Final Results

WH Ireland Group plc

(“WH Ireland”, “the Group” or “the Company”)

 

Final Results

 

WH Ireland, the financial services group that provides corporate broking and private wealth management services, today announces its final results for its financial year ended 30 November 2013.

 

Financial Highlights:

 

·      Revenue increased by 18.2% to £29.7m (2012: £25.1m)

·      Recurring revenue increased by 32% to £8.9m (2012: £6.8m)

·      Profit before tax £1.7m (2012: loss before tax £0.2m)

·      Basic earnings per share of 4.80p (2012: loss 0.89p)

·      Proposed final dividend of 1.5p (2012: 0.5p)

 

Corporate Broking:

 

·      Continued growth in the number of Corporate Broking clients to 85 (2012: 83)

·      Fund raisings totalled £102m (2012: £116m) in 21 transactions (2012: 25)

·      M&A transactions valued at £138m completed

·      Market making revenue and secondary commission both increased

 

Private Wealth Management:

 

·      Funds under management and administration rose by 43% to £2.5bn (2012: £1.7bn)

·      Acquisition of the former Seymour Pierce client list in February 2013 added over £300m of assets

·      Continuing to be active in seeking to recruit or acquire individuals or teams

·      Isle of Man office opened (see separate announcement issued today)

 

Richard Killingbeck, Chief Executive Officer, said:

 

“For the first time since the financial crisis, the Group is now operating in more benign markets, albeit the environment remains highly competitive and subject to much regulatory change and consolidation.”

 

“The current year has started well and the number of corporate clients that we advise has risen further, which is driving a good pipeline of corporate transactions. Our assets under management and administration have continued to grow boosted by stronger markets. We are also seeing some interesting opportunities to expand the reach of our Private Wealth Management business through new office openings such as in the Isle of Man and through recruitment.”

 

“Overall, we are focusing on delivering our strategic plan to develop further both divisions and thereby deliver strong shareholder returns. We look forward to the year ahead with confidence.”

 

In accordance with Rule 20 of the AIM Rules, WH Ireland Group plc confirms that the annual report and accounts for the year ended 30 November 2013, including notice of the Company’s annual general meeting to be held at 10.00am on 25 March 2014, will today be posted to shareholders. The report will be available, in electronic form, for download on the Company’s website: www.wh-ireland.co.uk.

 

For further information please contact:

 

WH Ireland Group plc	www.wh-ireland.co.uk
Richard Killingbeck, Chief Executive Officer	+44(0) 20 7220 1666
Panmure Gordon (UK) Limited
Hugh Morgan, Corporate Finance	+44(0)20 7886 2500
Adam Pollock, Corporate Broking
MHP Communications
Reg Hoare / Jade Neal / Jamie Ricketts	+44(0) 20 3128 8100
	whireland@mhpc.com

 

Notes to editors

 

WH Ireland Group plc:

WH Ireland is a financial services group offering private wealth management and corporate broking services.  Since 2000, the company has been listed on the London Stock Exchange on AIM (WHI).  The Group has two divisions:

 

Corporate Broking:  The Group provides corporate finance, research, market making and fund raising capabilities to quoted small/mid-cap companies, including a full NOMAD service to the majority of our corporate clients. WH Ireland is ranked 3rd largest Nominated Advisor and corporate broker by number of AIM clients.

 

Private Wealth Management: The Group provides wealth management and wealth planning services tailored to the individual, corporates, trusts and funds. It has over 140 years’ pedigree in private client wealth management. It manages £2.5 billion of assets under management and administration and operates from 12 offices around the United Kingdom.

 

Chairman’s Statement

 

The Board is pleased to be able to report that WH Ireland continued the progress reported at the half year which resulted in a strong financial performance for the year as a whole.  Both the Corporate Broking and Private Wealth Management divisions have contributed to pre-tax profits of £1.7 million on revenue of £29.7 million.  This encouraging result has enabled the Board to recommend payment of a 1.5 pence dividend, subject to shareholder approval.  Our stated intention has been to pay a progressive dividend and we believe this payment represents a prudent but fair distribution reflecting the progress made and our confidence in the Group’s future prospects.

 

Divisional review

 

The Corporate Broking division has built upon the investment made in key personnel in recent years.  The strength and depth of the team and the progress that has continued to be demonstrated during this past year has helped cement the company as one of the leading advisers, brokers and market makers in AIM and small cap companies.  With a better domestic economic backdrop the conditions for growth within this division are the best that they have been for some time.  It is clear that for the UK economy to flourish long term, it is important that funding is available for smaller companies with entrepreneurial flair.  We will be fundraising for a third EIS fund in 2014/15, which further supports our comprehensive service offering for any company listed on AIM.  We have also strengthened our Australian market making and broking product which we believe will position us well to grow our business with dual listed companies.

 

The Private Wealth Management division has grown considerably during the past year, helped by the acquisition of the assets of the former Seymour Pierce private client business.  Over £300 million of assets were transferred which has helped boost our assets under management and administration to nearly £2.5 billion.  There remains much work to be done in this division in regard to profitability, service development and managing regulatory change, but we are now beginning to see the benefits of improvements initiated during the second half of last year.  We remain confident in our continued ability to grow this division both organically and via acquisitive opportunities in the future and we have today announced the granting of our investment licence in the Isle of Man by the FSC.  The investment we have made in opening the office and the staffing with investment professionals reflects both the strategic importance we place on having an offshore offering and also the longer term opportunities we see for the Company.

 

Board and Staff

 

There were a number of Board changes during the year.  Richard Killingbeck, having joined the Group in September 2012 as Head of Private Wealth Management, and being appointed an Executive Director on 1 December 2012, became Chief Executive on 14 January 2013.  This followed the departure of Paul Compton, the previous Chief Executive in December 2012.  Richard has brought over 25 years of investment management and private banking experience to the role and is already making a significant impact.  As reported in January 2014 following the year end, a settlement with Mr Compton was subsequently reached in regard to all of his claims against the Group. WH Ireland wishes Paul Compton well for the future.

 

Also during the year, John Scott retired from the Board, but continues to be employed by the Group as an investment manager looking after a portfolio of clients. The Board thanks John for his contribution to the Group. Thanks are also in order to all our staff who have worked very hard to improve both the fortunes and prospects of WH Ireland.

 

Outlook

 

For the first time since the financial crisis, the Group is now operating in more benign markets.  However, the environment remains highly competitive and subject to much change, with the expectation of continuing ‘regulatory tinkering’ and further consolidation in the sectors we operate in.  The Board is also mindful that the costs of operating a smaller regulated entity continue to increase; as a result we continue to focus our efforts to reduce our cost to income ratio. 

 

The current year has started well and I am pleased to report that the number of corporate clients that we now advise has risen from the year end total of 85 to 87.  This growing client base is driving a good pipeline of corporate transactions in more supportive markets for fund raising.  Our assets under management and administration have continued to grow boosted by stronger markets. We are also seeing some interesting opportunities to expand the reach of our Private Client business through new office openings such as in the Isle of Man and through recruitment. 

 

We continue to seek high calibre individuals to join the Board who can help us achieve our ambition of becoming one of the leading independent financial service companies.  We hope to be in a position shortly to announce such an appointment.  Overall, we are focusing on delivering our strategic plan to develop further both the Corporate Broking and the Private Wealth Management divisions and thereby deliver strong shareholder returns. We look forward to the year ahead with confidence.

 

Rupert Lowe

Chairman

 

Chief Executive Officer’s Report

 

Overview

 

The year under review has been challenging yet rewarding, with tangible signs of progress. The financial results have begun to demonstrate the potential that is emerging from both the Corporate Broking and Private Wealth Management divisions. Total revenue increased by 18.2% to £29.7m and profit before tax increased from a loss of £0.2m to a £1.7m profit. Our balance sheet has continued to strengthen and includes, following the recent freehold property revaluation, net unencumbered property of £3.2m.

 

One of the key challenges during 2013 has been to build out a small but focused management structure in both divisions. This has been achieved by primarily promoting from within, and this greater structural focus is beginning to bring benefits in the discipline and day to day management of the business. Whilst not a direct contribution to revenue, this new structure is part of a wider focus across the Company to mitigate risk and to improve our cost management.

 

Corporate Broking

 

The Corporate Broking division has performed well. It is ranked third for the number of AIM clients that it is either broker or advisor (NOMAD) to, giving it critical mass and credibility in this very competitive market. Growth has been witnessed across all key areas of the division. At year end the number of Corporate clients stood at 85 compared to 83 last year helping to boost retained income by 32% to £2.9m; success fees rose by 16% to £4.1m following fund raisings of £102m and merger & acquisition activity totalling £138m; and trading revenue, primarily Market Making which rose by 15% to £1.4m as a result of both an increase in volume and the number of corporate stocks that we make markets in; secondary commissions also rose as our penetration of key institutional accounts increased.

 

The breadth of our offering beyond institutional broking is a key WH Ireland differentiator. Our retail focused marketing to regional private client brokers and our WHISpy publication have been highly valued by clients and will help us to continue to build our business in 2014.

 

Private Wealth Management

 

The Private Wealth Management division saw an increase in all key financial metrics, reflecting both greater confidence and activity from amongst existing clients, and also a nine month contribution from the acquisition of the private client business of Seymour Pierce which was completed in February 2013. This acquisition has proven to be most successful, with over £300m of client assets transferring and very few client losses. Including these funds, total funds under management and administration rose by 43% to £2.5bn at year end. The Private Wealth Management division has witnessed considerable regulatory changes during the year as the Retail Distribution Review celebrated its first anniversary. Further changes can be expected during the year ahead, which in turn will continue to present both challenges and opportunities. We are actively seeking to take advantage of these opportunities as they present themselves.

 

The Future

 

The Corporate Broking and Private Wealth Management divisions are at different stages of growth and development; the Corporate Broking division is focused upon delivering its ambition to be recognised as the leading smaller company corporate advisor and broker. As the third largest NOMAD by number of clients, it is well on its way to achieving this goal. As the reputation of this division has grown we are witnessing a number of high quality potential recruits seeking to join us and selective recruitment during 2014 is expected to be a key feature of growing this division.

 

The Private Wealth Management division is beginning to establish itself as a leading full service Private Client Wealth manager where client focus and service are recognised as key drivers of growth. A business review of non-core activities currently being undertaken in this division will result in a more focused offering, the benefits of which should begin to be evidenced in the second half of this year. We continue to be active in seeking to recruit or acquire individuals or teams with books of business to help us achieve our growth goals.

 

In my first report last year I referenced as one of the key metrics that I was focused upon was that of recurring revenue. In the year to November 2012 recurring revenue accounted for 27% of total Group revenue; in the year to November 2013 the figure was 30% on a higher revenue base. This is a pleasing progression but there is still work to be done to achieve our target of at least half of our total revenue being classified as recurring.

 

Richard Killingbeck

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income

For the year ended 30 November 2013

 

		Year ended	Year ended
		30 November	30 November
		2013	2012
	Note	£’000	£’000
Revenue		29,653	25,079
Administrative expenses		(28,734)	(24,989)
Operating profit		919	90
Other income		25	16
Investment gains		458	47
Fair value gains/(losses) on investments		238	(287)
Finance income		64	13
Finance expense		(52)	(56)
Profit/(loss) before tax		1,652	(177)
Tax expense		(516)	(33)
Profit/(loss) for the year		1,136	(210)
Other comprehensive income:
Valuation gains on available for sale investments		370	–
Transferred to profit or loss on sale of investments		(581)	(1)
Tax relating to components of other comprehensive income		48	6
Total other comprehensive income		(163)	5
Total comprehensive income		973	(205)
Profit/(loss) for the year attributable to:
Owners of the parent		1,136	(210)
Total comprehensive income attributable to:
Owners of the parent		973	(205)
Earnings per share for profit to the ordinary
equity holders of the parent during the period	4
Basic		4.80p	(0.89)p
Diluted		4.47p	(0.89)p

period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated and Company statement of financial position

As at 30 November 2013

 

		Group			Company
		As at	As at		As at	As at
		30 November	30 November		30 November	30 November
		2013	2012		2013	2012
	Note	£’000	£’000		£’000	£’000
ASSETS
Non-current assets
Property, plant and equipment		5,640	5,412		31	–
Goodwill	5	400	542		–	–
Intangible assets	6	489	604		–	–
Subsidiaries		–	–		1,828	1,970
Investments		447	1,251		–	–
Loan receivable		–	–		782	782
Deferred tax asset		378	625		24	71
		7,354	8,434		2,665	2,823
Current assets
Trade and other receivables		36,692	34,266		5,065	4,984
Other investments		847	313		–	–
Cash and cash equivalents	7	6,046	9,340		–	301
		43,585	43,919		5,065	5,285
Total assets		50,939	52,353		7,730	8,108
LIABILITIES
Current liabilities
Trade and other payables		(34,980)	(37,238)		(191)	(83)
Corporation tax payable		(131)	(30)		–	–
Finance Leases < 1 Year		(119)	(119)		–	–
Borrowings		(181)	(168)		(179)	(168)
Provisions		(344)	(299)		–	–
		(35,755)	(37,854)		(370)	(251)
Non-current liabilities
Borrowings		(1,348)	(1,519)		(1,348)	(1,519)
Finance Leases >1 Year		(228)	(347)		–	–
Deferred tax liability		(393)	(320)		–	–
Accruals and deferred income		(128)	(41)		–	–
Provisions		(21)	(21)		–	–
		(2,118)	(2,248)		(1,348)	(1,519)
Total liabilities		(37,873)	(40,102)		(1,718)	(1,770)
Total net assets		13,066	12,251		6,012	6,338
EQUITY
Share capital		1,185	1,184		1,185	1,184
Share premium		6	–		6	–
Available-for-sale reserve		7	170		–	–
Other reserves		982	982		229	229
Retained earnings		11,668	10,697		4,592	4,925
Treasury shares		(782)	(782)		–	–
Total equity		13,066	12,251		6,012	6,338

 

 

 

 

 

 

 

 

 

Consolidated and Company statement of cash flows

For the year ended 30 November 2013

 

		Group		Company
		Year ended	Year ended	Year ended	Year ended
		30 November	30 November	30 November	30 November
		2013	2012	2013	2012
		£’000	£’000	£’000	£’000
Operating activities:
Profit/(Loss) for the year		1,136	(210)	(168)	(530)
Adjustments for:
Depreciation, amortisation and impairment		394	372	142	573
Property Revaluation		(48)	–	–	–
Finance income		(64)	(13)	–	–
Finance expense		52	56	26	–
Taxation		516	33	47	(18)
(Gains)/losses in investments		(398)	130	–	–
Non-cash adjustment for share option charge		(57)	325	(57)	326
(Increase)/decrease in trade and other receivables		(1,435)	(7,610)	(189)	259
(Decrease)/increase in trade and other payables		(2,170)	9,940	108	(258)
Increase in provisions		45	234	–	–
(Increase)/decrease in current asset investments		(534)	105	–	–
Net cash generated from/(used in) operations		(2,563)	3,362	(91)	352
Income taxes paid		(47)	–	–	–
Net cash (out)/in flows from operating activities		(2,610)	3,362	(91)	352
Investing activities:
Proceeds from sale of investments		523	664	–	–
Interest received		64	13	–	–
Interest Paid: Finance Leases		(17)	(18)	–	–
Acquisition of property, plant and equipment		(402)	(686)	(31)	–
Acquisition of investments		(523)	(1,103)	–	–
Acquisition of Intangibles		84	(604)	–	–
Dividends paid		(108)	–	–	–
Redemption of loan notes		–	25	–	25
Net cash generated from/(used in) investing activities		(379)	(1,709)	(31)	25
Financing activities:
Proceeds from issue of share capital		7	133	7	133
(Decrease)/Increase in borrowings		(158)	244	(170)	(240)
Decrease in finance leases		(102)	–	–	–
Interest paid		(52)	(56)	(26)	–
Net cash (used in)/generated from financing activities		(305)	321	(189)	(107)
Net (decrease)/increase in cash and cash equivalents		(3,294)	1,974	(311)	270
Cash and cash equivalents at beginning of year		9,340	7,366	301	31
Cash and cash equivalents at end of year		6,046	9,340	(10)	301
Clients’ settlement cash		2,188	4,189	–	–
Group cash		3,858	5,151	(10)	301
Cash and cash equivalents at end of year	7	6,046	9,340	(10)	301

 

 

 

 

 

Consolidated statement of changes in equity

For the year ended 30 November 2013

 

			Available-
	Share	Share	for-sale	Other	Retained	Treasury	Total
	capital	premium	reserve	reserves	earnings	shares	equity
Group	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Balance at 1 December 2011	1,171	6,406	165	1,472	3,853	(1,069)	11,998
Losses arising on available-for-sale investments	–	–	(1)	–	–	–	(1)
Deferred taxation	–	–	6	–	–	–	6
Other comprehensive income	–	–	5	–	–	–	5
Loss after taxation	–	–	–	–	(210)	–	(210)
Total comprehensive income	–	–	–	–	(210)	–	(210)
Shares options exercised	13	120	–	–	–	–	133
Employee share option scheme	–	–	–	–	325	–	325
Share capital reduction	–	(6,526)	–	–	6,526	–	–
Reserve transfer	–	–	–	(490)	490	–	–
Treasury shares issued to employees	–	–	–	–	(287)	287	–
Balance at 30 November 2012	1,184	–	170	982	10,697	(782)	12,251
Losses arising on available-for-sale investments	–	–	(211)	–	–	–	(211)
Deferred taxation	–	–	48	–	–	–	48
Other comprehensive income	–	–	(163)	–	–	–	(163)
Profit after taxation	–	–	–	–	1,136	–	1,136
Total comprehensive income	–	–	–	–	1,136	–	1,136
Shares options exercised	1	6	–	–	–	–	7
Employee share option scheme	–	–	–	–	(57)	–	(57)
Dividends	–	–	–	–	(108)	–	(108)
Balance at 30 November 2013	1,185	6	7	982	11,668	(782)	13,066

The total number of authorised ordinary shares is 34.5 million shares of 5p each (2012: 34.5 million shares of 5p each).  The total number of issued ordinary shares is 23.7 million shares of 5p each (2012: 23.6 million shares of 5p each).  14,930 shares were issued during the year (2012: 264,785), of which none (2012: nil) are held as Treasury.

 

Company statement of changes in equity

For the year ended 30 November 2013

 

			Available-
	Share	Share	for-sale	Other	Retained	Treasury	Total
	capital	premium	reserve	reserves	earnings	shares	equity
Company	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Balance at 1 December 2011	1,171	6,406	–	719	(1,599)	(287)	6,410
Loss arising on available-for-sale investments	–	–	–	–	–	–	–
Other comprehensive income	–	–	–	–	–	–	–
Loss after taxation	–	–	–	–	(530)	–	(530)
Total comprehensive income	–	–	–	–	(530)	–	(530)
Share options exercised	13	120	–	–	–	–	133
Employee share option scheme	–	–	–	–	325	–	325
Share capital reduction	–	(6,526)	–	–	6,526	–	–
Reserve transfer	–	–	–	(490)	490	–	–
Treasury shares issued to employees	–	–	–	–	(287)	287	–
Balance at 30 November 2012	1,184	–	–	229	4,925	–	6,338
Loss after taxation	–	–	–	–	(168)	–	(168)
Total comprehensive income	–	–	–	–	(168)	–	(168)
Shares options exercised	1	6	–	–	–	–	7
Employee share option scheme	–	–	–	–	(57)	–	(57)
Dividends	–	–	–	–	(108)	–	(108)
Balance at 30 November 2013	1,185	6	–	229	4,592	–	6,012

The nature and purpose of each reserve, whether Consolidated or Company only, is summarised below:

Share premium

The share premium is the amount raised on the issue of shares that is in excess of the nominal value of those shares and is recorded less any direct costs of issue.

 

Available-for-sale reserve

The available-for-sale reserve reflects gains or losses arising from the change in fair value of available-for-sale financial assets except for impairment losses which are recognised in the income statement.  When an available-for-sale asset is impaired or derecognised, the cumulative gain or loss previously recognised in the available-for-sale reserve is transferred to the income statement.

 

Other reserves

Other reserves comprise a (consolidated) merger reserve of £754k (2012: £754k) and a (consolidated) capital redemption reserve of £228k (2012: £228k).

 

Retained earnings

Retained earnings reflect; accumulated income, expenses, gains and losses, recognised in the income statement and the statement of recognised income and expense and is net of dividends paid to shareholders.  The cumulative effect of changes in accounting policy is also reflected as an adjustment in retained earnings.  

 

During the previous financial year, the Company was granted a Court Order approving a Capital Reduction, which became effective on 29 November 2012.  This reduction created distributable reserves by cancelling the amount standing to the credit of the Company’s share premium account.

 

Treasury shares

Purchases of the Company’s own shares in the market are presented as a deduction from equity, at the amount paid, including transaction costs.  That is, treasury shares are shown as a separate class of shareholders’ equity with a debit balance.

 

Notes to the financial statements

 

1. Principal Accounting Policies

The financial information set out in this announcement has been prepared in accordance with the recognition and measurement principles of IFRS as endorsed for use in the European Union.

The financial information set out in this announcement does not constitute the group’s statutory accounts for the year ended 30 November 2013 or the year ended 30 November 2012 under the meaning of s434 Companies Act 2006, but is derived from the 2013 annual report and accounts.

The 2013 financial statements have been prepared on a basis consistent with the accounting policies set out in the 2012 financial statements.

Statutory accounts for the years ended 30 November 2012 and 30 November 2013 have been reported on by the Independent Auditors.

The Independent Auditors’ Report on the Annual Report and Financial Statements for years ended 30 November 2012 and 30 November 2013 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

Statutory accounts for the year ended 30 November 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 November 2013 will be delivered to the Registrar in due course.

 

 

 

 

2. Segment information

The Group has two operating segments, Private Wealth Management and Corporate Broking.

 

The Private Wealth Management division offers investment management and stockbroking advice and services to individuals and contains our Independent Financial Advisory (“IFA”) business, giving advice on and acting as intermediary for a range of financial products.  The Corporate Broking division provides corporate finance and corporate broking advice and services to companies and acts as Nominated Adviser to clients listed on the Alternative Investment Market (“AIM”) and contains our Institutional Sales and Research business, which carries out stockbroking activities on behalf of companies as well as conducting research into markets of interest to its clients.

 

All divisions are located in the UK.  Each reportable segment has a segment manager who is directly accountable to and maintains regular contact with the CODM.  The Head Office segment comprises centrally incurred costs and revenues.

 

No customer represents more than ten percent of the Group’s revenue.

 

The following tables represent revenue and profit information for the Group’s business segments

	Private Wealth	Corporate	Head
	Management	Broking	Office	Group
Year ended 30 November 2013	£’000	£’000	£’000	£’000
Revenue	17,991	8,488	3,174	29,653
Segment result	4,491	2,017	(5,589)	919
Other Income	–		25	25
Investment (losses)/gains	–	(19)	477	458
Fair value (losses)/gains on investments	(63)	45	256	238
Finance income	–	45	19	64
Finance expense	–	–	(52)	(52)
Profit/(loss) before taxation	4,428	2,088	(4,864)	1,652
Taxation	–	–	(516)	(516)
Profit/(loss) on continuing operations after taxation	4,428	2,088	(5,380)	1,136

 

	Private Wealth	Corporate	Head
	Management	Broking	Office	Group
Year ended 30 November 2012	£’000	£’000	£’000	£’000
Revenue	14,395	7,031	3,653	25,079
Segment result	3,109	1,246	(4,265)	90
Other Income	–	–	16	16
Investment gains	–	47	–	47
Fair value (losses)/gains on investments	(219)	25	(93)	(287)
Finance income	–	–	13	13
Finance expense	–	–	(56)	(56)
Profit/(loss) before taxation	2,890	1,318	(4,385)	(177)
Taxation			(33)	(33)
Profit/(loss) on continuing operations after taxation	2,890	1,318	(4,418)	(210)

 

Segment assets and segment liabilities are reviewed by the CODM in a consolidated statement of financial position.  As no measure of assets or liabilities for individual segments is reviewed regularly by the CODM, no disclosure of total assets or liabilities has been made.

 

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

 

3. Dividends

A final dividend of 0.5p per share was paid in 2012, and a final dividend of 1.5p per share is proposed for 2013.

 

 

 

 

4. Earnings per share (EPS)

Basic EPS is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares.

 

Diluted EPS is the basic EPS, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the year.  Options over 89,801 (2012: 7,164) shares are excluded from the EPS calculation as they are antidilutive.  Antidilutive options represent options issued where the exercise price is greater than the average market price for the period.

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

 

	Year ended	Year ended
	30 November	30 November
	2013	2012
	000’s	000’s
Group
Weighted average number of shares in issue during the period	23,698	23,547
Effect of dilutive share options	1,716	1,651
	25,414	25,198
	£’000	£’000
Earnings attributable to ordinary shareholders	1,136	(210)
Basic EPS
Continuing operations	4.80p	(0.89)p
Diluted EPS
Continuing operations	4.47p	(0.89)p

 

5. Goodwill

	Year ended	Year ended
	30 November	30 November
	2013	2012
Group	£’000	£’000
Beginning of year	542	683
Impairment	(142)	(141)
End of year	400	542

 

Impairment tests for goodwill

Goodwill of the Group is allocated to the following CGUs:

 

	Stockholm Investments Ltd	Total
	£’000	£’000
At 1 December 2011	683	683
Impairment	(141)	(141)
At 30 November 2012	542	542
Impairment	(142)	(142)
At 30 November 2013	400	400

 

 

The Group tests at least annually for goodwill impairment.  The recoverable amount of a CGU is determined based on value-in-use calculations.  These calculations use pre-tax cash flows based on financial budgets prepared by management covering a three year period and then extrapolated for the remaining useful economic life based on relevant estimated growth rates of 2% for revenue (2012: 3%) and 0% for costs (2012:0%).  This is then adjusted for the anticipated wind-down in the client books acquired at 5% per annum.  This net cash flow is then discounted by an appropriate cost of capital of 10% (2012: 10%) in order to estimate their present value.

 

The key assumptions for the value-in-use calculations are those regarding the discount rate, growth rates and expected changes to revenues and costs in the period.  Management has made these assumptions based on past experience and future expectations in the light of anticipated market conditions, combined with the actions taken during this and last year to streamline the Group’s operations whilst maximising revenue potential.

 

Where the value-in-use exceeds the carrying value of the goodwill asset, it has been concluded that no impairment is necessary.  However, where this is not the case, goodwill is written down to the net present value of cash flows at the balance sheet date.

 

Sensitivity analysis shows that the client wind-down variable is now the key component of the outcome of the recoverable amount of Stockholm Investments Limited, the remaining CGU.  This has been set at 5% per annum based on the historic movement in the client bank.  However, if this were to grow to a wind-down of 14% per annum, the recoverable amount after five years would be £nil.

 

6. Intangible assets

	Client
	relationships
	£’000
Cost
At 1 December 2011	641
Additions*	604
At 30 November 2012	1,245
Additions*	36
Other*	(120)
At 30 November 2013	1,161
Amortisation
At 1 December 2011	641
At 30 November 2012	641
Charge for the year	31
At 30 November 2013	672
Net book values
At 30 November 2013	489
At 30 November 2012	604
At 30 November 2011	–

 

*  The addition for the year ended 30 November 2012 relates to the acquisition of a client bank from Pritchard Stockbrokers Limited.  Following further dialogue with the administrators of Pritchard, a refund of £120k was agreed in October 2013 which is included in the ‘Other’ line in the year ended 30 November 2013.  The addition in the year ended 30 November 2013 relates to the acquisition of the client bank from Tenebris Realisations Limited (In Administration), formerly Seymour Pierce Limited.

 

7. Cash and cash equivalents

		Group			Company
		30 November	30 November		30 November	30 November
		2013	2012		2013	2012
		£’000	£’000		£’000	£’000
Cash and cash equivalents		6,046	9,340		–	301

 

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits with banks and financial institutions with a maturity of up to three months.

 

Cash and cash equivalents represent the Group’s and the Company’s money and money held for settlement of outstanding transactions.

 

Free money held on behalf of clients is not included in the balance sheet.  Free money at 30 November 2013 for the Group was £90,611k (2012: £76,356k).  There is no free money held in the Company (2012: £nil).

 

8. Events after the balance sheet date

A final dividend of 1.5p (2012: 0.5p) was proposed by the Board, payable on or before 11 April 2014 to shareholders on the Company’s register at the close of business on 07 March 2014.