TIDMHUME
RNS Number : 6418A
Hume Capital Securities PLC
24 December 2014
24 December 2014
Hume Capital Securities plc ("Hume" or the "Company")
Final results for year ended 31 August 2014
Hume Capital (AIM: HUME) (together with its subsidiaries the
"Group"), a financial services group comprising asset management,
corporate advisory and corporate and institutional stockbroking and
private client wealth management businesses, presents its audited
results for the year ended 31 August 2014.
-- A new management team was appointed towards the end of the
period (in late June 2014), a comprehensive review of the Group's
businesses has been undertaken and substantial restructuring and
reorganisation of the business has been largely implemented during
the period, with substantial cost saving benefits expected to be
seen in the financial period ending 31August 2015;
-- Revenue increased slightly by 0.5 per cent. to GBP6.0 million (2013: GBP6.0 million);
-- Loss before tax reduced by 27 per cent to GBP2.7 million
(2013: GBP3.7 million); losses include provisions for the costs of
the restructuring and reorganisation steps taken during the last
few months of the financial year;
-- The full benefit of the recent restructuring should see over
GBP2.75 million of annualised cost savings and the Group now has an
employee base with remuneration packages more geared to
performance;
-- Asset Management's collective investment vehicle portfolio is
being streamlined and since the year end new mandates have been won
for approximately GBP10 million of Discretionary Fund Management
portfolios, with substantial further mandates in the pipeline;
-- Corporate activity included some larger mandates over the
year and corporate client activity levels remained strong
throughout the period, with 25 transactions closed; and
-- The Private Client Wealth Management business, with
approximately 1,300 clients, is well positioned to offer attractive
alternatives to the "model portfolio" approach adopted by many of
our private client stockbroking competitors.
Commenting on the results, Guy Peters, CEO said:
"The last financial period has been one of significant change
for the Group. Many of the challenges that gave rise to the
substantial losses incurred in the period have now been addressed
and the business is better equipped for the future than at any time
in the past."
"There is still substantial further work to do in rebuilding the
capital base of the firm; however, the Group is now structured and
staffed in a more appropriate manner, we are starting to attract
new assets under management, we have a good corporate client base
from which to grow our corporate business and some interesting
prospects, and our private client teams are able to offer a
differentiated solution for their clients."
"I believe that the culture change we have striven to bring
about within the Group is beginning to take hold and that the
Group's financial performance for the year ended 31 August 2015
will show a substantial improvement."
The full Directors' report and financial statements for the year
ended 31 August 2014 will be posted to shareholders in early
January and uploaded at the same time to the Company's website at
www.humecapital.com.
Enquiries:
Hume Capital Securities plc
Guy Peters (Chief Executive Officer) 020 3693 1470
Grant Thornton UK LLP, Nominated Adviser
Philip Secrett /Melanie Frean/ Jamie Barklem 020 7383 5100
Chief Executive's Report
The financial year under review saw a slight increase in revenue
as against 2013 and an improvement in the results, albeit
insufficient to eliminate losses, despite some cost cutting
measures implemented in the first half of the period. To address
the issues inherent in the business, on 20 June 2014 board changes
were announced whereby I was appointed as Chief Executive Officer
together with a new Finance Director and a new Chief Operating
Officer. At this time Mike Frame stepped down as Finance Director,
having become very ill over the financial period. Sadly Mike passed
away in August 2014 and our thoughts are with him and his
family.
Immediately following our appointments, the new team undertook a
comprehensive review of the business and the Company's balance
sheet with a view to ensuring that the Company's financial
resources were adequate to fund the Group's business for the
foreseeable future. As a consequence, we undertook a substantial
restructuring and reorganisation of the business in the last
quarter of the period which has now been largely implemented,
albeit that we are only just beginning to benefit now (December
2014) from some of the cost savings made and other savings will not
come through until the second half of the current financial period
because of the lead times involved.
Following our appointment, the executive team took immediate
action to address the significant legacy creditor positions of the
Group's businesses and to reduce substantially the cost of the two
largest components of the Group's overheads, namely staff and
information technology costs, which were deemed to be excessive and
inappropriate for the current scale and nature of the Group's
businesses. Staff costs have therefore been reduced through a
mixture of redundancies and alterations to existing contracts to
better align remuneration with performance. Whilst this has
inevitably given rise to certain one-off costs, the business is now
structured and staffed in a more appropriate manner for its current
scale and workflow, rather than being structured in anticipation of
a substantial business upturn. Some initial information technology
cost savings have been achieved through the rationalisation of
existing systems, whilst further savings are anticipated as systems
are re-configured to better reflect the volume and type of business
the Group undertakes and is likely to undertake going forwards.
The next steps for the new team are to complete the re-design of
the Group's business operations and processes and ensure that
robust management tools are in place to provide real time
information, as far as practicable, to capture any issues before
they become problems. All of the actions taken to date and to be
taken are intended to embed a culture change in the Group's
businesses which will enable us to provide an enhanced service to
our clients, better manage the business and drive future growth
across our three core segments: asset management, corporate
advisory and corporate and institutional stockbroking and private
client wealth management. They will also enable us to streamline
and enhance the Group's requisite back office functions necessary
to deliver these services.
Overall, the Group made a pre-tax loss of GBP2.7 million, an
improvement of GBP1.0 million from the previous year. Part of this
year's loss is attributable to the costs associated with the
restructuring and reorganisation and appropriately providing for
historic liabilities.
During the financial year we raised GBP1.575 million of new
equity and an additional GBP1.43 million of debt, of which GBP0.43
million was repaid during the period.
Post year end a further GBP1.25million of debt has been raised,
further details of which are set out below. Almost half of this
debt has been provided by two significant shareholders on very
attractive terms. David Taylor, who currently holds 9.99 per cent.
of the Company's issued share capital, provided the Group with
GBP852,000 of unsecured debt finance during the period. Post year
end he has provided the Company with a new secured debt facility,
in substitution for and in repayment of the previous facility, of
GBP1,162,000. KB Foundation, which is currently the holder of 7.69
per cent. of the Company's issued share capital, has also provided
the Company with a new unsecured debt facility of GBP300,000 post
year end. The Company has also drawn a secured US$1,000,000 short
term loan post year end from a third party lender, which previously
provided a US$900,000 secured facility in September 2013, of which
US$665,000 had been repaid at the financial period end.
As stated in the 20th June 2014 announcement of the appointment
of the new executive team and an equity placing, the Board is
looking to ensure that the Company's financial resources are
adequate to fund the business for the foreseeable future. A
combination of the losses incurred to date and the review
undertaken by the new executive team necessitate a further
significant capital injection. The investors referred to but not
identified in the June 2014 announcement are David Taylor and the
KB Foundation, who have each confirmed that they intend to provide
the requisite funding to secure the Company's business for the
short and medium term, which is likely to require a further
significant equity injection. The provision of that further funding
will be subject to a number of regulatory and shareholder consents
and the precise quantum and nature of the further tranche of that
funding is expected to be announced as soon as practicable during
the first quarter of 2015.
The Asset Management business has won some substantial new
Discretionary Fund Management mandates towards the end of the
financial period. The funds managed have only started to arrive
since the period end, with approximately GBP10 million of new funds
under management having been added in recent months and the
prospects for the arrival of significantly more than this over the
next few months looking good. Separately, the collective investment
vehicle portfolio run by the Group is being simplified and we are
in the process of creating a number of new funds which should
launch during 2015.
The Corporate business remained the largest business in the
Group during the period and there is a pipeline of potential new
clients and some larger potential deals for 2015, subject as ever
to market conditions being favourable.
Private Client Wealth Management tends to follow the markets: we
have a reasonably broad client base and two good teams, backed up
by an in-house settlements team and access to some larger
fundraisings and a variety of smaller ones that helps differentiate
us from the competition.
Review of Business Units
Asset Management
The Asset Management division manages approximately GBP130
million of client money on a discretionary basis through a variety
of offshore collective investment vehicles and a Discretionary Fund
Management business. The significant majority of the money managed
within this division is contained within offshore collective
investment fund vehicles as part of a Guernsey based protected cell
company structure. The structure of these funds is being
streamlined in order to make the offering simpler to understand for
investors and potential investors or business introducers. The
Discretionary Fund Management service is being expanded
significantly and has already won mandates to manage over GBP10
million of new money since the period end, with further substantial
inflows anticipated over the remainder of the year. Overall, this
division made a loss for the period under review, but the changes
implemented by the new management team since the period end are
anticipated to reverse this position.
Corporate
The Corporate division, which comprises corporate advisory,
corporate and institutional broking remained the largest revenue
generator within the Group and was profitable in the last financial
year. In total we raised GBP37.8 million for our corporate clients
over the period across 25 transactions, a very significant uplift
as against the previous year. We currently have 20 corporate
retained clients, with a number of further clients in prospect.
This retainer base provides a useful contribution towards the costs
of the team, with transactions providing further upside. Since the
period end we have raised over GBP5 million for our corporate
clients, with a number of existing clients expected to raise
further funds this financial period. We also have a number of
interesting new mandates in the pipeline which should, subject to
market conditions and timing, generate additional transactional
revenue from some larger fundraisings during the current financial
year.
Private Client Wealth Management
The Private Client Wealth Management business is engaged in
running discretionary, advisory and execution only portfolios for
approximately 1,300 clients. Portfolios range from accounts
utilising a low risk portfolio model approach through to medium and
high risk accounts, where stock picking and active trading and
management are far more significant features. Discretionary equity
portfolios managed by this team amount to some GBP20 million, with
advisory and execution only amounting to a further GBP15 million.
Whilst this business lost money for the Group during the period,
the internal reorganisation and changes we have made should mean
that this business can perform better this year. Given its client
base and the increasing focus of our competitors on "model
portfolios", the opportunity for a business that can not only
replicate that model to the extent desired but also provide access
to market deals not generally available to retail clients should
position the business well for the future.
Outlook
The last financial period has been one of significant change for
the Group. Many of the challenges that gave rise to the substantial
losses incurred in the period have now been addressed and the
business is better equipped for the future than at any time in the
past, but there is still substantial further work to do.
This will include rebuilding the capital base of the firm, which
has been significantly impacted by losses and restructuring costs
over the period, in order that the Group meets its regulatory
capital requirements. This will be achieved through a combination
of retained profits plus the potential new capital raising
described above.
The Group is now structured and staffed in a more appropriate
manner for its current scale and workflow, with further information
technology savings anticipated as systems are re-configured. We are
starting to attract new assets under management in a competitive
environment, we have a solid corporate client base from which we
have the opportunity to grow our corporate business together with
some interesting prospects, and our private client teams are able
to offer a differentiated solution for their clients.
I believe that the culture change we have striven to bring about
within the Group is beginning to take hold and that the Group's
financial performance for the year ended 31 August 2015 will show a
substantial improvement.
I would like to thank our clients, shareholders, other
stakeholders and staff for all their support.
Consolidated Statement of Comprehensive Income
Year ended Year ended
31 August 31 August
2014 2013
GBP'000 GBP'000
Revenue 6,002 5,971
Administrative expenses (8,730) (9,683)
Share based payments 126 116
--------------- ---------------
Operating loss (2,602) (3,596)
Profit on disposal of
fixtures and equipment - 23
Finance costs (124) (90)
Interest income 3 3
--------------- ---------------
Loss before tax (2,723) (3,660)
Tax - (312)
--------------- ---------------
Total loss for the year (2,723) (3,972)
--------------- ---------------
Total comprehensive
loss for the year (2,723) (3,972)
=============== ===============
Loss per share
Basic and diluted (0.1p) (0.3p)
All the Group's revenue and operating loss was derived from
continuing operations.
There were no items of comprehensive income in the current year
or prior year, other than the loss as shown above. Accordingly, no
statement of comprehensive income is presented.
The loss and total comprehensive loss for the year are
attributable to the equity holders.
Consolidated and Company Balance Sheet
Group Company
31 August 31 August 31 August 31 August
2014 GBP'000 2013 2014 2013
GBP'000 GBP'000 GBP'000
Non-current
assets
Fixtures and
equipment 243 382 243 382
Intangible assets
and goodwill 1,383 1,383 - -
Deferred tax
asset 480 480 480 480
2,106 2,245 723 862
Current assets
Trade and other
receivables 5,716 33,156 5,528 32,812
Trading portfolio
assets 56 298 56 298
Investments 136 61 2,073 1,998
Cash and bank
balances 204 830 55 276
6,112 34,345 7,712 35,384
Total assets 8,218 36,590 8,435 36,246
Current liabilities
Trade and other
payables (6,548) (34,454) (6,655) (33,908)
Trading portfolio
liabilities - (136) - (136)
Short term borrowing (1,021) - 1,021 -
(7,570) (34,590) (7,676) (34,044)
Net current
assets (1,458) (245) 35 1,340
Total liabilities (7,570) (34,590) (7,676) (34,044)
Net assets 648 2,000 759 2,202
Equity
Share capital 2,623 1,764 2,623 1,764
Share premium
account 11,303 10,583 11,303 10,583
Retained loss (15,035) (12,104) (14,924) (11,902)
Deferred share
reserve 1,757 1,757 1,757 1,757
Total equity 648 2,000 759 2,202
Consolidated and Company Cash Flow Statement
Group Company
Year ended Year ended Year ended Year ended
31 August 31 August 31 August 31 August
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
Net cash used in operating
activities (2,026) (763) (1,633) (2,448)
Investing activities
Purchases of fixtures
and equipment (57) (89) (57) (89)
Goodwill and intangible
assets acquired in
exchange for shares
issued less cash acquired - (1,133) - -
Net cash used in investing
activities (57) (1,222) (57) (89)
Financing activities
Net proceeds on issue
of shares 1,580 2,900 1,580 2,900
Finance costs (124) (90) (112) (90)
Interest income 3 3 3 3
Net cash from financing
activities 1,459 2,813 1,470 2,813
Net (decrease)/increase
in cash and cash equivalents (626) 830 (221) 276
Cash and cash equivalents
at beginning of year 830 - 276 -
Cash and cash equivalents
at end of year 204 830 55 276
General information
1. The financial information set out above does not constitute
the Group's statutory accounts for the year ended 31 August 2014
but is derived from those accounts. Statutory accounts for 2014
will be delivered to the Registrar of Companies and posted to
shareholders in due course. The auditors' report on those accounts
were unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006.
2. Going Concern
The Financial Reporting Council issued a guidance note in
November 2009 requiring all companies to provide fuller disclosures
regarding the directors' assessment of going concern. The financial
statements of the Group have been prepared on a going concern
basis.
The Group has made a loss in the year and has had to restructure
some of its operations in order to secure its liquidity and capital
positions during the financial year. As highlighted in the Chief
Executive's statement, the financial year under review was one of
rebuilding the Group against a backdrop of very difficult market
conditions. The losses for the year have arisen because of the
substantial changes that needed to be implemented, in the context
of poor market conditions.
The Directors have prepared detailed forecasts for the enlarged
group for the foreseeable future which consider the liquidity and
capital position of the Group. These forecasts assume an immediate
increase in profitability based on the cost cutting measures
already implemented together with increased revenue from the
existing business divisions as discussed in both the Chief
Executive's statement and the Strategic Report sections of the
Annual Report. These forecasts show that the Group will need to
rebuild its capital base, which has been significantly impacted by
the retained losses in the year, within the going concern period in
order to meet its regulatory capital requirements.
In this respect the directors expect that the Group will be able
to obtain sufficient capital resources and funding through the
injection of new capital from the placement of new shares as
described in the Chief Executive's report, as well as it having the
ability to bring additional capital and cash in through further
restructuring.
Taking these factors into account, the Directors have a
reasonable expectation that the Group has adequate resources and
has sufficient liquidity to continue in existence for the
foreseeable future. Accordingly, the Directors have adopted the
going concern basis in preparing the financial statements.
3. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Losses
Year ended Year ended
31 August 31 August
2014 2013
GBP'000 GBP'000
Losses for the purposes of
basic loss per share being
net loss attributable to owners
of the Group (2,723) (3,972)
Number of shares '000 '000
Weighted average number of
ordinary shares for the purposes
of basic loss per share 2,115,191 1,273,527
Effect of dilutive potential
ordinary shares:
Share options 30,500 49,600
Ordinary shares issued post
year end - 323,214
Weighted average number of
ordinary shares for the purposes
of diluted loss per share 2,145,691 1,646,341
Share options and ordinary shares issued post year end are
antidilutive and therefore are disregarded in the calculation of
diluted loss per share.
4. Subsidiaries
Hume Capital Securities plc has four 100% fully owned
subsidiaries, Hume Capital Investments Limited (formerly EPIC
Investment Partners Limited), Hume Capital Guernsey Limited, XCAP
Securities (Middle East and India) Limited and XCAP Nominees
Limited. EPIC Investment Partners Limited owns 100% of Hume Capital
Management Limited.
5. Share capital
Share
capital
GBP'000
Authorised, allotted, issued and fully paid:
As at 1 September 2012
439.2 million ordinary shares of 0.5 pence
each 2,196
Issue of shares 1,325
Share capital re-organisation (1,757)
-------------
As at 31 August 2013:
1,764.324 million ordinary shares of 0.1
pence each 1,764
-------------
Issue of shares 859
-------------
As at 31 August 2014
2,623.735 million ordinary shares of 0.1
pence each 2,623
=============
The Company has one class of ordinary shares which carries no
right to fixed income.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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