Syndicate Asset Management Plc
("Syndicate", the "Company" or the "Group")
Final Results for the Year Ended 31 March 2009
Syndicate Asset Management Plc (AIM: SAM), the fund management group with
approximately £6.2 billion under management, today announces its audited
results for the year ended 31 March 2009.
Operational highlights for the period to 31 March 2009:
* successful acquisition and integration of the Scottish investment
management and financial planning businesses of Pagan Osborne into
Syndicate's wealth management subsidiary, Ashcourt, providing an additional
£200 million of funds under management or advice;
* 87% increase in client numbers for Syndicate's institutional fund
management business, EPIC;
* net funds inflow into the wealth management division during a declining
market; and
* cost cutting and rationalising activities begun across Group.
Financial highlights for the period to 31 March 2009:
* funds under management across Group increased to £5.92 billion (31 March
2008 : £5.70 billion);
* revenue £37.49 million for the year (2008: £40.29 million);
* 27% impairment on value of goodwill and intangibles of historic
acquisitions amounting to £18.80 million (2008: £nil);
* impairment in investment in associated company and available for sale
investments of £0.5million (2008: £nil);
* earnings before interest, tax, depreciation, amortisation and impairments £
2.73 million (2008: £5.91 million); and
* loss after impairments: £19.07million (2008: £3.76 million profit).
Post-period operational and financial Highlights:
* appointment of Jonathan Freeman as Group Chief Executive on 7 August 2009;
* in May 2009, a successful subscription with existing shareholders and
employees of the Group raising £3.1 million and, in addition, a debt for
equity swap totalling £2 million with certain of the Company's deferred
consideration holders; and
* announcement today of a Placing and Open Offer at the issue price of 1.5
pence per share to raise approximately £17.2 million.
David Pinckney, non-executive Chairman of the Company, commented:
"We have been working to ensure that we have an economically sound platform
from which to grow our business and are working on increased sharing of
resources both in order to grow our top line revenues and to gain increased
efficiencies and savings in our cost base. Consequently, I am pleased to also
announce today a proposal to raise approximately £17.2 million by the issue of
1,147,707,648 New Ordinary Shares through a Placing and Open Offer at the issue
price of 1.5 pence per share. The Placing Shares have been conditionally placed
with certain existing shareholders on behalf of the Company by Cenkos and some
of those shareholders participating in the Placing have also irrevocably agreed
to take up their respective entitlements under the Open Offer and to subscribe
for the balance of the Open Offer shares subject to clawback. This means that
all Qualifying Shareholders will be able to participate in the Open Offer."
The Company intends to publish and post the audited accounts for the year ended
31 March 2009 to shareholders on 30 September 2009. The accounts can
additionally be downloaded from the Company's website www.syndicateplc.com.
-Ends -
Further information:
Syndicate Asset Management Plc
David Pinckney (Chairman) Tel: 020 7659 8060
Jonathan Freeman (Group CEO)
Cenkos Securities plc
Stephen Keys/Julian Morse Tel: 020 7397 8900
GTH Communications
Toby Hall/Christian Pickel Tel: 020 7153 8039
CHAIRMAN' STATEMENT
I am pleased to report to you the results of Syndicate Asset Management plc
("Syndicate" or the "Group") for the year to 31 March 2009. This year has been
extremely testing for everyone involved in the financial services industry. The
first half of the year was reasonably steady and our interim results, which we
published on 11 November 2008, reflected that. It was, however, clear at that
stage that as a minimum there would be a downturn to most economies around the
world. What few predicted was the uncontrolled collapse in financial and
economic confidence which destroyed economic value around the world. The period
since the end of our financial year has seen some stabilisation of the
situation which has created a certain amount of optimism that economies are now
beginning to recover. It remains to be seen whether this recovery proves to be
for the long term or is only temporary.
Results
For the year ended 31 March 2009, our revenue was £37.49 million (2008: £40.29
million) which resulted in a reported loss before tax of £19.07 million (2008:
profit of £3.76 million). The reported loss before tax includes: charges for
the impairment of goodwill and intangibles generated from acquisitions of £
18.80 million (2008: £nil), representing approximately a 27% write-down in
goodwill and intangible values; the impairment of interests in associates of £
0.49 million (2008: £nil); the amortisation of client relationships, unit trust
management and investment trust contracts of £1.06 million (2008: £0.85
million); depreciation of £0.52 million (2008: £0.55 million); share based
charges relating to the Group share option plan of £0.51 million (2008: £0.16
million); and an exceptional loss suffered by certain clients of the Group of £
0.56 million (2008: £nil). The adjusted profit before tax, once these have been
added back, is a profit before tax of £2.86 million (2008: £5.32 million).
The results for the year to 31 March 2009 are disappointing. With hindsight,
and given the economic climate that now exists, our balance sheet was over
geared to the extent that it could not be comfortably supported by the lower
profits generated in the downturn. Our growth in revenues has depended too much
on growth in funds under management through acquisition at the expense of
investment in marketing to grow and develop our existing business platform.
Although we carried out a significant cost cutting exercise in the year, this
was not sufficient to cover the fall in revenues. We have not yet achieved the
full benefits from the economies of scale that can be derived from businesses
being a part of a larger group.
The basis of preparation of the financial statements is described in note 2 to
the Accounts and the reasons for adopting the going concern basis when material
uncertainties still exist. In their report, our auditors have likewise drawn
attention to these uncertainties although their report is not qualified.
The incentive plans that have been previously put in place for staff - which
was primarily the share option scheme - now fail to provide the incentives that
were originally intended due to the collapse in the Group's share price. This
Group is primarily a people business which needs loyalty of staff in order to
thrive. We believe that a key part of generating that loyalty are incentive
plans and to this end we are working to put in place a new long term incentive
plan ("LTIP"), which is intended to reward staff based on performance.
We have over the last few months begun the process of rectifying these issues,
the first action being the raising of equity finance and agreeing a debt for
equity swap which was announced on the 8 May 2009 and was approved by
shareholders at a General Meeting on 26 May 2009. We are also working to ensure
that we have an economically sound platform from which to grow our business and
are working on increased sharing of resources both in order to grow our top
line revenues and to gain increased efficiencies and savings in our cost base.
Placing of Shares
One of the consequences of the financial turmoil and collapse in stock market
valuations was that our bankers, Royal Bank of Scotland plc ("RBS"), required
us to reduce the amount of debt on the balance sheet to reflect the reduced
revenues and profitability of the Group. Having consulted with our financial
advisers, the Board concluded that for Syndicate to undertake a full rights
issue would have been too expensive and not feasible given the time constraints
imposed upon us by RBS in May 2009. We therefore undertook a subscription with
existing shareholders and employees of the Group, raising £3.1 million. In
addition, we agreed with certain of the deferred consideration holders, or
their assignees, a debt for equity swap totalling £2 million. These
transactions meant that we were not only able to reduce the Group's debt to RBS
by £2 million (from approximately £7.80 million to £5.80 million) but also
reduce our deferred consideration debt by £2 million to a maximum of £10.06
million payable over the next 3 years. This issue of shares was approved by
shareholders at a General Meeting on 26 May 2009.
We have also today announced a proposal to raise approximately £17.2 million by
the issue of 1.15 billion new ordinary shares through a conditional placing and
open offer at the issue price of 1.5 pence per share. The placing shares have
been conditionally placed with certain existing shareholders on behalf of the
Company by Cenkos and these shareholders participating in the placing have also
irrevocably agreed to subscribe for the balance of new ordinary shares not
taken up under the open offer. The placing and open offer is subject to, inter
alia, certain resolutions being passed at the Annual General Meeting and the
General Meeting which are proposed to take place on 29 October 2009. If the
necessary resolutions are not passed by shareholders then the placing and open
offer will fail and, pursuant to the terms of the revised borrowing facilities,
the Group's facilities could become immediately due and repayable (at the
option of RBS) if £3.3 million is not repaid to RBS by 31 October 2009.
Although the Directors would seek to agree further revisions to the Group's
borrowing facilities with RBS, there could be no assurance that the lenders
would not seek to call for the repayment of the facilities immediately, which
the Company would be unable to repay. It is for this reason that our auditors
have provided an "Emphasis of Matter" within the Independent Auditors Report.
People
We have experienced significant changes to the executive membership of the
Board during the year with Charles Gillow, Group COO, resigning on 25 September
2008 and John Morton, Group CEO resigning on 13 March 2009. The Board appointed
Peter Dew and Jonathan Freeman, formerly both non-executive Directors, as
Interim Group CEO's as a temporary measure and to ensure continuity of
management. As was subsequently announced, Jonathan Freeman formally accepted
the position of Group Chief Executive on 7 August 2009 with Peter Dew remaining
an Executive Director of the Company. It is intended that a further
non-executive Director will be appointed in due course to strengthen further
the management of the Group.
For employees across the Group, events in the financial services sector have
made the last year one of the most challenging periods in living memory. Staff
have had to deal with a range of material issues which have tested our
capabilities to the full. I would therefore like to thank all of those involved
in Syndicate for their continued dedication and commitment despite the obvious
difficulties that the Group has and, to an extent, continues to face.
Outlook
As set out in note 2 to the Accounts, which details the existence of a material
uncertainty which may cast doubt on the Company's ability to continue as a
going concern, although we successfully raised £3.1 m in May 2009 through a
placing of shares and RBS waived the March 2009 covenants and entered into an
amendment and restatement agreement with us, we are still committed to repaying
a further £3.3 million of our new bank facility prior to 31 October 2009. In
addition we have a range of other deferred consideration payments and loan
notes to repay in the next two years. It is for these reasons that the Board
recommends the approval by Shareholders of the resolutions at the forthcoming
General Meeting. The Board believes that if the resolutions are not approved
that there will be a material adverse impact upon the value of the Company's
ordinary shares.
With regards to the financial markets, it is still uncertain whether the recent
signs of stock market growth and stability will be short lived or are
indicative of a gradual recovery. We have taken the view for planning purposes
that markets will continue to be difficult and volatile. Consequently, the
Group has a huge amount to do over the coming months in order to ensure that,
whether or not there is economic recovery, we are successful. I have no doubt
that the building blocks are in place and that the commitment to deliver is
there.
David Pinckney
Chairman of the Board
28 September 2009
GROUP CHIEF EXECUTIVE'S REPORT
The financial year to 31 March 2009 was a period of time where the well
reported economic problems around the world, and the instability of the
financial services sector in particular, created an increasingly harsh
operational environment. As a result, a number of significant initiatives were
taken so as to protect and strengthen the business going forward. These
included: reducing acquisition activity, only one business being acquired in
the year compared with four in the previous year; making a number of
redundancies across the Group; speeding up our economies of scale programmes;
and recently reducing the debt on our balance sheet. In addition, one of the
key strategies of Syndicate began to pay off in this environment, which was to
develop a series of relatively unrelated revenue lines from the fund management
sector. In particular, whilst our wealth management businesses have suffered in
the past twelve months as the UK stock market and interest rates have fallen,
our fixed income business, Epic, has seen a significant increase in funds under
management and, as a result, revenue. We expect to be able to build on this
creation of relatively unrelated revenue streams going forward.
In what has been a very difficult year for global markets, Syndicate has not
been able to remain unaffected. Although FUM for the year to 3 1 March 2009
have remained stable at £5.92 billion (31 March 2008: £5.70 billion), revenue
for the year has fallen by 7% to £37.49 million from £40.29 million in the year
to 31 March 2008. Profit before tax and impairment has fallen by 90% from £3.76
million for the year to 31 March 2008 to £0.24 million to 31 March 2009, and
after impairment has fallen to a loss of £19.07 million.
The decline in revenue is largely due to the adverse impact the fall in the UK
stock market has had on our investment management fee revenue. Unlike a number
of other asset management businesses, the Group's funds under management have
remained relatively stable. However, this is primarily due to a change in the
mix of Syndicate's funds under management, with an increase in the fixed income
funds offsetting the decline in wealth management funds. Revenues from fixed
income management are generally lower than those in wealth management which
accounts for the decline in Group revenues. Although the Directors have taken
steps to reduce operating costs across the Group, the Group's cost base remains
relatively fixed and therefore the decline in revenues has had a significant
adverse impact on the Group's profitability.
As a result of the decline in revenues and profitability of certain of the
associates and subsidiary companies in the Group, the value of certain of these
assets has been assessed to be impaired. A charge of £18.80 million,
representing some 27% of the original goodwill value, has therefore been made
against Goodwill and Other Intangible Assets in this year's Accounts, together
with a charge of £0.49 million against interest in associate. In addition, the
Group has made an exceptional one off charge before tax of £0.56 million
relating to specific losses suffered by certain clients of the Group.
Syndicate's ambition continues to be to establish a broadly based investment
management business with the over-riding principle of allowing the managers in
the respective businesses to develop and expand their client base whilst
reducing their operational burden. A significant part of this ambition has so
far been achieved by acquisition, with the completion of twelve transactions
since September 2005. Organic growth has also been strong during the year, with
the Group benefiting from strong growth in its fixed interest business and also
an increasing amount of organic growth and cross selling within the wealth
management companies.
The first four years of Syndicate's life saw a rapid pace of acquisition with
eleven acquisitions being made between October 2005 and March 2008. Since then
your Board's focus has shifted towards the development of these acquired
businesses, the creation of cost savings that can start to be generated by each
of the companies being part of a larger organisation and stimulating organic
growth. Some economies of scale have been identified and taken advantage of
quickly; however, others will take longer to come through as we are determined
not to jeopardise the development of our respective businesses or the
entrepreneurial spirit we are promoting in each organisation.
Since 31 March 2008, the Group has made just one acquisition, this being the
investment management and financial planning businesses of Pagan Osborne
solicitors. This acquisition has given the company its first real presence in
Scotland, and added an extra £200 million of funds under management or advice
to our subsidiary Ashcourt. We believe that this addition will provide an
excellent base from which to expand further into the significant Scottish
financial services market.
We have continued with our plan of bringing together certain functions within
the companies we have acquired. This has been undertaken in a period when world
stock markets and economies are going through an unsettled period caused by
strains within the global banking system. During our last financial year the
FTSE All Share Index fell 32% but within that period the market reached a peak
of 3,243 and a low of 1,782. As the backbone of the Group's revenue is
investment management fees, which account for 44% of our total revenues, it is
impossible to avoid the impact of lower stock markets. This fall together with
the reduction in interest rates has had a significant negative impact on the
Group's funds under management which in turn has impacted revenues and profits.
Nevertheless, the loyalty of our customers, the diversity of our asset classes
and continued organic growth has helped ensure the company's FUM has remained
just under £6 billion. Although it is still too early to predict when markets
will return to a pattern of sustainable growth, your Group is positioned to
benefit from the eventual sustained rally. Indeed, it is your Board's view that
the recent turmoil in financial markets and the impact on domestic economies,
especially in the UK, is encouraging individuals to be more cautious in their
spending habits and increase the amount of money that they save, which
eventually feeds its way into world markets.
We are aware that this year has been very challenging for all asset classes and
we are acutely aware of the effect this has on our clients' portfolios,
particularly those relying on income levels. We have continued to work hard to
find suitable opportunities for our clients whenever we see them. We are
delighted with the loyalty shown to us by our client base with a very limited
number of redemptions and a continued number of new clients joining us. This
year has particularly emphasised the benefits of having such a wide range of
investment knowledge within all parts of the Group and increasingly we are
sharing these valuable resources and ideas across the Group.
Despite market conditions, this has also been an exciting year for our recently
established branded funds arm, Zenith. It has continued to work with our
subsidiaries to bring all our in-house funds onto one platform. Our Guernsey,
Dublin and UK- based funds can now be found on a dedicated website launched
earlier this year. With a global spread of retail clients, we believe this is
the best way to keep them in touch with developments and introduce ourselves to
new investors. The challenging market conditions of last year mean we have been
working hard assessing the range of funds we manage so as to ensure we offer a
range of products that meet the differing needs of clients in this period of
economic uncertainty. In particular, we want to ensure that we have a range of
funds that can meet the needs of investors seeking solutions for the longer
term.
The performance of EPIC, which was acquired in January 2007 as a second leg of
the business to reduce the Group's reliance on Wealth Management, has been
impressive this year. The financial crisis has led to an increased interest
from existing and potential clients in the fixed income expertise that we
offer. This, together with the recruitment of an additional team with strong
sales experience, has facilitated client numbers rising 87% in the last twelve
months.
The three wealth management businesses have developed in different ways in the
last twelve months. Ashcourt had a very successful year attracting in excess of
£87 million new funds under management. During the period, Ashcourt also
completed the acquisition of St Andrews Asset Management and Pagan Osborne IFA
boosting its Asset Management and Financial Planning arms and creating a solid
foundation from which to expand in Scotland. Ashcourt also took over the
investment operations arm of Rowan to create a common platform between the two
businesses and migrated to Pulse investment software. At the same time, the
company reduced its cost base going forward by approximately £0.75 million to
position itself to benefit significantly from any market upturn.
Rowan, in spite of the market falls, has continued to perform well. Over the
last twelve months it has: attracted new discretionary mandates as a result of
the integration of the Burfield & Partners business acquired in February 2008;
increased to over 60 the number of third party IFAs introducing discretionary
funds
via its outsource product; and delivered organic growth from its own advisers.
In addition, Savoy Financial Services, the IFA subsidiary of Savoy Investment
Management, was merged into Rowan in July 2008.This has resulted in an enhanced
offering to the former's clients and has increased the number of Rowan branded
offices across the South West.
Our third wealth management branded subsidiary, Savoy, was able to attract
significant new money investing into Government Bonds and Investment Grade
Corporate Bonds. We found that more and more non-discretionary clients actively
turned to their fund manager for advice and guidance in the very unstable
conditions, strengthening client relationships and winning new business, with
very low levels of client losses or complaints.
Over the last twelve months we have had to cope with increasing regulations
surrounding MiFID, Treating Customers Fairly (TCF), a Capital Requirements
Directive (CRD) and now the Retail Distribution Review (RDR). Each of these new
initiatives from the FSA has helped us to focus on the quality of the service
we offer our clients. The Group is currently undergoing a SREP review and
anticipates an increase in the regulatory capital that it is required to hold.
As already mentioned by your Chairman, it is your Company's intention through
the fund raising announced today to further strengthen its balance sheet and in
particular to bolster the Group's regulatory capital and reduce debt.
The progress that the Group has made over the last twelve months would not have
been possible without the dedication and support of our staff and I would like
to thank every member of staff whose efforts during the last twelve months have
been greatly appreciated.
Jonathan Freeman
Group Chief Executive
28 September 2009
CONSOLIDATED INCOME STATEMENT
Year ended 31 March 2009
Note 2009 2008
£'000s £'000s
Revenue 4 37,490 40,287
Cost of sales (13,107) (12,932)
Gross profit 24,383 27,355
Administrative expenses (23,225) (22,819)
Share of results of associate (28)
Profit from operations 5 1,158 4,508
Investment income 7 355 699
Other gains and losses 8 (19,314) -
Finance costs 9 (1,270) (1,450)
(Loss)/profit before tax (19,071) 3,757
Taxation 10 & 18 33 (1,019)
(Loss)/profit for the year attributable to (19,038) 2,738
the equity holders of the parent
(Loss)/earnings per share
Basic 11 (14.29)p 2.10p
Diluted (restated) 11 (14.29)p 2.09p
CONSOLIDATED BALANCE SHEET
Year ended 31 March 2009
Note 2009 2008
£'000s £'000s
restated*
Non-current assets
Goodwill 12 48,090 62,603
Other intangible assets 13 6,955 8,035
Property, plant and equipment 14 1,078 1,081
Investment in associate company 15 - 494
Available-for-sale
investments 16 146 146
Total non-current assets 56,269 72,359
Current assets
Trade and other receivables 17 12,528 10,753
Cash and cash equivalents 7,101 8,624
Available-for-sale investments 16 22 69
Total current assets 19,651 19,446
Total assets 75,920 91,805
Current liabilities
Trade and other payables 20 (12,515 (11,908)
Obligations under finance leases 19 (8) (7)
Loans and deferred consideration 21 (9,128) (3,810)
Short-term provisions 22 (1,073) (845)
Total current liabilities (22,724) (16,570)
Non-current liabilities
Loans and deferred consideration 21 (7,210) (10,792)
Deferred tax liabilities 18 (1,842) (2,211)
Obligations under finance leases 19 (5) (12)
Long-term provisions 22 (2,761) (4,496)
Total non-current liabilities (11,818) (17,511)
Total liabilities (34,542) (34,081)
Net assets 41,378 57,724
Equity
Share capital 23 275 261
Share premium account 24 55,750 53,517
Equity reserve 25 692 560
Retained earnings 26 (15,339) 3,386
Equity attributable to equity holders of 27 41,378 57,724
the parent
* see note 12
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES
For the year ended 31 March 2009
2009 2008
£'000 £'000s
(Loss)/profit for the year (19,038) 2,738
Unrealised currency gain recognised directly in equity 153 -
Transfer from equity reserve 1 60 -
Total recognised income and expense for the year (18,725) 2,738
attributable to equity holders of the parent
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2009
Note 2009 2008
£'000s £'000s
Operating activities
Profit for the year (19,038) 2,738
Adjustments for:
Depreciation of property, plant and 515 550
equipment
Amortisation of intangible assets 1,055 852
Impairment of goodwill and intangible 18,797 -
assets
Share based payment expense 510 157
Impairment of investment 23 30
available-for-sale
Share of results of associate 28
Impairment of investment in associate 494 -
Unrealised foreign exchange gain 153 -
Investment income (355) (699)
Finance costs 1,270 1,450
Corporation tax (credit)/expense (33) 1,019
Operating cash inflow before movements in 3,39 1 6,125
working capital
Increase in receivables (1,871) (1,246)
Increase/(decrease) in payables 210 (197)
Increase/(decrease) in provisions 81 (76)
Cash inflow from operations 1,811 4,606
Tax paid (3) (1,601)
Interest received 286 659
Interest paid (964) (1,047)
Net cash inflow from operating activities 1,130 2,617
Investing activities
Acquisition of subsidiaries net of cash - (5,938)
acquired
Acquisition of goodwill and intangible 12 & 13 (4,106) -
assets
Acquisition of investment in associate - (522)
Purchases of property, plant and equipment 14 (512) (367)
Sales of available-for-sale investments 23 128
Dividends received 69 40
Net cash used in investing activities (4,526) (6,659)
Financing activities
Proceeds of share issues 2,247 -
Costs of share issues (18) (15)
Loans received 3,000 7,100
Repayments of obligations under finance (8) (7)
leases
Repayments of loans and payments of (3,148) (2,245)
deferred consideration
Cancellation of warrants (200) -
Net cash from financing activities 1,873 4,833
Net (decrease)/increase in cash and cash (1,523) 791
equivalents
Cash and cash equivalents at beginning of 8,624 7,833
year
Cash and cash equivalents at end of year 7,101 8,624
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2009
1. GENERAL INFORMATION
Syndicate Asset Management plc ("Syndicate" or "the Company") is a company
incorporated in the United Kingdom under the Companies Act 1985.The address of
the registered office is given on page 69.The nature of the Syndicate Group's
("the Group") operations and its principal activities are set out in the
Chairman's and Group Chief Executive's reports on pages 5 and 7 respectively,
and in the business review on page 11.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the Group operates.
2. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting
Both the parent company financial statements and the Group financial statements
have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards as adopted by the EU ("Adopted
IFRSs"). On publishing the parent company financial statements here together
with the Group financial statements, the Company is taking advantage of the
exemption in s230 of the Companies Act 1985 not to present its individual
income statement and related notes that form a part of these approved financial
statements.
The financial statements have been prepared on the historical cost basis except
for available-for-sale financial assets which are included at fair value.The
principal accounting policies adopted are set out below and have been applied
consistently to all periods presented in these financial statements.
Going concern
The financial statements are prepared on a going concern basis which the
Directors believe to be appropriate for the following reasons.
The current economic environment is challenging and the Group has reported a
significant operating loss for the year.This is primarily due to the adverse
impact the fall in the UK stock market has had on its investment management fee
revenue. Although the Group's Funds Under Management ("FUM") have remained
relatively stable over the year, this is largely due to the addition of £200
million of FUM from the acquisition of the St Andrews Asset Management and
Pagan Osborne IFAs in August 2008 and the increase in the fixed interest FUM
offsetting the decline in the wealth management FUM. Revenues earned from fixed
income management are generally lower than those in wealth management which
accounts for the decline in Group revenue. Although the Directors have taken
steps to reduce operating costs across the Group, the Group's cost base remains
relatively fixed and therefore the decline in revenues of the Group has had a
significant adverse impact on its profitability and cash resources. Further
information regarding the financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Directors'
report on page 1 3.
The Directors have been in discussions since the end of 2008 with RBS, the
Group's bankers, and since early 2009 with the holders of deferred
consideration owed in respect of businesses previously acquired by the Group.
On 8 May 2009 the Directors announced the subscription from existing
shareholders and employees in respect of 3 10 million new ordinary shares at a
price of 1 penny per ordinary share raising gross funds of £3. 1 million (the
"May Subscription"). In addition there was also announced an agreement to
settle £2 million of deferred consideration owed to the deferred consideration
holders through an issue of 200 million new ordinary shares. The Directors also
announced that they had reached agreement with RBS that, subject to that
repayment of £2 million from the proceeds of the May Subscription and the
further repayment of £2 million by 3 1 July 2009, then the Group would not be
required to make any further repayments of loan capital to RBS during the next
1 8 months. At the same time, the deferred consideration holders entered into a
standstill agreement deferring all future capital and interest payments for a
similar 18 month period. Under the agreement with RBS four previous loan
facilities were combined into a single facility with new banking covenants put
in place based on future cash flow cover.
The Group has not raised the additional funds to repay the £2 million that was
due to the bank on 3 1 July 2009 but instead agreed with the bank an extension
of the deadline for payment. Pursuant to the extension of the deadline, the
bank agreed that it would waive covenant breaches at 31 July 2009 and 23
September 2009 respectively on the condition that the Group provides to the
bank in a satisfactory form and substance, a confirmation that it has placed
shares (such placing to be subject to shareholder approval) to enable the Group
to pay the bank £3.3 million by 31 October 2009. Under the terms of the
agreement, the Group is also required to pay to the bank an additional £ 1.875
million on or before 31 October 2010 with the balance of the loan repayable as
at 31 December 2010. If the Group is unable to make these payments on or before
the stipulated due date, it will be in breach of its covenants and the bank
will obtain the right to realise its security over the assets of the Group to
recoup any outstanding amounts.
The Directors have considered the ability of the Group to pay the sum of £3.3
million by 31 October 2009 and the remaining balances by 3 1 October 2010 and
31 December 2010 respectively. As at the date of the Report and Accounts, the
Group has also announced a proposal to raise £7.5 million by the issue of 500
million new ordinary shares through a conditional placing and approximately £
9.7 million by the issue of 647 million new ordinary shares through an open
offer at the issue price of 1 .5 pence per share which, if approved by
shareholders, would provide more than sufficient funds to allow the Group to
make the payment to the bank of £3.3 million and repay other remaining
balances. The placing shares have been conditionally placed with certain
existing shareholders on behalf of the Company by Cenkos and those shareholders
participating in the placing have also irrevocably agreed to take up their
respective entitlements under the open offer and to underwrite the remainder of
the open offer conditional upon receiving the necessary shareholder resolution.
The placing and open offer is subject to, inter alia, the necessary resolutions
being passed at the General Meeting which has been called to take place on 29
October 2009.
If the conditions of the placing and open offer (including the necessary
shareholder resolution) are not met then the placing and open offer will fail
and the Group is unlikely to be able to make the payments of £3.3 million to
its bankers by 3 1 October 2009.This scenario would result in the Group
breaching its covenants with RBS. Although the Directors would seek to agree
further revisions to the Group's borrowing facilities with RBS, there could be
no assurance that the lenders would not seek to call for the repayment of the
facilities immediately, which the Company would be unable to repay which may
mean that the Group is unable to continue in business as a going concern.
If these arrangements are concluded successfully according to the currently
expected timetable, the Directors believe that Syndicate and the Group will
have adequate resources both to make the required payment to RBS and to
continue to operate in the foreseeable future. Due to the positive reactions of
the shareholders to date to these arrangements the Directors believe that this
will be the case and for this reason the Directors consider it appropriate to
prepare the financial statements of the Company on a going concern basis.
The Directors believe that the conditional nature of the placing and offer
indicates the existence of a material uncertainty which may cast significant
doubt on the Company's ability to continue as a going concern and it may
therefore be unable to continue realising its assets and discharging its
liabilities in the normal course of business. These financial statements do not
include any adjustments that would result from the going concern basis of
preparation being inappropriate.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 3 1 March 2009. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values. Any excess of the cost of
acquisition over the fair values of the identifiable net assets acquired is
recognised as goodwill.
The results of subsidiaries acquired during the period are included in the
consolidated income statement from the date that control commences.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation. Investments in associates
An associate is an entity over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation
in the financial and operating decisions of the investee. Significant influence
is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting. Investments in
associates are carried in the balance sheet at cost, as adjusted by
post-acquisition changes in the Group's share of the net assets of the
associates, less any impairment in the value of the individual investments.
Losses of the associates in excess of the Group's interest in those associates
are not recognised.
Where a Group company transacts with an associate of the Group, profits and
losses are eliminated to the extent of the Group's interest in the relevant
associate.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of each
acquisition over the Group's interest in the fair value of the identifiable
assets liabilities and contingent liabilities of each subsidiary at the
respective dates of acquisition.
For the purpose of impairment testing, goodwill is allocated to the Group's
cash-generating units expected to benefit from the synergies of combination.
Cash-generating units to which goodwill has been allocated are tested for
impairment annually or more frequently where there is an indication that the
unit may be impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is
not reversed in a subsequent period.
On disposal of a subsidiary, the amount of goodwill attributable is included in
the determination of the profit or loss on disposal.
Other intangible assets
Other intangible assets comprise client relationships and unit trust management
and investment trust contracts recognised upon the acquisition of subsidiaries.
Such assets are assessed as to whether they have finite lives.
a. Client relationships
Acquired client relationships are capitalised at fair value based on
management's estimate of expected future cash flows to be generated over their
expected useful lives. The capitalised amounts are amortised on a straight-line
basis over the expected useful lives, estimated to be ten years or the life of
the trust.
b. Unit trust and investment trust management contracts
Acquired unit trust management and investment trust contracts are capitalised
at fair value based on management's estimate of the expected future cash flows
that these contracts will generate over their useful lives. The capitalised
amounts are amortised on a straight-line basis over the expected useful lives,
estimated to be ten years.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives, using the straight-line method, on the following
bases:
Fixtures and equipment 10% - 33%
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried
at a re-valued amount, in which case the impairment loss is treated as a
revaluation decrease.
Revenue recognition
Portfolio and other management advisory and service fees are recognised on a
straight-line basis over the period the service is provided. Asset management
fees are recognised pro rata over the period the service is provided.
Dealing commissions are recognised as net amount due on trade date. Initial
commissions receivable and commission rebates payable are recognised in the
period in which the services are provided. Trail and renewal commissions are
accounted for on an ongoing basis over the period that the service is provided.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
Cost of sales
Cost of sales comprises the direct employment costs associated with front
office staff plus any payments to third parties in respect of revenue share
arrangements, accounted for on an accruals basis.
Leasing
Leases are classified as finance leases when the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their
fair value or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. Lease payments are apportioned between finance
charges and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are
charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease. Benefits received and receivable as
an incentive to enter into an operating lease are also spread on a
straight-line basis over the lease term.
Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they
are incurred.
Profit from operations
Profit from operations represents the result from trading activities after
charging any restructuring costs and aborted acquisition costs, but before
investment income and finance costs.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Payments made to state- managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the
Group's obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme. The Group does not operate a
defined benefit retirement scheme.
Taxation
The tax charge or credit represents the sum of the tax currently payable on
Group results and deferred tax. The taxable result differs from net result as
reported in the income statement because it excludes items of income or expense
that are taxable or deductible in other periods and it further excludes items
that are never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax result nor the accounting result.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries except where the Group is able to
control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Classification of financial instruments issued by the Company
Financial instruments issued by the Company are treated as equity only to the
extent that they meet the following two conditions:
* they include no contractual obligations upon the Company to deliver cash or
other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially
unfavourable to the Company; and
* where the instrument will or may be settled in the Company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company's own equity instruments or is a
derivative that will be settled by the Company's exchanging a fixed amount
of cash or other financial assets for a fixed number of its own equity
instruments.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified takes
the legal form of the Company's own shares, the amounts presented in these
financial statements for called up share capital and share premium account
exclude amounts in relation to those shares.
Non-derivative financial instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in profit or loss when there is objective evidence that the asset is
impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short term highly liquid investments that are readily convertible into a known
amount of cash and are subject to an insignificant risk of changes in value.
Available-for-sale investments
These are measured at fair value based on bid prices where there is an active
market and Directors' estimate for unquoted holdings. Investments in equity
investments that do not have a quoted market price in an active market and
whose fair value cannot be reliably determined are measured at cost.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Borrowings
Interest bearing loans are recorded on initial recognition at their fair value
and are subsequently measured at amortised cost, using the effective interest
rate method. Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accruals basis to
the income statement using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are not settled in
the period in which they arise.
Trade payables
Trade payables are initially measured at their fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded as the amount of proceeds
received, net of direct issue costs.
Provisions
Provisions are recognised when the Group has a present obligation as the result
of a past event, when it is probable that the Group will be required to settle
that obligation. Provisions are recognised at the Directors' best estimate of
the expenditure required to settle the Group's liability.
Share-based payments
The Company issues equity-settled and cash-settled share-based payments to
certain employees of the Group. Equity-settled share-based payments are
measured at fair value at the date of grant. The fair value is determined using
the Black-Scholes model at the grant date and is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of shares that
will eventually vest and adjusted for the effect of non-market based vesting
conditions. Where options that are currently in issue are modified during the
period, the Company recognises the incremental increase in the fair value of
the new options compared to the old options at the modification date and
expenses this increase over the life of the modified award as well as the
original expense.
The valuation models used together with the assumptions used on expected
volatility, risk free rates, expected dividend yields and expected forfeiture
rates are disclosed in note 25.
The Company issued a warrant to certain advisers for services provided in a
previous period in connection with an acquisition made. These warrants were
measured at fair value in an equity reserve using the Black-Scholes model.
Deferred and contingent consideration
Deferred consideration due in respect of acquisitions, where the amount due is
uncertain and contingent on future events, is included in provisions at the
fair value of the Directors' estimate of amounts due. Where deferred
consideration is a fixed amount this is included at fair value in Loans and
Deferred Consideration.
New standards and interpretations not applied
The following Adopted IFRS was available for early application but has not been
applied by the Group in these financial statements. Its adoption is not
expected to have a material effect on the financial statements:
• IFRS 8 Operating Segments - (mandatory for periods beginning on or after 1
January 2009).This standard replaces IAS 14 and
requires segment disclosure based on the components of an entity that
management monitors in making operating decisions, rather than disclosure of
business and geographical segments. The application of IFRS 8 in the year ended
31 March 2009 would not have affected the balance sheets or income statement
but would have resulted in changes to operating segment disclosures. The Group
plans to adopt it in the year ending 31 March 2010.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY AREAS OF UNCERTAINTY Critical
judgements in applying the Group's accounting policies
In adopting IFRSs as the basis of selecting and applying appropriate Group
accounting policies management has had regard to critical judgements and also
key sources of estimation uncertainty. Key sources of critical judgements and
estimation uncertainty have been identified as follows:
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in
use of the cash-generating units to which goodwill has been allocated. The
value in use calculation requires the entity to estimate the future cash flows
expected to arise from the cash- generating unit and a suitable discount rate
in order to calculate present value. Details of the cash generating units are
contained in note 12.The carrying amount of goodwill at the balance sheet date
was £48.09 million (2008: £62.60 million). Impairment of £18.13 million (2008:
£nil) has been made during the year based upon the Directors' review.
Other intangible assets
Acquired client relationships, unit trust management and investment trust
contracts are capitalised on the basis of the net discounted expected revenues
and costs over their estimated lives. The Directors' estimates are based on
historical rates of client and contract retention and revenue generation.
Client relationship, unit trust management and investment trust contracts are
valued at £4.71 million, £1.99 million and £0.26 million (2008: £4.71 million,
£2.98 million and £0.34 million) respectively at the balance sheet. The
Directors' estimated useful lives for the client relationships and the unit
trust management contracts are ten years, and for the investment trust contract
four years, being the remaining life of the contract.
Provisions
The Directors have estimated provisions in respect of onerous property leases
and contingent deferred consideration, totalling £3.83 million (2008: £5.34
million), which would be dependent on achieving certain key performance
indicators, based upon information available at the balance sheet date. In
estimating these provisions the Directors have made key assumptions regarding
the timeframe of the expected cash outflows. For the onerous lease provision, a
discount rate of 5% has been used to value the expected future cash flows.
4. REVENUE
2009 2008
£'000s £'000s
33,394 35,248
Wealth management services
Institutional fund management 4,096 5,039
37,490 40,287
The Directors, having considered the requirements of International Accounting
Standard 14 "Segmental Reporting", are of the opinion that all the Group's
revenue arose from its two business segments which are wealth management and
institutional fund management as shown above. No material revenue was generated
outside of the UK and the Channel Islands.
5. PROFIT FROM OPERATIONS
Profit from operations has been arrived at after charging:
2009 2008
£'000s £'000s
Depreciation of property, plant and equipment 515 550
(see note 14)
Staff costs (see note 6) 19,526 19,918
Auditors' remuneration (see below) 376 245
Amortisation of intangible assets (see note 1 3) 1,055 852
The analysis of Auditors' remuneration is as
follows:
2009 2008
£'000s £'000s
Audit services 321 1 87
Tax services 12 30
Corporate finance services - 22
Other services 43 6
376 245
Auditors' remuneration can be analysed as
follows:
2009 2008
£'000s £'000s
Company 117 62
Other Group companies 259 183
376 245
6. STAFF COSTS, INCLUDING DIRECTORS' REMUNERATION
The average monthly number of employees (including 2009 2008
executive directors) was: Number Number
Administration staff 177 200
Fund managers and investment advisers 94 89
Directors and other managers 45 40
316 329
Their aggregate remuneration comprised:
2009 2008
£'000s £'000s
Wages and salaries 16,569 16,993
Social security costs 1,710 1,667
Other pension costs paid to defined contribution 1,247 1,258
arrangements
19,526 19,918
Aggregate Directors' emoluments included above
comprised:
2009 2008
£'000s £'000s
Emoluments 741 806
Pension contributions 52 41
793 847
The emoluments and pension contribution for the highest paid Director were £
227,715 and £22,672 respectively (2008: £289,73 1 and £21,250).
7. INVESTMENT INCOME
2009 2008
£'000s £'000s
Interest on cash and cash equivalents 286 364
Dividends on available-for-sale investments 69 40
Interest on overpaid tax - 295
355 699
8. OTHER GAINS AND LOSSES
2009 2008
£'000s £'000s
Impairment of goodwill (see note 12) 18,133 -
Impairment of other intangible assets (see 665
note 13)
Impairment of investment in associate company 494 -
Impairment of available-for-sale investment 22 -
19,314
9. FINANCE COSTS
2009 2008
£'000s £'000s
Interest on loans 929 844
Interest on deferred consideration 339 278
Interest on obligations under finance leases 2 2
Interest on underpaid tax - 326
Total borrowing costs 1,270 1,450
Interest on deferred consideration relates to the amortisation of imputed
interest arising on the recording of the deferred consideration at fair value.
10. TAXATION
2009 2008
£'000s £'000s
Current tax (365) (1,362)
Under provision in prior periods (150) (46)
(515) (1,408)
Deferred tax credit 548 389
33 (1,019)
Corporation tax is calculated at 28% (2008:30%) of the estimated assessable
result for the year. The current charge for the year can be
reconciled to the result per the income 2009 2008
statement as follows: £'000s £'000s
(Loss)/profit before tax in the year (19,071) 3,757
Tax charge at 28% (2008: 30%) thereon 5,340 (1,127)
Expenses not deductible for tax (6,033) (585)
Other allowances 160 107
Losses utilised/carried forward - 154
Foreign tax adjustments 168 145
Tax on foreign dividends (56)
Under provision in prior periods (150) (46)
(515) (1,408)
11. (LOSS)/EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
2009 2008
£'000s £'000s
(Loss)/profit for the purposes of basic (loss)/earnings per (19,038) 2,738
share being profit attributable to equity holders of the
parent
2009 Number 2008
restated*
Number
Weighted average number of ordinary shares for the 133,245,612 130,533,482
purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Warrants - 266,266
Options - 313,188
Weighted average number of ordinary shares for the 133,245,612 131,112,936
purposes of fully diluted earnings per share
The denominator for the purposes of calculating basic earnings per share has
been adjusted to reflect the share issues which took place in the year. In the
year the potential ordinary shares under the warrant and options would have the
effect of reducing the loss per share and therefore are anti-dilutive.
*The number of shares for the year ended 3 1 March 2008 has been restated to
show the potential dilutive effect of warrants and options on the ordinary
shares.
12. GOODWILL
£'000s
Cost 56,509
As at 3 1 March 2007 6,207
Recognised on acquisition of subsidiaries (94)
(44)
Adjustment to the fair value of consideration (20)
payable: PSD
LAinvest
Disposal
As at 3 1 March 2008 (previously reported) 62,558
Adjustment to acquisition balance sheet - Burfield 45
As at 3 1 March 2008 (restated) 62,603
Acquisition of goodwill 4,557
Adjustment to the fair value of consideration
payable:
EPIC (1,000)
Towerpoint (165)
PSD (171)
IFS 450
Burfield (51)
Impairment of goodwill:
Ashcourt (7,358)
IMH (987)
Savoy (5,692)
EPIC (1,925)
SAM Ci. (2,171)
As at 3 1 March 2009 48,090
Goodwill has arisen in respect of the following acquisitions:
£'000s
St Andrews Asset Management and Pagan Osborne Independent Financial Advisers
4,557
4,557
On 28 August 2008 Ashcourt Holdings acquired the financial services businesses
of Pagan Osborne solicitors, St Andrews Asset Management and Pagan Osborne
IFAs, for a total consideration of up to £5 million plus costs of £105,000.The
only asset acquired was client relationships valued at £640,000 (see note 13)
less deferred tax of £179,000. £2.5 million of the consideration is deferred
and contingent on the value of funds under management at 30 November 2009 and
the turnover of Pagan Osborne IFA for the period from acquisition to 30
November 2009 (see note 21 ).These businesses have been integrated into
Ashcourt and therefore records of turnover and results are not separately
maintained. The Directors estimate that the turnover arising from this
acquisition was £633,000. It has not been practicable to estimate a separate
trading result.
During the year the Directors revised their estimate of the net assets acquired
as part of the acquisition of Burfield and Partners Asset Management
Limited.The Balance Sheet as at 31 March 2008 has been restated to reflect this
change, with prior year account balances being affected as shown below:
Increase/
(decrease)
£'000s
Goodwill 45
Trade and other payables 45
Loans and deferred consideration - current (91)
Loans and deferred consideration - non current (184)
Long-term provisions 184
Short-term provisions 91
The reduction in goodwill in relation to PSD and LAInvest is due to a revision
of management's estimate of deferred consideration that will be payable.
Goodwill acquired is allocated to the cash generating unit ("CGU") which is
expected to benefit from the acquisition. The carrying amount of goodwill has
been allocated as follows:
£'000s
Ashcourt - a single CGU 19,551
IMH - a single CGU 7,802
Savoy - a single CGU 8,924
EPIC - a single CGU 11,194
SAM C.I. - a single CGU 619
Total 48,090
The goodwill allocated to the Ashcourt CGU includes the goodwill arising from
the acquisition of St Andrews Asset Management and Pagan Osborne Independent
Financial Advisers. The operations of these two businesses are being fully
integrated within Ashcourt and accordingly, the allocation reflects
management's opinion that this CGU will benefit from the acquisition. Ashcourt,
IMH and Savoy all provide wealth management services to private clients, trusts
charities and pension funds. EPIC provides cash and bond management services to
institutional investors and fixed interest and equity fund management services
for specialist closed-end funds. SAM C.I. administers a range of collectives in
Dublin, Guernsey and the UK, managed by other group companies.
The Group tests for impairment in the period of acquisition and annually
thereafter unless there are indications that goodwill may be impaired such that
earlier assessment is required. The recoverable amounts of CGU's are derived
from value-in-use calculations. The key assumptions used are those regarding
growth rates, and anticipated changes to revenues and costs during the period
covered by the calculations. Changes to revenue and costs are based upon
management's expectation. The Group prepares its annual budget and five-year
cash flow forecasts derived therefrom and thereafter extrapolates using a
growth rate of 5% (2008: 5%), which management consider does not exceed
industry average long term growth rates.
Management estimates discount rates using pre-tax rates which reflect current
market estimates of the time value of money and risks specific to the CGU's.
The rate used to discount the forecast cash flows from all CGU's is 12% (2008:
1 1%).This rate is also broadly similar to rates which management has observed
in use by other groups operating in the wealth management sector.
It is possible that the Company's time value of money and risks specific to the
CGU's may increase in the future which would cause the carrying amount of each
CGU to exceed their value-in-use.
13. OTHER INTANGIBLE ASSETS
Acquired Acquired Acquired Total
client unit trust Investment £'000s
relationships management trust
£'000s contracts management
£'000s contracts
£'000s
Cost 5,041 147 442 5,630
At 31 March 2007 738 3, 104 - 3,842
Acquired on acquisition of
subsidiaries
At 31 March 2008 5,779 3,251 442 9,472
Acquired on acquisition of 640 - - 640
subsidiaries
At 31 March 2009 6,419 3,251 442 10,112
Amortisation
At 31 March 2007 555 20 10 585
Charge for the year 516 248 88 852
At 31 March 2008 1,071 268 98 1,437
Charge for the year 642 325 88 1,055
Impairment losses - 665 - 665
At 31 March 2009 1,713 1,258 186 3,157
Carrying amount
At 31 March 2009 4,706 1,993 256 6,955
At 31 March 2008 4,708 2,983 344 8,035
At 31 March 2007 4,486 127 432 5,045
The recognition of acquired intangible assets in the period resulted from the
acquisitions as described in notes 12. Acquired client relationships and
acquired unit trust management contracts are amortised over their estimated
useful lives, being ten years. Acquired investment trust management contracts
are amortised over the life of the investment trust which on acquisition was
five years.
The impairment loss recognised during the year relates to Management's estimate
of the impairment in value of the unit trust management contracts acquired as
part of the acquisition of EPIC. See note 12 for details of impairment testing.
14. PROPERTY, PLANT AND EQUIPMENT
Fixtures and
equipment
£'000s Cost
At 31 March 2007 1,811
Acquired on acquisition of subsidiaries 41
Additions 367
At 31 March 2008 2,219
Acquired on acquisition of subsidiaries -
Additions 512
At 31 March 2009 2,731
Depreciation and impairment
At 31 March 2007 588
Charge for the year 550
At 31 March 2008 1,138
Charge for the year 515
At 31 March 2009 1,653
Carrying amount
At 31 March 2009 1,078
At 31 March 2008 1,081
At 31 March 2007 1,223
The carrying amount of the Group's fixtures and equipment includes an amount of
£4,000 (2008: £4,000) in respect of assets held under finance leases.
15. INVESTMENT IN ASSOCIATE COMPANIES
CombiMeer B.V.
£'000s
At 31 March 2007 -
Acquired during the year 522
Share of loss for the year (28)
At 31 March 2008 494
Impairment (494)
At 31 March 2009
CombiMeer B.V. is a Dutch registered company which provides financial planning
and advice to high net worth individuals in the Netherlands. At the year end
the Directors' estimate that the Group's investment in CombiMeer has a value of
£nil (2008: £494,000).
16. AVAILABLE-FOR-SALE INVESTMENTS
Included in non-current assets:
2009 2008
£'000s £'000s
Equity investments 146 146
146 146
Included in current assets:
2009 2008
£'000s £'000s
Available-for-sale-investments 22 69
22 69
These investments are held at the Directors'
estimate of fair value.
17. OTHER FINANCIAL ASSETS
2009 2008
£'000s £'000s
Trade and other receivables
Trade receivables and accrued income 11,568 9,773
VAT recoverable and other receivables 960 980
12,528 10,753
Allowance is made for estimated irrecoverable amounts from trade receivables of
£41,000 (2008: £1 8,000).The Directors consider that the carrying amount of
trade and other receivables approximates to their fair value.
Bank balances and cash comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates to their fair value.
Available-for-sale investments
Directors consider that their carrying value approximates to fair value.
Financial risk management
The financial risk management objectives and policies of the Group and related
disclosures are set out on pages 11 and 12 in the Business Review and note 28.
DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period.
At the balance sheet date, excess management expenses and tax losses available
for carry forward are approximately £2.9 million (2008: £2.9 million). No
deferred tax asset has been recognised in respect of the losses due to the
unpredictability of future profit streams in the companies where the losses
reside. Such losses may be carried forward indefinitely.
The net deferred tax liability comprises temporary timing differences arising
from the fair value of non-goodwill intangible assets (see note 13) arising on
the acquisition of subsidiaries, net of the deferred tax asset on timing
differences arising on the charge on share-based payments. The net liability is
made up as follows:
On On Total
acquisitions share-based
£'000s payments £'000s
£'000s
At 31 March 2007 1,521 - 1,521
Arising on acquisition of subsidiaries 1,076 - 1,076
Arising on share based payments (44) (44)
Released in the year (see note 10) (342) (342)
At 31 March 2008 2,255 (44) 2,211
Arising on acquisition of intangible 179 179
assets (see notes 12 and 13)
Released in the year (see note 10) (481) (67) (548)
At 31 March 2009 1,953 (111) 1,842
18. OBLIGATIONS UNDER FINANCE LEASES
Minimum Present
Minimum lease Present value of lease value of
payments lease payments payments lease
2009 2009 2008 payments
£'000s £'000s £'000s 2008
£'000s
Amounts payable under finance
leases:
Within one year 9 8 9 7
In the second to fifth years 5 5 14 12
inclusive
Total 14 13 23 19
Less:future finance charges (1) (4)
13 19
It is the Group's policy to lease certain of its fixtures and equipment under
finance leases.The average lease term is three to four years. For the year
ended 3 1 March 2009, the average effective borrowing rate was 9% (31 March
2008 - 9%). Interest rates are fixed at the contract date. All leases are on a
fixed repayment basis and no arrangements have been entered into for contingent
rental payments.
The fair value of the Group's lease obligations approximates to their carrying
amount.
The Group's obligations under finance leases are secured by charges over the
leased assets.
20. OTHER FINANCIAL LIABILITIES Trade and other payables
2009 2008
£'000s £'000s
restated
Trade and other payables 12,515 11,908
The Directors consider that the carrying amount of trade payables approximates
to their fair value. The prior year figure has been restated (see note 12).
21. LOANS AND DEFERRED CONSIDERATION Loans and deferred consideration have
arisen in connection with various acquisitions as follows:
Bank Deferred Loan Subordinated Total
Loans consideration notes loans £'000s
£'000s£'000s £'000s
£'000s
31 March 2009 - - - - -
- - -
Towerpoint (note a) - -
Horder and Company Ltd
(note b)
Chartwell House Group plc - - - 82 82
(note c)
LAinvest Ltd (note d) - - - - -
PSD Robinson Gear (note e) 237 237
EPIC Investment Partners - - 6,910 - 6,910
(note f)
Syndicate Asset Management 2,325 - - - 2,325
(C.I.) Ltd formerly Insight
Investment Management
(C.I.) Ltd (note g)
Independent Financial 1,275 - 1,245 - 2,520
Solutions Group Ltd (note
i)
Pagan Osborne (note j) 2,300 - - - 2,300
Other (notes h, k and l) 1,900 32 32 1,964
7,800 - 8,424 114 16,338
Repayable as follows:
Within one year 7,500 - 1,514 114 9,128
In the second year 200 - - - 200
In the third to fifth years 100 - 6,910 - 7,010
inclusive
7,800 - 8,424 114 16,338
Less: Amounts due within (7,500) (1,514) (114) (9,128)
one year
Amounts due for settlement 300 - 6,910 - 7,210
after one year
Bank Deferred Loan Subordinated Total
Loans consideration notes loans £'000s £'000s
£'000s £'000s
£'000s
31 March 2008
Towerpoint (note a) - 165 - - 1 65
Horder and Company Ltd (note - - 18 - 18
b)
Chartwell House Group plc - - - 458 458
(note c)
LAinvest Ltd (note d) - 290 - - 290
PSD Robinson Gear (note e) 259 259
EPIC Investment Partners - - 6,910 - 6,910
(note f)
Syndicate Asset Management 3,463 - - - 3,463
(C.I.) Ltd formerly Insight
Investment Management (C.I.)
Ltd (note g)
Independent Financial 1,575 - - - 1,575
Solutions Group Ltd (note i)
Other (notes h, k and l) 1,400 - 32 32 1,464
6,438 455 7,219 490 14,602
Repayable as follows:
Within one year 2,638 455 309 408 3,810
In the second year 1,275 - - 82 1,357
In the third to fifth years 2,525 - 6,9 10 - 9,435
inclusive
6,438 455 7,219 490 14,602
Less: Amounts due within one (2,638) (455) (309) (408) (3,810)
year
Amounts due for settlement 3,800 - 6,910 82 10,792
after one year
At 31 March 2009 the bank granted a conditional waiver of banking covenants to
the Group in respect of all of the Group's bank borrowing. If the conditions of
the waiver had not been met all Group bank borrowing would have become payable
on demand and therefore for accounting purposes this debt has been treated as
current debt. Since the year end, all the conditions of the waiver have been
complied with and the bank has rescheduled the Group debt merging all existing
bank loans into one new loan facility. Under the revised repayment schedule and
waiver, the bank has been repaid £2 million and is due to be repaid a further £
3.3 million before
3 1 October 2009 and has then undertaken to enter into an 18 month standstill
agreement from 3 1 March 2009 during which time repayment of capital sums are
suspended. The remaining debt is repayable within 2 years. The first £2 million
has been repaid to the bank from the proceeds of the May 2009 fundraising (see
note 3 1).
a. On 3 1 March 2004 Savoy Asset Management Limited acquired 100% of the
issued share capital of Towerpoint Investments Limited for a cash
consideration of £150,000 plus shares in Savoy Asset Management plc. In
addition, deferred consideration of up to £500,000 would be paid based on
the turnover of the acquired business. The fair value of amounts still
outstanding at 31 March 2009 was £nil (2008: £165,000).
b. On 3 June 2004 Ashcourt Investment Advisers Limited acquired 100% of the
issued share capital of Horder and Company Limited. Consideration included
deferred consideration to the maximum of £400,000 based on 20% of revenue
arising post-acquisition. The deferred consideration is payable over a
period of five years from the date of acquisition in the form of loan notes
which bear interest at the rate of 2% over base rate until redeemed, with
redemption at the option of the holder after six months from the date of
issue. At 31 March 2009, the amount of loan notes issued not yet redeemed
amounted to £nil (2008: £18,000).
c. On 10 November 2005,Ashcourt Holdings Limited acquired 100% of the issued
share capital of Chartwell House Group Plc for a cash consideration of £
1,659,000 plus consideration of £900,000 by way of a subordinated loan. The
loan pays interest at a rate of 1% above the HSBC Bank Plc base rate and
the Directors estimated its fair value on issue to be £880,000.The loan is
repayable each year and the amount of repayment is based on 15% of the
annual turnover of the Chartwell House business acquired. The loan must be
fully repaid by 30 April 2011. At 3 1 March 2009, the balance outstanding
was £82,000 (2008: £458,000). Following a general meeting of the company on
26 May 2009 all outstanding deferred consideration owing on Chartwell House
was satisfied by the issue of equity to the loan holders (see note 3 1).
d. On 2 May 2006, Ashcourt Holdings Limited acquired 100% of the issued share
capital of LAinvest Limited for a consideration calculated as 1% of funds
under management at the acquisition date plus 0.5% of funds under
management at the first and second anniversary of acquisition. The amount
outstanding at 3 1 March 2009 was £nil (2008: £290,000).
e. On 3 December 2006, Ashcourt Holdings Limited acquired 100% of PSD Robinson
Gear (Investment Planning) Limited. Consideration included deferred
consideration to the maximum of £1,500,000 based on 40% of revenue arising
post acquisition. The deferred consideration is payable over the period
from the date of acquisition to 30 November 2008 in the form of loan notes
which bear interest at the rate of 1% over the Bank of England base rate
until redeemed, with redemption at the option of the holder. At 3 1 March
2009, the amount of loan notes issued not yet redeemed amounted to £237,000
(2008: £260,000). Following a general meeting of the company on 26 May
2009, all outstanding deferred consideration owing on PSD Robinson Gear was
satisfied by the issue of equity to the loan note holders (see note 3 1).
f. On 19 January 2007, the Company acquired 100% of the issued share capital
of EPIC Investment Partners plc for £4,718,000 cash consideration of
together with 5,404,45 1 ordinary shares in the Company, loan notes
totalling £6,910,000 and additional contingent deferred consideration of £
1,559,000 which is included in provisions (see note 22).The loan notes
carry a coupon of 6% and are repayable in two instalments in 4 and 5 years.
The deferred consideration is payable over 3 years based on the performance
of the acquired business. In May 2009, the Company entered into a
standstill agreement with the loan note holders whereby they entered into
an 18 month standstill with interest being rolled up rather than paid.
g. On 29 June 2007, Syndicate Asset Management plc acquired 100% of the issued
share capital of Syndicate Asset Management (C.I.) Limited (formerly
Insight Investment Management (C.I.) Limited) for £5.5 million plus
expenses of £203,000. This acquisition was partly financed by a 5 year term
loan from National Westminster Bank of £4. 125 million carrying an interest
rate of 1 .75% over LIBOR. As at 31 March 2009, £2.352 million was
outstanding (2008: £3.463 million). Since the year end this facility has
been rescheduled and combined into a single bank loan.
h. On 29 June 2007, Syndicate Asset Management plc put in place a 3 year £3
million Revolving Credit Facility from National Westminster Bank carrying
an interest rate of 1.5% over LIBOR. To date £1.4 million has been drawn
down on this facility and is outstanding at 31 March 2009 (2008: £1.4
million). Since the year end this facility has been rescheduled and
combined into a single bank loan.
i. On 4 February 2008, Ashcourt Holdings Limited acquired 100% of the issued
share capital of Independent Financial Solutions Group Limited ("IFS").
Consideration included deferred consideration to the maximum of £2, 100,000
based on 55% of revenue arising post acquisition. The deferred
consideration is payable over the period from the date of acquisition to 31
January 2010 in the form of loan notes which bear interest at the rate of
0.5% over the Bank of England base rate until redeemed, with redemption at
the option of the holder. At 31 March 2009, there were loan notes issued
but not redeemed of £ 1.244 million (2008: £nil).The balance of the
contingent deferred consideration of £819,000 is included within Provisions
(see note 22). Following a general meeting of the Company on 26 May 2009,
the loan notes of £1.244 million were satisfied by the issue of equity to
the loan note holders. At the same time, the Company entered into an 1 8
month standstill agreement with the deferred consideration holders whereby
no further consideration would be paid within that period. Since the year
end, the bank facility used to finance this acquisition has been
rescheduled and combined into a single bank loan.
j. On 29 August 2008, the Company acquired the investment management and
financial planning businesses of Pagan Osborne solicitors. Consideration
included a maximum deferred consideration of £2.5 million payable in
December 2008 and December 2009.This acquisition was partly financed by a 3
year term loan from National Westminster Bank of £2.5 million carrying an
interest rate of 1.75% over LIBOR. The balance of the bank loan outstanding
at 31 March 2009 was £2.3 million. Following a general meeting of the
Company on 26 May 2009 part of the remaining deferred consideration of £
383,000 was satisfied by the issue of equity to the deferred consideration
holders. Since the year end, the bank facility has been rescheduled and
combined into a single bank loan.
k. The unsecured loan notes carry interest at the rate of 7.25% per annum and
are redeemable in whole or in part at the note-holders' option on 30 April
2007 or on any 30 April or 31 October, up to and including 30 April 2010.
l. The subordinated loan is repayable on demand and carries interest at a
fixed rate of 7.5% per annum.
The comparative figures have been restated following Management's
reclassification of the contingent deferred consideration payable on the
Burfield acquisition (see note 12).
22. PROVISIONS Surplus Contingent Other Total
leasehold deferred
property costs consideration
£'000s £'000s £'000s £'000s
At 31 March 2007 302 4,438 - 4,740
On acquisition of - 1,812 - 1,812
subsidiaries
Reduction in provision (75) (1,136) (1,211)
At 31 March 2008 227 5,114 - 5,341
On acquisitions - 964 - 964
Increase/(reduction) in 81 (2,552) (2,471)
provision
At 31 March 2009 308 3,526 - 3,834
2009 2008
£'000s £'000
Included in current 1,073 845
liabilities
Included in non-current 2,761 4,496
liabilities
3,834 5,341
The provision in respect of surplus leasehold assets reflects management's best
estimate of the liability arising from onerous lease obligations in respect of
leasehold property interests acquired on the acquisition of subsidiaries in the
periods ended 3 1 March 2006 and 2007.
The provision in respect of contingent deferred consideration relates to
consideration on acquisitions that will fall due only if future conditions are
met. These conditions include future levels of profitability, turnover or
values of funds under management as follows:
a. On 3 December 2006, Ashcourt Holdings Limited, a wholly owned subsidiary of
the Company, acquired PSD Robinson Gear (Investment Planning) Limited and
its subsidiary company Robinson Gear (Management Services) Limited. The
total consideration on this acquisition included deferred consideration,
contingent on 40% of the turnover of the acquired business over the next
two years. The provision included above at the balance sheet date is £nil
(2008: £645,000).
b. On 19 January 2007, the Company acquired EPIC Investment Partners Plc. The
total consideration on this acquisition included deferred consideration,
contingent on the profitability of the acquired business over the next
three years. The provision included above at the balance sheet date is £
1,559,000 (2008: £2,657,000). In May 2009, the Company entered into a
standstill agreement whereby any capital due would be rolled over and paid
at the end of the 18 month period.
c. On 4 February 2008, Ashcourt Holdings Limited, a wholly owned subsidiary of
the Company, acquired Independent Financial Solutions Group Limited. The
total consideration on this acquisition included deferred consideration,
contingent on a maximum of 55% of the turnover of the acquired business
over the next two years. The provision included above at the balance sheet
date is £8 19,000 (2008: £1,537,000). In May 2009, the Company entered into
a standstill agreement whereby any capital due would be rolled over and
paid at the end of the 18 month period.
d. On 28 August 2008, Ashcourt Holdings Limited, a wholly owned subsidiary of
the Company, acquired the business of St Andrews Asset Management and Pagan
Osborne IFA. The total consideration on this acquisition included deferred
consideration contingent on the funds under management of the asset
management business at a future date and the turnover of the IFA business
over the next 15 months. The provision included at 31 March 2009 is £
964,000 (2008: £nil). Following a general meeting of the Company on 26 May
2009 part of the deferred consideration of £383,000 was satisfied by the
issue of equity to the deferred consideration holders.
e. On 29 February 2008, Investment Management Holdings Limited acquired 100%
of the issued share capital of Burfield and Partners Asset Management
Limited. Consideration included minimum deferred consideration of £100,000
to a maximum of £275,000 based on 71% of revenue arising post acquisition.
The deferred consideration is payable over the period from the date of
acquisition to 31 March 2011. Following a general meeting of the company on
26 May 2009, further deferred consideration of £53,000 was satisfied by the
issue of equity to the deferred consideration holders. At the same time the
company entered into an 18 month standstill agreement with the deferred
consideration holders whereby no further consideration would be paid within
that period.
The prior year figure has been restated (see note 12).
23. SHARE CAPITAL
2009 2008
£'000s £'000s
Authorised:
250,000,000 ordinary shares of £0.002 each 500 500
Issued and fully paid:
137,579,042 (2008: 130,533,482)
ordinary shares of £0.002 each 275 261
During the year the Company issued shares on the under-noted dates in the
following amounts:
Number of Nominal Proceeds
shares of share
issued value
Number issue
of
shares £'000s
issued
£'000s
Placing of ordinary shares of £0.002 each on 30
May 2008 as part of the cancellation
of the warrants 250,000 1 200
Placing of ordinary shares of £0.002 each on 28 387, 190 1 310
August 2008
Ordinary shares of £0.002 each issued on 29 1,366,050 2 1,200
August 2008 as part of the consideration for St
Andrews Asset Management and Pagan Osborne IFAs
Ordinary shares of £0.002 each issued on 5 20,926 - 18
September 2008 to Yorkshire Building Society on
behalf of the Syndicate staff share incentive
scheme.
Ordinary shares of £0.002 each issued on 6 21,394 19
October 2008 to Yorkshire Building Society on
behalf of the Syndicate staff share incentive
scheme.
Placing of ordinary shares of £0.002 each in 5,000,000 10 500
December 2008
The Company has one class of ordinary shares
which carries no right to fixed income.
Management of the Company's capital is discussed in the Risk Management section
of the Director's Report and in Note 28.
Share capital
£'000s
At 3 1 March 2007 and 3 1 March 2008 261
Issue of equity shares 14
At 31 March 2009 275
24. SHARE PREMIUM ACCOUNT
Share premium
£'000s
At 31 March 2007 53,532
Less: Additional expenses of issue of equity shares in previous year (15)
At 31 March 2008 53,517
Issue of equity shares 2,233
At 31 March 2009 55,750
25. EQUITY RESERVE
Equity reserve
£'000s
At 31 March 2007 403
Share-based payments 157
At 31 March 2008 560
Share-based payments 510
Cancellation of warrants (200)
Costs of share issue (18)
Transfer to retained earnings (160)
At 31 March 2009 692
A charge of £5 10,000 (2008: £157,000) has been recognised in the income
statement. The balance on the equity reserve represents amounts provided in
respect of share-based payments.
On 6 August 2006, the Company issued options over 855,555 ordinary shares of
the Company. The options have been valued using the Black-Scholes model. Inputs
to the model are as follows:
Weighted average share price £0.655
Weighted average exercise price £0.655
Expected volatility 7.68%
Expected life 5 years
Risk-free rate 4.84%
Expected dividends -
On 21 March 2007, the Company issued options over 2,1 69,444 shares which were
not included in the 2007 accounts but have been valued under the Black-Scholes
model and accounted for in the year to 31 March 2008 onwards. The inputs to the
valuation of this issue are:
Weighted average share price £0.675
Weighted average exercise price £0.675
Expected volatility 3.34%
Expected life 5 years
Risk-free rate 5.10%
Expected dividends -
On 30 May 2008, the Company also issued options over a further 975,000 shares
which have been valued under the Black-Scholes model and accounted for in the
year to 3 1 March 2009.The inputs to the valuation of this issue are:
Weighted average share price £0.85
Weighted average exercise price £0.875
Expected volatility 7.63%
Expected life 3.5 years
Risk-free rate 4.01%
Expected dividends -
On 30 May 2008, the Company entered into a deed of cancellation with Noble
Financial Holdings Limited (`Noble'), a subsidiary of Noble Group Holdings
Limited, pursuant to which it was agreed that Noble cancel its outstanding
warrants over 93 1,666 ordinary shares in the capital of the Company, which
were exercisable at a price of 60p a share, upon receiving the sum of £200,000
from the Company.
On 1 6 December 2008 employees and Directors released their entitlement to
3,500,000 options over the Company's shares. These options were replaced on 18
December 2008 by options over 3,500,000 shares which have been valued under the
Black-Scholes model and accounted for in the year to 31 March 2009.The inputs
to the valuation of this issue are:
Weighted average share price £0.0875
Weighted average exercise price £0.12
Expected volatility 30%
Expected life 4 years
Risk-free rate 2.63%
Expected dividends -
The Company has established an unauthorised and an authorised share option
scheme. The authorised scheme received HM Revenue and Customs approval on 9
November 2006. For each award the exercise price is not greater than the market
value of the shares at the date of grant. The vesting period for each award is
three years and options are settled by an allotment of shares to individuals.
If the options remain unexercised after a period of ten years from the date of
award, the options expire. Furthermore, options are forfeited if the employee
leaves the Group before the options vest. Employees who are deemed `good
leavers' are entitled to exercise their option for a period of six months after
they leave.
The following share options granted under the scheme were in place at 31 March
2009:
Date option granted
Option Number of
Price Per Options
share
30 May 2008 87.5p 50,000
18 December 2008 12.0p 3,100,000
The number and weighted average exercise price ("WAEP")
of share options outstanding are as follows:
Number WAEP
(pence)
Outstanding at 31 March 2008 3,000,000 66.93
Issued during the year 4,475,000 28.45
Released during the year (3,500,000) 71.15
Forfeited during the year (825,000) 75.98
Outstanding at 31 March 2009 3,150,000 13.20
26. RETAINED EARNINGS/(DEFICIT)
£'000s
At 31 March 2007 648
Profit for the year 2,738
At 31 March 2008 3,386
Loss for the year (19,038)
Unrealised currency gain 153
Transfer from equity reserve 1 60
At 31 March 2009 (15,339)
27. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2009 2008
£'000s £'000s
Opening shareholders' funds 57,724 54,844
(Loss)/profit for the year (19,038) 2,738
Issue of ordinary shares 2,247 (15)
Share-based payments 5 10 157
Cancellation of warrants (21 8) -
Unrealised currency gain 153 -
Closing shareholders' funds 41,378 57,724
28. RISK MANAGEMENT
Exposure to credit risk, market risk (which combines foreign currency risk,
interest rate risk and market price risk) and liquidity risk arises in the
normal course of the Group's business. For details of the risks of the Company
see note 47.
Credit risk
The credit risk to the Group is limited to the non-payment of investment
management fees, commissions earned but not received, cash at banks and
investments. At the balance sheet date there were no significant concentrations
of credit risk external to the Group.
Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis.The Group does not require collateral in respect
of financial assets because for the majority of client accounts the Group has
the right to deduct its management fees from the clients' investment portfolio.
The historical incidence of bad debts has been very isolated and infrequent.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings assigned by international credit- rating agencies.
At the balance sheet date the Group had the
following credit risk exposures:
2009 2008
£'000s £'000s
Cash and cash equivalents 7, 101 8,624
Client receivables 7,733 5,951
Other debtors 960 850
15,794 15,425
The amounts in the above table are based on the
carrying value of all accounts.
The following table represents the aged breakdown of client receivables as at
the balance sheet date that are past their due date:
2009 2008
£'000s £'000s
Bad Debt Bad Debt
Gross Provisions Gross Provisions
< 60 days 2,435 - 5,598 -
60 - 180 days 167 4 162 11
180 - 360 days 60 21 108 4
> 360 days 26 16 9 3
2,688 41 5,877 18
Foreign currency risk
The Group is exposed to foreign currency risk on cash balances that are
denominated in a currency other than Sterling. The currencies giving rise to
this risk are primarily U.S. Dollars and Euros.
In respect of other monetary assets and liabilities held in currencies other
than Sterling, the Group ensures that the net exposure is kept to an acceptable
level, by buying or selling foreign currencies at spot rates where necessary to
address short-term imbalances.
The significant majority of the Group's clients are invoiced in Sterling and
the Group only maintains a small float of cash in foreign currencies.
Therefore, the Group's currency risk is minimal and accordingly no sensitivity
analysis has been presented.
Interest rate risk
The Group's exposure to interest rate risk on financial assets is mitigated by
placing surplus funds on fixed deposit for various levels of maturity. The
interest rates obtained are market rates which are typically linked to base
rate. Typically, cash is held on deposit for no longer than 90 days. All cash
balances at the year end were held on call deposit. The Group also has
interest-bearing financial liabilities with floating interest rates.
Management deems interest rate risk immaterial and does not actively manage
this risk. At the balance sheet date, the Group held £7.10 million (2008: £8.62
million) in cash and cash equivalents on which interest is earned and had £7.8
million (2008: £7.2 million) payable in loans and deferred consideration on
which interest is paid with floating rates of interest.
An increase of 50 basis points in interest rates at the balance sheet date
would increase the interest payable on floating rate interest bearing
liabilities held at the balance sheet date by £28,000 per annum net of tax,
assuming a corporation tax rate of 28%.
An increase of 50 basis points in interest rates at the balance sheet date
would increase interest receivable on cash and cash equivalents held at the
balance sheet date by £25,000 per annum net of tax, assuming a corporation tax
rate of 28%.
Market price risk
Equity prices are governed by markets in which such equities are traded. The
construction of equity portfolios for funds which the Group acts as Manager is
driven by the investment objectives of each fund and consequently market risk
cannot be fully mitigated. There were no principal stock positions at the
balance sheet date.
Management deems market price risk to be immaterial.
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial
resources to meet its obligations when they fall due, or will have to do so at
excessive cost. This risk can arise from mismatches in the timing of cash flows
relating to assets, liabilities and off-balance sheet instruments. The Group
monitors liquidity risk taking into account cash balances held and levels of
borrowing in addition to the requirements imposed by the Financial Services
Authority on the Group's regulated subsidiaries.
Non-derivative cash flows
The table below presents the cash flows receivable and payable by the Group
under non-derivative financial assets and liabilities by remaining contractual
maturities at the balance sheet date. The amounts disclosed in the table are
the contractual, undiscounted cash flows whereas the Group manages inherent
liquidity risk on expected undiscounted cash flows.
The net liquidity positions in the table below, relate to cash flows on
contractual obligations existing at the balance sheet date. They do not take
account of any cash flows generated from profits on normal trading activities
nor do they reflect the rescheduling of the bank debt described in note 21.
On demand < 3 3-12 1-5 > 5
months months years years
£'000
£'000 £'000 £'000 £'000
As at 31 March 2009
Assets
Cash and cash equivalents 7,101
Client receivables 2,647 5,086 - - -
Other financial assets - 137 313 75
Total financial assets 9,748 5,223 313 - 75
Liabilities
Trade and other payables - 8,803 692 - -
Bank loan commitments - 7,300 - 500 -
Loan note commitments 1,481 6,910
Deferred consideration - 82 1,091 2,507 -
Minimum operating lease - 329 920 3,781 681
commitments
Finance lease commitments - - 8 5 -
Total financial liabilities - 17,995 2,711 1 3,703 681
Net liquidity surplus/ 9,748 (12,772) (2,398) (13,703) (606)
(deficit)
On demand < 3 3-12 1-5 > 5
months months years years
£'000 £'000 £'000 £'000 £'000
As at 31 March 2008
Assets
Cash and cash equivalents 8,597 - - - -
Client receivables 2,318 5,656 - - -
Other financial assets - - - - 227
Total financial assets 10,915 5,656 - - 227
Liabilities
Trade payables - 3,387 - - -
Bank loan commitments - 662 475 5,300 -
Loan note commitments 65 375 278 6,994 -
Deferred consideration - 858 414 4,349 -
Minimum operating lease 31 3 940 2,859 930
commitments
Finance lease commitments - - 7 12 -
Total financial liabilities 65 5,595 2,114 19,514 930
Net liquidity surplus/ 10,850 61 (2,114) (19,514) (703)
(deficit)
Fair values
Estimation of fair values
The following summarises the major methods and assumptions used in estimating
the fair values of financial instruments reflected in the table.
Other investments
Fair value is based on quoted market prices at the balance sheet date without
any deduction for transaction costs.
Trade and other receivables / payables
For receivables / payables with a remaining life of less than one year, the
notional amount is deemed to reflect the fair value. All other receivables /
payables greater than one year are discounted at base rate to determine the
fair value.
29. ACQUISITION OF SUBSIDIARIES
During the year the Group made no new acquisitions of corporate entities. The
following acquisitions took place in the previous year.
In the year ended 31 March 2008, the Group acquired the entire share capital of
Syndicate Asset Management (C.I.) Limited (formerly Insight Investment
Management (C.I.) Limited) ("SAM (C.I.)"), Independent Financial Solutions
Group Limited ("IFS") and Burfield and Partners Asset Management Limited
("Burfield"). SAM (C.I.) manages a range of fixed interest cash, bond and
multi-manager open ended investment companies. IFS and Burfield both provide
wealth management services. The effect of each acquisition using the purchase
method of accounting is set out below. In the event that these acquisitions had
taken place on the first day of the financial year ended 31 March 2008, the
Group's combined revenue and profit for that year would have been £43.6 million
and £3.3 million respectively.
(a) Syndicate Asset Management (C.I.) Limited (formerly Insight Investment
Management (C.I.) Limited)
On 29 June 2007, Syndicate completed the acquisition of Syndicate Asset
Management (C.I.) Limited (formerly Insight Investment Management (C.I.)
Limited) ("SAM (C.I.)") for cash consideration of £5,500,000 plus expenses of £
203,000. SAM (C.I.) manages a range of fixed interest cash, bond and
multi-manager open ended investment companies. Funds under management at
acquisition were £5 12 million. This transaction has been accounted for by the
purchase method of accounting.
Book value Fair value Fair
adjustments value
£'000s £'000s £'000s
Net assets acquired:
Unit trust contracts 3,104 3,104
Property, plant and equipment 2 - 2
Available for sale investments 55 - 55
Trade and other receivables 2, 124 - 2,124
Cash and cash equivalents 1,911 - 1,911
Trade and other payables (3,414) - (3,414)
Deferred tax on acquired (869) (869)
intangibles
678 2,235 2,913
Goodwill 2,790
Total consideration 5,703
Satisfied by:
Cash 5,500
Directly attributable costs 203
5,703
Net cash outflow arising on
acquisition:
Cash consideration 5,703
Less: Cash and cash equivalents (1,911)
acquired
3,792
The turnover and profit after tax contributed by SAM (C.I.) in the period since
acquisition to 3 1 March 2008 were £4,159,000 and £784,000 respectively.
The factors that contribute to goodwill include SAM (C.I.)'s market reputation,
its ability to develop and deliver services which meet the needs of clients in
response to the changing statutory and regulatory environment together with
established compliance and risk management procedures which contribute
significantly to the quality of services provided to existing and new
customers. The acquisition strengthens the Group's infrastructure and ability
to develop its offshore fund capability.
(b) Independent Financial Solutions Group Limited
On 4 February 2008, the Company's wholly owned subsidiary Ashcourt Holdings
Limited acquired 100% of the issued share capital of Independent Financial
Solutions Group Limited ("IFS") for a cash consideration of £2,192,000,
including costs of £92,000 plus deferred consideration of £1,523,000.
Independent Financial Solutions Group Limited is an independent financial
adviser. This transaction has been accounted for by the purchase method of
accounting.
Book value Fair value Fair
£'000s adjustments value
£'000s £'000s
Net assets acquired:
Client relationships - 720 720
Property, plant and equipment 39 - 39
Trade and other receivables 378 - 378
Cash and cash equivalents 228 - 228
Trade and other payables (3 15) - (3 15)
Corporation tax payable (1 33) (1 33)
Deferred tax (5) - (5)
Deferred tax on acquired (202) (202)
intangibles
192 518 710
Goodwill 3,455
Total consideration 4,1 65
Satisfied by:
Cash 2,100
Deferred consideration 1,973
Directly attributable costs 92
4,165
Net cash outflow arising on
acquisition:
Cash consideration 2,192
Less: Cash and cash equivalents (228)
acquired
1,964
The deferred consideration is payable on the first and second anniversaries of
the acquisition and contingent on the level of turnover produced for the years
ending on those date. The fair value has been estimated by the Directors to be
£1,523,000 at the acquisition date. The operations of IFS have been integrated
within Ashcourt and therefore records of turnover and results are not
separately maintained. The Directors estimate that the turnover from clients
arising from the acquisition of IFS in the year ended 31 March 2008 was £
325,000. It has not been practicable to estimate a separate trading result.
The factors that contribute to goodwill include the extension of Ashcourt's
geographical presence, the addition of clients to whom services can be provided
by other members of the Syndicate group of companies, economies of scale and
cost savings through rationalisation of operations.
(c) Burfield and Partners Asset Management Limited
On 29 February 2008, the Company's wholly owned subsidiary Investment
Management Holdings Limited completed the acquisition of Burfield and Partners
Asset Management Limited for an initial cash consideration of £150,000 plus
further deferred contingent consideration of £275,000, plus expenses of £
32,000. Burfield provides wealth management services to private clients.
Book value Fair value Fair
£'000s adjustments value
£'000s £'000s
Net assets acquired:
Client relationships 18 18
Trade and other receivables 74 - 74
Cash and cash equivalents (23) - (23)
Trade and other payables (52) - (52)
Corporation tax payable (11) - (11)
Deferred tax on acquired intangibles (6) (6)
(12) 12 -
Goodwill 406
Total consideration 406
Satisfied by:
Cash 150
Deferred consideration 224
Directly attributable costs 32
406
Net cash outflow arising on 181
acquisition: Cash consideration
Less: Cash and cash equivalents -
acquired
181
The deferred consideration is payable annually over three years six months from
the date of acquisition and is contingent on the level of turnover arising from
the acquisition for the twelve month periods preceding the payment dates. The
fair value has been estimated by the Directors to be £275,000 at the
acquisition date.
The factors that contribute to goodwill include the extension of the Group's
presence in the region, cost efficiencies and the addition of new clients to
whom further group services can be provided.
Burfield's revenues and profit after taxation included in the Group results
since acquisition to 31 March 2008 were £440,000 and £85,000 respectively.
30. OPERATING LEASE ARRANGEMENTS
2009 2008
£'000s £'000s
Minimum lease payments under
operating leases recognised in income for the year 1,43 11,168
At the balance sheet date, the Group had outstanding commitments for future
minimum lease payments under non-cancellable operating leases, which fall due
as follows:
2009 2008
£'000s £'000s
Within one year 1,249 754
In the second to fifth years inclusive 3,78 1 2,175
After five years 681 790
5,711 3,719
Operating lease payments represent rentals payable by the Group for certain of
its office properties. Leases were negotiated for an average term of seven
years and rentals are fixed for an average of three years.
31. EVENTS AFTER THE BALANCE SHEET DATE
(i) Placing of ordinary shares
In May 2009, the Company issued 3 10 million new Ordinary Shares at a price of
1 penny per Ordinary Share raising gross funds of £3.1 million and agreed to
settle £2.0 million of deferred consideration owed in respect of businesses
previously acquired by the Group through an issue of 200 million new Ordinary
Shares. From the cash raised, £2 million was immediately repaid to the
Company's bank in respect of loans outstanding at the year end and a new loan
agreement entered into with the bank combining all the outstanding bank loans
and facilities into one new loan. Subject to the Company repaying a further £
3.3 million before
31 October 2009 the bank has agreed to enter into an 1 8 month standstill
agreement from 3 1 March 2009 whereby no further debt is repaid during that
period.
The Company has also today announced a proposal to raise up to approximately £
17.21 million by the issue of 1 . 15 billion New Ordinary Shares through a
Conditional Placing and Open Offer at the issue price of up to 1 .5 pence per
share. The Placing Shares have been conditionally placed with certain existing
shareholders on behalf of the Company by Cenkos and the shareholders
participating in the Placing have also irrevocably agreed to take up their
respective entitlements under the Open Offer. The Placing and Open Offer is
subject to, inter alia, the necessary resolutions being passed at the General
Meeting which has been called to take place on 29 October 2009.
32. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Company and its subsidiaries are disclosed in
the Company's separate financial statements (see note 45).
During the year Ashcourt Holdings Limited, a wholly owned subsidiary of the
Company, paid £7,800 (31 March 2008: £7,800) for the provision of disaster
recovery services to Thirty Acre Stables ("TAS") in which John Morton, the
former Group Chief Executive Officer, has a 100% interest. The balance due to
"TAS" at 3 1 March 2009 was £nil (3 1 March 2008: £nil).
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
International Accounting Standard 24 Related Party Disclosures. Further
information about the remuneration of individual Directors is provided on page
18.
2009 2008
£'000s £'000s
Short-term employee benefits 741 806
Other long-term benefits 52 41
793 847
Company Balance Sheet
As at 31 March 2009
Note 2009 2008
£'000s £'000s
Non-current assets
Property, plant and equipment 37 279 82
Investments in subsidiaries 39,247 57,026
Due from group companies 12,683 8,683
Total non-current assets 52,209 65,791
Current assets
Other receivables 383 127
Due from group companies 4,487 5,221
Cash and cash equivalents 8 242
Total current assets 4,878 5,590
Total assets 57,087 71,381
Current liabilities
Other payables 39 (376) (845)
Due to group companies (3,050) (2,683)
Loans and deferred consideration 40 (7,500) (1,621)
Total current liabilities (10,926) (5,149)
Non-current liabilities
Loans and deferred consideration 40 (7,210) (11,727)
Long term provisions 41 (1,559) (2,657)
Total non-current liabilities (8,769) (14,384)
Total liabilities (19,695) (19,533)
Net assets 37,392 51,848
Equity
Share capital 275 261
Share premium account 55,750 53,517
Equity reserve 692 560
Retained earnings (19,325) (2,490)
Equity attributable to equity holders of 37,392 51,848
the parent
The financial statements were approved by the Board of Directors and authorised
for issue on 28 September 2009. They were signed on its behalf by:
J Dumeresque J Freeman
Group Finance Director Group Chief Executive
Company Statement of Recognised Income and Expenses
For the year ended 31 March 2009
2009 2008
£'000s £'000s
Loss for the year (16,995) (591)
Transfer from equity reserve 160 -
Total recognised income and expense for the year (16,835) (591)
attributable to equity holders of the parent
Company Cash Flow Statement
For the year ended 31 March 2009
2009 2008
£'000s £'000s
Loss for the year (16,995) (591)
Adjustments for:
Depreciation of property, plant and 43 20
equipment
Share based payment expense 96 47
Investment income (21) (23)
Impairment of investments in subsidiaries 17,193 -
Finance costs 860 872
Management charges from group companies (2,350) (1,140)
Dividends received from subsidiary company (780) (762)
Corporation tax charge/(credit) (92) (408)
(2,046) (1,985)
Decrease/(increase) in other and group 492 (410)
receivables
(Decrease)/increase in other creditors and (24) 2,666
accruals
Management charges received 2,350 1,140
Net cash from operating activities 772 1,411
Investing activities
Interest income 21 23
Dividends received from subsidiary companies 780 762
Investment in subsidiaries (5,703)
Purchases of property, plant and equipment (240) (40)
Loans to Group companies to invest in (4,000) (1,975)
subsidiaries
Net cash used in investing activities (3,439) (6,933)
Financing activities
Proceeds of share issues 2,247 -
Cancellation of warrants (200)
Costs of share issue (18) (15)
Loans received 3,000 6,437
Loans repaid (1,930)
Interest paid (666) (705)
Net cash from financing activities 2,433 5,717
Net (decrease)/increase in cash and cash (234) 195
equivalents
Cash and cash equivalents at beginning of 242 47
year
Cash and cash equivalents at end of year 8 242
33. SIGNIFICANT ACCOUNTING POLICIES - THE COMPANY
The separate financial statements of the Company are presented as required by
the Companies Act 1985. As permitted by that Act, the separate financial
statements have been prepared in accordance with IFRSs as adopted by the EU.
Advantage has been taken of s230 of the Companies Act 1985 and a Company only
income statement is not presented.
The financial statements have been prepared on the historical cost basis.The
principal accounting policies adopted are the same as those set out in note 2
to the consolidated financial statements except as noted below.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment, plus the fair value of share-based payments
attributable to employees of the Company's subsidiary companies.
Share-based payments
The Company issues equity-settled and cash-settled share-based payments to
certain employees of the Company and the Group. Equity settled share-based
payments are measured at fair value at the date of grant. The fair value is
determined using the Black-Scholes model at the grant date and in respect of
employees of the Company is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions. For share-based
payments in respect of employees of other Group companies the fair value is
added to the cost of investment in those group companies on a straight-line
basis.
The valuation models used together with the assumptions used on expected
volatility, risk free rates, expected dividend yields and expected forfeiture
rates are disclosed in note 25.
The Company issued a warrant to certain advisers for services provided in a
previous period in connection with an acquisition made. These warrants were
measured at fair value in an equity reserve using the Black-Scholes model.
34. PROFIT FROM OPERATIONS - THE COMPANY
The auditors' remuneration for audit services to the Company was £107,500
(2008: £27,500).
35. TAX - THE COMPANY
2009 2008
£'000s £'000s
Current tax (56)
Receipt for Group Relief 151 464
151 408
The charge to corporation tax for the year is £nil (2008: £56,000 being the tax
due on dividends received from Syndicate Asset Management (C.I.) Limited).
Losses were incurred during the year, which were surrendered to subsidiary
companies and a payment for this group relief was received in the sum of £15
1,000 (2008: £464,000).
36. SUBSIDIARIES
Ashcourt Holdings Limited (formerly Ashcourt Holdings plc), Savoy Asset
Management Limited (formerly Savoy Asset Management Plc), EPIC Investment
Partners Limited, Syndicate Asset Management (C.I.) Limited (formerly Insight
Asset Management (C.I.) Limited) and Syndicate Administration Limited are the
only directly wholly owned subsidiaries of the Company. Details of the
Company's subsidiaries (excluding dormant companies) at 3 1 March 2009 are as
follows:
Name of subsidiary Place of Proportion Proportion
incorporation of voting of
ownership and interest power held
operation % %
Ashcourt Holdings Limited UK 100 100
Wholly Owned by Ashcourt Holdings
Limited:
Ashcourt Asset Management Limited UK 100 100
Ashcourt Investment Advisers Limited UK 100 100
Ashcourt Administration Limited UK 100 100
Ashcourt Financial Planning Limited UK 100 100
PSD Robinson Gear (Investment UK 100 100
Planning) Limited
Robinson Gear (Management Services) UK 100 100
Limited
LAinvest Limited UK 100 100
Independent Financial Solutions Group UK 100 100
Limited
Investment Management Holdings plc UK 100 100
Rowan & Company Capital Management UK 100 100
plc
Farlake Group Limited UK 100 100
Savoy Financial Planning Limited UK 100 100
Burfield & Partners Limited UK 100 100
Savoy Asset Management Limited UK 100 100
Wholly owned by Savoy Asset
Management Limited:
Savoy Investment Management Limited UK 100 100
Financiere France Europeene du Group Luxemburg 100 100
du Savoy SA
Guildhall Investment Management UK 100 100
Limited
EPIC Investment Partners Limited UK 100 100
Wholly owned by EPIC Investment
Partners Limited:
EPIC Asset Management Limited UK 100 100
EPIC Investment Partners (Guernsey) Guernsey 100 100
Limited
Syndicate Asset Management (C.I.) Guernsey 100 100
Limited
Syndicate Administration Limited UK 100 100
37. PROPERTY PLANT AND EQUIPMENT - THE COMPANY
Fixtures and
equipment
£'000s
Cost
At 31 March 2007 66
Additions 40
At 31 March 2008 106
Additions 240
At 31 March 2009 346
Depreciation and impairment
At 31 March 2007 5
Charge for the year 19
At 31 March 2008 24
Charge for the year 43
At 31 March 2009 67
Carrying amount
At 31 March 2009 279
At 31 March 2008 82
At 31 March 2007 61
38. FINANCIAL ASSETS - THE COMPANY
At the balance sheet date, amounts due from Group companies include amounts
receivable from Group companies of £12.68 million (2008: £8.68 million),
principally loaned for the financing of acquisitions. Although the amounts over
one year did not attract interest during the period, the Directors are
formalising these arrangements and therefore consider the balances approximate
to fair value. Group receivables of £nil (2008: £nil) are due within one year
in respect of management charges. Other receivables comprise VAT recoverable
and prepaid expenses.
Cash and cash equivalents
These comprise cash held by the Company and short-term bank deposits with an
original maturity of three months or less.The carrying amount of these assets
approximates their fair value.
39. FINANCIAL LIABILITIES - THE COMPANY
Other payables comprise:
2009 2008
£'000s £'000s
Other creditors and accruals 376 845
The Directors consider that the carrying amount of other
creditors approximates to their fair value.
At the balance sheet date, amounts due to Group companies were £3,051,000
(2008: £3, 1 33,000).Although the amounts over one year did not attract
interest during the period, the Directors are formalising these arrangements
and therefore consider the balance approximates fair value.
40. LOANS AND DEFERRED CONSIDERATION - THE COMPANY
Loans and deferred consideration have arisen in Bank Loan Total
connection with various acquisitions as follows: 31 Loans Notes £'000s
March 2009 £'000s £'000s
EPIC Investment Partners (note 21 f) - 6,910 6,910
Syndicate Asset Management (C.I.) Ltd formerly 2,325 - 2,325
Insight Investment Management (C.I.) Ltd (note 21
g)
Independent Financial Solutions Group Ltd (note 21 1,275 - 1,275
i)
Pagan Osborne (note 21 k) 2,300 2,300
Other (note 21 h) 1,900 - 1,900
7,800 6,910 14,710
Repayable as follows:
Within one year 7,500 - 7,500
In the second year 200 - 200
In the third to fifth years inclusive 100 6,910 7,010
7,800 6,910 14,710
Less: Amounts due within one year (7,500) - (7,500)
Amounts due for settlement after one year 300 6,910 7,210
31 March 2008
Bank Loan Total
Loans Notes
£'000s £'000s £'000s
EPIC Investment Partners (note 21 f) - 6,910 6,910
Syndicate Asset Management (C.I.) Ltd formerly
Insight Investment
Management (C.I.) Ltd (note 21 g) 3,463 - 3,463
Independent Financial Solutions Group Ltd (note 21 1,575 1,575
i)
Other (notes 21 h) 1,400 - 1,400
6,438 6,910 13,348
Repayable as follows:
Within one year 1,621 - 1,621
In the second year 2,292 - 2,292
In the third to fifth years inclusive 2,525 6,910 9,435
6,438 6,910 13,348
Less: Amounts due within one year (1,621) - (1,621)
Amounts due for settlement after one year 4,817 6,910 11,727
41. PROVISIONS Contingent
deferred
consideration
£'000s
At 31 March 2007 2,573
Increase in provision 84
At 31 March 2008 2,657
Reduction in provision (1,098)
At 31 March 2009 1,559
2009 2008
£'000s £'000s
Included in current liabilities - -
Included in non-current liabilities 1,559 2,657
1,559 2,657
The provision in respect of contingent deferred consideration relates to
consideration on acquisitions that will fall due only if future conditions are
met. These conditions include future levels of profitability, turnover or
values of funds under management as follows:
(a) On 19 January 2007, the Company acquired EPIC Investment Partners Plc. The
total consideration on this acquisition included
deferred consideration, contingent on the profitability of the acquired
business over the next three years. The provision included above at the balance
sheet date is £1,559,000 (2008: £2,657,000). In May 2009, the Company entered
into a standstill agreement whereby any capital due would be rolled over and
paid at the end of the 18 month period.
42. SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND EQUITY RESERVE
The movements on these items are disclosed in notes 23, 24 and 25 to the
financial statements.
43. RETAINED DEFICIT - THE COMPANY £'000s
As at 31 March 2007 Loss for the year (1,899)
(591)
As at 31 March 2008 (2,490)
(16,995)
Loss for the year 160
Transfer from equity reserve
As at 31 March 2009 (19,325)
44. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS - THE COMPANY
2009 2008
£'000s £'000s
Opening shareholders' funds 51,848 52,297
Loss for the year (16,995) (591)
Issue of ordinary shares 2,247 (15)
Share-based payments 510 157
Cancellation of warrants (218) -
Closing shareholders' funds 37,392 51,848
45. RELATED PARTY TRANSACTIONS
The Company charged management fees to its subsidiaries of £2,350,000 (2008: £
1, 140,000). Amounts due to and due from Group companies at 31 March 2009 are
disclosed in notes 38 and 39. Other related party transactions are disclosed in
note 32.
46. STAFF COSTS
The average monthly number of employees (including 2009 2008
executive directors) was: Number Number
Administration staff 2 3
Directors and other managers 5 7
7 10
Their aggregate remuneration comprised:
2009 2008
£'000s £'000s
Wages and salaries 9 19 1,015
Social security costs 109 73
Other pension costs paid to defined contribution 92 39
arrangements
1,120 1,127
47. RISK MANAGEMENT
Exposure to credit risk, market risk (which combines foreign currency risk,
interest rate risk and market price risk) and liquidity risk arises in the
normal course of the Company's business.
Credit risk
The credit risk to the Company is limited to the amounts owed by subsidiary
companies and cash at banks. At the balance sheet date there were no
significant concentrations of credit risk and no amounts were overdue.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit ratings assigned by international credit- rating agencies.
At the balance sheet date the Company had the following
credit risk exposures:
2009 2008
£'000s £'000s
Cash and cash equivalents 8 242
Due from Group companies 4,487 5,221
Other debtors 383 127
4,878 5,590
The amounts in the above table are based on the
carrying value of all accounts.
Foreign currency risk
The Company has no material exposure to foreign exchange risk.
Interest rate risk
The Company's exposure to interest rate risk on financial assets is mitigated
by placing surplus funds on fixed deposit for various levels of maturity. The
interest rates obtained are market rates which are typically linked to base
rate. Typically, cash is held on deposit for no longer than 90 days. All cash
balances at the year end were held on call deposit. The Company also has
interest-bearing financial liabilities with floating interest rates.
Management deems interest rate risk immaterial and does not actively manage
this risk. At the balance sheet date, the Company held £8,000 (2008: £242,000)
in cash and cash equivalents on which interest is earned and had £7.8 million
(2008: £6.4 million) payable in loans and deferred consideration on which
interest is paid with floating rates of interest.
An increase of 50 basis points in interest rates at the balance sheet date
would increase the interest payable on floating rate interest bearing
liabilities held at the balance sheet date by £28,000 per annum net of tax,
assuming a corporation tax rate of 28%.
An increase of 50 basis points in interest rates at the balance sheet date
would increase interest receivable on cash and cash equivalents held at the
balance sheet date by £nil per annum net of tax, assuming a corporation tax
rate of 28%.
Market price risk
Management considers the market price risk to the Company to be immaterial.
Liquidity risk
Liquidity risk is the risk that the Company does not have sufficient financial
resources to meet its obligations when they fall due, or will have to do so at
excessive cost. This risk can arise from mismatches in the timing of cash flows
relating to assets, liabilities and off-balance sheet instruments. The Company
monitors liquidity risk taking into account cash balances held and levels of
borrowing.
Non-derivative cash flows
The table below presents the cash flows receivable and payable by the Company
under non-derivative financial assets and liabilities by remaining contractual
maturities at the balance sheet date. The amounts disclosed in the table are
the contractual, undiscounted cash flows whereas the Company manages inherent
liquidity risk on expected undiscounted cash flows.
The net liquidity positions in the table below, relate to cash flows on
contractual obligations existing at the balance sheet date. They do not take
account of any cash flows generated from profits on normal trading activities
or dividends received from subsidiary companies.
On demand < 3 3-12 1-5 years > 5
months months years
£'000
£'000 £'000 £'000 £'000
As at 31 March 2009 8 - - - -
Assets
Cash and cash equivalents
Total financial assets 8 - - - -
Liabilities - 376 - - -
- 7,300 -
Trade payables - - - 500 -
Bank loan commitments Loan 6,910 -
note commitments Deferred
consideration 1,559
Total financial - 7,676 - 8,969
liabilities
Net liquidity surplus/ 8 (7,676) - (8,969)
(deficit)
As at 31 March 2008 Assets 242 - - - -
Cash and cash equivalents
Total financial assets 242 - - - -
Liabilities - 149 - - -
-
Trade payables 662 475 5,300 -
-
Bank loan commitments Loan 345 - 6,9 10
note commitments Deferred
consideration 2,312 -
Total financial - 1,156 475 14,522
liabilities
Net liquidity surplus/ 242 (1,156) (475) (14,522)
(deficit)
Estimation of fair values
The following summarises the major methods and assumptions used in estimating
the fair values of financial instruments.
Other investments
Fair value is based on quoted market prices at the balance sheet date without
any deduction for transaction costs.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the
notional amount is deemed to reflect the fair value. All other receivables/
payables greater than one year are discounted at base rate to determine the
fair value.
48. POST BALANCE SHEET EVENTS
Details of significant events occurring since the balance sheet date are set
out in note 31.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting (Meeting) of Syndicate
Asset Management plc (Company) will be held at 2.00 p.m. on 29 October 2009 at
the offices of Memery Crystal LLP, 44 Southampton Buildings, London,WC2A.