TIDMHUME
RNS Number : 9610A
Hume Capital Securities PLC
26 February 2014
Hume Capital Securities plc ("Hume" or the "Company")
Formerly XCAP Securities plc
Final results for year ended 31 August 2013
Hume (AIM: HUME) (together with its subsidiaries the "Group"), a
financial services group offering full service stockbroking, fund
management, corporate advisory and market making services, presents
its audited results for the year ended 31 August 2013.
-- GBP2.9 million raised of new equity capital to rebuild the
capital position of the Company and improve the shareholder base in
the financial year, with a further GBP0.9 million raised post year
end;
-- The Group acquired the Hume Capital Management trading
businesses in December 2012, and is pleased to report that these
businesses have been consistently profitable since June 2013;
-- Revenue increased by 12.9 per cent. to GBP6.0 million (2012: GBP5.3 million);
-- Loss before tax reduced to GBP3.7 million (2012: GBP4.5
million); Trading during the first five months of the current
financial year has been stronger than the same period last year and
the directors believe that the Group's overall financial
performance for the year ending 31 August 2014 will show a
significant improvement;
-- Major cost cutting implemented post acquisition with over
GBP1.9 million of annualised costs now taken out of the Group;
additional savings of GBP500k per annum implemented post year
end;
-- Key selective hires have improved our corporate offering;
-- Company growth strategy well entrenched with major referral
and fund management agreement signed in India since the financial
year end;
-- Continue to make markets in 288 stocks, including all the
clients to which we are retained corporate broker.
The Directors' report and financial statements for the year
ended 31 August 2013 has been sent to shareholders and uploaded to
the Company's website at www.xcapgroup.com.
Enquiries:
Hume Capital Securities plc
Nitin Parekh (Chief Executive Officer) 0203 693 1470
Grant Thornton UK LLP, Nominated Adviser
Philip Secrett /Melanie Frean/ Jamie Barklem 020 7383 5100
Chief Executive's Report
The financial year under review involved rebuilding the Group
against a backdrop of very difficult market conditions. The three
priorities were rebuilding the capital position, tackling the
inappropriate cost base and strengthening our market position in
key business segments. The losses, whilst extremely disappointing,
have arisen partly because of the substantial operational changes
that needed to be implemented.
Overall, the Group made a pre-tax loss of GBP3.7 million, an
improvement of GBP0.8 million from the previous year. Part of this
loss is attributed to the costs associated with the Hume Capital
Management acquisition along with associated re-structuring costs,
and in part caused by poor market conditions.
Firstly, during the financial year we raised GBP2.9 million of
new equity, and an additional GBP0.9 million has been raised post
year end. The capital raisings have been supported by new
shareholders as well as by staff, which is a positive indication of
the confidence in the business. The Group will continue to seek to
partner with strong investors to help execute the business
plan.
Second, tackling the cost base, without impacting revenues,
became a key focus for this financial year. This has been largely
achieved. Across the Group we have managed to keep the costs static
at GBP9.7 million (2012: GBP9.6 million) whilst increasing revenues
by 12.9 per cent. It is important to note that these costs have
remained flat despite including the costs of the acquired Hume
Capital Management businesses from December 2012 onwards as well as
the associated restructuring costs.
Since our interim statement, where we stated we had achieved an
annualised cost reduction of GBP1.2 million per annum, we have now
cut costs in total by GBP1.9 million, equating to over GBP700,000
in the second half of the financial year. There is a clear plan in
place to reduce costs by a further GBP500,000 per annum, taking the
overall annualised saving to GBP2.4 million; this equates to 24.7
per cent. reduction in costs compared to the 2011/12 financial
year. As a result of the cost reduction plan, I am pleased to
report that the Hume Capital Management businesses have been
consistently profitable since June 2013.
Finally, the Group has strengthened its position in key market
segments. Overall, revenues were up 12.9 per cent last year,
including the Hume Capital Management business. For the
pre-acquisition Group business, whilst overall revenues for the
financial year were down 7.4 per cent. on the prior year, revenues
recorded in the second half of the year were up 20.3 per cent.
against the comparable period in the previous year. Crucially,
second half year revenues for the pre-acquisition Group business
were up 2.0 per cent. on the first half of this financial year. The
trend in revenue growth is clearly improving.
The corporate pipeline has improved and we have a number of
mandates to execute in 2014 including an IPO and two M&A
transactions. This is in addition to the recent new corporate
client wins and the sharp increase in secondary fundraising
activity. It is particularly pleasing to have been awarded M&A
transactions for the first time.
Further, asset gathering is picking up momentum, and the wealth
management division is close to finalising a number of mandates in
the early part of 2014, as well as launching new funds.
Post year end the Group has changed its name to Hume Capital
Securities plc. This name change is part of the repositioning
strategy adopted by the Board last year and reflects the
significant changes in the balance of the business that have been
made over the past 12 months. The new name aligns the two main
aspects of Hume's business, capital markets and wealth management
where the focus is on an integrated solution for our clients. This
is an important development in the execution of Hume's corporate
strategy.
Review of Business Units
Capital Markets
Capital Markets as a whole was profitable in the last financial
year, highlighting how a focused strategy even in difficult markets
can reap benefits. Market making performed credibly against a poor
market backdrop. We took the necessary action to preserve capital
whilst still remaining a key market player in the 288 companies in
which we make a market.
Our strategy remains to be focused on stocks where we have an
edge, to continue to manage our exposures well and to provide
liquidity to our clients.
The corporate department has performed well in challenging
market conditions. In total we raised GBP12 million for our
corporate clients. We now have 22 corporate retained clients, with
a number in the pipeline. Importantly, our overall quality of
clients has improved and we are expecting this to generate
additional transactional revenue during the current financial
year.
We have seen a marked pick up in secondary cash raisings for our
corporate clients, which will underpin future revenues. Post year
end we have already raised GBP15 million for our corporate
clients.
Wealth Management
Wealth Management is comprised of the Hume asset management
business and Private Client Stockbroking, and refers to all third
party investor activity. Overall, it made a loss for the period
under review, driven by the Private Client business which saw a
significant decline in activity. Over the course of the period
under review, substantial progress has been made to reverse this.
First, the Hume Capital Management businesses turned profitable in
June 2013 after substantial business restructuring which included a
rationalisation of the fund range and streamlining of the product
offering. The net result is that investment performance has picked
up (for example European Opportunities and Global Equity Funds are
Top Quartile in their Investment Management Association peer group
in 2013) and profitability secured.
Private Client stockbroking has been difficult in the period
under review, given the market backdrop and a lack of deal flow. We
took steps to address this by closing down areas that did not
contribute to the bottom line and restructuring others. The loss
was a result of the cost cutting not keeping pace with the revenue
loss, but post year end this situation has improved. In addition,
we have managed to attract, post year end, new hires with a better
quality book of business and this already starting to deliver
results.
The outlook for Wealth Management is particularly positive. Fund
performance has improved, and new areas of distribution are
expected to start to yield results. We will also be launching a new
India Fund, with our partners in India and this will raise both
assets and the profile of the Group.
Outlook
Looking forward, the Group is now stronger than when I took over
in January 2013. The Group has raised capital, cut costs
aggressively and invested in the business but there is further work
to do. This will include rebuilding the capital base of the firm,
which has been significantly impacted by losses in the year, in
order that the Group meets its regulatory capital requirements.
This will be achieved through a combination of retained profits
plus potentially new capital raisings if considered
appropriate.
However, the benefits are that the Group is now operating with a
far more appropriate cost base, has an excellent pipeline of
corporate deal flow and is starting to attract new assets under
management in a competitive environment. Our original model of
having a strong corporate offering supported by excellent
distribution capabilities and an active market making function
still applies whilst now also being supported by a strong fund
management business.
I am pleased to report that trading during the first five months
of the current financial year has been stronger than the same
period last year and I believe that the Group's overall financial
performance for the year ended 31 August 2014 will show a
significant improvement. I would like to thank our clients,
shareholders and staff for all their support.
Hume Capital Securities plc
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2013
Year ended Year ended
31 August 31 August
2013 GBP'000 2012 GBP'000
Revenue 5,971 5,280
Administrative expenses (9,683) (9,566)
Share based payments 116 (78)
Operating loss (3,596) (4,364)
Profit on disposal of fixtures 23 -
and equipment
Fair value gains on investments - 10
Other losses - (46)
Finance costs (90) (89)
Interest income 3 6
Loss before tax (3,660) (4,483)
Tax (312) (229)
Total loss for the year (3,972) (4,712)
-------------- --------------
Total comprehensive loss for
the year (3,972) (4,712)
============== ==============
Loss per share
Basic and diluted (0.3p) (1.0p)
All the Group's revenue and operating loss was derived from
continuing operations.
There were no items of comprehensive income in the current year
or prior year other than the loss for that year shown above.
Accordingly, no statement of comprehensive income is presented.
The loss and total comprehensive loss for the year are
attributable to the equity holders.
Hume Capital Securities plc
Consolidated and Company Balance Sheet
As at 31 August 2013
Group Company
31 August 2013 31 August 31 August 31 August
GBP'000 2012 2013 2012
GBP'000 GBP'000 GBP'000
Non-current assets
Fixtures and equipment 382 526 382 526
Intangible assets
and goodwill 1,383 - - -
Deferred tax asset 480 792 480 792
2,245 1,318 862 1,318
Current assets
Trade and other receivables 33,156 16,579 32,812 16,579
Trading portfolio
assets 298 456 298 456
Investments 61 10 1,998 10
Cash and bank balances 830 328 276 328
34,345 17,373 35,384 17,373
Total assets 36,590 18,691 36,246 18,691
Current liabilities
Trade and other payables (34,454) (16,341) (33,908) (16,341)
Trading portfolio
liabilities (136) (210) (136) (210)
Bank overdraft - (328) - (328)
(34,590) (16,879) (34,044) (16,879)
Net current assets (245) 494 1,340 494
Total liabilities (34,590) (16,879) (34,045) (16,879)
Net assets 2,000 1,812 2,201 1,812
Equity
Share capital 1,764 2,196 1,764 2,196
Share premium account 10,583 7,632 10,582 7,632
Retained loss (12,104) (8,016) (11,902) (8,016)
Deferred share reserve 1,757 - 1,757 -
Total equity 2,000 1,812 2,201 1,812
Hume Capital Securities plc has five subsidiaries, EPIC
Investment Partners Limited, Hume Capital Management Limited and
Hume Capital Guernsey Limited, XCAP Securities (Middle East and
India) Limited and XCAP Nominees Limited. The financial statements
of Hume Capital Securities plc (registered number 6920660) were
approved by the Board of Directors and authorised for issue on 25
February 2014. They were signed on its behalf by:
Michael Andrew Frame
Finance Director
25 February 2014
Hume Capital Securities plc
Consolidated and Company Statement of Changes in Equity
For the year ended 31 August 2013
Share Premium Retained
Share Capital Account Other Reserves Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 August
2011 1,939 6,479 - (3,382) 5,036
Loss for the year - - - (4,712) (4,712)
Issue of share capital 257 1,153 - - 1,410
Credit to equity for
equity-settled share
based payments - - - 78 78
Balance at 31 August
2012 2,196 7,632 - (8,016) 1,812
Loss for the year - - - (3,972) (3,972)
Issue of share capital 1,325 2,951 - - 4,276
Debit to equity for equity-settled
share
based payments - - - (116) (116)
Share capital re-organisation* (1,757) - 1,757 - -
Balance at 31 August
2013 1,764 10,583 1,757 (12,104) 2,000
*As part of the acquisition of the Hume Capital trading
businesses a fundraising was undertaken. As the Placing Price was
less than the nominal value of the Existing Ordinary Shares, to
enable the Placing to proceed it was necessary to reorganise the
Company's share capital by sub-dividing and redesignating each
Existing Ordinary Share into one new ordinary share of 0.1 pence
each (a "New Ordinary Share") and one deferred share of 0.4p
each.
Hume Capital Securities plc Consolidated and Company Cash Flow
Statement
For the year ended 31 August 2013
Group Company
Year ended Year ended Year ended Year ended
31 August 31 August 31 August 31 August
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Net cash used in operating
activities (761) (1,385) (2,448) (1,385)
Investing activities
Proceeds on disposal of
fixtures and equipment - 4 - 4
Purchases of fixtures and
equipment (89) (205) (89) (205)
Goodwill and intangible
assets acquired in exchange
for shares issued less cash
acquired (1,133) - - -
Net cash used in investing
activities (1,222) (201) (89) (201)
Financing activities
Net proceeds on issue of
shares 2,900 1,409 2,900 1,409
Finance costs (90) (89) (90) (89)
Interest income 3 6 3 6
Net cash from financing
activities 2,813 1,326 2,813 1,326
Net increase/(decrease)
in cash and cash equivalents 830 (260) 276 (260)
Cash and cash equivalents
at beginning of year - 260 - 260
Cash and cash equivalents
at end of year 830 - 276 -
1. General information
The financial information set out above does not constitute the
Group's statutory accounts for the year ended 31 August 2013 but is
derived from those accounts. Statutory accounts for 2013 will be
delivered to the Registrar of Companies and posted to shareholders
in due course. The auditors' report on those accounts were
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006.
Going concern
The Financial Reporting Council issued a guidance note in
November 2009 requiring all companies to provide fuller disclosures
regarding the directors' assessment of going concern. The financial
statements of the Group have been prepared on a going concern
basis.
The Group has made a loss in the year and has had to restructure
some of its operations in order to secure its liquidity and capital
positions during the financial year. As highlighted in the Chief
Executive's statement, the financial year under review was one of
rebuilding the Group against a backdrop of very difficult market
conditions. The losses for the year have arisen because of the
substantial changes that needed to be implemented, in the context
of poor market conditions.
In light of the acquisition and the fundraisings during and
following the year end, the Directors have prepared detailed
forecasts for the enlarged group for the foreseeable future which
consider the liquidity and capital position of the Group. These
forecasts assume an immediate increase in profitability based on
the cost cutting measures already implemented together with
increased revenue from the existing business divisions as discussed
in both the Chief Executive's statement and the business review
section of the Annual Report. If these forecasts are not achieved
then the Group would need to rebuild its capital base, which has
been significantly impacted by the retained losses in the year,
within the going concern period in order to meet its regulatory
capital requirements. In this respect the directors expect that the
Group will be able to obtain sufficient capital resources and
funding through the injection of new capital from the placement of
new shares, as well as it having the ability to bring additional
capital and cash in through further restructuring, and the
redistribution of resources currently tied up in existing business
divisions.
Taking these factors into account, the Directors have a
reasonable expectation that the Group has adequate resources and
has sufficient liquidity to continue in existence for the
foreseeable future. Accordingly, the Directors have adopted the
going concern basis in preparing the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Group made up to 31 August each year. The Group
consists of Hume Capital Securities plc and four 100% fully owned
subsidiaries, EPIC Investment Partners Limited, Hume Capital
Guernsey Limited, XCAP Securities (Middle East and India) Limited
and XCAP Nominees Limited. EPIC Investment Partners Limited owns
100% of Hume Capital Management Limited.
XCAP Nominees Limited has net assets of GBP2 and therefore that
Company's information is not shown separately.
Under section 408 (4) of the Companies Act 2006, XCAP Nominees
Limited is exempt from the requirement to present its own income
statement.
Hume Capital Management Limited and EPIC Investment Partners
Limited both prepare annual accounts to 30 September.
Business combinations
All business combinations are accounted for by applying the
purchase method. The purchase method involves recognition, at fair
value, of all identifiable assets and liabilities, including
contingent liabilities, of the subsidiary at the acquisition date,
regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. The cost of
business combinations is measured based on the fair value of the
equity or debt instruments issued and cash or other consideration
paid, plus any directly attributable costs.
Goodwill arising on a business combination represents the excess
of cost over the fair value of the Group's share of the
identifiable net assets acquired and is stated at cost less any
accumulated impairment losses. Goodwill is tested biannually for
impairment. Any impairment is recognised immediately in the income
statement and is not subsequently reversed. Negative goodwill
arising on an acquisition is recognised immediately in the income
statement. On disposal of a subsidiary the attributable amount of
goodwill that has not been subject to impairment is included in the
determination of the profit or loss on disposal.
Intangible assets
The cost of intangible assets acquired in a business combination
is their fair value at the date of acquisition.
After initial recognition intangible assets are carried at cost
less accumulated amortisation and impairment losses. The carrying
amounts are reviewed at each reporting date when events or
circumstances indicate that the assets may be impaired. If any such
indication exists or as in the case of goodwill, when annual
impairment testing is required, the asset's recoverable amount is
estimated.
The recoverable amount is the higher of the asset's fair value
less costs to sell (or net selling price) and its value-in-use.
Value-in-use is the discounted present value of estimated future
cash inflows expected to arise from the
continuing use of the asset and from its disposal at the end of
its useful life.
Impairment is identified at the individual asset level where
possible. Where the recoverable amount of an individual asset
cannot be identified, it is calculated for the smallest
cash-generating unit (CGU) to which the asset belongs.
A CGU is the smallest identifiable group of assets that
generates cash inflows independently. When the carrying amount of
an asset (or CGU) exceeds its recoverable amount, the asset (or
CGU) is considered to be impaired and is written down to its
recoverable amount. An impairment loss is immediately recognised as
an expense.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non market-based vesting conditions. Details regarding
the determination of the fair value of equity-settled share-based
transactions are set out in note 13 to this announcement.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non
market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefits
reserve.
Accounting period
The financial statements cover a 12 month period from 1
September 2012 to 31 August 2013.
Hume Capital Management Limited and EPIC Investment Partners
Limited both have accounting periods that end on 30 September.
Their results have been consolidated as at 31 August 2013 for
inclusion in these financial statements.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 3 in the full Annual Report, the Directors are
required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects
only that year, or in the year of the revision and future years if
the revision affects both current and future years.
Critical judgements in applying the group's accounting
policies
The following are the critical judgements that the Directors
have made in the process of applying the Group's accounting
policies and that has the most significant effect on the amounts
recognised in financial statements.
Share based payments
The calculation of the fair value of share based payments
requires assumptions to be made regarding market conditions and
future events. These assumptions are based on historic knowledge
and industry standards. Changes to the assumptions used would
materially impact the charge to the income statement. Details of
the assumptions are set out in note 13 to this announcement.
Liquidity adjustment
Positions at the year end are assessed to ensure that the
carrying value reflects the fair value of the asset. Positions held
in illiquid stocks are adjusted to reflect this.
Deferred tax rates
The recognition of deferred tax assets is based upon whether it
is more likely than not that sufficient and suitable taxable
profits will be available in the future against which the reversal
of temporary differences canbe deducted.
As outlined in note 15 in the full Annual Report, the directors
have recognised a deferred tax asset of GBP480,000 and have not
recognised an asset in respect of remaining losses.
Goodwill
The amount of goodwill initially recognised as a result of a
business combination is dependent on the allocation of the purchase
price to the fair value of the identifiable assets acquired and the
liabilities assumed. The determination of the fair value of the
assets and liabilities is based, to a considerable extent, on
management's judgement.
Allocation of the purchase price affects the results of the
Group as finite lived intangible assets are amortised, whereas
indefinite lived intangible assets, including goodwill, are not
amortised and could result in differing amortisation charges based
on the allocation to indefinite lived and finite lived intangible
assets.
2. Business and geographical segments
Products and services from which reportable segments derive
their revenues
Information reported to the Group's Chief Executive Officer for
the purposes of resource allocation and assessment of segment
performance is focussed on the category of customer for each type
of activity. The Group's reportable segments under IFRS 8 are as
follows:
-- Capital Markets
-- Wealth Management
Information regarding the Group's operating segments is reported
below.
Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment for the year to 31 August 2013:
Capital Wealth Management Consolidated
Markets
Year ended Year ended Year ended
31 August 31 August 31 August
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,931 4,040 5,971
Result
Segment result 391 (828) (437)
Central administrative expenses (3,159)
-------------
Operating loss (3,596)
Profit on disposal of fixed
assets 23
Finance costs (90)
Interest income 3
Loss before tax (3,660)
Tax (312)
Loss after tax (3,972)
=============
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in note 3 in the full
Annual Report.
The following is an analysis of the Group's revenue and results
by reportable segment for the year ended 31 August 2012:
Capital Markets Wealth Management Consolidated
Year ended Year ended Year ended
31 August 31 August 31 August
2012 2012 2012
Revenue GBP'000 GBP'000 GBP'000
External sales 1,968 3,312 5,280
Result
Segment result (402) (567) (969)
Central administrative expenses (3,395)
-------------
Operating loss (4,364)
Fair value gains on investments 10
Other income (46)
Finance costs (89)
Interest income 6
Loss before tax (4,483)
Tax (229)
Loss after tax (4,712)
=============
Segment profit represents the profit incurred by each segment
without allocation of the share of central administration costs
including Directors' salaries, investment revenue and finance
costs, and income tax expense. This is the measure reported to the
Group's Chief Executive Officer for the purpose of resource
allocation and assessment of segment performance. All one off
non-recurring costs are included in central administrative
expenses.
The Directors do not consider the net assets readily
identifiable and consequently have not disclosed these separately
in this note.
Geographical information
All of the Group's revenue is generated within the UK.
3. Loss for the year
Loss for year ended 31 August 2013 has been arrived at after
charging:
Year ended Year ended
31 August 2013 31 August
GBP'000 2012
GBP'000
GBP'000
Depreciation of fixtures and equipment 210 176
Gain on disposal of fixtures and
equipment 23 -
Operating lease - property 253 253
Operating lease - equipment 143 164
Staff costs 2,960 3,104
4. Loss per share
The calculation of the basic and diluted loss per share is based
on the following data:
Losses
Year ended
31 August Year ended
2013 31 August 2012
GBP'000 GBP'000
Losses for the purposes of basic loss
per share being net loss attributable
to owners of the Group (3,972) (4,712)
Number of shares '000 '000
Weighted average number of ordinary shares
for the purposes of basic loss per share 1,273,527 439,177
Effect of dilutive potential ordinary
shares:
Share options 49,600 87,800
Ordinary shares issued post year end 323,214 439,177
Weighted average number of ordinary shares
for the purposes of diluted loss per
share 1,646,341 966,154
Share options and ordinary shares issued post year end are
antidilutive and therefore are disregarded in the calculation of
diluted loss per share.
5. Acquisition, intangible assets and goodwill
On 14 December 2012, Hume acquired 100 per cent of the issued
share capital of EPIC Investment Partners Limited and 100 per cent
of the issued share capital of Hume Capital Guernsey Limited,
obtaining control of both companies. EPIC Investment Partners
Limited owns 100 per cent of the issued share capital of Hume
Capital Management Limited.
These companies were the trading or fund management companies
within the Hume Capital LLP group of companies. They are
multi-asset, multi-disciplinary firms with a focus on equities,
fixed income, absolute return strategies and multi-manager products
with total assets under management in excess of GBP100 million.
The Group believes that the financial stability that this
transaction provides will create opportunities for the enlarged
group to gain critical mass and to increase both assets under
management and the level of trading and corporate advisory work we
undertake.
Acquisition of Hume Capital Guernsey Limited, Hume Capital
Management Limited and EPIC Investment Partners Limited:
GBP'000
Financial assets
Net assets 154
Identifiable intangible assets 451
Total identifiable assets 605
Goodwill 932
--------
Total consideration 1,537
========
Satisfied by:
Ordinary shares of Hume Capital
Securities plc 1,537
Less cash acquired on acquisition (404)
Goodwill and intangible assets
acquired in exchange for shares
issued less cash acquired 1,133
========
Pre-acquisition financial details of the companies acquired are
as follows:
Date of latest pre-acquisition Losses before
Company audited accounts Revenue tax Gross Assets
Hume Capital
(Guernsey) Limited Year to 31 March 2012 1,712,574 (94,156) 627,426
EPIC Investment
Partners Limited Year to 31 March 2011 - (1,817,352)* 2,015,093
Hume Capital
Management Limited Year to 31 March 2011 3,363,511 (390,692) 1,271,202
* Includes GBP1.34 million impairment of investments
Table detailing financial results of acquired businesses as
though the acquisition date for all businesses was the beginning of
the annual reporting period under review. Please note that actual
acquisition date was 14 December 2012.
Losses before
Company Revenue tax
Hume Capital
(Guernsey) Limited 722,004 (128,754)
EPIC Investment
Partners Limited - -
Hume Capital
Management Limited 604,773 (343,140)
Goodwill
Hume has recognised goodwill in respect of the Hume Capital
Management businesses acquisition as per the table below. The
factors that make up the goodwill recognised include but are not
limited to, the greater P/E ratio valuations placed on firms with
assets under management compared to pure trading houses and
assisting in delivering the benefits of recurring and non-trading
dependent revenue. In addition, goodwill was attributable to the
synergies from the Group's ability to combine clients and contact
bases and reduce head office costs to enhance shareholder
returns.
Group
GBP'000
Cost
At 31 August 2012 -
Additions 932
At 31 August 2013 932
Impairment
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Net book values
At 31 August 2013 932
At 1 September 2012 -
The Group tests, for each Cash Generating Unit (CGU), at least
annually for goodwill impairment. The recoverable amount of a CGU
is determined based on value-in-use calculations. These
calculations use pre-tax cash flows based on financial budgets
prepared by management covering a five year period and then
extrapolated for the remaining useful economic life based on
relevant estimated growth rates of 9.8% for revenue and 6.7% for
costs. This is then adjusted for the anticipated terminal growth
value of 5% per annum. This net cash flow is then discounted by an
appropriate cost of capital of 11% in order to estimate their
present value.
The key assumptions for the value-in-use calculations are those
regarding the discount rate, growth rates and expected changes to
revenues and costs in the period. Management has made these
assumptions based on past experience and future expectations in the
light of anticipated market conditions, combined with the actions
taken during this and last year to streamline the Group's
operations whilst maximising revenue potential.
Where the value-in-use exceeds the carrying value of the
goodwill asset, it has been concluded that no impairment is
necessary. However, where this is not the case, goodwill is written
down to the net present value of cash flows at the balance sheet
date.
The amounts recognised in respect of the identifiable assets
required and liabilities assumed are as set out in the table
below:
Intangible assets
Group
GBP'000
Cost
At 31 August 2012 -
Additions 451
At 31 August 2013 451
Amortisation
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Net book values
At 31 August 2013 451
At 1 September 2012 -
The above addition to intangible assets represents the value of
the funds under management acquired and client base acquired as
part of the Hume acquisition. The Board has assessed the carrying
value of this intangible asset and confirms it remains appropriate.
This intangible asset is assumed to have an indefinite useful
life.
The asset was valued using a combination of the value applied to
the assets under management and a discounted cashflow model.
6. Investments
Group Company
Investments Investments
GBP'000 GBP'000
Cost
At 31 August 2011 8 8
Additions 10 10
Disposals (8) (8)
At 31 August 2012 10 10
Additions 51 51
Acquisition of subsidiary in year
(note 14) - 1,537
Capitalisation of intercompany loan - 400
Disposals - -
At 31 August 2013 61 1,998
On 14 December 2012, XCAP Securities plc acquired 100 per cent
of the issued share capital of EPIC Investment Partners Limited and
100 per cent of the issued share capital of Hume Capital Guernsey
Limited, obtaining control of both companies. EPIC Investment
Partners Limited owns 100 per cent of the issued share capital of
Hume Capital Management Limited.
These companies were the trading or fund management companies
within the Hume Capital LLP group of companies. They are
multi-asset, multi-disciplinary firms with a focus on equities,
fixed income, absolute return strategies and multi-manager
products.
The Company believes that the financial stability that this
transaction provides will create opportunities for the enlarged
group to gain critical mass and to increase both assets under
management and the level of trading and corporate advisory work we
undertake.
The amount recognised as an investment in the Company accounts
represents the purchase price plus the capitalisation during the
year of an intercompany loan. The purchase price was 439,176,582
shares in XCAP Securities plc which were issued at a price of 0.35p
per share.
7. Subsidiaries
Hume Capital Securities plc has four 100% fully owned
subsidiaries, EPIC Investment Partners Limited, Hume Capital
Guernsey Limited, XCAP Securities (Middle East and India) Limited
and XCAP Nominees Limited. EPIC Investment Partners Limited owns
100% of Hume Capital Management Limited.
8. Cash, cash equivalents and bank overdraft
Group Company
31 August 31 August
31 August 2012 31 August 2012
2013 GBP'000 GBP'000 2013 GBP'000 GBP'000
Cash at bank and in
hand 830 328 276 328
Bank overdraft - (328) - (328)
830 - 276 -
Client money
Client money, held in segregated accounts not included in the
balance sheet, was GBP2.37 million (31 August 2012 - GBP2.68
million).
9. Borrowings
Group Company
31 August 31 August 31 August 31 August
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Secured borrowing at amortised
cost
Bank overdrafts - 328 - 328
Total borrowings
Amount due for settlement
within 12 months - 328 - 328
The bank overdraft is repayable on demand.
10. Share capital
Share capital
GBP'000
Authorised, allotted, issued and fully paid:
As at 1 September 2012
439.2 million ordinary shares of 0.5 pence each 2,196
Issue of shares 1,325
Share capital re-organisation (1,757)
As at 31 August 2013:
1,764.324 million ordinary shares of 0.1 pence each 1,764
The Company has one class of ordinary shares which carries no
right to fixed income.
On 14 December 2012 Hume announced that it received regulatory
approval to allow the acquisition of the Hume Capital Management
companies, together with a placing to raise approximately GBP2.4
million. All conditions have now been satisfied and the Acquisition
and Placing, as defined in the announcement on 3 October 2012, have
completed.
Accordingly, on 14 December 2012 the Company applied for
439,176,582 new ordinary shares of 0.1 pence each in the Company
("Ordinary Shares") issued pursuant to the Acquisition and
678,783,514 Ordinary Shares issues pursuant to the Placing. The
shares were admitted to trading on AIM on 20 December 2012.
As the Placing Price was less than the current nominal value of
the Existing Ordinary Shares, to enable the Placing to proceed it
was necessary to reorganise the Company's share capital by
sub-dividing and re-designating each Existing Ordinary Share into
one New Ordinary Share of 0.1 pence nominal value and one Deferred
Share of 0.4 pence nominal value (as set out in the table
below).
Pre Capital Reorganisation Post Capital Reorganisation
--------------------------- ----------------------------------------------
Existing Ordinary Shares Number of New Ordinary Number of Deferred
of 0.5 pence each Shares of 0.1 pence Shares of 0.4 pence
each each
--------------------------- ----------------------- ---------------------
1 1 1
--------------------------- ----------------------- ---------------------
The Capital Reorganisation has had no material impact on the
rights of the holders of Existing Ordinary Shares, which will
continue to carry the same voting rights and rights to dividends
and capital as previously. The New Ordinary Shares will continue to
be admitted to trading on the AIM market as currently. The New
Ordinary Shares will reflect the same proportion of the Company's
value as the Existing Ordinary Shares and therefore their intrinsic
value will be the same.
The Deferred Shares have very limited rights (contained in the
New Articles) such that, in practical terms they have no value and,
in the same way, nor do they carry any rights to voting, dividends
or a return on capital (otherwise than on a winding up). No
application has been made for admission of the Deferred Shares to
trading on AIM. It is envisaged that at a convenient time the
Deferred Shares will be purchased by or on behalf of the Company
and cancelled in accordance with the provisions of the New
Articles.
On 18 June 2013 the Company announced that it has raised
GBP525,000 through the issue of 175,000,000 new ordinary shares of
0.1p each in the Company ("Ordinary Shares") at 0.3 pence per
share.
Post year end, on 8 November 2013 the Company raised a total of
GBP905,000 via the issue of 323,214,285 new ordinary shares of 0.1p
each in the Company at 0.28p per share.
11. Share premium account
Share premium
GBP'000
Balance at 31 August 2011 6,479
Premium arising on issue of equity shares 1,158
Less expenses of issue of equity shares (5)
Balance at 31 August 2012 7,632
Premium arising on issue of equity shares 2,951
Balance at 31 August 2013 10,583
12. Retained loss
Share premium
GBP'000
Balance at 31 August 2011 (3,382)
Net loss for the year (4,712)
Credit to equity for equity-settled share-based
payments 78
Balance at 31 August 2012 (8,016)
Net loss for the year (3,972)
Debit to equity for equity-settled share-based
payments (116)
Balance at 31 August 2013 (12,104)
13. Share based payments
The Group has 3 share option schemes which have been established
for the Group's employees or consultants (as appropriate). They
are:
1. the XCAP Securities plc Group Share Option Plan 2009, an HMRC
approved scheme under Schedule 4 of the Income Tax (Earnings and
Pensions) Act 2003 pursuant to which options over ordinary shares
of the Group may be granted to individuals (as selected by and in
amounts determined by the Group's Remuneration Committee) who are
employees of the Company or of other members of its group;
2. the XCAP Securities plc Unapproved Share Option Scheme 2001
pursuant to which options over ordinary shares of the Group may be
granted to individuals (as selected by and in amounts determined by
the Group's Remuneration Committee) who are employees of the
Company or other members of its group; and
3. the XCAP Securities plc Consultant's Share Option Plan 2010,
pursuant to which options over ordinary shares of the Group may be
granted to individuals (as selected by and in amount determined by
the Group's Remuneration Committee) who are engaged to provide
consultancy services to the Company or other members of its group
or who are officers or employees of any Group member and are
engaged to provide consultancy services to any seed Group
member.
In the case of options granted during the year, all such options
are exercisable at prices between 1.5p and 1.875p per ordinary
share. The vesting period for all options granted under the
Approved Scheme is three years.
Options granted during the year under the Unapproved Scheme and
the Consultant's Scheme have a three year vesting period.
If options granted under any of the schemes remain unexercised
for a period of ten years from the date of grant then the options
expire.
In certain circumstances, options may be exercised earlier than
the vesting date if the option holder ceases to be an employee of
the relevant Group member. In particular, options may be exercised
for a period of six months after the option holder ceases to be
employed within the Group by reason of injury, ill health or
disability (evidenced to the satisfaction of the Remuneration
Committee), redundancy or retirement on or after reaching the age
of 55 or upon the sale or transfer out of the Group of the relevant
Group member or undertaking employing or contracting with him.
In the event of cessation of employment or engagement of the
option holder by reason of his death, his personal representatives
will be entitled to exercise the option within twelve months
following the date of his death. Where an option holder ceases to
be employed within the group for any other reason, options may also
become exercisable for a limited period at the discretion of the
Remuneration Committee. There are no additional performance
conditions attached to the share options presently issued.
2013
Weighted
average
Number exercise
of share price
options (in pence)
Outstanding at 1 September 2012 71,100,000 2.99
Forfeited during the year (21,500,000) 3.72
Outstanding at the end of the year 49,600,000 2.99
Exercisable at 31 August 2013 49,600,000 2.67
The Company has adopted the provisions of IFRS 2 as regards
share-based payment charges. These provisions require a calculation
of the fair value at the date of grant of share options granted to
directors and employees. This fair value is then charged to the
income statement over the vesting period of the options, and is
based on an expected number of employees leaving before their
options vest. The fair value is calculated using a variant of the
Black Scholes model.
The options outstanding at 31 August 2013 had a weighted average
exercise price of approximately 2.67p (2012: 2.99p) and a weighted
average remaining contractual life of approximately 7 years (2012:
8 years).
During the year ended 31 August 2013 no options were
granted.
During the year ended 31 August 2012, options were granted on 3
December 2011 and 29 February 2012. The aggregate of the estimated
fair value as at year end of the options granted during that year
was GBP155,429 which is spread over the life of the options.
The net credit to the income statement in relation to share
based payments was the net effect of the charge for the year and
the credit in relation to leavers in the year who held share
options.
The inputs into the Black-Scholes model are as follows:
31 August 31 August
2013 2012
Weighted average share price 2.67p 2.99p
Weighted average exercise price 2.67p 2.99p
Range of exercise price 1.5p - 4.5p 1.5p - 4.5p
Expected volatility 36% 36%
Expected life 5 Years 5 Years
Risk-free rate 0.74% 0.74%
Expected dividend yields 0% 0%
Expected volatility was determined by taking the average one
year historic volatility figure of a peer group. The expected life
used in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
14. Events after the balance sheet date
On 8 November 2013, the Group raised approximately GBP0.9
million (before expenses) through the issue of 323,214,285 New
Ordinary Shares ("Placing Shares") at a subscription price of 0.28
pence per share (the "Placing"). The Placing Shares were placed
with a number of high net worth individuals, institutional
investors and existing shareholders. Proceeds will be used for
general working capital purposes as the Company continues to
execute its corporate strategy.
15. Related party transactions
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 IAS 24 Related Party Disclosures.
Further information about the remuneration of individual Directors
is provided in the audited part of the Directors' Remuneration
Report on page 21 of the Annual Report.
Year ended Year ended
31 August 31 August 2012
2013 GBP'000
GBP'000
Short-term employee benefits 699 451
Post-employment benefits 78 30
777 481
Intercompany transactions
Hume Capital Securities plc charges Hume Capital Management
Limited a monthly management fee. During the period under review
these fees totalled GBP125,000 (2012: GBPnil). The monthly fees are
at the discretion of the Hume Capital Securities plc and Hume
Capital Management Limited's respective boards. As at the balance
sheet date GBPnil was outstanding (2012: GBPnil) in relation to
these fees.
Shares issued to significant shareholder
Following the termination of Mr Christopher Potts' consultancy
agreement on 31 December 2011 and its replacement with effect from
1 January 2012 with a business introducing agreement (with no fixed
fee element but a commission arrangement based on business
introduced), the Directors issued New Ordinary Shares in lieu of
fees of GBP50,000 due to Mr Potts for the period from 1 July 2011
to 31 December 2011 under his former consultancy agreement.
Accordingly, on 14 December 2012 Mr Potts was issued 14,285,714
New Ordinary Shares issued at 0.35p
In addition, Mr Potts participated in the placing that occurred
at as part of the Hume acquisition and subscribed for 35,714,285
placing shares at the placing price of 0.35p (being an aggregate
subscription of approximately GBP125,000).
The combined issues of these shares is classed as a related
party transaction pursuant to the AIM Rules.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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