the statement of comprehensive
income. Retained earnings include all other gains and losses and
transactions with owners not recognised elsewhere.
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Consolidated statement of financial
position) comprise cash at bank and other short-term highly liquid
investments, with a maturity of three months or less.
Consolidated cashflow statement
Six months ended 30 September 2014
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
GBP'000s GBP'000s
Operating activities:
Loss for the period (656) (2,143)
Adjustments for:
Profit from discontinued operations (10) (238)
Depreciation of property, plant
and equipment 265 478
Amortisation of intangible assets 293 293
Share based payments 90 199
Share of profit of associate (49) -
Finance income (26) (29)
Finance costs 11 1
Corporation tax credit (80) (72)
Operating cash outflow before
movements in working capital (162) (1,511)
Decrease in receivables 728 814
Decrease in payables (564) (770)
Increase in provisions 50 -
Cash inflow/(outflow) from operations 52 (1,467)
Tax received - 60
Interest received 26 29
Interest paid (11) (1)
Cash inflow/(outflow) from operating
activities 67 (1,379)
Investing activities
Purchases of property, plant and
equipment (487) (271)
Proceeds from disposal of discontinued
operations (net of cash disposed
of) 275 601
Additions to available-for-sale
investments (3) (19)
Additions to investments in associate (76) -
Acquisition of subsidiaries, net
of cash acquired (11,034) -
Net cash (outflow)/inflow from
investing activities (11,325) 311
Net cash decrease in cash and
cash equivalents (11,258) (1,068)
Cash and cash equivalents at beginning
of period 21,374 8,036
Cash and cash equivalents at end
of period 10,116 6,968
Notes to the unaudited interim financial report
Six months ended 30 September 2014
1. Reporting entity
Ashcourt Rowan plc (the "Company") is a company domiciled in the
United Kingdom. The condensed consolidated interim financial
statements of the Company as at and for the six months ended 30
September 2014 comprise the Company and its subsidiaries (together
referred to as the "Group") and the Group's interests in associates
and jointly controlled entities. The consolidated financial
statements of the Group as at and for the year ended 31 March 2014
are available upon request from the Company's registered office at
60 Queen Victoria Street, London EC4N 4TR or at
www.ashcourtrowan.com.
2. Accounting policies
Accounting policies
Basis of preparation
As permitted by AIM rules for Companies, IAS 34, 'Interim
Financial Reporting' has not been applied in this interim
report.
The accounting policies are in accordance with the recognition
and measurement principles of International Financial Reporting
Standards, International Accounting Standards and Interpretations
(collectively IFRS) issued by the International Accounting
Standards Board as endorsed for use in the European Union, and
these policies are disclosed in the Financial Statements for the
year ended 31 March 2014.
The financial information in this interim report does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The Annual Report and Financial Statements
for 2014 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statement for 2014 was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are the same as those
applied by the Group in its consolidated financial statements as at
and for the year ended 31 March 2014.
Going concern
The financial statements have been prepared on a going concern
basis which the Directors believe to be appropriate for the
following reasons. At 30 September 2014 the Group reported net
current assets of GBP7.9 million (30 March 2014: GBP21.4 million),
reduced as a result of upfront cash consideration to UKWM (GBP12.5
million) and defined consideration contingent liability. The
Directors have reviewed profit budgets and cash flow forecasts for
the coming year and expect the Group to strengthen its underlying
operating profitability before exceptional costs, depreciation,
impairment and amortisation and to produce operating cash flow
sufficient to fund existing activities and the development of the
business. The Directors consider that the Group is sufficiently
diversified and has no over reliance on any one customer or
supplier.
External payaways and revenue generator costs
External payaways and revenue generator costs comprises the
direct employment costs associated with front office revenue
generating staff plus any payments to third parties in respect of
revenue share arrangements, accounted for on an accruals basis.
Exceptional costs and receipts
Exceptional items are non-recurring items which are either
outside the normal scope of the Group's ordinary activities or by
their nature they could distort the Group's underlying annual
earnings. In accordance with IAS 1 Presentation of Financial
Statements such items are disclosed separately on the face of the
consolidated statement of comprehensive income within the financial
statements to enhance understanding of the Group's financial
performance.
Management believe that the combination of identification of
exceptional costs and receipts on the face of consolidated
statement of comprehensive income in conjunction with the more
detailed disclosure of the composition of exception items in Note 4
provide an enhanced understanding of the underlying performance of
the business.
Payments in relation to earn-in and earn-out agreements
Payments in relation to earn-in and earn-out agreements
represent payments to revenue generators joining or leaving the
business based on the value of client relationships brought,
transferred or retained to the group. The payments are charged to
income when paid and are separately disclosed together with other
exceptional costs. Management believe that the separate
identification of payments in relation to earn-in and earn-out
agreements in conjunction with the additional disclosure in Note 4
provide an enhanced understanding of the underlying performance of
the business.
3. Operating segments
At the beginning of the year the Group had two reportable
segments, Investment Management and Financial Planning, which are
the Group's strategic business units. On 4 April 2014, the Group
acquired the UK Wealth Management group of companies ('UKWM') which
consisted of reportable segments for Investment Management,
Financial Planning, Pension Administration and an additional
segment, Corporate Solutions (Note 6). The Pension Administration
segment was subsequently sold on 11 August 2014 and has been
treated as discontinued operations in these financial statements
(Note 7). As a result the Group has three continuing reportable
segments at the period end, Investment Management, Financial
Planning and Corporate Solutions.
The strategic business units offer a different mix of products
and services and are managed separately. For each of the strategic
business units the Group's CEO reviews internal management reports
on at least a monthly basis.
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment profit
before tax, as included in the internal management reports that are
reviewed by the Group's CEO, Jonathan Polin, and the Group
Executive Committee who are the Chief Operating Decision Makers
(CODM). Segment profit is used to measure performance as management
believes that such information is the most relevant in evaluating
the results of certain segments relative to other entities that
operate within these industries. Inter-segment pricing is
determined on an arm's length basis. The Group has no other
operating segments other than those shown below.
Investment Financial Corporate
Management Planning Pension Administration Solutions Total Total
(Discontinued) (Discontinued)
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
30.9.14 30.9.13 30.9.14 30.9.13 30.9.14 30.9.13 30.9.14 30.9.13 30.9.14 30.9.13
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
Revenue 12,025 11,295 6,662 3,880 128 38 1,231 - 20,046 15,213
Inter-segment
revenues (1,350) (1,738) 1,347 1,738 - - 3 - - -
Total Revenue 10,675 9,557 8,009 5,618 128 38 1,234 - 20,046 15,213
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
External
payaways
and revenue
generator
costs (2,448) (2,145) (2,981) (2,515) (2) (2) (547) - (5,978) (4,662)
Gross Profit 8,227 7,412 5,028 3,103 126 36 687 - 14,068 10,551
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
Direct support
costs (3,546) (5,073) (2,575) (3,657) (117) (34) (414) - (6,652) (8,764)
Segment
Contribution 4,681 2,339 2,453 (554) 9 2 273 - 7,416 1,787
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
Recharges and
overheads (2,634) (648) (2,486) (189) - - (410) - (5,530) (837)
Underlying
EBITDA 2,047 1,691 (33) (743) 9 2 (137) - 1,886 950
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
Amortisation
and
depreciation (255) (247) (276) (274) - - - - (531) (521)
Share based
payments (26) (51) (14) (25) - - - - (40) (76)
Exceptionals 5 (96) (5) - 1 (359) - - 1 (455)
Finance income 18 23 1 1 - 1 - - 19 25
Finance
expense (6) (1) - - - - - - (6) (1)
Profit before
Tax 1,783 1,319 (327) (1,041) 10 (356) (137) - 1,329 (78)
--------------- ----------- -------- -------- -------- --------------- --------------- -------- -------- -------- --------
3. Operating segments (continued)
Reconciliations of reportable segment revenues,
other administrative expenses and profit
or loss
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
Revenues GBP'000s GBP'000s
------------------------------------------- -------------- ----------------------------
Total revenue for reportable segments 20,046 15,213
Unallocated revenue for holding
companies 22 -
Less: revenue from discontinued
operations (128) (38)
------------------------------------------- -------------- ----------------------------
Consolidated revenue for continuing
operations 19,940 15,175
------------------------------------------- -------------- ----------------------------
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
Total other administrative expenses GBP'000s GBP'000s
------------------------------------------- -------------- ----------------------------
Total direct support costs for
reportable segments 6,652 8,764
Total recharges and overheads
for reportable segments 5,530 837
Unallocated administrative expenses
for head office and parent company 64 80
Less: other administrative expenses
incurred by discontinued operations (117) (34)
------------------------------------------- -------------- ----------------------------
Consolidated total administrative
expenses for continuing operations 12,129 9,647
------------------------------------------- -------------- ----------------------------
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
Profit/(loss) before tax GBP'000s GBP'000s
------------------------------------------- -------------- ----------------------------
Total profit/(loss) before tax
for reportable segments 1,329 (78)
Reconciliation of unallocated
amounts:
Head office costs and costs of
parent company (41) (79)
Amortisation and depreciation (27) (249)
Exceptional costs (including earn-in
and earn-out costs) (1,998) (1,689)
Share-based payments (50) (124)
Finance income 7 4
Finance expense (5) -
Share of profit of associate 49 -
Less: profit before tax from discontinued
operations (10) (238)
------------------------------------------- -------------- ----------------------------
Consolidated loss before tax for
continuing operations (746) (2,453)
------------------------------------------- -------------- ----------------------------
4. Exceptionals
Six months Six months
ended ended
30 September 30 September Year ended
31 March
2014 2013 2014
(unaudited) (unaudited) (audited)
Exceptional Costs GBP'000s GBP'000s GBP'000s
Change Management Programme
Operating model 12 892 1,024
ICT Project - 158 180
Asset Management - 34 34
Financial Planning - 39 245
Governance & controls - 225 478
Corporate restructuring
and redundancies (14) 553 887
Irrecoverable VAT on projects 16 38 60
Other Exceptional Costs
Acquisition and lift out
costs 326 265 615
UKWM integration 1,236 - 164
Occupancy restructuring
costs - 79 23
Compensation payments and
provisions for impairment
of trade receivables - 96 67
Total Exceptional Costs 1,576 2,379 3,777
Payments in relation to
earn-in and earn-out agreements 421 - 410
__________
_ ___________ __________
1,997 2,379 4,187
Exceptional Receipts
Gains from the restructuring
of introducer relationships - - 23
Total Exceptional Receipts - - 23
____________ ____________ ___________
Net Exceptional Costs 1,997 2,379 4,164
Note: Ashcourt Rowan's Change Management Programme was completed
prior to March 2014. Exceptional costs relating to Change
Management Programme in the period represent residual costs that
were incurred in the six months to 30 September 2014.
5. Goodwill
GBP'000s
---------------------------------------- ---------
Cost
As at 31 March 2013 34,448
Additions through acquisition 1,961
------------------------------------------ ---------
As at 31 March 2014 36,409
Additions through acquisition (note 6) 13,152
Disposal (note 7) (343)
------------------------------------------ ---------
As at 30 September 2014 49,218
------------------------------------------ ---------
On 4 April 2014, the Group completed its acquisition of 100% of
UKWM group of companies having obtained Financial Conduct Authority
(FCA) Change of Control approval for the transaction (see note 6
for full details of the transaction).
Goodwill has been included at the
reporting date as follows:
GBP'000s
Cash consideration at completion 12,507
Contingent deferred consideration
payable 15 months after completion 1,627
Fair value of net assets acquired
at 4 April 2014 (982)
Goodwill (note 6) 13,152
------------------------------------- ---------
On 11 August 2014, the Group completed the sale of its Self
Invested Personal Pension and Small Self Administered Scheme
businesses acquired on 4 April 2014 with UKWM to City Trustees, a
subsidiary of Mattioli Woods (see note 7).
The amount of goodwill disposed of GBP343,000 at the reporting
date has been provisionally assessed based upon the fair value of
the net assets of the businesses disposed and the fair value of the
consideration and deferred consideration receivable. The amount of
goodwill disposed of at the reporting date is provisional and a
final valuation will be completed and reported in the consolidated
financial statements as at 31 March 2015.
6. Business combinations
On 4 April 2014, the Group completed its acquisition of 100% of
UKWM group of companies having obtained Financial Conduct Authority
(FCA) Change of Control approval for the transaction.
UKWM is a financial services group that offered independent
financial planning, wealth management and employee benefits to
personal, corporate and trustee clients. UKWM operated out of five
offices in Leeds (HQ), Macclesfield, Pontefract, Rugby and York.
Post acquisition the group has consolidated the Leeds and
Pontefract locations into one and relocated the Leeds office to new
premises.
At completion, this acquisition increased the Group's nationwide
footprint to 17 offices (since reduced to 16 through the
combination of Leeds and Pontefract offices) and its FUM to over
GBP5 billion, of which GBP2.2 billion was discretionary and managed
(since increased to GBP2.3 billion).
Details of the fair value of UKWM identifiable assets and
liabilities acquired, excluding value of intangibles removed as a
result of the acquisition on 4 April 2014 is summarised below:
Fair
Value
GBP'000s
Property, plant and equipment 256
Trade and other receivables 1,066
Cash and cash equivalents 1,473
Trade and other payables (1,813)
-------------------------------------- ---------
UKWM Net acquired assets excluding
intangibles at 4 April 2014 982
-------------------------------------- ---------
The maximum consideration payable:
GBP'000s
Cash consideration at completion 12,507
Contingent deferred consideration
payable 15 months after completion 1,750
Maximum Total Consideration 14,257
------------------------------------- ---------
The Group's estimate of deferred consideration payable at the
reporting date is GBP1,627,000, as shown below, based on known
performance of the business against deferred consideration metrics
for Year 1 deferred consideration and reasonable expectations about
future performance, discounted at a rate reflecting the risk
inherent to the business.
GBP'000s
Contingent deferred consideration
payable 15 months after completion 1,627
Estimated Deferred Consideration 1,627
------------------------------------- ---------
Goodwill is included at the reporting
date as follows:
GBP'000s
Cash consideration at completion 12,507
Contingent deferred consideration
payable 15 months after completion 1,627
Fair value of net assets acquired
at 4 April 2014 (982)
Goodwill (note 5) 13,152
--------------------------------------- ---------
6. Business combinations (continued)
The maximum deferred consideration of GBP1,750,000 is payable 15
months after completion and is subject to meeting or exceeding
certain conditions, primarily linked to recurring revenue
performance.
Given that conditions are currently being met as run rate
recurring revenue of the business acquired currently exceeds the
threshold set, the full amount of deferred consideration is likely
to be payable and GBP1,627,000 has been recognised at fair value in
the draft completion accounts, discounted at a rate of 6%
reflecting the risk inherent to the business.
Acquisition costs of GBP326,000 (31.03.14: GBP301,000) arose
during the period as a result of the transaction, these have been
recognised as part of exceptional costs (note 4) in the statement
of comprehensive income.
Goodwill has been recognised on the basis of the draft
completion accounts of the UKWM Group of companies, the
apportionment of goodwill and the final assessment of acquired net
assets, including client intangibles and the apportionment of Cash
Generating Units (CGU's) will be completed for inclusion in the
final report and accounts at 31 March 2015.
The estimated CGU's, fair value of net assets acquired excluding
intangibles as at 4 April 2014 is as follows:
GBP'000s
Asset management 675
Financial planning 617
Pension administration 65
Corporate services 198
Central and holding (573)
UKWM Net acquired assets excluding
intangibles at 4 April 2014 982
------------------------------------ ---------
The results of the UKWM Group of companies included within the
consolidated statement of comprehensive income for the six months
ended 30 September 2014 are as follows:
GBP'000s
Revenue 5,110
Cost of sales (1,457)
---------
Gross profit 3,653
Administrative expenses (3,555)
Depreciation (32)
---------
Operating profit 66
Finance income 5
Finance costs (5)
---------
Profit for the period from continuing operations 66
Profit for the period from discontinued
operations 11
---------
Profit for the period 77
---------
The above trading figures contain an element of integration into
the existing CGU's of the group and as a result potentially not
fully reflective of the business acquired.
6. Business combinations (continued)
The annual audited results of the UKWM group of companies for
the year ended 31 December 2013 (the last full financial year prior
to acquisition), excluding UK GAAP goodwill amortisation and group
finance costs (linked to previous ownership and financing structure
and no longer relevant after acquisition), prior to acquisition are
as follows:
GBP'000s
Revenue 8,802
Cost of sales (4,517)
---------
Gross profit 4,285
Administrative expenses (4,446)
Depreciation (109)
---------
Operating profit (270)
Finance income 2
Finance costs (15)
---------
Profit before tax for the period from continuing
operations (283)
7. Discontinued operations
On 11 August 2014, the Group completed the sale of its Self
Invested Personal Pension and Small Self Administered Scheme
businesses acquired on 4 April 2014 with UKWM (see note 6) to City
Trustees, a subsidiary of Mattioli Woods. The sale comprised of the
trade and certain working capital of its wholly-owned subsidiary
Pensions Administration Limited, carrying out personal pension
administration. In addition, on the same date, the Group completed
the sale of its wholly-owned subsidiaries Acomb Trustees Limited,
Simmonds Ford Trustees Limited and Ropergate Trustees Limited, also
acquired with UKWM (note 6), carrying out trustee services for
personal pension administration.
The consideration for the subsidiaries and business disposed has
been agreed as a combination of cash consideration at completion,
the buyer assuming a level of liabilities for post deal costs and
negative net working capital transferred and two tranches of
contingent deferred consideration over a two year period.
The maximum consideration due for the disposal is as
follows:
GBP'000s
Cash consideration at completion 275
Contingent deferred consideration
at 12 months after completion 40
Contingent deferred consideration
at 24 months after completion 40
Maximum Total Consideration 355
----------------------------------- ---------
The Group estimate of deferred consideration receivable at the
reporting date is GBP53,000, as shown below, based on known
performance of the business against deferred consideration metrics
for Year 1 deferred consideration and reasonable expectations about
future performance, discounted at a rate reflecting the risk
inherent to the business.
GBP'000s
Contingent deferred consideration
at 12 months after completion 33
Contingent deferred consideration
at 24 months after completion 20
Estimated Deferred Consideration 53
----------------------------------- ---------
7. Discontinued operations (continued)
The directors are unable to complete final fair valuations for
the identifiable assets and liabilities disposed at the date of
these financial statements, the fair values of the assets and
liabilities disposed will be finalised during the twelve months
following completion and updated fair values will be presented in
the consolidated financial statements at 31 March 2015.
The directors' estimate the fair values of the net assets of the business disposed at 11 August
2014 as follows:
GBP'000s
Goodwill (note 5) 343
Trade and other receivables 147
Trade and other payables (162)
Net assets 328
-------------------------------------------------------------------------- -----------------------
The business disposed has been treated as discontinued
operations, there are no comparative interim figures for the
operations disposed as they formed part of the Group of companies
acquired during the period as detailed in note 6.
Summary of profit after tax for discontinued operations:
Six months Six months
ended ended
30 September 30 September
2014 2013
(unaudited) (unaudited)
GBP'000s GBP'000s
Profit/(loss) for the period from
discontinued operations
Pensions Administration Limited 11 -
Ashcourt Administration Limited (1) 4
Net gain on sale of discontinued
operations - 234
Total Profit from discontinued
operations 10 238
Officers and professional advisers
Current Directors
Hugh Ward, Non-Executive Chairman
Jonathan Polin, Chief Executive Officer
Alfio Tagliabue, Chief Financial Officer
James Roberts, Non-Executive Director
Secretary
Alfio Tagliabue
60 Queen Victoria Street
London EC4N 4TR
Registered office
60 Queen Victoria Street
London EC4N 4TR
Bankers
The Royal Bank of Scotland
Corporate Banking
9th Floor
280 Bishopsgate
London EC2M 4RB
Website
www.ashcourtrowan.com
Registrars
Computershare Investor Services
The Pavilions
Bridgwater Road
Bristol BA13 8AE
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Nominated adviser and broker
Cantor Fitzgerald
One Churchill Place
London
E14 5RB
Lawyers
CMS Cameron McKenna
Mitre House
160 Aldersgate Street
London
EC1A 4DD
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DGBDBUGDBGSU
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