TIDMARDN
RNS Number : 6412B
Arden Partners plc
03 February 2020
Arden Partners plc
("Arden" or the "Company" or the "Group")
Preliminary results for the year ended 31 October 2019
Arden Partners plc (AIM: ARDN), the institutional stockbroking
company, today announces unaudited preliminary results for the year
ended 31 October 2019.
Operational highlights
-- Equity capital markets were extremely challenging throughout
the financial year as a result of political, macroeconomic and
Brexit uncertainties
o As a consequence, revenues across the Group were impacted
negatively
o Costs controlled in response to market conditions
-- Corporate clients increased to 55 at year end (2018: 51) with
a corresponding increase in the level of recurring revenues derived
from the associated client retainers
-- Encouraging start to the current financial year with a number
of transactions completed in the first quarter, including a number
of equity fundraisings
o Current year to date revenues and profits well ahead of
comparative prior period
Financial highlights
-- Revenue: GBP6.6 million (2018: GBP7.4 million)
-- Loss before tax: GBP2.6 million (2018: GBP2.8 million loss before tax)
-- Basic loss per share: 8.9p (2018: 9.6p loss per share)
Commenting on the results and Arden's outlook, Mark Ansell,
Chairman, said:
"2019 was a challenging market environment for everyone involved
in small and mid cap equity capital markets. We reacted by tightly
managing our costs and focusing on growing our corporate client
list.
As a result of our actions, Arden continues to have the balance
sheet strength and the people to compete effectively.
Furthermore, the current financial year has started well with a
number of transactions being completed including a number of equity
fundraisings. The decisive result of the UK General Election in
December 2019 has removed some of the uncertainty which has
impacted markets and we are well placed to capitalise on
opportunities as and when they arise."
For further enquiries:
Arden Partners plc 020 7614 5900
Donald Brown - Chief Executive Officer
James Reed-Daunter - Executive Director
Steve Douglas - Group Finance Director
GCA Altium Limited (NOMAD) 020 7484 4040
Sam Fuller / Tim Richardson
Notes for editors
Arden is a dedicated corporate adviser and multi-service
stockbroker to small and mid-cap companies in the UK and their
investors.
The absolute core of our business is the effective management of
the needs of our significant and growing base of corporate clients,
and the effective support of their relationships with existing and
potential shareholders.
These relationships are enhanced by the quality of our corporate
finance advice and industry research, and the strong market
presence of our sales and trading teams.
Our corporate finance capabilities encompass M&A, corporate
finance advisory, broking and Sponsor and NOMAD services. We
represent our clients in private transactions and AIM and Main
Market share issues.
Our research is designed to be sector focused, concentrating on
top down thematic trends which highlight companies giving investors
an exposure to the real growth areas of the small-cap and AIM
markets.
It is the job of the sales team to keep institutions abreast of
these themes and stock ideas. When there is a requirement for our
corporate clients to raise money to fulfil their growth ambitions,
the sales team is in a strong position to effect this, with its
entrenched relationships with the UK institutional and
non-institutional markets.
Our market making and trading teams provide liquidity in the
shares of our corporate clients. We also trade the shares of
non-client corporates on behalf of institutions.
The recently added Arden Wealth Management team offers a bespoke
service to our clients, with the ability to trade/invest in
equities, bonds and a range of global investment funds, as well as
allowing clients to participate in Primary and Secondary equity
placings.
Chairman's Statement
Equity capital markets for small and mid cap companies were
extremely challenging throughout the financial year under review.
The prevailing political, macroeconomic and Brexit uncertainties
led to falls in business confidence, corporate activity, stock
liquidity, trading volumes and investment, together with a sharp
increase in volatility levels. The impact of these factors across
the small and mid-cap community - from quoted companies to advisers
- was marked. Aggregate activity levels were substantially reduced
as many investment decisions were put on hold pending some form of
clarity.
As a result of these external factors, the Group's performance
for the year was significantly impacted with revenues down 10% to
GBP6.6 million (2018: GBP7.4 million) and a loss before tax of
GBP2.6 million (2018: GBP2.8 million loss before tax). Loss per
share was 8.9p (2018: loss per share of 9.6p).
Despite this market backdrop, we continued to make progress in
delivering our strategy. We grew our retained corporate client base
with a corresponding increase in the level of recurring revenues
derived from associated retainers. Further, we increased the number
of transactions we completed for these clients (although the number
of completed equity fundraisings was significantly reduced from the
prior year). We are now retained to act for 55 listed companies
(2018: 51), 80% of which are listed on AIM. The average market
capitalisation of our corporate clients rose in the year to GBP138
million (2018: GBP125 million). This continued progress is a
testament to our focus on superior client service and delivery
in-line with or above our clients' expectations. The Group also
continued carefully to monitor its cost base given the prevailing
market conditions.
The current year has started in a promising manner. We have
already generated revenues well in excess of those achieved in the
same period last year and we are trading profitably. The UK general
election in December 2019 delivered a decisive result which should
remove some of the market uncertainties that impacted 2019. The
government has promised a pro-business fiscal regime and there is
early evidence of capital returning to the UK.
Our balance sheet remains strong. We hold cash and cash
equivalents in excess of our capital adequacy requirements and
sufficient to protect us against short to medium term market
fluctuations. We continue to believe the Group is well positioned
in its markets, a position from which we can continue to execute
our ongoing growth strategy.
Corporate progress is not possible without good people and this
is especially true in challenging times. It has been great to see
the energy levels, skill and enthusiasm remain high despite the
challenging market backdrop. I would like to thank my Board, our
corporate and institutional clients and all our hard-working staff
for their support during this year.
Mark Ansell
Chairman
Chief Executive's Statement
Our performance for the year was significantly impacted by
macroeconomic and political uncertainty. These uncertainties led to
a decline in volumes in UK equities and a significant increase in
market volatility levels. Institutional investors typically adopted
a more cautious approach toward investing in UK equities,
specifically at the smaller end of the market, with many long-only
institutions suffering cash outflows. Consequently, activity levels
amongst our institutional clients were generally subdued.
Further, the freezing of funds at a high profile smaller-cap
investor led to liquidity reviews across the UK institutional
smaller-cap investor base. Equity markets are designed to fund
growth businesses and we hope to see increased liquidity to the
smaller cap segment of the market in the near term.
In addition, UK business confidence weakened and decisions
regarding investment and/or M&A were often deferred. In
aggregate, there were only seven AIM IPO's in the first ten months
of calendar 2019, the lowest number since AIM's inception in 1995.
Similarly, the quantum of secondary fundraisings on AIM fell
substantially in 2019; in the twelve months to October 2019 only
GBP3.1bn was raised (2018: GBP4.8bn). The number of fund raisings
(primary and secondary) undertaken by our clients declined
significantly compared to the prior year.
However, we continued to make good strategic progress in growing
the core fundamentals of our business - in particular, our retained
corporate client base rose to 55 at 31 October 2019 from 51 a year
earlier.
Business review
2019 2018 % change
GBP'm GBP'm
------------------------------------ ------- ------- ---------
Equities 0.7 1.0 (22.9)
Corporate Finance (incl. corporate
retainers) 5.8 6.4 (8.8)
Wealth Management 0.1 - n/a
Total Revenue 6.6 7.4 (10.0)
Corporate Finance
2019 2018 % change
----------------------------------- ----- ----- ---------
Corporate finance revenue (GBP'm) 5.8 6.4 (8.8)
Number of corporate transactions 36 25 44.0
Funds raised (GBP'm) 67 124 (46.0)
Number of corporate clients 55 51 7.8
The number of corporate transactions completed during the year
rose but transactions requiring funds to be raised fell
significantly. This was in line with the market as a whole. As a
consequence, funds raised for clients in the year were
significantly lower than in the previous year. Completed
transactions tended to be smaller or more technical in nature,
resulting in much lower average fees per transaction. Towards the
end of the financial year, we noted an increase in public company
M&A transactions and that trend has continued into the new
financial year. Furthermore, we have seen increasing appetite for
fund raisings - both IPO and secondary - following the UK election.
Whilst it is still too early to draw firm conclusions, the signs
are encouraging that equity capital market conditions might be
improving.
It is pleasing to report the growth in number of retained
corporate clients to 55 from 51. This has increased our annualised
recurring revenues from retainers and we have risen to 11(th) place
in the ARL corporate advisers guide (by number of corporate
clients) (2018: 12(th) place). The average market capitalisation of
our clients rose to GBP138 million (2018: GBP125 million).
Equities
2019 2018 % change
GBP'm GBP'm
------------------ ------- ------- ---------
Equities revenue 0.7 1.0 (22.9)
The repercussions of MiFID II, introduced in January 2018,
continued to impact the performance of the Equities division, which
also reflected reduced trading activity amongst our institutional
client base.
Our research offering has been expanded and new sectors added to
our coverage. We have launched our Research Portal, which provides
the greatest possible access for potential investors to Arden's
corporate client research. Our research is also available via the
ResearchTree portal where it has been repeatedly top ranked for its
quality and we were delighted when our oil and gas analyst was
voted No.1 Small and Mid-Cap Oil & gas sector analyst in the
2019 Extel Awards. Our research fees have remained steady year on
year.
The market making book and a revaluation of certain warrants
recorded a cumulative profit of GBP0.1 million in the year (2018:
GBP0.4 million loss).
Current trading and outlook
The current financial year has started well with the completion
of a number of transactions including a number of equity
fundraisings. The decisive result of the UK General Election in
December 2019 has removed some of the uncertainty which has
impacted our markets and we are well placed to capitalise on
opportunities as and when they arise.
Revenues generated in the current financial year are well in
excess of those achieved in the same period last year and we are
trading profitably in the year to date. Furthermore, we remain
active in the market and have a healthy pipeline of corporate
transactions which gives us visibility on a strong first half
performance. We remain well capitalised and will protect our
balance sheet whilst remaining focussed on our growth strategy and
on our clients' needs.
I would like to thank all our clients and shareholders for their
continued support and to express the appreciation of the entire
Board for the considerable hard work and commitment of our
staff.
Donald Brown
Chief Executive Officer
Finance Review
Revenue
Revenue for the full year totalled GBP6.6 million, a decrease of
10.0% on 2018 as unfavourable political and macroeconomic
conditions impacted all aspects of our business. Revenues were more
equally split across the year highlighting that the difficult
market conditions were in evidence throughout the period: GBP3.4
million of second half revenue accounted for 52.4% of total
revenues. (2018: GBP4.7 million / 64.4%).
2019 2018 % change
------------------------------ ----- ----- ---------
Revenue (GBP'm) 6.6 7.4 (10.0)
Average number of employees 50 48 4.2
Revenue per employee (GBP'k) 132 154 (14.3)
Average headcount increased by 4% in the year as we continued to
invest in our people in order to deliver our superior client
service and position the Group for future growth. This plus the
fall in the revenue materially impacted the revenue per head
measure.
Costs
2019 2018 % change
GBP'm GBP'm
------------------------------- ------- ------- ---------
Staff costs 5.6 5.7 (2.2)
Non-staff costs 3.7 4.5 (17.8)
Total administrative expenses 9.3 10.2 (9.1)
Average number of employees 50 48 4.2
Staff related costs comprise the majority of our cost base and
they reduced marginally year on year due to the absence of any
restructuring payments.
Non-staff costs were tightly controlled and, as a result,
reduced by 17.8% as we managed our costs in light of market
conditions.
Liquidity position
The Group's liquidity position (which comprises cash and cash
equivalents, long market making equity positions, trade and other
receivables) was GBP6.9 million at the year end (2018: GBP9.8
million). The decrease is primarily due to funding the trading
losses for the year.
The Directors believe that the liquidity position, which is an
alternative performance measure, provides more useful information
for shareholders on the underlying liquidity of the Group than the
reported net assets number as it focuses solely on the liquid
assets of the Group.
Net asset position and capital adequacy
The Group's net assets at the year end were GBP6.1 million
(2018: GBP9.2 million), the reduction being the result of the loss
incurred in the year. The capital adequacy ratio as at 31 October
2019 was 266% (2018: 428%).
The Group holds surplus capital on its balance sheet and
continually assesses this position throughout the year. During the
year, the Group assessed the liquidity of its capital resources by
realising certain assets into cash. This exercise reassured the
Board that the Group's liquid assets could be accessed, at short
notice, should market conditions remain depressed.
Steven Douglas
Group Finance Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2019
2019 2018
GBP'000 GBP'000
------------------------------------------------------- ------- --------
Revenue 6,627 7,366
Administrative expenses (9,181) (10,204)
Expected credit loss (98) -
-------------------------------------------------------- -------
Loss from operations (2,652) (2,838)
Finance income 94 48
Finance expense - -
-------------------------------------------------------
Loss before taxation (2,558) (2,790)
Income tax charge (2) (31)
-------------------------------------------------------- ------- --------
Loss after taxation (2,560) (2,821)
Other comprehensive income for the year:
Items that will or may be reclassified subsequently
to profit or loss:
Decrease in fair value of available for sale
financial assets - (9)
Transfer to profit or loss on disposal of
available for sale assets - 8
Deferred tax taken to equity (3) -
Total comprehensive income for the year attributable
to equity shareholders (2,563) (2,822)
======================================================== ======= ========
Loss per share
Basic (8.9p) (9.6p)
======================================================== ======= ========
Diluted (8.9p) (9.6p)
======================================================== ======= ========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2019
2019 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ------- ------- -------
Assets
Non-current assets
Property, plant and equipment 111 104
Deferred tax asset 2 8
Total non-current assets 113 112
---------------------------------------- ------- ------- ------- -------
Current assets
Assets held at fair value
through P&L 3,043 3,981
Available for sale financial
assets - 520
Trade and other receivables 2,866 2,873
Cash and cash equivalents 2,538 4,667
Total current assets 8,447 12,041
---------------------------------------- ------- ------- ------- -------
Total assets 8,560 12,153
---------------------------------------- ------- ------- ------- -------
Current liabilities
Financial liabilities held
at fair value (244) (59)
Trade and other payables (2,258) (2,870)
Total current liabilities (2,502) (2,929)
---------------------------------------- ------- ------- ------- -------
Total liabilities (2,502) (2,929)
---------------------------------------- ------- ------- ------- -------
Net assets 6,058 9,224
======================================== ======= ======= ======= =======
Shareholders' equity
Called up share capital 3,338 3,338
Capital redemption reserve 700 700
Share premium account 6,691 6,691
Employee Benefit Trust reserve (974) (849)
Available for sale reserve - (7)
Retained earnings (2,255) 519
---------------------------------------- ------- ------- ------- ---------
Total equity before deduction
of own shares 7,500 10,392
Own shares (1,442) (1,168)
---------------------------------------- ------- ------- ------- ---------
Total equity 6,058 9,224
======================================== ======= ======= ======= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 October 2019
2019 2018
GBP'000 GBP'000
--------------------------------------------- ------- -------
Operating activities before taxation
(Loss)/profit before tax (2,558) (2,790)
Adjustments for:
Fair value adjustments (98) 166
Depreciation of fixtures, fittings and
computer equipment 71 36
Net interest receivable (94) (48)
Share based payment expense 89 104
---------------------------------------------- ------- -------
Operating cash flow before changes in
working capital (2,590) (2,532)
Decrease/(increase) in operating assets 1,389 (1,444)
(Decrease)/increase in operating liabilities (252) 264
Purchase of available for sale investments - (527)
Proceeds from disposal of available for
sale investments - 501
Cash used in operations (1,453) (3,738)
Income taxes paid - -
--------------------------------------------- ------- -------
Net cash flows from operating activities (1,453) (3,738)
---------------------------------------------- ------- -------
Investing activities
Purchases of property, plant and equipment (78) (73)
Net interest received 94 48
---------------------------------------------- ------- -------
Net cash flows from investing activities 16 (25)
---------------------------------------------- ------- -------
Financing activities
Exercise of share options - (16)
Purchase of own shares (399) (296)
Dividends paid to equity shareholders (293) (295)
---------------------------------------------- ------- -------
Net cash flows from financing activities (692) (607)
---------------------------------------------- ------- -------
Decrease in cash and cash equivalents (2,129) (4,370)
Cash and cash equivalents at the beginning
of the year 4,667 9,037
---------------------------------------------- ------- -------
Cash and cash equivalents at the end
of the year 2,538 4,667
============================================== ======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2019
Employee
Share Capital Benefit Available
Share Premium Redemption Own Trust for sale Retained
Capital Account Reserve Shares Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
Balance at
1 November
2017 3,338 6,691 700 (872) (849) (6) 3,547 12,549
Loss for year - - - - - - (2,821) (2,821)
Transferred
to profit or
loss on disposal
of available
for sale assets - - - - - 8 - 8
Revaluation
of available
for sale financial
assets - - - - - (9) - (9)
--------- --------- ------------- --------- --------- ------------ ---------- --------
Total comprehensive
income for
the year - - - - - (1) (2,821) (2,822)
Contributions by
and distributions
to owners
Dividends - - - - - - (295) (295)
Purchase of
own shares - - - (296) - - - (296)
Share based
payments - - - - - - 104 104
Share options
exercised - (16) (16)
Balance at
31 October
2018 3,338 6,691 700 (1,168) (849) (7) 519 9,224
Transition
adjustment - - - - - 7 (7) -
At 1 November
2018 (as restated) 3,338 6,691 700 (1,168) (849) - 512 9,224
Loss for year - - - - - - (2,560) (2,560)
Deferred tax
taken to equity - - - - - - (3) (3)
Total comprehensive
income for
the year - - - - - - (2,563) (2,563)
Contributions by
and distributions
to owners
Dividends - - - - - - (293) (293)
Purchase of
own shares - - - (274) (125) - - (399)
Share based
payments - - - - - - 89 89
Balance at
31 October
2019 3,338 6,691 700 (1,442) (974) - (2,255) 6,058
===================== ========= ========= ============= ========= ========= ============ ========== ========
Notes
1. The capital redemption reserve represents the nominal value
of shares that have been cancelled that were previously held as Own
Shares.
2. Own Shares represents shares purchased to be held as treasury shares at historical cost.
3. The Employee Benefit Trust reserve represents shares held in
the parent Company by the Arden Partners Employee Benefit Trust
which is consolidated in these financial statements in accordance
with the accounting policy in note 1.
NOTES
1) Accounting policies
Basis of preparation
The financial information included in this preliminary
announcement is unaudited. This information does not constitute the
annual report and accounts of the Group for the year ended 31
October 2019 within the meaning of section 434 of the Companies Act
2006. The audited annual report and accounts of the Group for the
year ended 31 October 2018 has been filed with the Registrar of
Companies. The auditor's report on those financial statements was
unqualified and did not contain any statement under section 498 (2)
or (3) of the Companies Act 2006 and did not include references to
any matters to which the auditor drew attention by way of
emphasis.
The principal accounting policies applied in the preparation of
the financial statements are set out below. The policies have been
consistently applied to the Group and Company to all the years
presented.
These policies are in accordance with International Financial
Reporting Standards, International Accounting Standards and
Interpretations (collectively, "IFRS") issued by the International
Accounting Standards Board as endorsed for use in the European
Union. The Group and Company Financial Statements have been
prepared in accordance with IFRS. These financial statements have
also been prepared in accordance with those parts of the Companies
Act 2006 that are applicable to companies preparing their financial
statements in accordance with IFRS.
The Consolidated and Company Financial Statements have been
prepared under the historical cost convention as modified by the
revaluation of certain financial assets, financial liabilities and
derivative instruments to fair value.
New standards effective during the year
The Group applies, for the first time, IFRS 9 Financial
Instruments and IFRS 15 Revenue from Contracts. The impact of which
is set out below.
IFRS 9 Financial Instruments
The Group has identified that the adoption of IFRS 9, which
replaces IAS 39 Financial Instruments: Recognition and Measurement
from 1 November 2018, has had material impact on its consolidated
financial statements with the Group recognising a GBP98,000
impairment charge during the year. Further details can be found in
Note 16 to the financial statements.
Transitions
The standard has been adopted from 1 November 2018 and applied
retrospectively by adjusting where necessary, the statement of
financial position at the date of initial application, with no
requirement to restate comparative periods.
Classification and measurement of financial assets
The Group's financial assets consist of trading assets from its
Equities, Corporate Finance and Wealth Management activities are
currently measured at fair value through profit and loss either
held for trading or designated at fair value. This treatment will
therefore not change under IFRS 9. However, at the date of
transition the Group held GBP520k of investments as
available-for-sale, which will be classified as being at amortised
cost under IFRS 9. The available for sale asset was subsequently
disposed of during the financial year, all changes in the fair
value up to the point of disposal were recorded in the consolidated
statement of comprehensive income. In addition, the balance on the
available for sale reserve at 31 October 2018 of GBP7,000 has been
transferred to retained earnings.
The following table and the accompanying notes below explain the
original measurement categories under IAS 39 and the new
measurement categories under IFRS 9 for each class of the Group's
financial assets and financial liabilities as at 1 November
2018:
As at 1 November 2018 Old classification New classification Old carrying New carrying
under IAS 39 under IFRS amount amount
9 under under
IAS 39 IFRS 9
GBP'000 GBP'000
Financial Assets
Cash and cash equivalents Loans and receivables Amortised Cost 4,667 4,667
Fair value Fair value
through profit through profit
Trading assets or loss or loss 3,886 3,886
Fair value Fair value
Derivative financial through profit through profit
assets - Warrants or loss or loss 95 95
Available for sale Available for
financial assets sale Amortised cost 520 520
Market receivables Loans and receivables Amortised cost 1,040 1,040
Trade receivables Loans and receivables Amortised cost 1,046 1,046
Other receivables Loans and receivables Amortised cost 236 236
Total financial assets 11,490 11,490
============================================================================ ============= =============
Financial liabilities
Fair value Fair value
Short market making through profit through profit
positions or loss or loss 59 59
Market Payables Loans and receivables Amortised cost 888 888
Trade Payables Loans and receivables Amortised cost 473 473
Other payables Loans and receivables Amortised cost 528 528
Total financial liabilities 1,948 1,948
============================================================================ ============= =============
Impairment
The Group applies an expected credit loss model when calculating
impairment losses on its trade and other receivables. In applying
IFRS 9 the Group must consider the probability of a default
occurring over the contractual life of its trade receivables and
contract asset balances on initial recognition of those assets. The
new impairment model applies to financial assets measured at
amortised cost but not to investments in equity instruments.
IFRS 15 Revenue from Contracts with Customers
This standard has been adopted on its mandatorily effective date
of 1 November 2018 and applied on a retrospective basis. There was
no material impact of applying the standard on this basis due to
the type of revenue which is earned within the Group and the
absence of any long-term contract arrangements and therefore no
cumulative effect to adjust in the opening balance of retained
earnings. The Group will continue to assess individual customer
contracts for separate performance obligations to allocate the
correct transaction price as they occur.
Standards that have been issued, but are not yet effective for
the year ended 31 October 2019 include:
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases. The standard is
effective for annual periods beginning on or after 1 January 2019
with early adoption permitted. The standard was endorsed in
November 2017. The Group has decided it will apply the modified
retrospective adoption method in IFRS 16, and, therefore, will only
recognise leases on the balance sheet as at 1 November 2019.
IFRS 16 results in lessees accounting for most leases within the
scope in a manner similar to the way in which finance leases are
currently accounted for under IAS 17 Lease. Lessees will recognise
a 'right of use' asset and a corresponding financial liability on
the balance sheet. The asset will be amortised over the period of
the lease and the financial liability measured at amortised
cost.
The Group anticipates recording a right of use asset of GBP0.4m
and a corresponding lease liability of GBP0.3m, with the right of
use asset depreciated over the life of the lease and the lease
liability calculated by discounting the quarterly lease payments
over the remaining term of the lease at a discount rate which
represents the incremental cost of borrowing.
IFRIC 23 Uncertainty Over Income Tax Positions
IFRIC 23 clarifies how to recognise and measure current and
deferred income tax assets and liabilities when there is
uncertainty over income tax treatments.
Significant accounting policies
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The Company has taken advantage of Section 408 of the Companies
Act 2006, and the Statement of Comprehensive Income of the parent
Company is not presented. The parent Company's loss after taxation
for the financial year amounted to GBP2,565,000 (2018: loss
GBP2,821,000).
Revenue
In accordance with IFRS 15, revenue is recognised to the extent
that it is probable that the economic benefits associated with the
transaction will flow into the Group. Where consideration includes
financial instruments or other non--cash items, revenue is measured
at fair value using an appropriate valuation method.
Revenue comprises commission earned on primary, secondary and
private capital raising (Corporate placing commission), Corporate
Finance advisory fees, Corporate Finance annual retainer fees, the
net realised and unrealised trading gains or losses of shares
traded on a principal basis, commissions and fees earned from
trading shares on an agency basis and Research retainer fees.
Corporate Finance Division
-- Corporate placing commissions are variable fees agreed on a
deal by deal basis based on a percentage of the funds raised as
part of a transaction. Given that fees related to this work are
success based, there is a significant risk of reversal of the
variable revenue and therefore the performance obligation is
satisfied at a point in time when the transaction is completed.
Where there are arrangements in place for an element of revenue to
be paid away the cost is recognised in administrative expenses.
-- Corporate finance advisory fees are only recognised once all
performance obligations have been met and there is a contractual
entitlement for the Group to receive them for advisory fees this is
typically only when a deal completes.
-- Corporate Finance retainer fees are accrued over the period
for which the service is provided and are based on a contract
between the Group and the client. The negotiated contract price
varies by contract and is documented in the contract.
Equities Division
-- Net trading gains or losses are the realised and unrealised
profits and losses from market-making long and short positions on a
trade date basis and comprise all gains and losses from changes in
the fair value of financial assets and liabilities held for
trading, together with any related dividend on positions held. Net
trading gains or losses also include gains and losses arising on
equity options and warrants received in lieu of corporate finance
fees.
-- Commission is recognised when receivable in accordance with
the date of the underlying transaction. It is variable fee based on
a percentage of the transaction and therefore performance
obligation is satisfied at the date of the underlying transaction
to which the brokerage relates.
-- Research retainer fees are recorded in the period to which
they relate and the contract price can be variable from period to
period based on the level or standard of research provided.
Contracts are in place between the Group and each of its research
clients and amounts recorded are either over a period for which the
service is provided, or where discretionary based on variable
considerations derived from the most recent level of research
provided in the previous period updated for recent events or
communications with the client.
Interest receivable
Finance income, which comprises principally interest received,
is recognised using the effective interest rate method.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of
depreciation and impairment in value.
Depreciation is provided to write off the cost, less estimated
residual values, of all property, plant and equipment evenly over
their expected useful lives on a straight line basis. It is
calculated at the following rates:
Improvements to leasehold buildings - 33.33% per annum
Fixtures, fittings and computer equipment - 33.33% per annum
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and liabilities
Investments are recognised and derecognised on the trade date
where the purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at
fair value, plus transaction costs, except for those financial
assets classified as at fair value through profit or loss, which
are initially measured at fair value.
Assets and liabilities are presented net where there is a legal
right to offset and an intention to settle in that way.
Stock borrowing collateral
The Group may enter into stock borrowing arrangements with
certain institutions. These are entered into on a collateralised
basis with securities or cash advances received as collateral.
Under such arrangements a security is purchased with a
commitment to return it at a future date at a future agreed price.
The securities purchased are not recognised on the Statement of
Financial Position and the transaction is treated as a secured loan
made for the purchase price.
Where cash has been used to effect the purchase, the cash
collateral amount is recorded as a pledged asset on the Statement
of Financial Position.
Foreign currency transactions
Transactions in foreign currencies are translated into sterling
at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated into sterling at the exchange
rate ruling at the reporting date. Foreign exchange differences
arising on translation are recognised in the Statement of
Comprehensive Income within administrative expenses.
Taxation
Income tax on the profit or loss for the periods presented
comprises current and deferred tax. Income tax is recognised in the
Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity, in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided based upon temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Dividends
Dividends are recognised when they become legally payable.
Interim dividends are recognised when paid. Final dividends are
recognised when approved by shareholders at an Annual General
Meeting. Dividends unpaid at the reporting date are only recognised
as a liability at that date to the extent that they are
appropriately authorised and are no longer at the discretion of the
Company.
Own Shares
The cost of purchasing Treasury Shares held by the Company are
shown as a deduction against equity and are declared as Own
Shares.
Leased assets
Operating lease rentals are charged to the Statement of
Comprehensive Income on a straight line basis over the period of
the lease.
Pension costs
Contributions to defined contribution pension schemes are
charged to the Statement of Comprehensive Income in the period in
which they become payable.
Employee Benefit Trust
Arden Partners Employee Benefit Trust is a trust established by
Trust deed in 2006 and the assets and liabilities are held
separately from the Company. Its assets and liabilities are fully
consolidated in the consolidated and Company Statements of
Financial Position, and holdings of Arden Partners plc shares by
the Arden Partners Employee Benefit Trust are shown as a deduction
from Company and consolidated equity under the heading "Employee
Benefit Trust reserve".
Share based payments - equity settled
All options granted are recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value is
measured using the Black-Scholes model, taking into account the
terms and conditions upon which the options were granted.
Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. Vesting
conditions for all the share option schemes relate to service
conditions and profit, which are non market conditions the features
of which are not incorporated not the fair value of the option. As
long as all other vesting conditions are satisfied, a charge is
made irrespective of whether the market conditions are satisfied.
The cumulative expense is not adjusted for failure to achieve a
market vesting condition.
Critical accounting estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the reported
amounts of assets, liabilities, income and expense. The estimates
and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances, the results of which form the basis of judgements
about carrying amounts of assets and liabilities. Actual results
may differ from those amounts.
Estimates and judgements that may have an effect on the next
financial year are discussed below:
Derivative Financial Assets
The equity options are initially accounted for and measured at
fair value on the date the Group becomes a party to the contractual
provisions of the option contract and subsequently measured at fair
value. The gain or loss on re-measurement is taken to the income
statement within revenue, as part of net trading gains or losses.
The fair value of equity options are estimated by using valuation
models such as Black-Scholes.
Share Based Payments
Employee services received, and the corresponding increase in
equity, are measured by reference to the fair value of the equity
instruments at the date of grant. The fair value of share options
is estimated by using valuation models, such as Black-Scholes, on
the date of grant based on certain assumptions.
Policy applicable from 1 November 2018 under IFRS 9:
The two principal classification categories for financial assets
are: measured at amortised cost and fair value through profit or
loss (FVTPL). The classification of financial assets under IFRS 9
is generally based on the business model in which a financial asset
is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their
initial recognition unless the Group changes its business model for
managing financial assets, in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised
cost are measured at FVTPL. This includes all derivative financial
assets. On initial recognition, the Group may irrevocably designate
a financial asset that otherwise meets the requirements to be
measured at amortised cost as at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise
arise.
Assets held at FVTPL are subsequently measured at fair value.
Net gains and losses, including any interest or dividend income,
are recognised in profit or loss.
Financial assets at amortised cost are subsequently measured at
amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment are recognised in profit
or loss. Any gain or loss on derecognition is recognised in profit
or loss.
Dividends are recognised as income in profit or loss unless the
dividend clearly represents a recovery of part of the cost of the
investment.
Policy applicable before 1 November 2018 under IAS 39:
Financial assets
Financial assets comprise held for trading instruments, those
designated at fair value through profit or loss, available for sale
assets, and loans and receivables. The Group classifies its
financial assets into one of the categories discussed below,
depending on the purpose for which the asset was acquired. The
Group has not classified any of its financial assets as held to
maturity. Purchases and sales of financial assets are recognised on
trade date.
The Group's accounting policy for each category is as
follows:
-- Assets held at fair value: Held for trading instruments
represent long market making positions and are measured at fair
value with gains and losses from changes in fair value being taken
to the Statement of Comprehensive Income. Derivative financial
assets may include options which are valued using the Black-Scholes
model, which management intends to hold in the short term and any
change in fair value are taken to the Statement of Comprehensive
Income. The derivative financial instruments are not designated as
hedging instruments.
Assets designated at fair value through profit and loss are
valued with reference to current quoted prices in active markets.
They are designated as fair value through profit and loss as
management review performance of the asset as part of a portfolio
of assets at fair value.
-- Available for sale assets: Non-derivative financial assets
that do not qualify to be classified in another category are
classified as available for sale financial assets. They are carried
at fair value with changes in fair value recognised directly in a
separate component of equity (available for sale reserve). Where
there is a significant or prolonged decline in the fair value of an
available for sale financial asset (which constitutes objective
evidence of impairment), the full amount of the impairment,
including any amount previously charged to equity, is recognised in
the Statement of Comprehensive Income. When an available for sale
financial asset is disposed of, the cumulative gain or loss
previously recognised in equity is reclassified from other
comprehensive income to the profit or loss account.
-- Loans and receivables: These assets are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market. They arise principally through the
provision of services to customers (e.g. trade receivables), but
also incorporate other types of contractual monetary asset. They
are initially recognised at fair value plus transaction costs that
are directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the
Statement of Comprehensive Income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
Included within loans and receivables are market receivables
which comprise of sold security transactions awaiting settlement at
year end. These balances are shown gross and are recognised on
trade date at cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances
that are readily convertible to a known amount of cash and are not
subject to a significant risk of changes in value. Cash and cash
equivalents all have original dates to maturity of three months or
less.
Financial liabilities
The Group classifies its financial liabilities into one of the
categories discussed below, depending on the purpose for which the
liability was acquired. The Group's accounting policy for each
category is as follows:
-- Fair value through profit or loss: These financial
liabilities represent short market-making positions and are stated
at fair value. Gains and losses from changes in fair value are
taken to the Statement of Comprehensive Income.
For financial liabilities which are quoted in active markets,
fair values are determined by reference to the current quoted offer
price.
-- Other financial liabilities: These comprise market payables,
trade payables, other payables and accruals. They are initially
recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Included within other financial liabilities are market payables
which comprise of purchased security transactions awaiting
settlement at the year end. These balances are shown gross and are
recognised on trade date at cost.
2) Revenue
Revenue is wholly attributable to the principal activity of the
Group and arises solely within the United Kingdom.
2019 2018
GBP'000 GBP'000
-------------------------------------------------- -------------- --------------
Equities Division 751 974
Corporate Finance Division 5,839 6,400
Wealth Management Division 37 -
Transfer to profit or loss on disposal
of available for sale assets - (8)
Total revenue 6,627 7,366
--------------------------------------------------- -------------- --------------
Services transferred at a point in time 4,164 5,687
Services transferred over a period of time 2,463 1,679
--------------------------------------------------- -------------- --------------
Total revenue 6,627 7,366
=================================================== ============== ==============
Included within revenue of the Equities Division is a profit of
GBP97,000 (2018: loss GBP150,000) relating to the fair value
adjustment of derivatives held within assets that are fair valued
through profit or loss.
Included within revenue of the Equities Division is a profit of
GBP63,000 (2018: GBPNil) relating to the fair value of a warrant
over securities which was received as consideration for Corporate
Finance services rendered.
The Directors are of the opinion that there are three operating
segments and while segment revenues are reviewed internally
business resources are not allocated to segments for the purposes
of deriving either profit or assets. In 2019, none of the Group's
customers contributed revenue of more than 10% of the Group's total
revenue. In 2018, one of the Group's customers contributed revenue
of GBP1,075,000, being more than 10% of the Group's total
revenue.
3) Dividends
Dividends recognised in the year consisted of the 2018 final
dividend of GBP293,000 (1p per share).
Dividends recognised in the prior year consisted of the 2017
final dividend of GBP295,000 (1p per share).
4) Earnings per share
In addition to the basic earnings per share, underlying earnings
per share has been shown because the Directors consider that this
gives a more meaningful indication of the underlying performance of
the Group. Where applicable, all adjustments are stated after
taking into consideration current tax treatment ignoring deferred
tax.
Year ended Year ended
31 October 2019 31 October 2018
Pence per Numerator Pence per Numerator
Share GBP'000 Share GBP'000
------------------------------------ ------------ ----------- ------------- ------------
Loss per share (8.9) (2,560) (9.6) (2,821)
Add: IFRS2 share-based
payments 0.3 89 0.5 142
Add: Restructuring costs - - 3.1 923
Underlying basic loss (8.6) (2,471) (6.0) (1,756)
==================================== ============ =========== ============= ============
Diluted loss per share (8.9) (2,560) (9.6) (2,821)
Add: IFRS2 share-based
payments 0.3 89 0.5 142
Add: Restructuring costs - - 3.1 923
Underlying diluted loss (8.6) (2,471) (6.0) (1,756)
==================================== ============ =========== ============= ============
The Directors believe that the underlying loss and underlying
loss per share, which are alternative performance measures, provide
more useful information for shareholders on the underlying
performance of the Group than the reported numbers as they fairer
reflect the underlying operating performance of the Group as these
costs are not considered part of the usual operations.
Year ended Year ended
31 October 31 October
2019 2018
Number Number
---------------------------------- ----------- -----------
Denominator
Weighted average number
of shares in issue for
basic earnings calculation 28,794,079 29,533,754
Weighted average dilution
for outstanding share
options 52,235 228,578
---------------------------------- ----------- -----------
Weighted average number
for diluted earnings calculation 28,846,314 29,762,332
================================== =========== ===========
The 2,310,700 (2018: 1,480,700) shares held by the Arden
Partners Employee Benefit Trust and 4,304,724 (2018: 2,364,481)
shares held in Treasury, being the weighted average number of
treasury shares in issue during the year, have been excluded from
the denominator.
No adjustment has been made to the diluted loss per share of
8.9p as the dilution effect of the weighted average number of
outstanding share options of 52,235 would be to decrease the loss
per share.
5) Annual Report and Accounts
Copies of the 2019 Report and Accounts will be posted to
shareholders in due course. Copies will also be available from the
Company's registered office and from the Company's website
www.arden-partners.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BLGDBDSXDGGB
(END) Dow Jones Newswires
February 03, 2020 02:00 ET (07:00 GMT)
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