28 June 2024
KINGSWOOD HOLDINGS LIMITED
("Kingswood", the "Company" or the "Group")
Final
results for the year ended 31 December 2023
Kingswood Holdings Limited (AIM:
KWG), the international, fully integrated wealth and investment
management group, announces its audited financial results for the
year ended 31 December 2023.
Continuing Operations
Group Revenue was £86.2m for the
year ended 31 December 2023, increasing £23.6m or 37.7% compared to
the prior year
· UK &
Ireland (UK&I) revenues increased to £46.6m, a 37.5% increase
year on year, reflecting resilience to market headwinds and the
benefit of acquisitions in the current and prior
periods.
· US revenues
(the Company has a 50.1% interest in Kingswood US, LLC which
accordingly is fully consolidated into Group reporting) of £39.6m
increased 37.8% year on year.
Group operating profit from
continuing operations was £10.8m, an increase of £3.0m or 37.9%
compared to 2022.
· UK&I operating profit of £8.9m, increased by £3.2m or
56%
· US
operating profit of £1.9m from continuing operations, a £0.2m or
11% decrease year on year
In the interim results
announcement of 29 September 2023, we referred to our expected
pro-forma Operating Profit for the full year to be c.£13.6m. This
was after adjustments for MMPI and Baseplan Limited. The
comparative Operating Profit for the full year (on the same
pro-forma basis) was £12m.
The difference between the £10.8m
out-turn and the comparative £12m forecast at half-year was due to
a delay in revenue receipts by Kingswood Investments in the US, a
change to the intended approach to advice pricing harmonisation in
the UK and a slower market recovery than expected.
Whilst below stated management
expectations at the interim results, operating profit was up over
37% on prior year.
Group FY2023 statutory Loss before
Tax of £13.3m was £2.0m higher than the prior year largely due to
the following:
· The
Group incurred £7.3m of finance costs during the year on debt
facility drawdowns, reflective of our strategy to use leverage as
an accelerant for growth.
· Non-recurring
costs, including broker fees on M&A transactions and costs
incurred to reposition the business, totalled £4.7m for the year, a
decrease of £1.6m compared to the prior year.
·
Non-cash impacting items of
£10.4m were £1.9m higher than FY2022 and included amortisation of
intangible assets, finance costs recognised on the unwinding of
deferred consideration and preference share dividends.
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£m unless otherwise
stated
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2023
|
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2022*
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Change
|
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Revenue
|
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86.2
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62.6
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38%
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Operating Profit
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10.8
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7.8
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38%
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Profit/(Loss) from discontinued
operations
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(0.6)
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0.3
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-300%
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*The Group results are restated following completion of the
disposal of a US subsidiary (further detail in discontinued
operations below).
At 31 December 2023
UK&I comprised £3.5bn AuM (Assets under
Management) and £5.9bn AuA (Assets under Advice), with growth of
£0.3bn and £0.3bn respectively in 2023, and AuA in Ireland of
£0.7bn. UK AuM in our market leading IBOSS managed portfolio
service ended the year at £2.1bn, up £0.4bn or 25% on the prior year.
US AuA of £2.9bn at 31 December
2023 was £0.5bn, or 22.0%, higher year on year driven by growth in
the number of authorised representatives.
Discontinued
Operations:
Sale of Benchmark Investments, LLC
On 11 May 2022, Kingswood US, LLC
(in which Kingswood holds 50.1% of the voting rights) ("KWUS")
entered into a member interest purchase agreement with EF Hutton
Holdings LLC to sell the entire share capital of its wholly owned
subsidiary Benchmark Investments, LLC ("BMI") for total
consideration of US$5.0m (approximately £4.1m). This transaction
completed on 9 November 2023 (the "Disposal").
About BMI
BMI offers a variety of financial
services to both institutional and retail clients.
The sale of BMI reflects KWUS's
strategic decision to optimise its business portfolio and
streamline operations. Following the Disposal, KWUS, LLC will focus
on its core strengths and areas of growth within the financial
services industry. KWUS will retain operations at premises in New
York, USA.
In the unaudited management
accounts for the year ending 31 December 2020, revenue generated by
BMI was approximately US$20.98m (£16.30m) net profit was US$0.24m
(£0.19m).
Consideration
The consideration of US$5.0m
comprised:
- US$2.5m
(approximately £2.0m) received in cash at closing;
- US$1.5m
(approximately £1.2m) in further cash instalments received
post-closing; and
-
US$1.0m (approximately £0.8m) of
contingent cash consideration, which was only payable to KWUS if
certain pre-existing contractual obligations were not upheld for
six months post-closing. On 9 May 2024 all conditions were met and
the contingent consideration was forgiven.
KWUS will use the proceeds of the
Disposal to support future growth.
Therefore, BMI is classified as a
discontinued operation under IFRS 5, "Non-current Assets Held for
Sale and Discontinued Operations." As such, the results of BMI have
been segregated from continuing operations for both the current and
prior periods. The results of BMI up to 9 November 2023 have been
presented separately as discontinued operations. In the period through to its disposal BMI generated revenue of
£38m (2022: £83m) and a net loss of £0.6m (2022: net profit £0.3m).
To provide a consistent and comparable view of the Group's
financial performance, the prior year's financial results have been
restated to reflect BMI as a discontinued operation. This
restatement involves reclassifying BMI's revenues, expenses,
assets, and liabilities from continuing operations to discontinued
operations in the prior period.
Strategic Highlights
The acquisition of IBOSS Asset
Management in December 2021 has enabled strong flows into group
investment solutions and accelerated growth in IBOSS is a key
objective for the UK business:
o During 2023, we have re-organised our operating model for
growth investing in additional business development managers,
investment professionals and operational capability. In 2023 we
on-boarded 17 new firms, up 42% on
the prior year.
o IBOSS AuM managed by IBOSS for Kingswood clients and those of
external IFA's was £2.1bn at 31 December 2023, an increase of
£0.4bn on the prior year.
o In 2023, IBOSS became the only discretionary fund
management (DFM) provider to win FTAdviser's 5 Star Award for four
consecutive years, retained its 5 Star and 5 Diamond Defaqto
ratings and gained further recognition from the adviser community
by scooping three accolades at the Citywire Wealth Manager
Awards.
·
Kingswood was named as one of the UK's 'Best
Workplaces for Women' in 2023, by Great Place to Work. We continue
to make progress in addressing diversity imbalances across the
organisation and remain committed to increasing the female
representation of our UK adviser population to at least 25% in the
medium term, compared to current levels of 22% (2022:
19%).
· Our
US footprint further expanded in the first half of the year adding
25 new registered representatives and supporting growth in our
total AuA in Kingswood US to £2.9bn.
· On 9
November 2023, Kingswood completed the disposal of BMI.
The disposal of BMI reflects Kingswood US's
strategic decision to optimise its business portfolio and
streamline operations, allowing it to focus on core strengths and
areas of growth within the financial services industry.
· Kingswood US has
continued to grow its registered investment advisor/broker dealer
(RIA/BD) business organically through the introduction of Kingswood
Investments (KI) in Q2 2023, an in-house investment banking and
capital markets division to support investment banking
capabilities. This addition, combined with the existing teams,
positions Kingswood as a comprehensive provider of investment
banking services in the US.
David Lawrence, Kingswood Chief
Executive Officer, commented:
"I am delighted to report
continued strong financial progress in 2023, with revenue for both
the Group and the core UK and Ireland business up over 37% on the
prior year.
"As a leveraged growth business,
we see operating profit as our key performance indicator. Whilst
this is lower than our forecast when the publishing our June 2023
interim results, it was up a very healthy 56% in UK and Ireland and
37% for the Group on the prior year.
"Operational highlights from 2023
include the completion of the acquisition of our Moloney
Investments Limited ("MMPI") to which we have subsequently added
our first "bolt-on acquisition, Baseplan Limited. We have seen
forward momentum in our IBOSS business where we added 17 new IFA
firms and now have in excess of £2bn under our management from both
IFA and vertically integrated flows.
"In the US, we have re-focused the
business, introducing "Kingswood Investments" to provide investment
banking and capital markets capability as well as continuing to
onboard advisers using the Kingswood US platform."
Post Period End
As announced on 31 May 2024, the
Convertible Preference Shares issued to the Group by HSQ Investment
Limited ("HSQ"), a wholly owned indirect subsidiary of funds
managed and/ or advised by Pollen Street Capital Limited, were
converted into 469,263,291 new Ordinary Shares in the Company
("Conversion") at the agreed conversion price of 16.5 pence per
Ordinary Share. The conversion makes for a clearer capital
structure which the Group hopes will be welcomed by
investors.
In March 2024, the Group appointed
a new CFO, Vinoy Nursiah. Vinoy joined Kingswood from CSC Global
Financial Markets, having previously been at Intertrust and SFM
Europe.
2024 Outlook
In the UK and Ireland, our
strategic focus continues to be on five key areas:
1. Organic
growth - most simply described as "more advice to more
clients".
2.
Vertical integration through movement of AuA into our internal
investment solutions where suitable for the client to do
so.
3. Further
selective M&A.
4. Growth
in UK IFA firms using IBOSS as a partner and outsourced DFM
provider.
5.
Continuing to respond appropriately to Consumer Duty and continuing
to build a highly professional financial advice led
business.
In the US, our strategic focus is
on:
1.
Continuing the growth trajectory through expansion of RIA/ BD
activity including additional activities approved by FINRA. This
includes expanding employment and office operations and engaging in
research activities.
2.
Leveraging technology integration to increase market presence and
strengthen capabilities.
3.
Increasing opportunities within investment banking operations and
pursuing selective acquisitions.
Our stated near-term target is to
build our AUM/A to in excess of £10bn in UK&I and £12.5bn for
the Group. We expect to achieve both of these targets during
2024.
In the medium term, we are
targeting for Group operating profit to increase to £25m with AuM/A
of £20m.
An abridged presentation of
Kingswood's results and strategic direction is available our
website https://www.kingswood-group.com/financial-reports/
The annual report will shortly be
available and can be viewed or downloaded our
website: https://www.kingswood-group.com/financial-reports/
For further details, please contact:
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Kingswood Holdings Limited
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+44 (0)20 7293 0730
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David Lawrence
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www.kingswood-group.com
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Cavendish
Capital Markets
Limited (Nomad & Broker)
Simon Hicks / Abigail
Kelly
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+44 (0)20 7220 0500
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GreenTarget (for Kingswood media)
Jamie Brownlee / Ellie
Basle
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+44 (0)20 7324 5498
Jamie.Brownlee@greentarget.co.uk
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About Kingswood
Kingswood Holdings
Limited (trading as Kingswood) is an AIM-listed (AIM: KWG)
international fully integrated wealth management group. It services
circa 20k clients from a growing network of offices across the UK
with overseas offices in US, Ireland and South Africa.
Kingswood offers a range of
trusted investment solutions to its clients, which range from
private individuals to some of the UK's largest
universities and institutions, including investment advice and
management, personal and company pensions and wealth planning.
Kingswood is focused on building on its position as a leading
player in the wealth and investment management market through
targeted acquisitions, creating a global business through strategic
partnerships.
Registration number: 42316 (Guernsey)
Kingswood
Holdings Limited
Annual Report and
Consolidated Financial Statements for the Year Ended
31 December 2023
Kingswood Holdings Limited
Kingswood at a glance
•
Kingswood Holdings Limited and its subsidiaries
(the "Group" or "Kingswood") is an international, fully integrated
wealth and investment management business listed on the AIM market
of the London Stock Exchange under ticker symbol (AIM:
KWG).
•
Kingswood offers a range of wealth planning and
investment management solutions to its clients, which range from
private individuals to some of the UK's largest universities and
institutions. Kingswood is focused on becoming a leading
participant in its sector through targeted acquisitions in the UK
and US, complemented by strong organic growth.
•
The Group's core client proposition centres on
primary offerings in wealth planning and investment management to
deliver best in class financial solutions for its
clients.
Kingswood Holdings Limited
2023 Highlights
Strategic Highlights
•
At 31 December 2023 UK&I comprised £3.5bn AuM
(Assets under Management) and £5.9bn AuA (Assets under Advice). UK
AuM in our market leading IBOSS model portfolio service (MPS) ended
the year at £2.1bn, up £0.4bn and 25% on the prior year.
•
The acquisition of IBOSS Asset Management in
December 2021 has enabled strong flows into group investment
solutions and accelerated growth in IBOSS is a key objective for
the business:
Ø During
2023, we re-organised our operating model for growth investing in
additional business development managers (BDM), investment
professionals and operational capability. In 2023 we on-boarded
17 new independent financial advisor (IFA)
firms, up 42% on the prior
year.
Ø IBOSS
AuM model by IBOSS for Kingswood clients and those of external
IFA's was £2.1bn at 31 December 2023, an increase of £0.4bn on the
prior year.
Ø In
2023, IBOSS became the only discretionary fund management (DFM)
provider to win FTAdviser's 5 Star Award for four consecutive
years, retained its 5 Star and 5 Diamond Defaqto ratings
and gained further recognition from the adviser
community by scooping three accolades at the Citywire Wealth
Manager Awards.
•
Kingswood places clients at the heart of
everything we do and we are extremely proud to have retained
our 4.8 out of 5 star rating on VouchedFor, home to the UK's
most trusted advisers.
•
Kingswood was named as one of the UK's 'Best
Workplaces for Women' in 2023, by Great Place to Work. We continue
to make progress in addressing diversity imbalances across the
organisation and remain committed to increasing the female
representation of our UK adviser population to at least 25% in the
medium term, compared to current levels of 22% (2022:
19%).
•
Our US footprint further expanded in the first
half of the year adding 25 new registered representatives and
supporting growth in our total AuA in Kingswood US to
£2.9bn.
•
On 9 November 2023, Kingswood US sold its
broker-dealer, Benchmark Investments, LLC (BMI). The sale of BMI
reflects Kingswood US's strategic decision to optimise its business
portfolio and streamline operations, allowing it to focus on core
strengths and areas of growth.
•
Kingswood US has continued to grow its
registered investment advisor/broker
dealer (RIA/BD)
business organically, and through the introduction of Kingswood
Investments (KI) in Q2 2023, an in-house investment banking and
capital markets division to support investment banking
capabilities. This addition, combined with the existing teams,
positions Kingswood as a comprehensive provider of investment
banking services in the US.
Kingswood Holdings
Limited
2023
Highlights
2023 Financial Highlights
Continuing
Operations:
Group revenue was £86m; £23.6m or
38% higher than 2022 reflecting resilience to market headwinds and
the benefit of acquisitions in the current and prior
periods:
•
UK and Ireland (UK&I) revenues increased to
£46.6m, a 37.5% increase year on year.
•
US revenues (the Company has a 50.1% interest in
Kingswood US, LLC and accordingly is fully consolidated into Group
reporting) of £39.6m increased 37.8%.
Group operating profit from
continuing operations was £10.8m, an increase of £3.0m or 37.9%
compared to 2022.
•
UK&I operating profit of £8.9m was £3.2m or
56% higher than 2022.
•
US operating profit of £1.9m from continuing
operations decreased by £0.2m, or 11%.
The statutory loss before tax at
31 December 2023 of £13.3m, was £2.0m higher than the prior year.
The Group incurred £7.3m of finance costs during the year on debt
facility drawdowns, reflective of our strategy to use leverage as
an accelerant for growth. Non-recurring costs, including broker
fees on M&A transactions and costs incurred to reposition the
business, totalled £4.7m for the year, a decrease of £1.6m compared
to the prior year. Non-cash impacting items of £10.4m were £1.9m
higher than 2022 and included amortisation of intangible assets,
finance costs recognised on the unwinding of deferred consideration
and preference share dividends.
|
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£000's (unless otherwise stated)
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2023
|
2022*
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Change
%
|
|
Total Revenue
|
86,160
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62,562
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37.7%
|
|
Group Recurring Revenue
%
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58.7%
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71.6%
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(12.9)%
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Operating Profit
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10,816
|
7,842
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37.9%
|
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Loss before tax
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(13,261)
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(11,221)
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(18.2)%
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Total Equity
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60,899
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73,979
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(17.7)%
|
|
AuM (£m)
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3,513
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3,185
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10.3%
|
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AuA (£m)
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8,817
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7,268
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21.3%
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Number of Advisers - UK& Ireland
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117
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100
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17.0%
|
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Number of Authorised
Representatives - US
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232
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217
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6.9%
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*The 2022 Group results are restated following a successful
sale of a US subsidiary which is presented as discontinued
operations in 2023.
Discontinued
operations
•
The Group's US business sold its broker-dealer
subsidiary BMI, renowned for offering a variety of financial
services to both institutional and retail clients, for proceeds of
$5m (£4.1m). The sale of the business completed on 9 November 2023.
In the period through to its disposal the business generated
revenue of £38m (2022: £83m) and a net loss of £0.6m (2022: net
profit £0.3m). The Group's prior year results are restated
following sale of the subsidiary which was designated as a
discontinued operation in 2023.
Kingswood Holdings Limited
Chairman's Statement
I am pleased to report that 2023 has been another
year of solid performance for the Kingswood Group. Despite
challenging market conditions, the Group achieved growth in AuM/A,
revenue and operating profit.
We are delivering our growth strategy set out in
2019 to create a leading international wealth and investment
management business. The UK and US wealth management sectors
continues to exhibit strong, long-term growth characteristics
supported by demographic trends, and opportunities for ongoing
consolidation within what continues to be a fragmented
industry.
In the UK we are reporting record levels of revenue
and operating profit with significant growth across Wealth Planning
(WP) and Investment Management (IM). Under the leadership of our
CEO David Lawrence, growth is supported by a strong and unrelenting
focus on our client experience, a progressive investment in
technology and an equal investment in our colleagues, all of which
is underpinned by strong integration and operational
excellence.
We have established ourselves as an M&A
counterparty of choice and have a proven integration capability
with an ability to complete over 10 integrations per year. Since
2018, the Group has acquired 22 UK wealth management businesses
which are projected to deliver strong, sustainable revenues and
operating profit. In the UK&I we now have 117 financial
advisers and investment managers operating across 19 locations to
support our retail and institutional client base. IBOSS provides
Kingswood with an award-winning investment offering to our
clients.
Under the leadership of Mike Nessim, our US CEO, the
US business delivered another year of growth and business
expansion, adding 25 new registered representatives and growing
total assets under management by $0.8bn to $3.7bn. The sale of BMI
optimised the US business and streamlined back-office processes and
regulatory oversight while delivering an improved experience to
advisors and clients in the US. Kingswood US has continued to grow
its RIA/BD business organically through the introduction of
Kingswood Investments (KI) in Q2 2023, an in-house investment
banking and capital markets division to support investment banking
capabilities. This addition, combined with the existing teams,
positions Kingswood as a comprehensive provider of investment
banking services in the US.
We have benefitted from our partnership with
Pollen Street Capital which continues to invest in the business to
enable our acquisition and growth strategies. As planned during the
year we drew down on our debt facility to provide funding to
accelerate strategic growth as well as to fund existing deferred
consideration liabilities.
The Board places great importance on building a
business with strong governance and a culture that supports
sustainable long-term success. With that in mind we focus on where
we can make the largest positive impact on the environment, both in
measuring and reducing our carbon footprint and offering clients a
suite of ESG portfolios which take account of environmental, social
and governance issues. We are committed to creating a workplace and
culture that is welcoming and inclusive for everyone and have seen
much success in the employee-led Diversity and Inclusion Forum
launched last year. We will continue to make a significant
investment in learning and development for all colleagues by
launching career paths and supporting colleagues with their
professional and career development.
We continue to invest in our client experience
through technology and other means. The client portal we
launched in 2022 in the UK, Kingswood Go, is transforming our
client experience by providing a single client sign-on and view
across multiple platforms. We are also improving operational
efficiency and client experience through the creation of a client
facing digital fact find and automated suitability reports. In the
US we have invested in technology infrastructure to provide
advisors with a superior integrated wealth management platform
offering products such as Annuities, Equities, Alternatives, and
Mutual Funds.
Kingswood Holdings Limited
Chairman's Statement
The Board continues to operate a robust risk
management framework so that we can maintain compliance with our
regulatory responsibilities and ensure both customers and suppliers
are always treated fairly. Jonathan Freeman, in his capacity as an
independent Non-Executive Director, continues to assume
responsibility for ensuring that the Group has appropriate
corporate governance standards in place and that these standards
are applied within the Group as a whole.
Turning to 2024, the UK macroeconomic outlook in the
short term remains highly uncertain, and recessionary risks are
still at play. Nonetheless, the fundamental opportunity for
Kingswood remains strong, driven by the market opportunity. We look
to the future with confidence.
Finally, on behalf of the Board, I would like to
thank our management team and all our colleagues for their effort,
focus and commitment to achieving our goals in what has continued
to be a challenging operating environment.
David Hudd Chairman
Date: 27 June 2024
Kingswood Holdings
Limited
Chief Executive Officer
's Statement
Introduction
I am delighted to present our financial results for
2023.
As with previous years, I will limit my comments to
that of the UK and Ireland business and am
accordingly grateful to Mike Nessim (US CEO) for his comments on
our US business.
Market Overview
Following on from 2022, macro-economic headwinds
continued during 2023, most notably higher than desirable
inflationary pressure and high interest rates. This and a higher
cost of living continues to impact our clients, most of whom are
considered to be "mass affluent" and accordingly by no means immune
to these issues.
The financial markets remained unpredictable for
most of 2023, directly impacting the many Kingswood clients either
saving for retirement or in retirement, although it was pleasing to
see some stability and growth return during Q4
2023.
Our clients want us to provide sound advice on some
of the things that matter most in life. They trust us to do this
well and, in most cases, also want us to manage their investments.
On this point, our diversified investment approach and long track
record of high performance matched with low volatility remains very
appropriate to our client's needs.
Despite the macro-economic uncertainty and still
unpredictable markets, the UK wealth management sector continues to
exhibit strong, long-term growth characteristics as supported by
the recurring nature of its revenues and demographic trends.
Complexity in laws and regulations continue to
increase, not least in 2023 through the introduction of Consumer
Duty, though much of this is welcome and directly links to the
highly professional and client centric business that we aspire to
be.
Business Overview
Our strategic focus is single-mindedly on both
Financial Advice / Planning and Investment Management activity,
relying on external expertise for other aspects of the client
value-chain.
We have a broad Financial Advice Proposition that is
holistic in its nature. This is predominantly delivered to clients
face to face. Our Financial Advisers take time to understand our
clients, their goals and what is important to them. From this, we
are then able to provide a comprehensive range of solutions to meet
their needs. By building enduring relationships with clients, we
can help realise the best financial outcomes for them. Our taglines
of Advice Every Step of the
Way and Protect and
Grow are perfect manifestations of this.
The acquisition of IBOSS Asset Management in
December 2021 has allowed us to deepen our Investment Management
offering with an enhanced research capability, ably led by our CIO
Chris Metcalfe and Head of Investment Management, Paul Surguy.
For Private Clients our proposition now comprises:
IBOSS Model Portfolio Service (MPS), Kingswood Personal
and Kingswood AiM portfolio.
IBOSS Model
Portfolio Service - in addition to a core range of actively
managed risk-rated portfolio's, we provide Passive, Decumulation,
and Sustainable variants too. This is our Central Investment
Proposition (CIP) and is available on most of the recognised
third-party platforms.
Kingswood Holdings Limited
Chief
Executive Officer's Statement
Kingswood
Personal - a more tailored investment management service,
often provided in parallel to a financial adviser relationship but
led by an Investment Manager
Kingswood AiM Portfolio -
launched in December 2022 to help clients with their Inheritance
Tax and similar needs.
For Institutional Clients, particularly UK
universities, we continue to provide a long-standing Fixed Income
and Treasury offering led by Nigel Davies.
Delivering Business Growth
The UK strategy is focused on
building a leading business in the sector. Our delivery of this is
through the optimising of a series of value drivers:
Acquisition
Following a frenetic 2022 which saw Kingswood
purchase ten Financial Advice businesses, during 2023 we took a
conscious decision to focus on taking time to fully integrate and
digest these businesses. This coincided with what we felt were
becoming unsustainable purchase multiples and the increased cost of
capital.
During Q1 2023 we did, however, conclude the
purchase of Barry Fleming and Partners Limited, based in Newbury,
increasing our presence in the Thames Valley area and creating a
hub. We also closed the purchase of Moloney Investments Limited
(MMPI), based in Dublin. This purchase has created an exciting
entry point for Kingswood into the Irish market. The market
displays similar features to those seen in the UK and some strong
growth opportunities. We have subsequently concluded our first
"bolt-on" acquisition in Ireland, Base-Plan Limited which closed in
Q1 2024. The acquisition of Barry Fleming and MMPI have added a
further £0.7bn AuA; 21 advisers and £3.8m Operating Profit to the
Group.
We continue to explore additional acquisition
opportunities both in the UK and in Ireland as we position
Kingswood for further growth.
Integration
Effective integration is critical to an acquiring
business such as Kingswood. Capably led by our COO, Harriet
Griffin, we have built a highly effective, collaborative and
repeatable process for integration which is both client and
colleague centric and respectful of the business being
purchased.
Kingswood Holdings Limited
Chief
Executive Officer's Statement
Organic Growth
Kingswood exhibits a clear point
of difference to its most obvious competitors in that it has three
clear routes to market in terms of organic growth.
• Growth in Financial Advice activity - an increase in adviser numbers of
17
We are actively hiring new financial advisers, as
well as developing colleagues within the
business in other roles who wish to
become financial advisers. This creates the capacity required for
organic growth.
In terms of client demand, Kingswood is typically
purchasing businesses where the principals remain committed and, in
many cases, have unfulfilled ambitions but welcome the freeing up
of some of the bureaucracy that has crept in to allow them to get
back to advising clients. By creating the right environment for
this and supporting the business where needed, we can foster an
environment of organic growth. In addition to this, other
initiatives to support organic growth range from strategic
alliances with professional firms to introducing clients to early
digital lead creation.
• Growth from vertical integration -
£1.1bn at 31 December
2023, compared to £650m in
2022.
Acquiring IBOSS gave Kingswood a Model Portfolio
Service (MPS) solution and Centralised Investment Proposition (CIP)
that has a long-term track record of high performance and low
volatility, supported by an award-winning service proposition.
Advisers and firms are not targeted in any way to move monies to
our CIP, although from the individual client appraisal process we
consider it will be more suitable than their existing investment
solution in a large number of cases. Total
vertically integrated assets were £1.1bn at FY23 representing over
20% of platformed AuA, and have aspiration over time to transfer up
to 40%.
Bryan Parkinson, appointed in
March 2024 as MD, Head of Wealth Planning will spearhead both
organic and vertically growth in 2024.
• Onboarding of IFA firms into IBOSS - 17 new
IFA firms onboarded
IBOSS core activity is the provision of out-sourced
discretionary fund management (DFM)
services to IFA firms. 2023 remained challenging here with existing
client IFA firms needing greater reassurance and investment of time
and new IFA targets showing reluctance to change their approach in
a turbulent market.
In H2 2023, as markets improved, we took the
opportunity to reorganise the IBOSS Business Development activity,
hiring new BDM's to support our growth ambition. Since then, over
the remainder of 2023 we have on-boarded 12 firms
in 5 months with a very strong forward pipeline as well.
This has coincided with a period of increasingly high performance
across the IBOSS portfolios and the emerging introduction of
enabling technology, all of which gives us confidence for
2024.
• Institutional Growth
Kingswood's excellent reputation
with UK universities and similar institutions enables the
onboarding of new clients each year and 2023 was no different. This
part of Kingswood demonstrates c.10% growth p.a.
Kingswood Holdings Limited
Chief Executive Officer's Statement
1 Building a Leading and
Progressive Business
a. We appointed Paul Hammick as our Chief Risk Officer in April
2023, introducing deeper capability to this aspect of our business.
With increased regulation (such as Consumer Duty) and regulatory
scrutiny more generally, enhancing this function should serve us
well.
b. Under the leadership of Rachel Bailey (Chief People Officer),
we continue to actively invest in our colleague proposition with a
clear aim to become a magnetic people business. We have continued
to invest in deepening our learning and development for all
colleagues, launching our accelerator programme for advisers of the
future, seen further adviser academy graduations and the completion
of ongoing leadership development programmes.
Diversity is a challenge in our
sector and where we aspire that at least 25% of our financial
advisers will be female in the medium term, compared to
20.4% at end of 2023
(c.19% at 2022). We are publishing our gender pay gap report
with these results.
Under the leadership of Lucy
Whitehead (Chief Client Officer), we continue to invest in our
client experience through technology and other means. Following
launch of our client portal - Kingswood Go in 2022, we now have
over 7,500 clients registered. We have also responded positively to
the requirements of Consumer Duty and are further embedding the
principles of this in the business. We are also proud to have
a net promoter score (NPS) of 88 which demonstrates our commitment
to ensuring service is central to our offering. We continue to
measure regularly client sentiment which drives our ambitions for
service excellence in our ambitions for service excellence in the
business.
c. In 2024 we look to invest in and transform our finance and
data capabilities and were pleased to announce the appointment of
our new Chief Financial Officer, Vinoy Nursiah earlier this year
who will lead this work.
Dimensions
As at 31 December 2023, the
UK&I business employed 367 people, of which 117 are client
facing financial advisers / investment managers operating from 19
locations with £3.5bn asset under management and as further £5.9bn
asset under advice / influence.
|
UK& Ireland
|
|
|
|
|
|
|
KPIs
|
|
2023
|
2022
|
2021
|
2020
|
|
Employees
|
|
367
|
335
|
203
|
185
|
|
Advisers
|
|
117
|
100
|
70
|
64
|
|
Locations
|
|
19
|
17
|
14
|
11
|
|
AUM (£bn)
|
|
3.5
|
3.2
|
1.7
|
1.4
|
|
AUA (£bn)
|
|
5.9
|
4.9
|
3.2
|
2.8
|
Kingswood Holdings Limited
Chief Executive
Officer's Statement
Outlook
Building on the 17 acquisitions completed under my
leadership to date and those that came before, we are well placed
to maintain momentum in this area with a healthy pipeline of future
opportunities at various stage of study and negotiation.
Organic growth is a core focus post integration
where we can confidently expect year on year growth in initial and
ongoing fees from assets under advice, in addition to which we
expect to see a healthy migration of assets to our CIP and an
increase in IFA firms using IBOSS as their outsourced DFM.
I believe that successful firms will not only truly
put the client at the heart of the relationship, but will also be
highly accessible, have clear propositions and most importantly
provide great value for money. Technology plays a key part in this
as do our colleagues hence the focus on these areas as part of our
strategy.
Key Performance Indicators
Vinoy Nursiah, Group CFO goes into more detail on
financial performance in his section but total revenue for the year
was £46.5m, a 38% increase on the prior year reflecting the impact
of recent acquisitions. 85% of UK&I revenue is recurring in
nature providing a strong, annuity style fee stream which is
critical to delivering sustainable, long term returns to
shareholders.
|
£000's (Unless otherwise stated)
|
2023
|
2022
|
2021
|
|
Total Revenue
|
46,545
|
33,844
|
21,889
|
|
Recurring Revenue %
|
85%
|
88%
|
87%
|
|
UK&I Operating Profit
|
15,677
|
11,488
|
6,144
|
To conclude, growing a sustainable business at the
pace at which we are doing it requires colleagues who are special
individuals. I am proud not only of our leadership team but of what
everyone in Kingswood does each and every day for our clients and
each other, without which the exciting story outlined in this
report would not be possible.
David Lawrence
Chief Executive Officer
27 June 2024
Kingswood Holdings
Limited
US Chief Executive Officer's
Statement
Introduction
Kingswood US is a premier wealth management
firm with c$3.7 billion in assets and offices throughout the United
States. With both an SEC-registered registered investment advisor
(RIA) and a financial industry regulatory authority
(FINRA)-licensed broker/dealer in-house alongside an
institutional-quality product offering and a personal approach to
service, Kingswood is an ideal partner for independent financial
advisors looking for a new place to call home. The business also
includes Kingwood Capital Markets, a national investment banking
platform that leverages our expanding distribution channels and
drives growth across equity and debt advisory, capital raising and
M&A.
2023 was another year of growth and business
expansion for Kingswood US. We were thrilled to be recognised with
important industry accolades: Kingswood Wealth Advisors, LLC (our
RIA) was named to the USA Today and Statista list of Best Financial
Advisory Firms for 2023, and Kingswood Capital Partners, LLC (our
broker-dealer) was named to the IBD Elite 2023 by Financial
Planning magazine.
We added 25 new registered representatives, which
further expanded our U.S. footprint and grew our total assets under
management by $0.8bn. Our newest members cited access to a larger
universe of services, solutions and technology for their clients as
a chief reason for their transition. We continue to grow the
team, seek out strategic relationships to help these advisors
expand their infrastructure and technology ecosystem, and work with
innovative investment providers to help meet the needs of our
financial advisors and their clients.
We continued to expand our in-house Investment
Banking offering, which focuses primarily on providing access to
capital for mid-market businesses that are undergoing varying
degrees of operational, financial or market-driven change. We
expanded our team of seasoned professionals, all of whom bring
relevant industry relationships and a broad network of internal and
external operating resources that can strengthen client businesses
and enhance value. As part of this expansion, Kingswood also
added new offices in New York, NY; Miami, FL; and Austin, TX.
Lastly, the completion of the BMI sale enabled us to
consolidate our two SEC-registered RIAs, Benchmark Advisory
Services, LLC and Kingswood Wealth Advisors, LLC, under the
Kingswood Wealth Advisors (KWA) brand which streamlines back-office
processes and regulatory oversight while delivering an improved
experience to advisors and their clients.
Overview: U.S.
Wealth Management Market 2023
Overall, the U.S. wealth management market in 2023
was marked by a need for adaptation and innovation in response to
economic pressures, changing client expectations, and technological
advancements. Wealth managers who successfully navigated these
challenges by embracing non-traditional assets and technologies
were better positioned for growth and competitiveness in the
evolving market landscape. Two carryover trends we are paying
particular attention to include:
Economic &
Market Conditions
High inflation, market volatility, and fluctuating
interest rates create a challenging environment for wealth
managers. These factors necessitate a closer look at pricing
strategies and cost management to maintain profitability and
competitiveness.
Private Markets and
Differentiation
As private markets became more mainstream, wealth
managers seek to differentiate themselves by offering niche
products, thematic investments, and direct co-investment
opportunities. This focus on unique offerings helped firms attract
and retain very wealthy clients.
Kingswood Holdings
Limited
US Chief Executive Officer
Statement
Continuing operations:
Key Performance Indicators
|
|
|
|
|
|
$000's (Unless otherwise stated)
|
2023
|
2022**
|
Change
|
|
Total Revenue
|
49,379
|
35,354
|
39.7%
|
|
Gross Profit
|
8,389
|
5,344
|
57.0%
|
|
Operating Profit
|
2,333
|
2,600
|
(10.2)%
|
|
AuA ($m)*
|
3,700
|
2,857
|
29.5%
|
|
# of Authorised Representatives
|
232
|
217
|
6.9%
|
* The US AUM/A is based on actuals and proforma assets from
registered representatives as at 31 December
2023.
**The 2022 Group results are restated following a successful
sale of a US subsidiary which is presented as discontinued
operations in 2023 and 2022.
Mike Nessim
Kingswood US Chief Executive Officer
27 June 2024
Kingswood Holdings
Limited
Group Chief Financial
Officer
The Group delivered another strong set of results in
2023. The UK&I reported a material improvement in financial
performance supported by acquisitions in the current and prior
period. The US division also reported an increase in revenue from
continued operations driven by growth in RIA/BD revenues and
AuM.
In 2023, we upheld stringent cost and balance sheet
discipline and our balance sheet remains well capitalised. We
continue to maintain a strong discipline in how we think about the
businesses we acquire, ensuring that the multiples we pay are
within our risk appetite and funding profile.
Financial Performance -
continuing operations.
The Group's financial performance for the year was
resilient against market headwinds demonstrating the inherent
strength of the business model's diversification across both
business lines and geography. Group revenue was £86.2m, a 37.7%
increase compared to 2022. Operating Profit of £10.8m from
continuing operations was 37.9% higher than 2022 reflecting both
acquisitions and organic growth across UK, Ireland and the US.
Operating Expenditure of £39.9m was £12.0m higher than the prior
year, reflecting the impact of the Irish acquisition of £4.2m, the
impact of acquisitions in the UK business of £4.1m, higher
operating costs in the US £2.6m and higher Central Costs of
£1.0m.
The statutory loss before tax at
31 December 2023 of £13.3m, was £2.0m higher than the prior year.
The Group incurred £7.3m of finance costs during the year on debt
facility drawdowns, reflective of our strategy to use leverage as
an accelerant for growth. Non-recurring costs, including broker
fees on M&A transactions and costs incurred to reposition the
business, totalled £4.7m for the year, a decrease of £1.6m compared
to the prior year. Non-cash impacting items of £10.4m were £1.9m
higher than 2022 and included amortisation of intangible assets,
finance costs recognised on the unwinding of deferred consideration
and preference share dividends.
The Group had £18.7m of cash at December 2023, an
increase of £2m since 31 December 2022. This increase was driven by
£39.0m debt facility drawdowns received in the year and operating
cash flows of £4.6m offset by payments relating to acquisitions of
£24.8m, deferred consideration of £9.6m, and interest paid on debt
facility of £5m. Net Assets were £60.9m, a decrease of £13.1m
compared to the prior year.
Kingswood Holdings
Limited
Group Chief Financial
Officer
Segmental Analysis
The table below provides a breakdown of the annual
financial performance of the four Operating Segments within the
Kingswood Group: Investment Management, Wealth Planning, Ireland
and Kingswood US. The Group separately reports on Central Costs
incurred to support the running of the operating segments and the
parent company.
Investment Management
AuM increased to £3.5bn, with growth of £0.3bn in
the year supported by positive market movements across Q4 2023 and
vertical integration, where an existing Wealth Planning client
chooses a Kingswood investment product or service (MPS/PPS).
Vertically integrated assets totalled £1.1bn at
31 December 2023,
compared to £650m in 2022. Revenue was £8.0m, an
increase of 10.9% compared to prior year and Operating Profit was
£3.0m compared to £2.1m in 2022. Operating Expenditure was broadly
flat on 2022 levels.
Wealth Planning
AuA of £5.2bn increased by 5.8% compared to prior
year and included £140m of acquisition related inflows and 2.9%
from organic growth. Revenue was £32.4m, an increase of 21.5%
compared to 2022 and Operating Profit was £10.7m, an increase of
14.5%.
Kingswood Holdings
Limited
Group Chief Financial
Officer
US
AuA of £2.9bn increased by 29.5% in 2023 on a
reported currency basis and revenue of £39.6m represented an
increase compared to the prior year (2022: £28.7m). The Kingswood
US wealth management business increased its authorised
representatives to 232 by December 2023, with $3.7bn of client
assets. Due to Investment Banking revenues being transactional in
nature, recurring revenue in the US is lower than the UK&I and
also decreased year over year.
Central
Costs were £6.7m in 2023 (2022: £5.8m). The Group continued
to apply prudence to the management of its cost base in 2023.
However, costs increased year over year as a result of the
strengthening of the executive team and central functions to
support a larger business.
Reconciliation between Operating Profits and
Statutory Profits
Operating Profit is considered by the Board to be an
accurate reflection of the Group's performance when compared to the
statutory results, as this excludes income and expense categories
which are deemed of a non-recurring nature or a non-cash operating
item. A reconciliation between operating and statutory profit
before tax for the year ended 31 December 2023 with comparatives is
shown in the table below:
Group
|
|
|
|
(Restated*)
|
|
|
2023
|
|
2022
|
|
£ 000
|
|
£ 000
|
|
Operating Profit
|
10,816
|
|
7,842
|
|
Business Re-positioning Costs
|
(1,894)
|
|
(1,964)
|
|
Transaction Costs
|
(2,828)
|
|
(4,379)
|
|
Finance Costs
|
(12,966)
|
|
(6,398)
|
|
Other Finance Costs
|
(6,046)
|
|
(4,470)
|
|
Remuneration Charge (Deferred
Consideration)
|
(474)
|
|
(1,852)
|
|
Other Gains / (Losses)
|
131
|
|
-
-
|
|
Loss before Tax
|
(13,261)
|
|
(11,221)
|
•
2023 Business Re-positioning Costs mainly
comprise restructuring costs, share based payment expenses, US rep
recruitment fees and technology investment costs.
•
Transaction costs are acquisition related (legal
fees, due diligence, broker fees and project costs). In 2023 the
gain on sale of subsidiary of £1m is included in transaction
costs.
•
Finance costs reflect £2.6m dividends that have
accrued on the Group's preference shares in issue and £7.3m of
interest accrued from the debt facility. The remaining £3.1m of
finance costs charged to the P&L in 2023 largely comprise costs
related to the unwinding of deferred consideration.
•
Other finance costs represent £4.9m from the
amortisation of intangible assets and £1.1m depreciation of Right
of Use Assets, property, and IT/office equipment.
•
£0.4m Remuneration Charges reflect deferred
consideration payments resulting from acquisitions completed in
2019 and 2020. Under the treatment of deferred consideration per
IFRS 3, in circumstances where the payment of deferred
consideration is contingent on the seller remaining within the
employment of the Group during the deferred period, the contingent
portion of deferred consideration is treated as remuneration and
accounted for as a charge against profits.
Kingswood Holdings
Limited
Group Chief Financial
Officer
Discontinued operations
The Group's US business sold, its broker-dealer
subsidiary BMI, renowned for offering a variety of financial
services to both institutional and retail clients, for proceeds of
$5m (£4.1m), a gain on sale of £1m was recognised in 2023. The sale
of the business completed on 9 November 2023. The sale qualifies
BMI as a discontinued operation under IFRS 5, "Non-current Assets
Held for Sale and Discontinued Operations." As such, the results of
BMI have been segregated from continuing operations for both the
current and prior periods. The results of BMI up to the date of
sale have been presented separately as discontinued operations.
BMI's financial performance during 2023 deteriorated in the period
through to its disposal with revenue generated of £38m (2022: £83m)
and a net loss of £0.6m (2022: net profit £0.3m). At 31 December
2022, £7.4m assets and £5.4m liabilities relates to BMI, which was
classified as a discontinued operation (see Note 2 and Note 6 for
details).
Balance Sheet
Net Assets at 31 December 2023 were £60.9m (2022:
£73.9m). Non-current assets were £152.5m for the year-ended 31
December 2023 (2022: £132.3m), an increase of £20.2m compared to
the prior year reflecting increases to intangible assets and
goodwill from acquisitions completed in 2023. Current assets were
£33.1m (2022: £29.0m) reflecting a £2m increase in cash and
increase in trade receivables of £9.5m primarily due to £7.4m of
assets in prior year being reclassified to held for sale. Cash at
31 December 2023 was £18.7m (2022: £16.7m).
Current liabilities were £39.6m at 31 December 2023
(2022: £38.4m). The increase of £1.2m reflects a £3.1m increase in
deferred consideration liability partially offset by a reduction in
US investment banking commission accruals. Non-current liabilities
were £85.1m as at 31 December 2023 (2022: £49,0m). The increase of
£36.1m year over year reflects a £38.5m net movement on the debt
facility and an increase of £4.9m in deferred tax liabilities,
offset by a £6.9m reduction in non current
deferred consideration and £0.4m lease liabilities and other long
term liabilities.
Acquisitions
We are pleased with the progress made in expanding
Kingswood, with businesses acquired in UK and Ireland respectively
in 2023. We have strong experience across the senior management
team and have developed a strong internal capability to complete
transactions quickly and efficiently.
Our selection process is rigorous, and we look at
many factors including cultural fit, client focus and dedication,
and key personnel retention to preserve and grow those client
relationships. Our model is to free up advisers' time to focus on
their clients, and to provide a centralised, efficient support
infrastructure. We are committed to driving organic growth within
every acquired business and bring a 'whole of wallet' approach
where Kingswood can bring considerable additional products and
services to the table for clients, generating revenue growth from
the existing client base.
Financially, we assess businesses on strict
performance parameters, with a focus not just on revenue and profit
measures but also on Assets under Advice and Management (AUA/M) and
Return on Investment (ROI). Post-acquisition, we create monthly
performance reports against these metrics and adjust strategy and
implementation accordingly.
Kingswood Holdings
Limited
Group Chief Financial
Officer
|
Date
|
Acquisition
|
AUM/A £bn
|
No of
Advisers
|
Acquired Operating Profit
£m
|
|
Jan-23
|
Barry Fleming Partners
|
0.10
|
3
|
0.7
|
|
Mar-23
|
Moloney Investments Ltd
(MMPI)
|
0.60
|
14
|
3.1
|
|
|
Total
|
0.74
|
17
|
3.8
|
Outlook
I was delighted to join the Kingswood team as Group
CFO in March 2024. My experience in business development,
client service, finance transformation and building best-in-class
finance teams marries well with Kingswood's next key phase of its
integration programme, underpinning the delivery of the 5 year
strategic plan.
Kingswood remains well positioned as an
international integrated AIM-listed provider in a highly fragmented
market of over 27,000 independent advisors facing the increased
regulatory requirements of the FCA's Consumer Duty. This
represents a twin market opportunity of both a flight to quality
for clients and also increased consolidation as regulatory
pressures mount on smaller providers.
Over the last three months, I have worked closely
with the Group's highly talented business leaders, the experienced,
engaged and highly supportive board, shareholders and
advisers. It is highly motivating and rewarding to work
alongside such expertise and I am left very optimistic that this
collective will further build upon the Group's successes to
date.
In the medium term, we are targeting for Group
operating profit to increase to £25m with AuM/A of £20bn:
· Of which, UK&I
business will make up £21.5m operating profit and £15.5bn AuM/A
· In the US, we expect
to derive increased value from the now established Kingswood
Investment Banking operations. We will continue to grow our core
RIA/BD business by onboarding additional advisers, as opportunity
allows.
Kingswood's financial strategy is to partner closely
with the leadership and deliver decision support via best-in-class
people, processes and platforms to drive growth, profit and
cashflow. We will maintain a robust and disciplined balance
sheet via a risk-based control framework.
Vinoy Nursiah
Group Chief Financial
Officer
27 June 2024
Kingswood Holdings Limited Principal Risks and
Uncertainties
Principal Risks and Uncertainties
The Board is ultimately responsible for the
management of risk and regularly considers the most significant and
potential risks likely to impact delivery of the Group's strategy.
The Board also has responsibility for implementing and maintaining
a Group-wide system of internal controls and a robust risk
management framework, and regularly reviewing the efficiency and
effectiveness of those systems and frameworks.
Our risk assessment process considers both the
likelihood and impact of risk events which could prevent the
implementation of Group strategy and have a material impact on the
performance of the Group. These risks can arise from internal or
external events. The principal risks identified as having a
potential material impact on the Kingswood Group are summarised
below together with our mitigation strategies. This list is by no
means exhaustive and can and will change over time.
Overview of Risk Management
Framework
Kingswood offers a suite of wealth planning and
investment management solutions to its clients, which range
from private individuals to some of the UK's largest
universities and institutions. Kingswood continues to focus on
taking advantage of consolidation opportunities in the UK, Ireland
and US wealth management sectors to build a larger, scaled
business.
In the UK, Kingswood is the 100% owner of a number
of regulated entities offering a full financial planning service
primarily to UK based private client individuals as well as a small
number of trusts and corporate clients. This covers advice on
investments, pensions, protections, and a range of other
services.
The Group offers investment management for private
client individuals via risk graded Model Portfolio Services, an
OEIC, and Personal Portfolio Services. There is also an
institutional business offering a range of fixed income mandates to
institutional clients.
Some legal entities within the Group are regulated
firms. This means that they have to be approved by the FCA and
adhere to regulatory requirements.
Scope
This Risk Management Framework
applies to the Group's UK businesses.
1. Governance
The following committees provide formal governance
and oversight and oversight of the Risk Management Framework.
Board: The Board is
ultimately responsible for the Risk Management Framework across the
Group. In practice, oversight is delegated to the committees set
out below, with escalation of material items to the Board as
required.
Audit & Risk
Committee: This committee is responsible for assisting
the Board in its oversight of risk management across the Group.
This includes:
· Oversight & challenge to maintain a supportive risk
culture in the Group;
· Reviewing key risk metrics;
· Reviewing the key risk register;
· Overseeing and challenging risk appetite;
· Ensure risks are appropriately identified and
managed.
· Monitoring the integrity of the group's financial
reporting
· Ensuring effective internal controls are in place
· Monitoring the performance of external audit (and any
internal audit)
Nomination & Remuneration
Committee: Oversight and challenge of key appointments
and executive remuneration.
Regulated Entity Boards:
Oversight and challenge of overall business performance, risks,
controls and consumer outcomes in respect of the regulated
firms.
Executive Committee:
Executive responsibility for ensuring the overall performance of
the firm and its strategy.
Risk & Compliance
Committee: The main executive level committee
responsible for the reporting. monitoring, review and challenge of
all risk types facing the firm. This committee is attended by the
company executives and subject matter experts as required. The
committee reports the regulated entity Boards as well as the Audit
& Risk Committee.
2. Three Lines of
Defence
To ensure the effectiveness of Kingswood Group's
risk management framework, the Board and Senior Management rely on
adequate line functions.
1st Line of Defence: All
businesses within the group have day to day ownership and
responsibility for their risks.
· Identifying and assessing risks;
· Managing & controlling risks;
· Measuring risks and developing key risk
indicators;
· Mitigating risk and balancing reward;
· Reporting and escalation.
2nd Line of Defence:
Kingswood maintains an independent 2nd line Risk & Compliance
function that provides support and independent challenge to the
first line. Responsibilities include:
· Design & operation of the Risk Framework;
· Risk
Assessment;
· Risk
Appetite;
· Risk
reporting;
· Independent 2nd line assurance testing;
· Challenge and oversee the adequacy of controls & action
plans.
3rd Line of Defence: The
Group commissions external consultants in lieu of an internal audit
function in order to challenge the adequacy of our Risk Management
and Compliance Frameworks.
3. Risk
Framework
The Risk Framework details the core risk management
components and structures used across the firm, and defines a
consistent and measurable approach to identifying, assessing,
measuring, monitoring, controlling, mitigating, and reporting
risk.
The remainder of this section sets out the
techniques and organisational arrangements that ensure all
principal risks facing the group are identified and understood
along with the processes in place to protect the group and prevent
detriment to its customers and colleagues.
4. Risk Types
|
Risk Type
|
Risks identified
|
|
Capital
|
· Cash position;
· ICARA;
· Funding
|
|
Liquidity
|
· Corporate cash deposited with external banks;
· Failed trades;
· Indirect liquidity risk associated with client
portfolios;
· Poor or uncertain streams of income;
· Low current ratio <1 (current asset / current
liabilities)
|
|
Market
|
· Impact on revenue from market movements (i.e. interest &
foreign exchange rates, equity & commodity prices, margin,
credit spreads & implied volatilities & political/country
risk);
· Indirect market risk in client portfolios
|
|
CASS
|
· Client cash deposited with external banks (CASS
rules)
|
|
Climate
|
· Inability to comply with reporting and disclosure
requirements
|
|
Change / Execution
|
· Acquisitions and adaptations to inorganic growth;
· Technology and regulatory developments
|
|
Compliance & Corporate Governance
|
· Governance arrangements, (including Product
Governance);
· AIM listed company obligations;
· Risk and Compliance monitoring plan
|
|
Conduct file quality - (investment)
|
· Suitability of client files;
· Investment Manager Training & Competence
scheme
|
|
Conduct file quality - (wealth planning)
|
· Suitability of client files;
· WP T&C scheme
|
|
|
|
|
Conduct (other)
|
· Employee behaviours, client centric culture
· Senior Manager & Certification Regime and regulatory
conduct
|
|
Data
|
· Protection and integrity of client data
· Protection and integrity of firm data (corporate and
employee)
|
|
Enterprise-Wide Risk Management Framework
|
· Risk management identification, assessment and
management
|
|
Financial Crime
|
· Identification or prevention of suspicious activity from
clients, third parties and employees
· Inadequate systems & controls to mitigate organisational
vulnerabilities to Market Abuse Regulation, Anti Money Laundering,
Anti Bribery & Corruption
|
|
Information Security and Cyber
|
· Data loss
· Data/Cyber Security and unauthorised access
· IT infrastructure
|
|
Insurance (Group)
|
· Inadequate cover (Professional Indemnity Insurance, Physical,
Employee)
· Poor coverage of perils
|
|
Operational Resilience
|
· Business continuity
· Disaster recovery plan and crisis management
|
|
Business Process (investment operations)
|
· Systems
· Process
· People
|
|
Business Processes (wealth planning)
|
· Systems
· Process
· People
|
|
People
|
· Resourcing and key person dependency
· Skills and capacity of future workforce
|
|
Regulatory & Legal
|
· Risk of regulatory fine or censure
· Litigation, reputational damage
· Complaints upheld
|
|
Third Party
|
· Supply chain risks
· Procurement
· Competition risk
|
5. Risk Appetite
Risk appetite statement is an expression of how much
risk the Group is willing to take. Some risks must be taken, but
these should be managed. Other risks must be avoided such as harm
to customers or lack of compliance with regulation.
The Board has the ultimate responsibility for the
development of appropriate strategies, systems, and controls for
the management of risks within the business.
The risk appetite statement is reviewed at least
annually, or more often as deemed appropriate. Any high risks
are required to have a clear mitigation plan presented to the Audit
& Risk Committee
6. Risk
Assessments
The Group identifies its key risks via a Top-Down
Risk & Control Self-Assessment. This is intended to identify
the key risks facing the Group as a whole. The 'risk-map' is
regularly reviewed by the Risk Committee and by the Audit &
Risk Committee. Risks are assessed on a likelihood and impact basis
with key controls and further mitigating actions identified.
More detailed process risk assessments make take
place on an ad-hoc basis in relation to particular processes,
systems or areas of risk.
7. Risk Events /
Breaches
The Risk team maintains a log of Risk events and
breaches to ensure that any affected clients are put back in the
position they would have been had there been no incident.
The team also ensures that the risk event is
understood, and that appropriate corrective actions are taken as
well as preventative actions to minimise the risk of future
reoccurrence. Root causes, themes and trends are monitored to
identify any areas for further attention.
8. Key Risk
Indicators
A suite of measures are maintained
each month to track movements in the key risks as per the Risk
map.
These include:
· File
review results;
· Annual reviews;
· Complaints;
· Incidents;
· Breaches;
· Compliance monitoring actions;
· Any
actions arising from independent 2nd line and external assurance
reviews.
9. Monitoring and
Reporting
The Kingswood Risk team coordinates monthly
reporting to the Risk Committee and quarterly to the Audit &
Risk committee.
10. ICARA &
IFPR
Under the IFPR rules, the investment entities within
the Group are required to complete an ICARA which may be subject to
review by the FCA as part of their Supervisory and Evaluation
process (SREP). The Group has two investment management
subsidiaries subject to this regulation - IBOSS Asset Management
and Kingswood Investment Management - and both are assessed
separately.
The ICARA covers:
· Minimum capital calculations
· Base
case financial forecast
· Material Harm analysis
· Liquidity Risk analysis
· Stress testing
· Wind
down plan
· Disclosures
The ICARA is managed by the Finance & Risk teams
and updated regularly throughout the year and formally on an annual
basis.
Kingswood Holdings Limited Corporate social
responsibility
Introduction
Our commitment to Corporate Social Responsibility
(CSR) reflects our values and our aspiration to create long-term
value for all stakeholders, including our clients, employees,
shareholders, suppliers, communities, and the environment. By
embedding Corporate Responsibility in everything that we do, we
will ensure that every single touch point for our clients adheres
to consistent standards and objectives.
Our Environmental, Social, and Governance (ESG)
framework helps us to identify and manage the material risks and
opportunities related to environmental, social, and governance
factors that can impact our long-term financial performance. This
combined approach to CSR and ESG is integral to our strategy and
our mission to be a sustainable and responsible business.
This CSR and ESG statement outlines our approach,
our key priorities and our progress in the past year. As an
acquisitive-based organisation, we also use measurement practices
on our new acquisitions to ensure we have a clear benchmark upon
integration into the Group.
Our Approach
Our approach to CSR and ESG is based on our
commitment to creating sustainable value for all our stakeholders.
We believe that our business operations should be conducted in a
responsible and ethical manner that promotes economic, social, and
environmental well-being. To achieve this, we have developed an ESG
framework that is integrated into our business strategy,
decision-making processes, and risk management framework. Our
approach is guided by our values of impact, teamwork and integrity,
and a respect for human rights and the environment.
Our Key Priorities
We are consciously focusing on where we can make the
largest positive impacts on the environment and have identified the
following ESG priorities as the most significant for our business
and stakeholders: climate change, labour practices, data privacy,
and stakeholder engagement. We recognise the potential risks and
opportunities associated with these issues and have prioritised our
efforts accordingly. We have established targets and KPIs to
measure our performance and progress in these areas, and we
regularly review and update our strategy to reflect changes in the
external environment and stakeholder expectations.
On a continuous basis we are looking at how we can
both improve the client experience as well as reducing our impact
on the environment. Our partnership with Ecologi has enabled
us support projects in the world that support carbon
regeneration.
The increasing requirements from clients for
flexibility has allowed through the use of technology for our
frontline teams to be able to meeting with clients virtually when
required which not only provides clients with that visual
connection but it also supports our impact on the
environment.
"Kingswood Go", our client portal has an increasing
number of clients using the application. Not only does this
application provide high levels of security to our clients for
peace of mind, but it also allows for documents to be shared
digitally and portfolio valuations to be available to clients which
eliminates the need for printing and mailing of documents. This
digital solution not only saves costs and reduces paper waste, but
also enables our customers to access information more quickly and
conveniently.
We believe that offering flexibility in the way that
we work is an important way to reduce our carbon footprint and
promote sustainability, while also encouraging a greater work-life
balance for all our employees. We recognise the importance of
diversity and inclusion, and we are committed to fostering a
culture that values and promotes it at all levels of our
organisation. Research shows that by 2025, 60% of the UK wealth
pool will belong to women so it is crucial that we have appropriate
female representation in our organization. Over 2023, we are proud
that 20% of our frontline advisers were female, and increasing this
percentage continue to be an area of focus for us.
Kingswood Holdings Limited Corporate social
responsibility
Our Performance
During 2023, we remained focused on becoming a more
responsible corporate citizen in the communities in which we
operate, taking the following actions across our ESG framework:
The environment
•
Our usage of DocuSign has seen us save over 160k
sheets of paper and 13.5 lbs of Co2 over 2023
•
Increased the number of client registrations on
Kingswood Go to over 7,500 since launching in March 2022.
•
Our partnership with Ecologi, a climate solution
has enabled us to offset our entire carbon footprint through
supporting a broad range of carbon avoidance and reforestation
around the globe.
Social
•
Actively supported several initiatives, including
'Black History Month', with diversity and inclusion remaining at
the forefront of our agenda.
•
Continued to develop our people through the
roll-out of our Leadership Development Programme and extension of
our Career Development Program.
•
Heightened the focus on awareness dates that
would affect a broad range of colleagues, such as Mental Health
Awareness and introduced our mental health first aiders as a
package of initiatives to colleagues when they need
them.
•
Continued to deliver an outstanding service to
our clients across the globe. In the UK we continue to rate
4.8/5 on Vouched For and regularly survey our
clients, achieving a Net Promoter Score of +88 in December 2023
(2022: +46).
•
In the UK we committed all fundraising activities
to our charity of Mind, which was chosen by our colleagues.
In the US we are passionate about serving our communities and are
proud to support A friend's house, Skull Games and Camp Cowboy
supporting military families with financial contributions and the
gift of our team members' time.
We currently have 400 employees across our global
operations:
Kingswood Holdings Limited Corporate social
responsibility
Governance
•
Demonstrated our commitment to improving our
diversity and inclusion practices through increasing the female
representation of our Board from 14% to 38%. We believe that this
has brought us closer to achieving our goal of having a board that
reflects the diversity of our stakeholders.
Our Governance
Our CSR and ESG governance structure is based on
best practices and ensures that we have clear accountability,
oversight, and transparency. Jonathan Freeman, in his capacity as
an independent Non-Executive Director, continues to assume
responsibility for ensuring that the Group has appropriate
corporate governance standards in place and that these standards
are applied within the Group as a whole. Our Chief Client Officer,
Lucy Whitehead, assumes responsibility for our ESG initiatives and
reporting to the Board.
We engage with our stakeholders regularly to ensure
that their views and concerns are taken into account. We also
disclose our ESG performance through various channels, including in
our Annual Report, and company website.
Future commitments
We are committed to continuous improvement in our
CSR and ESG performance and have outlined our commitments for the
coming years below. We believe that these commitments will help us
to create long-term value for our stakeholders and contribute to a
more sustainable and responsible future.
· Reduce our carbon emissions intensity year on year.
· Providing further educationally based training for colleagues
to learn more about diversity and behavioural issues in the
workplace.
· Continuing our mission to support diversity and have a
collegiate workforce
We welcome feedback and suggestions from our
stakeholders on how we can continue to improve our CSR and ESG
practices and outcomes.
Kingswood Holdings Limited
Board of directors
Governance
The Directors of Kingswood Holdings Limited
recognise the importance of sound corporate governance and have
chosen to apply the Quoted Companies Alliance Corporate Governance
Code (the QCA Code). The QCA Code takes key elements of good
governance and applies them in a manner that is workable for the
different needs of growing companies and was developed by the
Quoted Companies Alliance as an alternative corporate governance
code applicable to AIM companies.
Jonathan Freeman, in his capacity as an independent
Non-Executive Director, has assumed responsibility for ensuring
that the Group has appropriate corporate governance standards in
place and that these requirements are followed and applied within
the Group as a whole. The QCA Code corporate governance
arrangements that the Board has adopted are designed to ensure that
the Group delivers long term value to its shareholders and that
shareholders have the opportunity to express their views and
expectations for the Group in a manner that encourages open
dialogue with the Kingswood Board.
Kingswood's Board has the responsibility to set
strategy for the Group and to monitor the performance of the
operating subsidiaries. The subsidiary boards have the
responsibility to oversee, govern and direct the operations of the
subsidiary entities in line with relevant rules and regulations and
overall Group strategy.
The respective Boards have established various
committees, each of which has written terms of reference. The
principal committees of the Group Board are the Audit and Risk
Committee and the Nomination and Remuneration Committee.
The principal methods of communicating the
application of the QCA Code are this Annual Report and the Group's
website which sets out the 10 QCA Code principles and how Kingswood
Holdings Limited complies with those principles and the related
disclosures: www.kingswood-group.com/corporate-governance.
The Group applies all the QCA principles in full.
Corporate governance structure
The role of Non-Executive Chairman is held by David
Hudd. The Board considers that the Non-Executive Directors provide
a strong and consistent independence to the Executive members.
During the year, two new independent Non-Executive Directors, Gemma
Godfrey and Jane Millar joined the Group.
None of the Non-Executive Directors are involved in
the day-to-day management of the Group and are free from any
business or other relationship which could materially interfere
with their judgement. Biographies of the Non-Executive Directors
are contained on pages 33 to 35.
Kingswood Holdings Limited
Board of directors
During the year ended 31 December 2023, the
Non-Executive Chairman was responsible for leadership of the Board,
creating conditions for the effectiveness of the Board and
individual Directors and developing the Group's strategy. The CEO
and US CEO were responsible for running the Group's business day to
day and, subject to Board agreement, the implementation of
strategy.
The minutes of scheduled meetings of the Board are
taken by the Company Secretary. In addition to constituting records
of decisions taken, the minutes reflect questions raised by Board
members in relation to the Group's business and, in particular,
issues arising from the reports included in the Board or Committee
papers circulated prior to the relevant meeting. Unresolved issues
(if any) are recorded in the minutes.
Corporate governance and the management of the
Group's resources is achieved by regular review and discussion,
through meetings and video calls, monthly management accounts,
presentations and external consultant reports and briefings.
Independence of Board of Directors
The Board considers that all Non-Executive Directors
bring an independent judgement. The QCA code recommends that at
least two independent Non-Executive Directors sit on the Board. At
year-end, the Board had nine members, with one Executive and eight
Non-Executive Directors. David Hudd, Gemma Godfrey, Jane Millar and
Jonathan Freeman are considered 'independent'. Jonathan Massing,
Gary Wilder, Howard Garland, Duncan Gerard and Lindsey McMurray are
not considered independent due to the size of shareholding they are
directly or indirectly associated with.
During the year under review, the Board comprised:
• Jonathan Freeman (Independent Non-Executive Director)
• Howard Garland (Non-Executive Director)
*
• David Hudd (Independent Non-Executive Chairman)
• Jonathan Massing (Non-Executive
Director, Deputy Chairman)
• Lindsey McMurray (Non-Executive Director)
• Gary Wilder (Non-Executive Director)
• David Lawrence (Executive Director, Chief Executive
Officer)
• Gemma Godfrey (Independent Non-Executive Director)
• Jane Millar (Independent Non-Executive Director)
• Duncan Gerard (Non-Executive Director) **
*Howard Garland resigned from the board on 30
November 2023.
**On 1 December 2023, Duncan Gerard joined the Board
as aNon-Executive Director.
The Board has scheduled meetings at least quarterly
with additional meetings taking place as required. The Board
formally met six times throughout the year. Meetings of the Board
are held at the Group's offices in London or via video call. The
number of main Board meetings and committees held in 2023 and
individual attendance was as follows:
Kingswood Holdings Limited
Board of directors
|
Director
|
Board
|
Audit Committee
|
Nomination & Remuneration
Committee
|
|
Jonathan Freeman
|
6/6
|
4/4
|
1/1
|
|
Howard Garland
|
1/6
|
|
|
|
David Hudd
|
6/6
|
3/4
|
1/1
|
|
Jonathan Massing
|
6/6
|
|
|
|
Lindsey McMurray
|
6/6
|
|
|
|
Gary Wilder
|
5/6
|
|
|
|
David Lawrence
|
6/6
|
|
|
|
Gemma Godfrey
|
5/6
|
|
|
|
Jane Millar
|
1/1
|
4/4
|
|
The Board has approved a formal schedule of matters
reserved for consideration and decision. These are divided into
several key areas, including but not limited to:
· Constitution of the Board, including its various Committees,
and succession planning (as recommended by the Nomination and
Remuneration Committee).
· Group strategy and transactions.
· Financial reporting (including approval of interim and final
financial statements).
· Group finance, banking, and capital structure arrangements.
· Regulatory matters (including the issue of shares,
communication, and announcements to the market).
· Group compliance risk management and control processes and
decisions (as recommended by the Audit and Risk
Committee).
· Approval of remuneration policies (as recommended by the
Nomination and Remuneration Committee).
Matters requiring Board and Committee approval are
generally the subject of a written proposal by the Executive
Directors to the Board (or Committee) and circulated prior to the
relevant meeting. All Directors receive appropriate information on
the Group comprising a financial report and other relevant
paperwork from each of the responsible executives and other members
of senior management before each scheduled Board meeting. The
Executive Directors and other invited members of senior management
present reports to each meeting on key issues including strategy,
risk & compliance, finance, operations, people, and legal
matters.
The Board recognises the importance of on-going
professional development and education, particularly in relation to
new laws and regulations potentially impacting the business of the
Group. Such training may be obtained by Directors individually or
through the Group. Directors also maintain knowledge and skills
through their day-to-day roles and may additionally obtain
independent professional advice at the Group's expense. Third party
Directors' and Officers' liability insurance at a level considered
appropriate for the size and nature of the Group's business is
maintained.
The terms and conditions of each Director's
appointment are available for inspection at the Group's head office
in London during normal business hours. The letters of appointment
of each Non-Executive Director specifies the anticipated level of
time and commitment including, where relevant, additional
responsibilities in respect of the Audit and Risk, and the
Nomination and Remuneration Committees. Details of other material
commitments of the Non-Executive Directors are disclosed to the
Board and maintained in a register by the Company Secretary.
Kingswood Holdings Limited
Board of directors
Subsidiary boards
Each of the Group's UK operating subsidiary
companies has a separate Board which meets at least quarterly to
discuss key matters pertaining to the subsidiaries' activities. The
Chief Executive Officer, Group Chief Financial Officer, Group Chief
Operating Officer and Group Chief Risk Officer sit on each of the
operating subsidiary boards with Independent NED's attending as
observers. The Group's US interests are ultimately held through its
subsidiary company KW Wealth Group Limited and to date US
investments have been reviewed by the Group Board. In addition, key
Group Board members sit on the US division's advisory board.
Board committees
The Board has established committees including Audit
& Risk and Nomination & Remuneration, each with separate
terms of reference. These are available for viewing at Kingswood's
London office.
Audit and Risk committee
The Audit and Risk Committee is chaired by Jonathan
Freeman with David Hudd joining in January 2020 and Jonathan
Massing in January 2021. In January 2023, Jonathan Massing resigned
from the committee and Jane Millar joined. The Audit and Risk
Committee is responsible for providing formal, transparent
arrangements to the application of suitable financial reporting and
internal control principles having regard to good corporate
governance. The committee is also responsible for monitoring the
external audit function including the independence, objectivity,
and cost-effectiveness of the Group's external auditor. The meeting
is attended by the Group Chief Executive Officer, Group Chief
Financial Officer and Group Chief Risk Officer.
The independence and effectiveness of the external
auditor is reviewed annually. The possibility of undertaking an
audit tender process is considered on a regular basis. The Audit
and Risk Committee meets at least twice a year with the auditors to
discuss their appointment, independence and objectivity, the
issuance of the Interim and Annual Reports and any audit issues
arising, internal control processes and any other appropriate
matters. Fees in respect of audit services are set out in note 7 of
the Notes to the Financial Statements. Fees for non-audit services
paid to the auditors are not deemed to be of such significance as
to impair independence and therefore the Audit Committee considers
the objectivity and independence of the auditors safeguarded.
Internal control
The Board is responsible for establishing and
maintaining the Group's system of internal control and for
reviewing its effectiveness. The system of internal control is
designed to manage, rather than eliminate, the risk of failure to
achieve business objectives and can only provide reasonable, but
not absolute, assurance against material misstatement or loss.
The Audit and Risk Committee monitors and reviews
the effectiveness of the system of internal control and reports to
the Board when appropriate with recommendations. The annual review
of internal control and financial reporting procedures did not
highlight any issues warranting the introduction of an internal
audit function. It was concluded, given the current size and
transparency of the operations of the Group, that an internal audit
function was not required at this time. The main features of the
internal control system are outlined below:
Kingswood Holdings Limited
Board of directors
A control environment exists through close
management of the business by the Executive Director. The Group has
a defined organisational structure with delineated approval limits.
Controls are implemented and monitored by the Executive
Director.
The Board has a schedule of reserved matters
expressly for its consideration and this includes approval of
acquisitions and disposals, major capital projects, treasury and
risk management and approval of business plans and budgets.
The Group utilises a detailed budgeting and
forecasting system. Detailed budgets are prepared annually by the
Executive Directors and senior management and submitted to the
Board for approval. Forecasts are regularly updated to reflect
changes in the business including cash flow projections and are
monitored by the Board. Actual results are monitored against
budgets and variances reviewed by the Board.
Financial risks are identified and evaluated for
consideration by the Board and senior management. Standard
financial control procedures are operated throughout the Group to
ensure assets are safeguarded and proper accounting records
maintained.
Nomination and Remuneration committee
The Nomination and Remuneration Committee is
responsible for the consideration of Board appointments, the review
of Board structure, its size and composition and the identification
of future Board requirements by reference to the balance of skills,
knowledge and experience present on the Board and the scale and
direction of the Group. It is chaired by David Hudd, and Jonathan
Freeman and Gemma Godfrey are also members.
The Committee is also responsible for establishing a
formal and transparent procedure for executive remuneration policy
and for determining the remuneration packages of individual
Directors. This includes agreeing with the Board the framework for
remuneration of the Group Chief Executive Officer, the Company
Secretary, and such other members of the executive management of
the Group as it is designated to consider.
It is also responsible for recommending to the Board
the total individual remuneration packages of each Director
including, where appropriate, bonuses, incentive payments and share
options. No Director is involved in a decision regarding their
personal remuneration. The Board considers the current composition
of the Nomination and Remuneration Committee appropriate given the
size of the Group. There was one Nomination and Remuneration
Committee meeting held during the financial year ended 31 December
2023.
Remuneration policy
The Board retains responsibility for overall
remuneration policy. Executive remuneration packages are designed
to attract and retain executives with the necessary skill and
experience to hold a senior management role in the Group. The
Committee recommends to the Board the remuneration packages by
reference to individual performance and uses the knowledge and
experience of the Committee members, published surveys relating to
AIM companies, the financial services industry and market changes
generally. The Committee has responsibility for recommending any
long-term incentive schemes.
The Board determines if Executive Directors are
permitted to serve in roles with other companies. Such permission
would be granted on a strictly limited basis, where there are no
conflicts of interest or competing activities and providing there
is not an adverse impact on the commitments required to the Group.
Earnings from such roles would be required to be disclosed to the
Committee Chairman.
Kingswood Holdings Limited
Board of directors
There are four main elements of the remuneration
package for Executive Directors and executive staff:
1. Basic salaries and benefits in kind: Basic salaries are
recommended to the Board by the Committee, based on the performance
of the individual and the compensation for similar positions in
comparable companies. Benefits in kind including death in service
cover are available to all staff and Executive Directors. Benefits
in kind are non-pensionable.
2. Share options: The Company operates approved share option
schemes for key personnel to incentivise performance through equity
participation. Exercise of share options under the schemes is
subject to defined exercise periods and compliance with the AIM
Rules. The schemes are overseen by the Nomination and Remuneration
Committee which recommends to the Board all grants of share options
based on the Committee's assessment of personal performance and
specifying the terms under which eligible individuals may be
invited to participate. The AIM rules refer to the requirement for
performance related elements of remuneration to form a significant
proportion of the total remuneration package of Executive Directors
and should be designed to align their interests with those of
shareholders. The Nomination and Remuneration Committee currently
considers that the best alignment of these interests is through the
continued use of performance incentives through the award of share
options in the Company's existing long term incentive plan (LTIP)
awards scheme.
3. Bonus scheme: The Group has a discretionary bonus scheme for
Executive Directors and staff which is specific to each individual
and their role within the Group.
4. Pension contributions: The Group pays a defined contribution
to the pension schemes of Executive Directors and staff. The
individual pension schemes are private, and assets are held
separately from those of the Group.
Policy on non-executive remuneration
All Non-Executive Directors, except Pollen Street
Capital's representatives to the Board, receive a fee for their
services as a Director which is approved by the Board, mindful of
their time commitment and responsibilities and current market rates
for comparable organisations and roles. Non-Executive Directors are
also reimbursed for travelling and other incidental expenses
incurred on Group business.
The Board encourages the ownership of shares in the
Company by Executive and Non-Executive Directors and in normal
circumstances does not allow Directors to undertake dealings of a
short-term nature.
Ownership of the Company's shares by Non-Executive
Directors is considered a positive alignment of interest with
shareholders. The Board periodically reviews the shareholdings of
Non-Executive Directors and seeks guidance from its advisors if, at
any time, it is concerned that the shareholding of any
Non-Executive Director may, or could appear to, conflict with their
duties as an independent Non-Executive Director of the Company.
Directors' remuneration, including Directors'
interests in share options over the Company's share capital, are
set out in the Directors' Report (page 36) and the Directors'
Remuneration Report (page 40).
Re-election
Under the Company's articles of association, all
Directors are subject to election by shareholders at the AGM
immediately following appointment. All Directors formally retire by
rotation at intervals of no more than three years, requiring
re-election by shareholders.
Kingswood Holdings Limited
Board of directors
Performance evaluation
The composition of the Board is regularly reviewed
to ensure it maintains the necessary depth and breadth of skills to
sustain the delivery of the Group's long-term strategy. The Board
is committed to ensuring it maintains the necessary combination of
skill, experience, and gender balance.
Evaluations of the Board, the Committees and
individual Directors are undertaken on an annual basis in the form
of peer appraisal, questionnaires, and discussions to determine
effectiveness and performance. This includes a review of success in
achieving annual objectives set by the Board. The Board may utilise
the results of the annual evaluation process to identify training
and development needs and succession planning.
Relationship with shareholders and dialogue with
institutional shareholders
The Chairman, Group Chief Executive Officer and the
Group Chief Financial Officer maintain dialogue with key
shareholders in relation to strategy and corporate governance
issues.
All shareholders receive the Annual Report
incorporating audited financial statements and are welcome to
attend the Company's AGM. The Directors attend the meeting and are
available to answer questions both formally during the meeting and
informally afterwards.
The collection and analysis of shareholder proxy
votes is handled independently by the Group's registrars. The
Chairman announces the results of the proxy votes lodged after
shareholders have voted on a show of hands. All Committee chairmen
are, where possible, available at the AGM. The Non-Executive
Directors are available to shareholders and may be contacted
through the Chief Executive Officer's office.
The Group's website at www.kingswood-group.com
is an important source of information for investors, including
information required in compliance with AIM Rule 26, and is updated
regularly.
Corporate culture and social responsibility
The Board seeks to maintain the highest standards of
integrity in the conduct of the Group's operations. An open culture
is encouraged within the Group with regular communications and
meetings with staff where open dialogue and feedback is sought.
The Group is committed to conducting its business in
a socially responsible manner and to respect the needs of
employees, investors, customers, suppliers, regulators, and other
stakeholders. The Group is also committed to being a responsible
employer and to promoting values, standards and policies designed
to assist our employees in their conduct, working and business
relationships.
The most significant impact on the environment from
the Group's activities is the emission of greenhouse gases as a
result of running the Group's offices, associated travel, and the
recycling of waste. The Group is committed to minimising the amount
of travel employees undertake and to recycling as much of the
Group's waste as possible. The Group will continue to look at ways
to act in a socially responsible manner.
Kingswood Holdings Limited
Board of directors
DAVID HUDD - Non-Executive Chairman
David trained as a solicitor with Linklaters and,
after a successful career as an investment banker in structured
finance, joined Hogan Lovells, the international law firm, as a
partner in 1994. He was consistently ranked as a market-leading
lawyer for over 25 years. From 2005 David led the firm's global
finance practice before assuming the role of Global Deputy CEO in
2014. He retired from this position and as a partner in June 2020
but continues to serve as Senior Counsel at Hogan Lovells. David
earned his MA Jurisprudence (Oxon) in 1980 and qualified as a
solicitor in 1983.
David joined the Board in June 2018 as a
Non-Executive Director and subsequently became Non-Executive
Chairman in July 2021.
JONATHAN MASSING - Non-Executive Deputy Chairman
Jonathan is Non-Executive Deputy Chairman. He brings
wide ranging experience to the Board, in particular in corporate
finance and acquisitions. He has a strong background in commercial
and corporate finance advisory, buyouts, venture capital,
shareholder dispute advisory, and private businesses valuation.
Jonathan is a Chartered Accountant and has extensive experience in
the sale and acquisition of private companies and provides advice
on debt structures and working capital facilities. In 1998 he set
up Kingswood Investment Partners Limited as a private equity
investor. He is also a founder of Kingswood Property Finance
Limited Partnership and founded a City-based advisory firm
Kingswood in 1993.
Jonathan joined the Board in October 2017.
GARY WILDER - Non-Executive Director
Gary is a Chartered Accountant and a graduate of the
Bayes Business School, University of London. He has over 30 years'
experience in pan-European private equity and real estate,
particularly in investment, capital raising, structuring, debt
financing and asset management. He is the co-founder of Kingswood
Property Finance Limited Partnership where he made a series of
long-term strategic investments in financial services. Gary's key
responsibilities include building strategic relationships with new
and existing investors, bankers, financial advisers and directing
capital raising efforts to the growth and expansion of the
platform.
Gary joined the Board in October 2017 as Group CEO.
In April 2022, Gary stepped back into a Non-Executive Director
role.
JONATHAN FREEMAN - Non-Executive Director
Jonathan is a Non-Executive Director and chairs the
Audit and Risk Committee and is a member of the Nomination and
Remuneration Committee. He is a seasoned corporate financier and
company director with extensive experience of listed companies,
financial services and FCA regulated entities. This experience is
important to the Group as it is quoted on AIM and subsidiary
entities are regulated by the Financial Conduct Authority in the
UK.
Jonathan joined the Board in June 2018.
Kingswood Holdings Limited
Board of directors
HOWARD GARLAND - Non-Executive Director
Howard holds a First-Class Honours degree in
Mathematics from University College London. Howard is a partner at
Pollen Street Capital and a member of its private equity and credit
investment committees. Howard re-joined Pollen Street Capital in
2015 having been a Principal at RBS until 2012. Prior to re-joining
Pollen Street Capital as Partner in 2015, Howard assisted the
Swedish credit institution Hoist Finance in entering the UK debt
collecting and NPL debt purchasing sector, supporting the
acquisition of a number of UK companies and debt portfolios in both
structuring and operational roles. Howard is also on the Board of
Punkta.
Howard joined the Board in December 2019 and resigned from the Board in November 2023.
LINDSEY McMURRAY - Non-Executive Director
Lindsey holds a First-Class Honours degree in
Accounting and Finance and holds an MPhil in Finance from
Strathclyde University. Lindsey has been a private equity and
credit investor for more than 26 years with a focus on the
financial and business services sector. Alongside Kingswood,
Lindsey sits on the Boards of Shawbrook Bank, CashFlows, 1st Stop
Group and BidX1. Lindsey co-founded Pollen Street Capital in 2013
and serves as Managing Partner. Lindsey is the Chairman of the
Pollen Street Capital's private equity and credit investment
committees. Prior to Pollen Street Capital, Lindsey worked at RBS
and spent six years at Cabot Square Capital, where she was a
Partner focused on investments in the financial services
sector.
Lindsey joined the Board in December 2019.
DAVID LAWRENCE - Group Chief Executive Officer
David was appointed as UK CEO of Kingswood in
December 2020 and has over 30 years' experience in financial
services, predominantly with Lloyds Banking Group where he held
numerous executive leadership roles in distribution and functional
areas across its Retail, Commercial and Insurance divisions. In
2014, David became the Commercial Director and then Chief Operating
Officer for Lloyds' Private Banking and Wealth businesses with
additional responsibility for its Mass Affluent proposition and
strategy. He played a lead role in the establishment of Schroders
Personal Wealth, a joint venture wealth management business between
Lloyds Banking Group and Schroders, becoming Chief Commercial
Officer for this business in March 2019.
David joined the Board in April 2022 as Chief
Executive Officer.
GEMMA GODFREY - Non-Executive Director
Gemma is a Non-Executive Director and advisor,
having founded two digital businesses. She specialises in helping
businesses digitise and de-risk the delivery of new services. She
is on the boards of publicly listed and private equity backed
companies; for which she is a member of remuneration, risk and
audit committees focused on ESG. Gemma was the Head of Investment
Strategy for Brooks Macdonald Plc and, prior to this, chaired the
investment committee for Credo Capital.
Gemma joined the board in October 2022.
JANE MILLAR - Non-Executive Director
Jane has over 30 years financial services experience
as Non-Executive Director, Board and Chief Executive Officer roles
across the wealth management industry. Jane is passionate about how
the power of digital enablement brings large benefits to clients
and organisations. Jane led the integrations of two major
investment management businesses at Investec Wealth and Investment
where she was also a Board director.
Jane joined the board in October 2022.
Kingswood Holdings Limited
Board of directors
DUNCAN GERARD - Non-Executive Director
Duncan is a partner at Pollen Street Capital having
joined in 2017. Prior to joining Pollen Street, he spent seven
years focused on financial services mergers and acquisitions,
principally advising private equity firms on the disposal and
acquisition of mid-market portfolio companies. He is qualified as a
Chartered Financial Analyst and accountant which he gained whilst
at EY. Duncan has an honours degree in Economics and Finance from
Loughborough University.
Duncan joined the board in December 2023
Kingswood Holdings
Limited
Directors' Report for the
Year Ended 31 December 2023
The directors present their report and the
consolidated financial statements for the year ended 31 December
2023. The Corporate Governance Statement is set out from page 23
onwards. All financial information given in this Directors' Report
is taken solely from the statutory results prepared in accordance
with UK adopted international accounting standards.
Principal activity
The principal activity of the Group is the operation
of a wealth planning and investment management business
Financial risk management objectives and
policies
Information about the Group's risk management is
included in the Strategy section under Risks & Uncertainties on
page 18 to 22.
Results and dividends
The Group's performance during the year is discussed
in the Strategy section on pages 2 to 17. The results for the year
are set out in the audited Consolidated Statement of Comprehensive
Income on page 49. The Directors do not recommend the payment of a
dividend for the year ended 31 December 2023 (31 December 2022:
£nil).
Capital structure
Details of KHL's issued share capital, together with
details of the movements in the number of shares during the year,
are shown in notes 37 and 38.
Capital management
The primary objective of the Company's capital
management strategy is to maintain a strong capital structure in
order to support the development of its business, to maximise
shareholder value and to provide benefits for its other
stakeholders. Details of the management of this risk can be found
in the Strategy section under Risks & Uncertainties.
All of the regulated entities within the Group must
also comply with the FCA capital adequacy rules.
Kingswood US has majority ownership interests in
three US regulated entities - one is subject to regulatory
oversight by FINRA and two come under the SEC's regulatory regime
for Registered Investment Advisers (RIAs) - and must comply with
certain capital adequacy requirements.
Directors of the group
The names and a short biography of the Directors of
the Company are set out on pages 33 to 35.
The appointment and replacement of Directors is
governed by the Company's Articles of Association, The Companies
(Guernsey) Law, 2008 and related legislation. The Company's
Articles of Association themselves may be amended by special
resolution of the Company's shareholders. The Group also applies
the Quoted Companies Alliance Corporate Governance Code.
The Company's Articles of Association provide that
generally one third (rounded down to the nearest whole number) of
the Board of Directors are required to retire by rotation, save for
Directors who are appointed during the year, who must stand down
and offer themselves for re-election at the next occurring Annual
General Meeting (AGM) of the Group. The Directors who offer
themselves for re-election will be announced in conjunction with
the AGM announcement, which is expected to be held in the latter
part of the year.
Kingswood Holdings
Limited
Directors' Report for the
Year Ended 31 December 2023
Directors' interests
Directors who held office during 2023 had the
following beneficial interests in the ordinary shares of the
Company as of 31 December 2023:
No. Ordinary
shares held
|
Description
|
2023
|
|
2022
|
|
Jonathan Freeman
|
87,750
|
|
87,750
|
|
Jonathan Massing
|
350,000
|
|
-
|
|
David Hudd
|
650,000
|
|
650,000
|
|
Gary Wilder
|
1,115,051
|
|
1,115,051
|
|
Gary Wilder and Jonathan
Massing
|
144,125,262
|
|
144,125,262
|
|
|
146,328,063
|
|
145,978,063
|
** Gary Wilder and Jonathan Massing's shares relate
to KPI (Nominees) Limited's holding as both have a beneficial
interest in that entity.
Employees
It is the Company's policy to involve employees in
the day-to-day operation of the Group's business and ensure that
matters which could concern them, including the Group's strategic
objectives and performance are communicated in an open and timely
fashion. The Directors seek to achieve this through executive
committee meetings, subsidiary Board meetings, e-mail communication
and informal staff communication.
The Group is committed to an equal opportunity
policy for all prospective and existing employees such that
selection takes place based on ability, qualifications and
suitability for the job, irrespective of background, age, race,
gender or sexual orientation. The Group's executives, senior
management and employees are required to support and implement all
such policies in their daily work ethic to maximise the potential
of its entire workforce. A Diversity and Inclusion Forum comprising
employees from across team has recently been formed to further
encourage diversity and inclusion across the Group and make it a
central tenet of Kingswood's culture.
Employees who become disabled during their
employment with the Group will be retained and re-trained where
possible.
Future developments and events after the statement
of financial position date
A review of the Group's business and an indication
of likely future developments are contained in the Strategy section
of this report.
Substantial shareholdings
The Group had been notified, in accordance with
Chapter 5 of the Disclosure and Transparency Rules, of the
following voting rights of shareholders holding 3% or more of the
issued share capital of the Company as of 31 December 2023:
Name of
Shareholder
Percentage of voting rights andNo. of
ordinary shares issues share capital
|
KPI (Nominees) Limited
|
66.44%
|
144,125,262
|
|
OvalX
|
4.83%
|
10,476,969
|
All Shareholdings stated are beneficial. KPI
(Nominees) Limited is owned and controlled by Gary Wilder and
Jonathan Massing.
Kingswood Holdings
Limited
Directors' Report for the
Year Ended 31 December 2023
Substantial shareholdings
(continued)
The Company had issued 77,428,443 irredeemable,
convertible preference shares at £1 per share to HSQ INVESTMENT
LIMITED, a wholly owned indirect subsidiary of funds managed and/or
advised by Pollen Street Capital at 31 December 2023. The
preference shares are convertible into Kingswood Holdings Limited
ordinary shares at 16.5p per share on or before 31 December
2023.
At 31 December 2023 the conversion is conditional
upon regulatory approvals in a number of jurisdictions which were
in the process of being obtained. Upon satisfaction of all
conditions outstanding relating to Conversion, application will be
made to the London Stock Exchange for the required new Ordinary
Shares to be admitted to trading ("Admission"). The new Ordinary
Shares will rank pari passu with the existing Ordinary Shares.
On the 31 May 2024 the Company announced that,
following the grant of the anticipated approvals by the applicable
regulatory authorities in the US, UK and
the Republic of Ireland, the Convertible Preference Shares are
converting, at the agreed conversion price of 16.5
pence per Ordinary Share, into a total of 469,263,291 new
Ordinary Shares in the Company ("Conversion"). Refer to Note 37
Events after the balance sheet note for more details.
Directors' liabilities
During the year the Group made qualifying
third-party indemnity provisions for the benefit of its Directors
and these remain in force at the date of this report.
Going concern
In accordance with Financial Reporting Council
guidance all companies are required to provide fuller disclosures
regarding the Directors' assessment of going concern. The Group's
business activities, together with the factors likely to affect its
future development and liquidity and capital position, are reviewed
under the key risks affecting the business section as set out in
the Strategy section on pages 2 to 17.
The Directors have reviewed the cash flow forecast
for the next 12 months, from the date of issuance of these
financial statements and are satisfied that the Group can continue
to prepare its financial statements on the going concern basis. As
part of the Directors' consideration of the appropriateness of
adopting the going concern basis in preparing the Annual Report, a
range of scenarios have been considered, including a central
scenario and a downside scenario, based on a number of
macroeconomic assumptions. The Company and Group continue to
operate with sufficient levels of liquidity and capital for the
going concern period in all modelled scenarios. The Group operates
centralised treasury arrangements and shares banking arrangements
between the parent and its subsidiaries.
Further, the Directors, have received a letter of
support from Pollen Street Capital Limited ("PSCL"), a wholly owned
indirect subsidiary of the ultimate controlling party of the Group,
HSQ Investment Limited. In this capacity, PSCL has confirmed
that the Company and its subsidiary companies are an important part
of their investment portfolio, and, through the Funds, it is their
current intention to continue to support financially the Group in
the 12 months following the approval of the Group's financial
statements for the year ended 31 December 2023. PSCL has also
confirmed the Funds have sufficient undrawn investor commitment to
support the intention.
The Directors, having made appropriate enquiries,
have no reason to believe that a material uncertainty exists that
may cast significant doubt regarding the ability of Group to
continue as a going concern or its ability to continue with the
current banking arrangements.
Kingswood Holdings
Limited
Directors' Report for the
Year Ended 31 December 2023
On the basis of their assessment of the Group's
financial position and of the enquiries made of the Directors the
Company, the Directors have a reasonable expectation that the Group
will be able to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern
basis of accounting in preparing the annual financial
statements.
Auditor
Each of the persons who are Directors of Kingswood
Holdings Limited at the date of approval of this annual report
confirms that:
• So far as the Director is aware, there is no relevant audit
information of which the Group's auditor is unaware; and
• The Director has taken all the steps that he/she ought to
have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Group's
auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of Section 249 of The Companies
(Guernsey) Law, 2008.
Approved by the board and
signed on its behalf by:
David Hudd
Chairman
Date: 27 June 2024
Kingswood Holdings Limited Directors' remuneration
report
|
|
|
Pension
|
Option
value of
|
|
|
Base salary
|
and
|
LTIP
|
2023
|
2022
|
|
inc. NIC
|
benefits
|
shares
|
Total
|
Total
|
|
£ 000
|
£ 000
|
£ 000
|
£
000
|
£
000
|
|
Executive
|
|
|
|
|
|
|
David Lawrence
|
400
|
50
|
172
|
622
|
412
|
|
Non-Executive
|
|
|
|
|
|
|
Gary Wilder
|
50
|
-
|
-
|
50
|
63
|
|
Jonathan Freeman
|
54
|
-
|
-
|
54
|
54
|
|
David Hudd
|
75
|
-
|
-
|
75
|
75
|
|
Jonathan Massing
|
50
|
-
|
-
|
50
|
50
|
|
Jane Millar
|
46
|
-
|
-
|
46
|
11
|
|
Gemma Godfrey
|
46
|
-
|
-
|
46
|
11
|
|
|
|
|
|
|
|
|
Aggregate emoluments
|
721
|
50
|
172
943
|
675
|
Approved by the board and signed on its behalf
by:
David Hudd
Chairman
27 June 2024
Kingswood Holdings Limited Directors' responsibility
statement
The Directors are responsible for preparing the
Annual Report and the financial statements in accordance with
applicable law and regulations.
The Companies (Guernsey) Law, 2008 requires the
Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the Group financial
statements in accordance with UK adopted international accounting
standards. The Directors must not approve the annual financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the Consolidated
Statement of Comprehensive Income for the year. In preparing these
financial statements, International Accounting Standard 1 requires
that Directors:
•
Properly select and apply accounting policies
•
Present information, including accounting
policies, in a manner that provides relevant, reliable, comparable,
and understandable information
•
Provide additional disclosures when compliance
with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other
events and conditions on the entity's financial position and
financial performance; and
•
Make an assessment of the Group's ability to
continue as a going concern
The Directors are responsible for keeping proper
accounting records that are sufficient to show and explain the
Group's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and enable them to ensure
that the financial statements comply with The Companies (Guernsey)
Law, 2008. They are also responsible for safeguarding the assets of
the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information included
on the Group's website www.kingswood-group.com.
Legislation in the United Kingdom and Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility
statement
We confirm that to the best of our knowledge:
• The annual financial statements, prepared in accordance with
UK adopted international accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole
• The Strategy includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
• The Annual Report and financial statements, taken as a whole,
are fair, balanced, and understandable and provide the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
Approved by the board and signed on its behalf
by:
.........................................
David Hudd
Chairman
27 June 2024
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KINGSWOOD
HOLDINGS LIMITED
Opinion
We have audited the financial
statements of Kingswood Holdings Limited ("the company") and its
subsidiaries (together 'the Group") for the year ended 31 December
2023 which comprise the Consolidated Income Statement,, the
Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of
Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework
that has been applied in their preparation of the Group financial
statement is applicable law and UK-adopted international accounting
standards.
In our opinion, the Group
financial statements:
· give
a true and fair view of the state of the Group's affairs as at 31
December 2023 and of the Group's loss for the year then
ended;
· have
been properly prepared in accordance with UK-adopted international
accounting standards and
· have
been properly prepared in accordance with the requirements of the
Companies (Guernsey) Law 2008.
Basis for opinion
We conducted our audit in
accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our report. We
are independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial
statements, we have concluded that the director's use of the going
concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the directors'
assessment of the group's ability to continue to adopt the going
concern basis of accounting included:
§ Confirmation of our understanding of management's going
concern assessment process. We also engaged with management to
ensure all key factors were considered in their
assessment.
§ We
obtained management's going concern assessment, including the cash
forecast for a period exceeding twelve months from the date the
financial statements were approved by the directors. The group has
modelled various scenarios in their cash forecasts to incorporate
unexpected changes to the forecast liquidity of the
group.
§ We
reviewed the factors and assumptions included in the cash forecast.
We considered the appropriateness of the assumptions and methods
used to calculate the cash flow forecasts and determined that the
assumptions and methods utilised were appropriate to be able to
make an assessment for the group.
§ We
obtained a letter of support from Pollen Street Capital Limited
confirming its intention in providing financial
support to the Group in the twelve months following the approval of
the Group's financial statements for the year ended 31 December
2023, if required.
§ We
reviewed the Group's going concern disclosures included in the
annual report in order to assess that the disclosures were
appropriate and in conformity with the reporting
standards.
Based on the work we have
performed, we have not identified any material uncertainties
relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's ability to
continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for
issue.
Our responsibilities and the
responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Our application of materiality
The scope of our audit was
influenced by our application of materiality. We determined
materiality for the financial statements as a whole to be
£1,245,000 (2022: £1,460,000) for the consolidated financial
statements using 1% of Group revenue, including revenue from
discontinued operations, based on the 31 December 2023 financial
statements. We consider Group revenue to be the most stable
benchmark and the most relevant determinant of the Group's
performance used by shareholders.
We used a different level of
materiality ('performance materiality') to determine the extent of
our testing for the audit of the financial statements. Performance
materiality is based on the overall materiality as adjusted for the
judgements made as to the entity risk and our evaluation of the
specific risk of each audit area having regard to the internal
control environment. This was set at 70% of overall materiality at
£872,000 (2022: £1,022,000).
We agreed with the Audit Committee
that we would report to the Committee all audit differences in
excess of 5% of overall materiality at £62,000 (2022: £73,000) as
well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We reassessed
materiality at the end of the audit and did not find it necessary
to revise our planning materiality.
Whilst materiality for the Group's
financial statements as a whole was set at £1,245,000, each
significant component of the group was audited to an overall
materiality ranging between £97,000 and £820,000 (2022: £97,700 and
£900,650) with performance materiality set at 70% of overall
materiality. We applied the concept of materiality both in planning
and performing our audit, and in evaluating the effect of
misstatement.
We reassessed materiality at the
end of the audit and did not find it necessary to revise our
planning materiality.
Our approach to the audit
Our audit approach was developed
by obtaining an understanding of the Group's activities, the key
subjective judgements made by the directors, for example in respect
of significant accounting estimates that involved making
assumptions, and considering future events that are inherently
uncertain, and the overall control environment, such as impairment
of goodwill, impairment of intangible assets and provision for
deferred consideration payments.
Based on this understanding we
assessed those aspects of the Group's transactions and balances
which were most likely to give rise to a material misstatement and
were most susceptible to irregularities including fraud or error.
Specifically, we identified what we considered to be key audit
matters and planned our audit approach accordingly.
All the subsidiaries of the Group
(components) are based in the United Kingdom ("UK"), the United
States of America ("US") and Ireland. The Group audit team have
responsibility for the audit of all components included in the
consolidated financial statements. We performed an assessment to
determine which components were significant to the
Group.
All components which contributed
greater than 15% of the Group's net assets or Group's revenue were
identified as financially significant and subject to a full scope
audit of their complete financial information. Five components were
financially significant to the Group, with three located in the UK
and two located in the US. All work was performed by the Group
audit team.
All components which included
account balances that have the same significant risk profile as the
Group were identified as risk significant. There were seven
components which were subject to the audit of the relevant account
balances, classes of transactions and disclosures.
For components that we considered
to be non-significant, these components were principally subject to
analytical review procedures performed by the Group audit team,
together with additional testing over audit risk
areas.
Key audit matters
Key audit matters are those
matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these key audit matters.
|
Area
|
Reason
|
How our scope addressed this matter
|
|
Revenue recognition
Refer to note 3 (accounting
policy) and 4 (financial disclosures) of the Group financial
statements.
|
Revenue is the most relevant determinant of the Group's performance used
by shareholders. Inaccurate or incomplete revenue could have a
material impact on group performance.
The Group's revenue from
continuing operations amounting to £86,160,000. The Group's revenue
including discontinued operations amounting to £124,471,000.
Revenue was derived from the wealth planning business, investment
management business and US operations from the following
activities:
- Investment
management;
- Wealth planning;
· Initial fees;
· Ongoing Fees;
· Commissions;
· Advisory Fees
For investment management fees,
there is a risk that the fees have not been calculated accurately
and have not been calculated in accordance with the signed
investment management agreements.
For wealth planning income (inc.
initial fees, ongoing fees and commissions), there is a risk that
such fees have not been calculated accurately.
For advisory fees, there is a risk
over the accuracy and completeness of these fees.
|
UK and Irish Businesses
Our approach for the wealth
planning and investment management segments in the UK and Ireland
included:
-
Performing a walkthrough to understand the internal control
environment in operation for the significant income streams.
-
Testing key manual controls in the KW Wealth Planning Limited and
KW Investment Management Limited revenue business cycle to ensure
they were operating effectively.
-
Substantive testing of revenue transactions via sampling basis for
the Irish entities.
To address the accuracy assertion
for investment management fee revenue, we used data analytics to
check the accounting entries for all income postings. Any entries
that did not follow the expectation were investigated and subject
to substantive testing to confirm why this was the case. We
verified whether revenue was accounted for in accordance with UK
adopted international accounting standards.
For wealth planning revenue, we
selected a sample of revenue transactions throughout the year and
traced to supporting documentation where possible, as well as
vouching to cash receipts/ deductions in the respective client
accounts and verified whether revenue was accounted for in
accordance with UK adopted international accounting
standards.
To address the completeness
assertion, we reconciled the revenue report to data extracted from
the systems to the general ledger in the accounting system to
ensure completeness of the balances.
For a sample of fees, we obtained
invoices and rate confirmation letters/signed client agreements to
agree the fees charged to the clients.
US Business
Our approach for the broker
dealers and investment banking revenue in the US
included:
Performing walkthroughs of the
different revenue streams to understand and corroborate the
controls in place.
Performing procedures to ensure
revenue balances have been collectively converted from US GAAP to
UK adopted international accounting standards.
Reviewing supporting evidence to
ensure that the US entities had met their obligations under the
contracts and that there was a reasonable basis to believe that the
obligation was in fact satisfied and the revenue appropriately
recognised.
Reviewing respective bank
movements as well as the postings to the general
ledgers.
Reviewing the accounting policies
and related procedures relative to IFRS 15 and reviewing the
adequacy and completeness of the corresponding financial statement
note disclosures.
Key observations:
Based on the procedures performed,
we are satisfied that revenue is appropriately recognised and
classified.
|
|
Impairment of goodwill and other intangible
assets
Refer to notes 3 (accounting
policy) and 16 (financial disclosures) of the Group financial
statements.
|
Goodwill amounting to £62,889,000
(2022: £55,538,000) arose from the acquisitions in a business
combination.
Other intangible assets arise in
respect of acquired client lists amounting to £83,516,000
(£67,931,000).
Impairment of goodwill and other
intangible assets is considered a significant risk as significant
judgements and estimates are required to be exercised by
management
in assessing whether any
impairment provision is required.
Significant judgements and
estimates are involved in the computation of the recoverable amount
of goodwill such as fair value less cost to sell and value in
use.
In respect of the other intangible
assets, significant judgement is involved to determine whether the
initial recognition criteria have been met and the estimated useful
life is appropriate and supportable.
|
We obtained an understanding and
tested the design and implementation of the group's controls over
the impairment assessment process.
For the impairment of goodwill we
performed the following:
We evaluated the appropriateness
of management's identification of the Group's Cash Generating
Units.
We challenged management on the
appropriateness of the impairment models and reasonableness of the
assumptions used through performing the following:
•
Benchmarking the Group's key market-related
assumptions in the models, including discount rates and long-term
growth rates.
•
Assessing the reliability of any forecasts
through a review of actual and past performance and comparing to
previous forecasts;
•
Testing the mathematical accuracy and performing
sensitivity analyses of the models;
•
Understanding the commercial prospects of the
assets, and where possible comparing the assumptions with external
data sources;
•
Assessing management's sensitivity analysis
showing the impact of a reasonably possible change in the
underlying assumptions; and
•
Assessing the adequacy of the disclosures within
the financial statements.
For other intangible assets
(client lists), we performed the following:
•
Verifying the amounts capitalised in the year
against supporting agreements;
•
Challenging management's assessment that any
additions met the required capitalisation criteria;
•
Performing an assessment of the appropriateness
of the useful life applied to each new client list acquisition and
considered the continued appropriateness of the existing useful
lives for previously completed acquisitions;
•
Reviewing management's assessment of any
impairment indicators, considering both internal and external
sources of information; and
•
Assessing the sufficiency of the sensitivity
analyses performed by management, focusing on what we considered to
be reasonably possible changes in key assumptions.
Key observations:
Based on the procedures performed,
we consider management's assessment of no impairment on goodwill
and other intangible assets to be appropriate and the carrying
value of goodwill and other intangible assets are appropriately
stated.
|
Other information
The other information comprises
the information included in the annual report, other than the
financial statements and our auditor's report thereon. The
directors are responsible for the other information contained
within the annual report. Our opinion on the group financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this
regard.
Other Companies (Guernsey) Law, 2008
reporting
Matters on which we are required to report by
exception
We have nothing to report in
respect of the following matters in relation to which the Companies
(Guernsey) Law, 2008 reporting requires us to report to you if, in
our opinion:
· adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been received
from branches not visited by us; or
· the
financial statements are not in agreement with the accounting
records and returns; or
· we
have not received all the information and explanations we require
for our audit.
Responsibilities of directors
As explained more fully in the
directors' responsibilities statement, the directors are
responsible for the preparation of the Group financial statements
and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or
error.
In preparing the Group financial
statements, the directors are responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is
detailed below:
· We
obtained an understanding of the Group and the sector in which they
operate to identify laws and regulations that could reasonably be
expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with
management, industry research, application of cumulative audit
knowledge and experience of the investment management and wealth
management sectors.
· We
determined the principal laws and regulations relevant to the Group
in this regard to be those arising from the Companies (Guernsey)
Law, 2008, AIM Rules for Companies, those resulting from being
authorised by the Financial Conduct Authority to undertake
regulated activities, UK adopted international accounting standards
and rules from the Financial Industry Regulatory Authority (FINRA)
and Central Bank of Ireland (CBI) in respect of certain US and
Irish businesses.
· We
designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the group
and parent company with those laws and regulations. These
procedures included but were not limited to making enquiries of
management and those responsible for legal and compliance matters,
review of minutes of the Board and papers provided to the audit
committee to identify any indications of non-compliance, and review
of legal / regulatory correspondence with the FCA, FINRA and
CBI.
· We
also identified the possible risks of material misstatement of the
financial statements due to fraud. We considered, in addition to
the non-rebuttable presumption of a risk of fraud arising from
management override of controls, that there was a potential for
management bias in relation to the recognition of revenue, the
assessment of any impairment of goodwill and other intangible
assets and the assessment of the provision for deferred
consideration. We addressed this by challenging the assumptions and
judgements made by management when auditing those significant
accounting estimates.
· As
in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures
which included, but were not limited to: the testing of
journals; reviewing accounting estimates for evidence of
bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal
course.
Because of the inherent
limitations of an audit, there is a risk that we will not detect
all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with
regulation. This risk increases the more that compliance with
a law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to
become aware of instances of non-compliance. The risk is also
greater regarding irregularities occurring due to fraud rather than
error, as fraud involves intentional concealment, forgery,
collusion, omission or misrepresentation.
A further description of our
responsibilities for the audit of the financial statements is
located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's report.
Use of our report
This report is made solely to the
company's members, as a body, in accordance with section 262 of the
Companies (Guernsey) Law, 2008. Our audit work has been undertaken
so that we might state to the parent company's members those
matters we are required to state to them in an auditor's report and
for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone, other than the
parent company and the parent company's members as a body, for our
audit work, for this report, or for the opinions we have
formed.
PKF Littlejohn LLP
Chartered Accountants
15 Westferry Circus
Canary Wharf
London
E14 4HD
27 June 2024
Kingswood Holdings
Limited
Consolidated Statement of
Total Comprehensive Income for the Year Ended 31 December
2023
|
|
|
2023
|
|
|
(Restated)
2022
|
|
Note
|
£ 000
|
|
|
£ 000
|
|
Revenue
|
4
|
86,160
|
|
|
62,562
|
|
Cost of sales
|
|
(35,487)
|
|
|
(26,829)
|
|
Gross profit
|
|
50,673
|
|
|
35,733
|
|
Administrative expenses
|
|
(39,857)
|
|
|
(27,891)
|
|
Operating profit
|
|
10,816
|
|
|
7,842
|
|
Non-operating costs:
|
|
|
|
|
|
|
Business re-positioning costs
|
4
|
(1,894)
|
|
|
(1,964)
|
|
Finance costs
|
9
|
(12,966)
|
|
|
(6,398)
|
|
Other finance costs
|
4
|
(6,046)
|
|
|
(4,470)
|
|
Acquisition-related items:
|
|
|
|
|
|
|
Transaction costs
|
4
|
(2,828)
|
|
|
(4,379)
|
|
Remuneration charge (deferred
consideration)
|
23
|
(474)
|
|
|
(1,852)
|
|
Other gains or losses
|
10
|
131
|
|
|
-
|
|
Loss before tax
|
|
(13,261)
|
|
|
(11,221)
|
|
Income tax receipt/(expense)
|
11
|
(2,705)
|
|
|
4,456
|
|
Loss for the year from continuing operations
|
|
(15,966)
|
|
|
(6,765)
|
|
Profit/(Loss) from discontinued
operations net of tax
|
|
(636)
|
|
|
273
|
|
Loss for the year
|
|
(16,602)
|
|
|
(6,492)
|
|
Other comprehensive
income
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or
loss
|
|
|
|
|
|
|
Foreign currency translation
gains
|
|
-
|
|
|
-
|
|
Total comprehensive income for the
year
|
|
(16,602)
|
|
|
(6,492)
|
|
Loss after tax is attributable to:
|
|
|
|
|
|
|
Owners of the company
|
|
(18,233)
|
|
|
(7,797)
|
|
Non-controlling
interests
|
|
1,631
|
|
|
1,305
|
|
Total comprehensive income attributable to:
|
|
|
|
|
|
|
Owners of the parent company
|
|
(18,233)
|
|
|
(7,797)
|
|
Non-controlling
interests
|
|
1,631
|
|
|
1,305
|
|
|
|
|
|
|
|
|
- Basic loss per share - continuing operations
|
13
|
(0.08)
|
|
|
(0.04)
|
|
- Diluted loss per share - continuing operations
|
13
|
(0.02)
|
|
|
(0.01)
|
The Basic and diluted loss per
share from discontinued operations was £0.00 (2022:
profit per share £0.00)
*2022 results are restated due to
a business classified as discontinued operations - see Note 2
and Note 6
Kingswood Holdings
Limited
Consolidated Statement of
Financial Position as at 31 December 2023
|
|
|
2023
|
|
(Restated)
2022
|
|
|
Note
|
£ 000
|
|
£ 000
|
|
|
Assets
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Property, plant and equipment
|
14
|
770
|
|
787
|
|
|
Right of use assets
|
15
|
3,236
|
|
3,553
|
|
|
Intangible assets
|
16
|
146,405
|
|
123,469
|
|
|
Deferred tax assets
|
17
|
2,058
|
|
4,492
|
|
|
|
|
152,469
|
|
132,301
|
|
|
Current assets
|
|
|
|
|
|
|
Trade and other receivables
|
18
|
14,295
|
|
4,812
|
|
|
Short term investments
|
|
72
|
|
52
|
|
|
Assets held for sale
|
6
|
-
|
|
7,405
|
|
|
Cash and cash equivalents
|
|
18,704
|
|
16,726
|
|
|
|
|
33,071
|
|
28,995
|
|
|
Total assets
|
|
185,540
|
|
161,296
|
|
|
Equity and liabilities
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Share capital
|
25
|
(10,846)
|
|
(10,846)
|
|
|
Share premium
|
25
|
(8,224)
|
|
(8,224)
|
|
|
Preference share capital
|
26
|
(70,150)
|
|
(70,150)
|
|
|
Foreign currency reserve
|
|
778
|
|
422
|
|
|
Other reserves
|
|
(17,423)
|
|
(14,373)
|
|
|
Retained earnings
|
|
49,162
|
|
31,595
|
|
|
Equity attributable to owners of
the company
|
|
(56,703)
|
|
(71,576)
|
|
|
Non-controlling
interests
|
|
(4,196)
|
|
(2,391)
|
|
|
Total equity
|
|
(60,899)
|
|
(73,967)
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Other non-current liabilities
|
24
|
(2,358)
|
|
(2,806)
|
|
|
Loans and borrowings
|
24
|
(62,879)
|
|
(24,343)
|
|
|
Deferred tax liabilities
|
17
|
(17,476)
|
|
(12,584)
|
|
|
Deferred consideration
|
23
|
(2,369)
|
|
(9,228)
|
|
|
|
|
(85,082)
|
|
(48,961)
|
|
|
Current liabilities
|
|
|
|
|
|
|
Trade and other payables
|
21
|
(15,654)
|
|
(12,201)
|
|
|
Liabilities associated with assets
held for sale
|
8
|
-
|
|
(5,396)
|
|
|
Deferred consideration
|
23
|
(23,905)
|
|
(20,771)
|
|
|
|
|
(39,559)
|
|
(38,368)
|
|
|
Total liabilities
|
|
(124,641)
|
|
(87,329)
|
|
|
Total equity and liabilities
|
|
(185,540)
|
(161,296)
|
|
|
|
|
|
|
|
|
Kingswood Holdings
Limited
Consolidated Statement of
Financial Position as at 31 December 2023
*2022 results are restated due to a
business classified as discontinued operations - see Note 2
and Note 6.
Approved by the board and signed on
its behalf by
.........................................
David Hudd
Chairman
27 June 2024
Kingswood Holdings
Limited
Consolidated Statement of
Changes in Equity for the Year Ended 31 December 2023
|
|
Share capital
|
|
Foreign
|
|
|
Equity
attributable to the
owners of
|
Non-
|
|
|
and share
|
Preference
|
currency
|
Other
|
Retained
|
the parent
|
controlling
|
|
premium
|
share capital
reserve
|
reserves
|
earnings
|
Company
|
interests
|
Total equity
|
|
£ 000
|
£ 000
|
£ 000
|
£
000
|
£
000
|
£
000
|
£
000
|
£
000
|
|
At 1 January 2022
|
19,070
|
70,150
|
(488)
|
11,041
|
(23,800)
|
75,973
|
925
|
76,898
|
|
(Loss)/profit for the year
|
-
|
-
|
-
|
-
|
(7,797)
|
(7,797)
|
1,305
|
(6,492)
|
|
Dividends due to non-controlling
interests
|
-
|
-
|
-
|
-
|
-
|
-
|
21
|
21
|
|
Issue of preference share
capital
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Other adjustment
|
-
|
-
|
-
|
852
|
-
|
852
|
-
|
852
|
|
Share based remuneration
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Preference share capital
reserve
|
-
|
-
|
-
|
2,480
|
-
|
2,480
|
-
|
2,480
|
|
Foreign exchange gain
|
|
-
|
|
|
|
-
|
|
|
|
66
|
|
|
-
|
|
|
|
2
|
|
|
68
|
|
|
140
|
|
|
208
|
|
At 31 December 2022
|
|
19,070
|
|
|
|
70,150
|
|
|
|
(422)
|
|
|
14,373
|
|
|
|
(31,595)
|
|
|
71,576
|
|
|
2,391
|
|
|
73,967
|
|
(Loss)/profit for the year
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
(18,233)
|
|
|
(18,233)
|
|
|
1,631
|
|
|
(16,602)
|
|
Other adjustment
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
666
|
|
|
666
|
|
|
174
|
|
|
840
|
|
Share based remuneration
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
456
|
|
|
|
-
|
|
|
456
|
|
|
-
|
|
|
456
|
|
Preference share capital
reserve
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
2,594
|
|
|
|
-
|
|
|
2,594
|
|
|
-
|
|
|
2,594
|
|
Foreign exchange gain/(loss)
|
|
-
|
|
|
|
-
|
|
|
|
(356)
|
|
|
-
|
|
|
|
-
|
|
|
(356)
|
|
|
-
|
|
|
(356)
|
|
At 31 December 2023
|
|
19,070
|
|
|
|
70,150
|
|
|
|
(778)
|
|
|
17,423
|
|
|
|
(49,162)
|
|
|
56,703
|
|
|
4,196
|
|
|
60,899
|
Kingswood Holdings
Limited
Consolidated Statement of
Changes in Equity for the Year Ended 31 December 2023
Note 25 provides further details of, and the split
between, Share Capital and Share Premium.
Additional reserves consist of foreign exchange
translation, other reserves including share-based remuneration and
expenses charged against reserves.
The notes on pages 55 to 104 form an integral part
of the financial statements
Kingswood Holdings
Limited
Consolidated Statement of
Cash Flows for the Year Ended 31 December 2023
|
|
|
|
|
(*Restated)
|
|
|
|
2023
|
|
2022
|
|
Note
|
£ 000
|
|
£ 000
|
|
Net cash from/(used in) operating
activities
|
27
|
4,593
|
|
(2,704)
|
|
Investing activities
|
|
|
|
|
|
Property, plant and equipment
purchased
|
|
(136)
|
|
(113)
|
|
Business Combinations
|
|
(24,776)
|
|
(32,272)
|
|
Proceeds from the disposal of a
subsidiary, net of cash disposed
|
|
946
|
|
-
|
|
Deferred consideration
|
|
(9,638)
|
|
(10,774)
|
|
Net cash outflow from investing
activities
|
|
(33,604)
|
|
(43,159)
|
|
Financing activities
|
|
|
|
|
|
Interest paid
|
|
(5,910)
|
|
(21)
|
|
Lease payments
|
|
(940)
|
|
(852)
|
|
Dividends paid to non-controlling
interests
|
|
(491)
|
|
(811)
|
|
New loans received / loans
repaid
|
|
39,025
|
|
23,784
|
|
Net cash generated from financing
activities
|
|
31,684
|
|
22,100
|
|
Net increase/(decrease) in cash
and cash equivalents
|
|
2,673
|
|
(23,763)
|
|
Cash and cash equivalents at 1
January
|
|
16,726
|
|
42,933
|
|
Effect of exchange rate
fluctuations on cash held
|
|
(695)
|
|
454
|
|
Cash transferred to asset held for
sale
|
|
-
|
|
(2,898)
|
|
Cash and cash equivalents at 31
December
|
19
|
18,704
|
|
16,726
|
*2022 results are restated due to
a business classified as discontinued operations - see Note 2
and Note 6
The notes on pages 55 to 104 form an integral part
of the financial statements
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
1 General information
Kingswood Holdings Limited (the Company) is a
company incorporated in Guernsey under The Companies (Guernsey)
Law, 2008. The shares of the Company are traded on the AIM market
of the London Stock Exchange (ticker symbol: KWG). The consolidated
financial statements comprise the financial statements of the
Company and its subsidiary undertakings (together the Group), for
the year ended 31 December 2023. The nature of the Group's
operations and its principal activities are set out in the
Directors Report. Certain subsidiaries in the Group are subject to
the FCA's regulatory capital requirements and therefore required to
monitor their compliance with credit, market and operational risk
requirements, in addition to performing their own assessment of
capital requirements as part of the ICARA. The US subsidiaries are
required to be compliant under FINRA guidance.
These financial statements were authorised for issue
by the board on 25 June 2024.
2 Restatement of Prior Year
Results
The sale of subsidiary BMI in the
year qualifies as a discontinued operation under IFRS 5,
"Non-current Assets Held for Sale and Discontinued
Operations". To provide a consistent and
comparable view of the Group's financial performance, the prior
year's financial results have been restated to reflect BMI as a
discontinued operation. As such, the
results of BMI have been segregated from continuing operations for
both the current and prior periods. This
restatement involves reclassifying BMI's revenues, expenses,
assets, and liabilities from continuing operations to discontinued
operations in the prior period financial statements.
The financial statements for the prior period
have been restated to reflect this reclassification. The effect of
the reclassification on the Group's statement of financial position
and statement of comprehensive income in respect of the comparative
amount for the year ended 31 December 2022 is set out
below:
|
|
|
|
|
|
|
|
|
31 Dec
2022
|
|
Adjustment
for
|
|
31 Dec
2022
|
|
|
As
reported
|
|
Discontinued
Operations
|
|
Restated
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Revenue
|
145,998
|
|
(83,436)
|
|
62,562
|
|
Cost of sales
|
(103,878)
|
|
77,049
|
|
(26,829)
|
|
Gross Profit
|
42,120
|
|
(6,387)
|
|
35,733
|
|
Administrative expenses
|
(33,424)
|
|
5,533
|
|
(27,891)
|
|
- Staff costs
|
(23,720)
|
|
1,750
|
|
(21,970)
|
|
- Other
|
(9,704)
|
|
3,783
|
|
(5,921)
|
|
Operating profit
|
8,696
|
|
(854)
|
|
7,842
|
|
Business re-positioning
costs
|
(1,964)
|
|
-
|
|
(1,964)
|
|
Finance costs
|
(6,398)
|
|
-
|
|
(6,398)
|
|
Other Finance costs
|
(4,507)
|
|
37
|
|
(4,470)
|
|
Transaction costs
|
(4,924)
|
|
545
|
|
(4,379)
|
|
Remuneration charge (deferred
consideration)
|
(1,852)
|
|
-
|
|
(1,852)
|
|
Other gains or losses
|
(23)
|
|
23
|
|
-
|
|
Loss before tax
|
(10,972)
|
|
(249)
|
|
(11,221)
|
|
Income tax
receipt/(expense)
|
4,480
|
|
(24)
|
|
4,456
|
|
Loss for the year net of tax reclassified to discontinued
operations
|
|
|
(273)
|
|
273
|
|
Loss for the year from continuing
operations
|
(6,492)
|
|
-
|
|
(6,492)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
|
|
31 Dec
2022
|
|
Adjustment
for
|
|
31 Dec
2022
|
|
|
As
reported
|
|
Discontinued
Operations
|
|
Restated
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Property, plant and equipment
|
832
|
|
(45)
|
|
787
|
|
|
|
|
|
|
|
|
Total non-current assets
|
132,346
|
|
(45)
|
|
132,301
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
9,274
|
|
(4,462)
|
|
4,812
|
|
- Trade receivables
|
7,440
|
|
(2,886)
|
|
4,554
|
|
- Prepayments and other
receivables
|
1,834
|
|
(1,576)
|
|
258
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
19,624
|
|
(2,898)
|
|
16,726
|
|
Assets held for sale
|
-
|
|
7,405
|
|
7,405
|
|
Short term investments
|
52
|
|
-
|
|
52
|
|
|
|
|
|
|
|
|
Current Assets
|
28,950
|
|
45
|
|
28,995
|
|
|
|
|
|
|
|
|
Total Assets
|
161,296
|
|
-
|
|
161,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
(17,597)
|
|
5,396
|
|
(12,201)
|
|
- Trade payables
|
(2,976)
|
|
493
|
|
(2,483)
|
|
- Accrued expenses
|
(11,812)
|
|
4,903
|
|
(6,909)
|
|
Liabilities associated with assets held for
sale
|
-
|
|
(5,396)
|
|
(5,396)
|
|
|
|
|
|
|
|
|
Current liabilities
|
(38,368)
|
|
-
|
|
(38,368)
|
|
|
|
|
|
|
|
|
Total Liabilities
|
(87,329)
|
|
-
|
|
(87,329)
|
|
Total equity and liabilities
|
(161,296)
|
|
-
|
|
(161,296)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 Accounting policies Basis
of accounting
The financial statements of the Group have been
prepared in accordance with UK adopted international accounting
standards and in line with the Guernsey Company Law.
The financial statements have been prepared on the
historical cost basis; except for the revaluation of financial
instruments (please refer to note 28 for details). Historical cost
is generally based on the fair value of the consideration given in
exchange for the assets. The principal accounting policies adopted
are set out below.
Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Group made up to 31 December each
year.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Basis of consolidation
(continued)
The subsidiaries of the Group are detailed in note
19. All businesses are consolidated from the date of
acquisition.
For the purpose of the consolidated financial
statements, the results and financial position of each subsidiary
are expressed in pounds sterling, which is the functional and
presentation currency for the consolidated financial statements.
A subsidiary is an entity controlled by the company.
Control is achieved where the company has the power to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of
during the year are included in the income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting
policies into line with those used by the group.
A discontinued operation is a component of the
Group's business, the operations and cash flows of which can be
clearly distinguished from the rest of the Group and which: (a)
represents a separate major line of business or geographical area
of operations; (b) is part of a single co-ordinated plan to dispose
of a separate major line of business or geographic area of
operations; or (c) is a subsidiary acquired exclusively with a view
to resale. Classification as a discontinued operation occurs at the
earlier of disposal or when the operation meets the criteria to be
classified as held for sale. When an operation is classified as a
discontinued operation, the comparative statement of profit and
loss and OCI is re-presented as if the operation had been
discontinued from the start of the comparative year.
The purchase method of accounting is used to account
for business combinations that result in the acquisition of
subsidiaries by the group. The cost of a business combination is
measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange,
plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. Any excess
of the cost of the business combination over the acquirer's
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is recorded as
goodwill.
Inter-company transactions, balances and unrealised
gains on transactions between the company and its subsidiaries,
which are related parties, are eliminated in full.
Intra-group losses are also eliminated but may
indicate an impairment that requires recognition in the
consolidated financial statements.
Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies
adopted by the group. Non-controlling interests in the net assets
of consolidated subsidiaries are identified separately from the
group's equity therein. Non-controlling interests consist of the
amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes
in equity since the date of the combination. Total comprehensive
income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit
balance.
Going concern
The Directors review the going concern position of
the Group on a regular basis as part of the monthly reporting
process which includes consolidated management accounts and cash
flow projections and have, at the time of approving the financial
statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Further, as detailed in the Directors' report, a letter of
support from PSCL, who intends to to continue to support the Group
financially in the 12 months following the approval of the Group's
financial statements for the year ended 31 December 2023 has been
obtained. Accordingly, the Directors continue to adopt the going
concern basis of accounting in preparing the financial
statements.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Foreign currency
Transactions in foreign currencies are translated to
the Group's functional currency at the foreign exchange rate ruling
at the date of the transaction and recognized in the consolidated
income statement. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are re translated to
the functional currency at the foreign exchange rate ruling at that
date. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction. Foreign exchange
differences arising on translation of a foreign entity are
recognized in equity. Foreign entity income statements are
translated to the Group's functional currency at the twelve month
average for the relevant fiscal year.
Revenue recognition
Performance obligations and timing of revenue
recognition
The majority of the Group's UK revenue, being
investment management fees and ongoing wealth advisory, is derived
from the value of funds under management / advice, with revenue
recognised over the period in which the related service is
rendered. This method reflects the ongoing portfolio servicing
required to ensure the Group's contractual obligations to its
clients are met. This also applies to the Group's US Registered
Investment Advisor ("RIA") business.
For certain commission, fee-based and initial wealth
advisory income, revenue is recognised at the point the service is
completed. This applies in particular to the Group's US Independent
Broker Dealer ("IBD") services, and its execution-only UK
investment management. There is limited judgement needed in
identifying the point such a service has been provided, owing to
the necessity of evidencing, typically via third-party support, a
discharge of pre-agreed duties.
The US division also has significant Investment
Banking operations, where commission is recognised on successful
completion of the underlying transaction.
Determining the transaction price
Most of the Group's UK revenue is charged as a
percentage of the total value of assets under management or advice.
For revenue earned on a commission basis, such as the US broker
dealing business, a set percentage of the trade value will be
charged. In the case of one-off or ad hoc engagements, a fixed fee
may be agreed.
Allocating amounts to performance obligations
Owing to the way in which the Group earns its
revenue, which is largely either percentage-based or fixed for
discrete services rendered, there is no judgement required in
determining the allocation of amounts received. Where clients
benefit from the provision of both investment management and wealth
advisory services, the Group is able to separately determine the
quantum of fees payable for each business stream.
Further details on revenue, including disaggregation
by operating segment and the timing of transfer of service(s), are
provided in note 3 below.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Borrowings
All borrowing costs are measured at the present
value of the contractual payments due to the lender over the loan
term, with the discount rate determined by reference to the
interest rate inherent in the loan.
Retirement benefit costs
The Group contributes to defined contribution
pension schemes, held in separately administered funds.
Contributions to the schemes are charged as per employee contracts
through the profit or loss as they fall due.
Taxation
The tax expense for the period comprises current and
deferred tax. Tax is recognised in profit or loss, except that a
change attributable to an item of income or expense recognised as
other comprehensive income is also recognised directly in other
comprehensive income.
Current tax
The tax payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income as it excludes items of income or
expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. Tax is
recognised in the Statement of Comprehensive Income, except where a
charge attributable to an item of income and expense is recognised
as other comprehensive income, or where an item recognised directly
in equity is also recognised in other comprehensive income or
directly in equity respectively. The current income tax charge is
calculated on the basis of tax rates and laws that have been
enacted or substantively enacted by the reporting date in the
countries where the Group operates and generates income.
Deferred tax
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and is
accounted for using the Statement of Financial Position liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group
is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is
reviewed at each Statement of Financial Position date and reduced
to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered. Detailed financial forecasts are in place to support the
carrying value of the deferred asset.
Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or
the asset is realised. Deferred tax is recognised in the Statement
of Comprehensive Income, except where a charge attributable to an
item of income and expense is recognised as other comprehensive
income, or where an item recognised directly in equity is also
recognised in other comprehensive income or directly in equity
respectively
Deferred tax assets and liabilities are offset when
there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net
basis.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Property, plant and equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and any recognised impairment
loss.
Depreciation
Depreciation is recognised so as to write off the
cost or valuation of assets less their residual values over their
useful lives, using the straight-line method, on the following
basis:
Asset class
Office equipment, fixtures and fittings:
over 60 months on a straight-line basis
IT equipment and software:
over 36 months on a straight-line basis
The gain or loss arising on the disposal or
retirement of an asset is determined as the difference between the
sales proceeds and the carrying amount of the asset and is
recognised in income.
Depreciation periods for newly-acquired businesses
may vary, however the Group aims to harmonise such accounting
estimates within 12 months.
Business combinations
All business combinations are accounted for by
applying the acquisition method. The acquisition 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. Where a full assessment of fair values is not
practicable at the signing of these financial statements,
provisional accounting has been adopted. 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. The consideration liability is
contingent on performance requirements during the deferred
consideration period. The value of the contingent consideration is
determined by EBITDA and/or revenue targets agreed on the
acquisition of each asset, as defined under the respective Purchase
Agreements. As at the reporting date, the Group is expecting to pay
the full value of its deferred consideration as all acquisitions
are on target to meet the requirements.
Where the payment of deferred consideration is
contingent on the continued employment of the seller(s) of a
business post-acquisition during the deferred payment period, such
contingent consideration is treated as remuneration in accordance
with IFRS 3, and accounted for as a charge against profits as
incurred. No deferred liability is created for this portion of
consideration at the time of acquisition.
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 annually
for impairment. Any impairment is recognised immediately through
the profit and loss. Negative goodwill arising on an acquisition is
recognised immediately through the profit and loss.
Impairment
Goodwill and other intangible assets with an
indefinite life are tested annually for impairment. For the
purposes of impairment testing, goodwill acquired in a business
combination is allocated to each of the Group's CGUs that are
expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquisition are assigned to
those units. The carrying amount of each CGU is compared to its
recoverable amount. For more detail refer to note 14.
Where goodwill forms part of a CGU and part of the
operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of
the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation disposed of
and the portion of the CGU retained.
Kingswood Holdings
Limited
Notes to the Financial Statements for the Year Ended 31 December
2023
Intangible assets
Client relationships
Client relationships acquired in a business
combination are recognised at fair value at the acquisition date.
Relationships acquired outside of a business combination are
initially recognised at cost. In assessing the fair value of these
relationships, the Group has estimated their finite life based on
information about the typical length of existing client
relationships. Amortisation is calculated using the straight line
method over their useful lives, ranging from 10 to 20 years.
Goodwill
Goodwill represents the excess of the cost of
acquisition over the fair value of the Group's share of the net
identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill on acquisitions of subsidiaries is included
in 'intangible assets'. Goodwill is tested annually for impairment
and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed.
Financial assets and liabilities
Financial assets and liabilities are recognised in
the Group's Statement of Financial Position when the Group becomes
a party to the contractual provisions of the instrument and are
initially measured at fair value.
Classification and initial measurement of financial
assets
Financial assets are derecognised when the
contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks
and rewards are transferred. A financial liability is derecognised
when it is extinguished, discharged, cancelled or expires.
As required under IFRS 9, financial assets are
classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); and
• fair value through other comprehensive income (FVOCI).
In the periods presented the Group did not have any
financial assets categorised as FVOCI.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if
the assets meet the following conditions (and are not designated as
FVTPL):
• they are held within a business model whose objective is to
hold the financial assets and collect its contractual cash flows;
and
• the contractual terms of the financial assets give rise to
cash flows that are solely payments of principal and interest on
the principal amount outstanding.
After initial recognition, these are measured at
amortised cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial.
Classification and measurement of financial
liabilities
Financial liabilities are initially measured at
amortised cost or at fair value, and, where applicable, adjusted
for transaction costs unless the Group designated a financial
liability at fair value through profit or loss. Subsequently,
financial liabilities are measured at amortised cost using the
effective interest method.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Impairment of financial assets
Impairment provisions for current and non-current
trade receivables are recognised based on the simplified approach
within IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised
within cost of sales in the consolidated 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.
Impairment provisions for receivables from related
parties and loans to related parties are recognised based on a
forward looking expected credit loss model. The methodology used to
determine the amount of the provision is based on whether there has
been a significant increase in credit risk since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. The
assessment of whether there has been a significant increase in
credit risk is based on an increase in the probability of a default
occurring since initial recognition. For those for which credit
risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that
are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are
recognised.
The Group considers a broad range of information
when assessing credit risk and measuring expected credit losses,
including past events, current conditions, reasonable and
supportable forecasts that affect the expected collectability of
the future cash flows of the instrument.
In applying this approach, IFRS 9 makes a
distinction between:
• financial instruments that have not deteriorated
significantly in credit quality since initial recognition or that
have low credit risk (Stage 1); and
• financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk is
not low (Stage 2); and
• financial assets that have objective evidence of impairment
at the reporting date (Stage 3).
12-month expected credit losses' are recognised for
the first category while 'lifetime expected credit losses' are
recognised for the second category.
Under the ECL model, a dual measurement approach
applies whereby a financial asset will attract an ECL allowance
equal to either:
• 12 month expected credit losses (losses resulting from
possible defaults within the next 12 months); or
• lifetime expected credit losses (losses resulting from
possible defaults over the remaining life of the financial
asset).
Measurement of the expected credit losses is
determined by a probability-weighted estimate of credit losses over
the expected life of the financial instrument.
Equity
Debt and equity instruments are classified as either
financial liabilities or as equity in accordance with the substance
of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued are recognised at the
proceeds received, net of direct issue costs.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Impairment of financial assets
(continued)
Effective interest rates
The effective interest method is a method of
calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
Reclassification of equity
Under the Guernsey Company law, Kingswood Holdings
Limited reserves the right to set movement from share premium into
another reserve.
Trade payables
These amounts represent liabilities for goods and
services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid
within 30 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within
12 months after the reporting period. They are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest method.
Client money
The Group holds money on behalf of clients in
accordance with the client money rules of the Financial Conduct
Authority and other regulatory bodies. Such money and the
corresponding liabilities to clients are not shown on the face of
the Statement of Financial Position, as the Group is not
beneficially entitled thereto. The amounts held on behalf of
clients at the Statement of Financial Position date are stated in
note 20.
Deferred consideration
Deferred consideration, which is included within
liabilities or equity depending on the form it takes, relates to
the Directors' best estimate of amounts payable in the future in
respect of certain client relationships and subsidiary undertakings
that were acquired by the Group. Deferred consideration is measured
at its fair value based on the discounted expected future cash
flows.
The amount recognised as deferred consideration is
dependent on the acquisition structure, specifically the employment
terms of the seller(s) post acquisition. If payment of deferred
consideration is contingent on the continued employment of the
seller(s) during the deferred payment period, such contingent
payment is treated as remuneration, not deferred consideration, and
accounted for as a charge against profits as incurred over the
deferred period.
Remuneration payable on business combinations
Payments due in relation to share or business
purchase agreements, but which remain linked to the continued
employment of the acquiree's employees, are recognised as a
remuneration expense through the Consolidated Statement of
Comprehensive Income. These costs are excluded from Operating
Profit on the basis these costs relate to acquisitions and do not
reflect the ongoing underlying business performance, and will cease
when the earnout period on a given deal concludes.
Non-operating costs and other acquisition-related items
In addition to the above, certain other costs have
been excluded from Operating Profit, on the basis these costs
primarily relate to acquisitions or other non-recurring
expenditure. The retained Operating Profit figure represents the
Directors' assessment of the ongoing underlying performance of the
core business.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Share based remuneration
Equity-settled share-based remuneration 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 28.
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 Statement of
Financial Position 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 the
Statement of Comprehensive Income such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
the equity-settled share based payments reserve.
Cash and cash equivalents
For the purposes of the cash flow statement, cash
and cash equivalents include cash in hand, deposits held at call
with banks, and other short-term highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of change in value. Such investments are
normally those with original maturities of three months or less.
Cash and cash equivalents are stated net of bank overdrafts, if
any.
Leases
Under IFRS 16, a contract is, or contains, a lease
if the contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration.
The Group leases a number of assets, including
properties and office equipment.
The Group initially records a lease liability
reflecting the present value of the future contractual cash flows
to be made over the lease term, discounted using the Group's
incremental borrowing rate. This is the rate payable by the Group
on a loan of a similar term, and with similar security to obtain an
asset of similar value. A right-of-use asset is also recorded at
the value of the lease liability plus any directly related costs
and estimated dilapidation expenses.
Subsequent to initial measurement lease liabilities
increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortised on a straight-line basis over the
remaining term of the lease or over the remaining economic life of
the asset if, rarely, this is judged to be shorter than the lease
term.
When the Group revises its estimate of the term of
any lease (because, for example, it re-assesses the probability of
a lessee extension or termination option being exercised), it
adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted using
a revised discount rate. An equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term. If
the carrying amount of the right-of-use asset is adjusted to zero,
any further reduction is recognised in profit or loss.
All leases are accounted for by recognising a
right-of-use asset and a lease liability except for leases of low
value assets and leases with a duration of 12 months or less. The
Group recognises the lease payments associated with such leases as
an expense on a straight-line basis over the lease term.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
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 that had the most significant effect on the
amounts recognised in the financial statements.
Assessment of control
Control is considered to exist where an investor has
power over an investee, or else is exposed, and has rights, to
variable returns. The Group determines control to exist where its
own direct and implicit voting rights relative to other investors
afford KHL - via its board and senior management - the practical
ability to direct, or as the case may be veto, the actions of its
investees. KHL holds 50.1% of voting rights in Kingswood US, LLC
and its subsidiaries, as well as having representation on the US
division's advisory board by key KHL Board members. The Group has
thus determined that the Company has the practical ability to
direct the relevant activities of Kingswood US, LLC and its
subsidiaries and has consolidated the sub-group as subsidiaries
with a 49.9% non-controlling interest.
Estimates and Assumptions
Intangible assets:
Expected duration of client relationships
The Group makes estimates as to the expected
duration of client relationships to determine the period over which
related intangible assets are amortised. The amortisation period is
estimated with reference to historical data on account closure
rates and expectations for the future. During the year, client
relationships were amortised over a 10-20 year period as detailed
in note 16.
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. Goodwill is reviewed annually
for impairment by comparing the carrying amount of the CGUs to
their expected recoverable amount, estimated on a value-in-use
basis.
Share-based remuneration
Share-based remuneration
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
Statement of Comprehensive Income. Details of the assumptions are
set out in note 28.
Deferred Tax
Recoverability of deferred tax assets
The amount of deferred tax assets recognised
requires assumptions to be made to the financial forecasts that
probable sufficient taxable profits will be available to allow all
or part of the asset to be recovered. More information is disclosed
in note 16 to the financial statements.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Estimates and Assumptions (continued)
Leases:
Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate
implicit in leases where it is the lessee, therefore, it uses its
incremental borrowing rate to measure lease liabilities. This is
the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment.
The incremental borrowing rate therefore reflects
what the Group 'would have to pay', which requires estimation when
no observable rates are available or when they need to be adjusted
to reflect the terms and conditions of the lease (for example, when
leases are not in the subsidiary's functional currency). The Group
estimates the incremental borrowing rate using observable inputs
(such as market interest rates) when available and is required to
make certain entity-specific estimates (such as the subsidiary's
stand-alone credit rating).
Deferred consideration:
Deferred payments
The Group structures acquisitions such that
consideration is split between initial cash or equity settlements
and deferred payments. The initial value of the contingent
consideration is determined by EBITDA and/or revenue targets agreed
on the acquisition of each asset. It is subsequently remeasured at
its fair value through the Statement of Comprehensive Income, based
on the Directors' best estimate of amounts payable at a future
point in time, as determined with reference to expected future
performance. Forecasts are used to assist in the assumed settlement
amount.
Discontinued operations and assets held for
sale
Non-current assets, or disposal groups comprising
assets and liabilities, are classified as held-for-sale if it is
highly probable that they will be recovered through a sale
transaction rather than through continuing use. The assets or
disposal group are measured at the lower of carrying amount and
fair value less cost to sell. A discontinued operation is a
component of the Group's business, the operations and cash flows of
which can be clearly distinguished from the rest of the Group and
which:
(a) represents a separate major line of business or
geographical area of operations;
(b) is part of a single co-ordinated plan to dispose
of a separate major line of business or geographic area of
operations; or
(c) is a subsidiary acquired exclusively with a view
to resale.
Classification as a discontinued operation occurs at
the earlier of disposal or when the operation meets the criteria to
be classified as held for sale. When an operation is classified as
a discontinued operation, the comparative statement of profit and
loss and OCI is re-presented as if the operation had been
discontinued from the start of the comparative year.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
4 Business and geographical
segments
Information reported to the Group's Non-Executive
Chairman for the purposes of resource allocation and assessment of
segment performance is focused on the category of customer for each
type of activity.
The Group's reportable segments under IFRS 8 are as
follows: investment management, wealth planning and US
operations.
The Group has disaggregated revenue into various
categories in the following table which is intended to depict how
the nature, amount, timing and uncertainty of revenue and cash
flows are affected by economic data and enable users to understand
the relationship with revenue segment information provided
below.
The following is an analysis of the Group's revenue
and results by reportable segment for the year to 31 December 2023.
During the year, the sale of subsidiary Benchmark Investments, LLC
(BMI), which is part of US operations has been classified as held
for sale and is shown as discontinued operations. The prior year
comparative has been restated.
The table below details a full year's worth of
revenue and results for the principal business and geographical
divisions, which has then reconciled to the results included in the
Statement of Comprehensive Income:
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
4 Business and geographical segments (continued)
|
|
|
Investment
management
|
|
Wealth
planning
|
|
US
operations
|
|
Ireland
operations
|
|
|
Group
|
|
Continuing
Total
|
|
Discontinued
Total
|
|
Total
|
|
|
2023
|
|
2023
|
|
2023
|
|
2023
|
|
|
2023
|
|
2023
|
|
2023
|
|
2023
|
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
|
Revenue (disaggregated by timing):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Point in time
|
974
|
|
4,420
|
|
28,633
|
|
1.550
|
|
|
-
|
|
35,577
|
|
36,484
|
|
72,061
|
|
|
Over time
|
6,995
|
|
27,970
|
|
10,941
|
|
4,636
|
|
|
41
|
|
50,583
|
|
1,827
|
|
52,410
|
|
|
External sales
|
7,969
|
|
32,390
|
|
39,574
|
|
6,186
|
|
|
41
|
|
86,160
|
|
38,311
|
|
124,471
|
|
|
Direct expenses
|
(1,154)
|
|
(1,482)
|
|
(32,851)
|
|
-
|
|
|
-
|
|
(35,487)
|
|
(36,322)
|
|
(71,809))
|
|
|
Gross profit
|
6,815
|
|
30,908
|
|
6,723
|
|
6,186
|
|
|
41
|
|
50,673
|
|
1,989
|
|
52,662
|
|
|
Operating profit / (loss)
|
3,020
|
|
10,709
|
|
1,870
|
|
1, 948
|
|
|
(6,731)
|
|
10,816
|
|
(103)
|
|
10,713
|
|
|
Business re-positioning costs
|
(265)
|
|
(425)
|
|
-
|
|
-
|
|
|
(1,204)
|
|
(1,894)
|
|
-
|
|
(1,894)
|
|
|
Finance costs
|
(13)
|
|
(156)
|
|
(13)
|
|
(3)
|
|
|
(12,781)
|
|
(12,966)
|
|
(6)
|
|
(12,972)
|
|
|
Amortisation and depreciation
|
(9)
|
|
(1,656)
|
|
(145)
|
|
(51)
|
|
|
(4,185)
|
|
(6,046)
|
|
(37)
|
|
(6,083)
|
|
|
Other gains / (losses)
|
-
|
|
(5)
|
|
46
|
|
-
|
|
|
90
|
|
131
|
|
-
|
|
131
|
|
|
Remuneration charge (deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consideration)
|
-
|
|
-
|
|
-
|
|
-
|
|
|
(474)
|
|
(474)
|
|
-
|
|
(474)
|
|
|
Transaction costs
|
6
|
|
(586)
|
|
1,117
|
|
(72)
|
|
|
(3,293)
|
|
(2,828)
|
|
(490)
|
|
(3,318)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before tax
|
2,739
|
|
7,881
|
|
2,875
|
|
1,822
|
|
|
(28,578)
|
|
(13,261)
|
|
(636)
|
|
(13,897)
|
|
|
Tax
|
-
|
|
(39)
|
|
(37)
|
|
(290)
|
|
|
(2,339)
|
|
(2,705)
|
|
-
|
|
(2,705)
|
|
|
Profit / (loss) after tax
|
2,739
|
|
7,842
|
|
2,838
|
|
1,532
|
|
|
(30,917)
|
|
(15,966)
|
|
(636)
|
|
(16,602)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Business and geographical
segments (continued)
|
|
|
|
Investment
|
|
Wealth
|
|
US
|
|
Ireland
|
|
|
|
|
|
|
|
|
|
|
|
|
management
|
|
planning
|
|
Operations
(Restated)
|
|
operations
|
|
|
Group
|
|
Continuing
Total
(Restated)
|
|
Discontinued
Total
(Restated)
|
|
Total
|
|
|
|
2022
|
|
2022
|
|
2022
|
|
2022
|
|
|
2022
|
|
2022
|
|
2022
|
|
2022
|
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£'000
|
|
|
Revenue (disaggregated by timing):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Point in time
|
931
|
|
3,018
|
|
13,807
|
|
-
|
|
|
-
|
|
17,756
|
|
81,235
|
|
98,991
|
|
|
Over time
|
6,252
|
|
23,644
|
|
14,910
|
|
-
|
|
|
-
|
|
44,806
|
|
2,201
|
|
47,007
|
|
|
External sales
|
7,183
|
|
26,662
|
|
28,717
|
|
-
|
|
|
-
|
|
62,562
|
|
83,436
|
|
145,998
|
|
|
Direct expenses
|
(1,277)
|
|
(1,183)
|
|
(24,376)
|
|
-
|
|
|
7
|
|
(26,829)
|
|
(77,049)
|
|
(103,878)
|
|
|
Gross profit
|
5,906
|
|
25,479
|
|
4,341
|
|
-
|
|
|
7
|
|
35,733
|
|
6,387
|
|
42,120
|
|
|
Operating profit / (loss)
|
2,135
|
|
9,353
|
|
2,112
|
|
-
|
|
|
(5,758)
|
|
7,842
|
|
854
|
|
8,696
|
|
|
Business re-positioning costs
|
(282)
|
|
(378)
|
|
-
|
|
-
|
|
|
(1,304)
|
|
(1,964)
|
|
-
|
|
(1,964)
|
|
|
Finance costs
|
-
|
|
(130)
|
|
-
|
|
-
|
|
|
(6,268)
|
|
(6,398)
|
|
-
|
|
(6,398)
|
|
|
Amortisation and depreciation
|
(3)
|
|
(1,092)
|
|
-
|
|
-
|
|
|
(3,375)
|
|
(4,470)
|
|
(37)
|
|
(4,507)
|
|
|
Other gains / (losses)
|
-
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
-
|
|
(23)
|
|
(23)
|
|
|
Deferred payments
|
-
|
|
-
|
|
-
|
|
-
|
|
|
(1,852)
|
|
(1,852)
|
|
-
|
|
(1,852)
|
|
|
Transaction costs
|
191
|
|
(1,389)
|
|
(48)
|
|
-
|
|
|
(3,133)
|
|
(4,379)
|
|
(545)
|
|
(4,924)
|
|
Profit / (loss) before tax
|
2,041
|
|
6,364
|
|
2,064
|
|
-
|
|
|
(21,690)
|
|
(11,221)
|
|
249
|
|
(10,972)
|
|
Tax
|
-
|
|
-
|
|
(46)
|
|
-
|
|
|
4,502
|
|
4,456
|
|
24
|
|
4,480
|
|
Profit / (loss) after tax
|
2,041
|
|
6,364
|
|
2,018
|
|
-
|
|
|
(17,188)
|
|
(6,765)
|
|
273
|
|
(6,492)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 results are restated due to a
business classified as discontinued operations - see Note 2
and Note 6.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
4
Business and geographical segments
(continued)
|
Investment
management
|
Wealth
planning
|
US
operations
|
Ireland
operations
|
Group
|
Total
|
|
2023
|
2023
|
2023
|
2023
|
2023
|
2023
|
|
£ 000
Additions to non-current
|
£ 000
|
£ 000
|
£ 000
|
£ 000
|
£
000
|
|
assets
47
Reportable segment
|
(978)
|
(1,964)
|
3,976
|
21,521
|
22,602
|
|
assets
4,809
|
22,359
|
22,749
|
10,524
|
123,041
|
183,482
|
|
Tax assets
|
|
|
|
|
2,058
|
|
Total Group assets
Reportable segment
|
|
|
|
|
185,540
|
|
liabilities
906
|
3,859
|
5,152
|
811
|
113,913
|
124,641
|
|
Total Group liabilities
|
|
|
|
|
124,641
|
|
|
|
Investment management
|
Wealth planning
|
US
operations
|
Ireland
operations
|
Group
|
Total
|
|
2022
|
2022
|
2022
|
2022
|
2022
|
2022
|
|
£
000
Additions to non-current
|
£ 000
|
£ 000
|
£ 000
|
£ 000
|
£
000
|
|
assets
(153)
Reportable segment
|
3,011
|
1,130
|
-
|
39,951
|
43,939
|
|
assets
5,375
|
24,533
|
24,492
|
-
|
102,403
|
156,803
|
|
Tax assets
|
|
|
|
|
4,492
|
|
Total Group assets
Reportable segment
|
|
|
|
|
161,295
|
|
liabilities
562
|
5,530
|
8,132
|
-
|
73,105
|
87,329
|
|
Total Group liabilities
|
|
|
|
|
87,329
|
|
5 Loss after tax
|
|
|
|
|
|
|
Loss after tax for the year is
stated after charging
|
|
|
|
|
|
2023
|
2022
(Restated)
|
|
|
|
£ 000
|
£ 000
|
|
Depreciation of property, plant
and equipment (incl right of use asset)
|
1,125
|
1,069
|
|
Gain on sale of subsidiary (Note
31)
|
1,039
|
-
|
|
Amortisation of intangible
assets
|
4,921
|
2,944
|
|
Staff costs
|
30,460
|
21,970
|
|
|
|
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
5 Loss after tax (continued)
See Directors' Remuneration Report on page 40 for
details of Directors' remuneration during the year.
Included in the loss after tax are business
re-positioning and transaction costs. Business re-positioning costs
include restructuring costs in relation to staff and third-party
suppliers. Transaction costs are primarily deal-related and driven
by the acquisitions entered into by the Group.
6 Discontinued
operations
On November 9th, Kingswood US
sold the entire share capital of wholly owned subsidiary Benchmark
Investments, LLC (BMI) for a consideration of US$5million. The sale
of BMI reflects Kingswood US's strategic decisions to optimise its
business portfolio and streamline operations, allowing the Company
to focus on core strengths and areas of growth within the financial
services industry. At 31 December 2022, the business has been
classified as held for sale and is classified as a discontinued
operation.
|
|
|
|
Results of discontinued operations:
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Revenue
|
38,311
|
|
83,436
|
|
Cost of sales
|
(
36,322)
|
|
(77,049)
|
|
Gross Profit
|
1,989
|
|
6,387
|
|
Administrative expenses
|
(2,092)
|
|
(5,533)
|
|
- Staff costs
|
(516)
|
|
(1,750)
|
|
- Other
|
(1,576)
|
|
(3,783)
|
|
Operating profit
|
(103)
|
|
854
|
|
Business re-positioning
costs
|
|
|
(101)
|
|
Finance costs
|
(6)
|
|
(4)
|
|
Other Finance costs
|
(37)
|
|
(37)
|
|
Transaction costs
|
(490)
|
|
(440)
|
|
Other gains or losss
|
|
|
(23)
|
|
(Loss)/Profit before tax
|
(636)
|
|
249
|
|
Income tax
receipt/(expense)
|
-
|
|
24
|
|
Loss for the year from discontinued
operations
|
(636)
|
|
273
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Owners of the Company
|
(319)
|
|
137
|
|
Non-controlling
interests
|
(317)
|
|
136
|
|
|
(636)
|
|
273
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
Cash flows used in discontinued operations
|
£ 000
|
|
£ 000
|
|
Net cash from operating
activities
|
-
|
|
2,898
|
|
Net cash from investing
activities
|
-
|
|
-
|
|
Net cash from financing
activities
|
-
|
|
-
|
|
Net cash flows for the
year
|
-
|
|
2,898
|
|
6 Discontinued operations (continued)
At 31 December 2022, the disposal
group was stated at its carrying value and comprised the following
assets and liabilities:
|
|
|
|
|
2022
|
|
|
|
|
£ 000
|
|
Property, plant and equipment
|
|
|
45
|
|
Trade and other
receivables
|
|
|
4,462
|
|
Cash and cash
equivalents
|
|
|
2,898
|
|
Assets held for sale
|
|
|
7,405
|
|
|
|
|
|
|
Trade and other payables
|
|
|
5,396
|
|
Liabilities associated with assets held for
sale
|
|
|
5,396
|
7 Auditors'
remuneration
|
The analysis of fees payable to
the Group's auditor is as follows:
|
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Audit of Company
|
378
|
|
320
|
|
Audit of Subsidiaries
|
130
|
|
135
|
|
CASS audit
|
28
|
|
31
|
|
Total auditor's remuneration
|
536
|
|
486
|
|
8
Staff costs
|
|
|
|
The average monthly number of
persons (including Executive Directors) is
|
as follows:
|
|
|
2023
No.
|
|
2022
(Restated)
No.
|
|
Management
|
3
|
|
4
|
|
Client advisers
|
118
|
|
93
|
|
Operations
|
269
|
|
168
|
|
Finance
|
14
|
|
17
|
|
Risk and Compliance
|
7
|
|
8
|
|
Human resources
|
6
|
|
10
|
|
Average number of employees
|
417
|
|
300
|
|
Aggregate staff remuneration
comprised:
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
|
8
Staff costs (continued)
|
|
|
|
|
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Wages and salaries
|
25,318
|
|
17,116
|
|
Social security costs
|
2,191
|
|
2,046
|
|
Pension costs, defined
contribution scheme
|
1,599
|
|
1,364
|
|
Other short-term employee
benefits
|
474
|
|
479
|
|
Redundancy costs
|
422
|
|
113
|
|
Share-based remuneration
|
456
|
|
852
|
|
Total staff costs
|
30,460
|
|
21,970
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Operating staff costs
|
29,614
|
|
21,186
|
|
Business re-positioning costs
|
324
|
|
250
|
|
Acquisition team costs
|
522
|
|
534
|
|
Total staff costs
|
30,460
|
|
21,970
|
2022 staff costs are restated due
to a business classified as discontinued operations - see Note 2
and Note 6.
9 Finance
costs
|
|
2023
|
|
2022
|
|
£ 000
|
|
£ 000
|
|
Interest cost on external
borrowings
|
7,292
|
|
456
|
|
Finance cost in relation to lease
liability (note 21)
|
150
|
|
147
|
|
Finance cost in relation to
deferred consideration
|
2,870
|
|
3,109
|
|
Preference share dividends
|
2,594
|
|
2,481
|
|
Other finance costs
|
60
|
|
205
|
|
Total finance costs
|
12,966
|
|
6,398
|
|
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
10 Other gains and
losses
|
|
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Other gains and losses
|
(93)
|
|
-
|
|
Unrealised gain/(loss) on
fixed income securities
|
224
|
|
-
|
|
|
131
|
|
-
|
|
2022 other gains and losses are
restated due to a business classified as discontinued operations -
see Note 2 and Note 6.
|
|
11 Taxation
|
|
|
|
|
Tax charged/(credited) in the
income statement
|
|
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Current taxation
|
|
|
|
|
Current year tax expense
|
-
|
|
-
|
|
|
|
|
|
|
Reclassification of discontinued
operation income tax
|
-
|
|
24
|
|
Foreign tax adjustment to prior
periods
|
228
|
|
22
|
|
Total current income tax
|
228
|
|
46
|
|
Deferred taxation
|
|
|
|
|
Movement in deferred tax (note
16)
|
2,477
|
|
(4,502)
|
|
Tax (receipt)/expense in the
income statement
|
2,705
|
|
(4,456)
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Factors affecting tax charge for the year
The tax on profit before tax for the year has
increased from 19% to 25% as of 1st April 2023.
|
The differences are reconciled
below:
|
|
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Loss before tax
from continuing operatuons
|
(13,261)
|
|
(10,972)
|
|
Corporation tax at standard
rate
|
(3,120)
|
|
(2,085)
|
|
Expenses not deductible for tax
purposes
|
2,290
|
|
2,823
|
|
Adjustments for Statement of
Financial Position items
|
438
|
|
210
|
|
Benefit of superdeduction
|
-
|
|
(6)
|
|
(Over)/under provision in prior
years
|
1,268
|
|
22
|
|
Adjustment for revenue ineligible
for tax purposes
|
(3)
|
|
(48)
|
|
Unrelieved tax losses carried
forward
|
(152)
|
|
(417)
|
|
Foreign tax adjustments
|
(310)
|
|
-
|
|
Movement in deferred tax
|
1,326
|
|
(4,502)
|
|
Reclassification of discontinued
operation income tax
|
-
|
|
24
|
|
Different tax rates applied in
overseas jurisdictions
|
968
|
|
(477)
|
|
Total tax (credit)/charge
|
2,705
|
|
(4,456)
|
|
Factors that may affect future tax changes
|
|
|
|
In the Spring Budget 2021, the UK Government
announced that from 1 April 2023 the corporation tax rate would
increase to 25% (rather than remaining at 19%, as previously
enacted). This new law was substantively enacted 24 May 2021.
Deferred taxes at the Statement of Financial Position date have
been measured using these enacted tax rates and reflected in these
financial statements.
The tax expense excludes a tax charge from
discontinued operations of £nil (2022: credit £23,555).
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
12 Dividends
The Directors are not proposing to pay a dividend to
ordinary shareholders in respect of the year ended 31 December 2023
(year ended 31 December 2022: £nil).
|
13 Earnings per share
|
|
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Loss from continuing operations
for the purposes of basic loss per share, being net loss
attributable to owners of the Group
|
(17,597)
|
|
(8,070)
|
|
Loss from discontinued operations
for the purposes of basic loss per share, being net loss
attributable to owners of the Group
|
(636)
|
|
273
|
|
Total loss for the purposes of
basic loss per share, being net loss attributable to owners of the
Group
|
(18,233)
|
|
(7,797)
|
|
Number of shares
|
|
|
|
|
|
|
|
|
|
Weighted average number of
ordinary shares
|
216,920,724
|
|
216,920,724
|
|
Convertible preference shares in
issue
|
538,027,380
|
|
512,407,029
|
|
Share options
|
5,956,773
|
|
5,897,018
|
|
Weighted average number of
ordinary shares assuming conversion
|
760,904,877
|
|
735,224,771
|
Owing to the Group being in a loss-making position
for the years ending 31 December 2023 and 2022, the effect of any
conversion events would be antidilutive to the loss per share.
Therefore the diluted loss per share has not been restated from the
basic loss per share from continuing operation of £0.08 (2022: loss
per share £0.04).
The basic loss per share
from discontinued operations was £nil (2022: profit per share
£0.00).
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
14 Property, plant and equipment
|
|
|
|
|
|
Furniture, fittings and
equipment
|
|
Total
|
|
|
£ 000
|
|
£ 000
|
|
Cost or valuation
|
|
|
|
|
At 1 January 2022
|
1,655
|
|
1,655
|
|
Additions
|
113
|
|
113
|
|
Reclassifications
|
1,438
|
|
1,438
|
|
Acquisitions NBV
|
80
|
|
80
|
|
Foreign exchange movements
|
17
|
|
17
|
|
Transfer to Asset held for
sale
|
(132)
|
|
(132)
|
|
At 31 December 2022
|
3,171
|
|
3,171
|
|
At 1 January 2023
|
3,171
|
|
3,171
|
|
Additions
|
136
|
|
136
|
|
Acquisitions NBV
|
1,056
|
|
1,056
|
|
Foreign exchange movements
|
18
|
|
18
|
|
At 31 December 2023
|
4,381
|
|
4,381
|
|
Depreciation
|
|
|
|
|
At 1 January 2022
|
714
|
|
714
|
|
Charge for year
|
310
|
|
310
|
|
Reclassifications
|
1,438
|
|
1,438
|
|
Transfer to Asset held for
sale
|
(87)
|
|
(87)
|
|
Foreign exchange movements
|
9
|
|
9
|
|
At 31 December 2022
|
2,384
|
|
2,384
|
|
At 1 January 2023
|
2,384
|
|
2,384
|
|
Charge for the year
|
362
|
|
362
|
|
Acquisitions NBV
|
865
|
|
865
|
|
At 31 December 2023
|
3,611
|
|
3,611
|
|
Carrying amount
|
|
|
|
|
At 31 December 2023
|
770
|
|
770
|
|
At 31 December 2022
|
787
|
|
787
|
Prior year reclassification of £44,982 at NBV in
2022 includes assets reclassified to assets held for sale. (see
Note 2 and Note 6).
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
15 Right of use assets
|
|
|
|
Property
£ 000
|
|
Total
£
000
|
|
|
Cost or valuation
|
|
|
|
|
|
At 1 January 2022
|
4,089
|
|
4,089
|
|
|
Other Adjustment
|
(137)
|
|
(137)
|
|
|
Additions
|
1,705
|
|
1,705
|
|
|
At 31 December 2022
|
5,657
|
|
5,657
|
|
|
At 1 January 2023
|
5,657
|
|
5,657
|
|
|
Additions
|
446
|
|
446
|
|
|
At 31 December 2023
|
6,103
|
|
6,103
|
|
|
Depreciation
|
|
|
|
|
|
At 1 January 2022
|
1,370
|
|
1,370
|
|
|
Adjustment
|
(25)
|
|
(25)
|
|
|
Charge for year
|
759
|
|
759
|
|
|
At 31 December 2022
|
2,104
|
|
2,104
|
|
|
At 1 January 2023
|
2,104
|
|
2,104
|
|
|
Charge for the year
|
763
|
|
763
|
|
|
At 31 December 2023
|
2,867
|
|
2,867
|
|
|
Carrying amount
|
|
|
|
|
|
At 31 December 2023
|
3,236
|
|
3.236
|
|
|
At 31 December 2022
|
3,553
|
|
3,553
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
16 Goodwill and other intangible assets
|
|
|
|
Goodwill
|
|
Other intangible
assets
|
|
Total
|
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
|
Cost or valuation
|
|
|
|
|
|
|
|
At 1 January 2022
|
45,150
|
|
42,615
|
|
87,765
|
|
|
Additions
|
18,402
|
|
33,491
|
|
51,893
|
|
|
Revaluation of acquisition
|
(6,364)
|
|
-
|
|
(6,364)
|
|
|
Exchange adjustments
|
629
|
|
-
|
|
629
|
|
|
At 31 December 2022
|
57,817
|
|
76,106
|
|
133,923
|
|
|
At 1 January 2023
|
57,817
|
|
76,106
|
|
133,923
|
|
|
Additions
|
7,433
|
|
20,288
|
|
27,721
|
|
|
Revaluation of
acquisition
|
247
|
|
-
|
|
247
|
|
|
Exchange adjustments
|
(329)
|
|
(1)
|
|
(330)
|
|
|
At 31 December 2023
|
65,168
|
|
96,393
|
|
161,561
|
|
|
Amortisation
|
|
|
|
|
|
|
|
At 1 January 2022
|
2,279
|
|
5,231
|
|
7,510
|
|
|
Charge for year
|
-
|
|
2,944
|
|
2,944
|
|
|
At 31 December 2022
|
2,279
|
|
8,175
|
|
10,454
|
|
|
At 1 January 2023
|
2,279
|
|
8,175
|
|
10,454
|
|
|
Charge for year
|
-
|
|
4,702
|
|
4,702
|
|
|
At 31 December 2023
|
2,279
|
|
12,877
|
|
15,156
|
|
|
Carrying amount
|
|
|
|
|
|
|
|
At 31 December 2023
|
62,889
|
|
83,516
|
|
146,405
|
|
|
At 31 December 2022
|
55,538
|
|
67,931
|
|
123,469
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Goodwill
Goodwill acquired in a business combination is
allocated at acquisition to the CGUs that are expected to benefit
from that business combination.
The Group has identified five CGUs at 31 December
2023 analysed between Investment Management, Wealth Planning,
Ireland operations and its US operations split between RIA and IBD
operations and the Investment Banking business. A CGU is defined as
the smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from other
assets or groups of asset. Key management information is prepared
and reviewed across the Group's operating segments, and proposed
acquisitions are analysed in one of those segments.
This is the tenth year in which the investment
management and wealth planning CGUs have been analysed in this
format. As the goodwill recognised on US acquisitions is not
considered to be allocable on a non-arbitrary basis to individual
CGUs, the carrying value of goodwill recognised on US acquisitions
in 2020 is attributed to the combined US operating segment, made up
of the RIA/IBD and Investment Banking CGUs. KHL's directly owned
subsidiaries KW US Holdings Limited, and KW UK Financial Holdings
Limited respectively hold and reflect the distinction between the
US and UK businesses. KW UK BidCo Limited ("BidCo") was
incorporated as 100% owned subsidiary of KW UK Financial Holdings
Limited. BidCo in turn is 100% owner of KW UK Wealth Planning
HoldCo Limited and KW UK Investment Management Limited. These
holdings companies own the Group's UK regulated Wealth Planning and
Investment Management firms and reflect the split between the
investment management and wealth planning CGUs depending on which
CGU the relevant assets are allocated to. KHL acquired Moloney
Investments Limited during the 2023 financial year, with the
goodwill recognised on acquisition wholly being allocated to the
Ireland CGU.
The carrying value of goodwill at 31 December 2023
is allocated as follows:
|
|
|
Investment
Management
|
Wealth
Planning
|
US Operations
|
|
IRE
Operations
|
Total
|
|
£ 000
|
£ 000
|
£ 000
|
|
£ 000
|
£ 000
|
|
16,338
|
36,117
|
5,580
|
|
4,854
|
62,889
|
|
|
Goodwill
The Group tests each CGU, or
groups of CGUs, at least annually for goodwill impairment. The
recoverable amount of a CGU is determined as the higher of fair
value less costs to sell and the value in use. Valuations are based
on the discounted cash flow method. Projected cash flows are based
on the most recent business plan, with a terminal growth rate of
2%, which is considered prudent in the context of the long-term
average growth rate for the investment management and financial
planning industries in which the CGUs operate. The discount rates
used were 12.3% for the investment management and wealth planning
CGUs and 15.0% for the US CGUs, reflecting the risk-free rate of
interest and specific risks relating to each of the CGUs. The value
of the CGU related to Level 3 fair value measurements. Ireland CGU
has not been tested for impairment on the basis the acquisition
completed within less than 12 months of the Group's financial
year-end.
The US group of CGUs
exceeded its carrying amount by £12.7m. The value of the investment
management and the wealth planning CGUs exceeded their carrying
value by £37.7m and £14.9m respectively.
The projected cashflows prepared
by management are considered to be prudent with natural
sensitivities already built into the model. Further sensitivity
analysis has been performed with clear headroom in the recoverable
amount over the goodwill balance.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Intangible assets
Intangible assets are valued based on underlying
assets under management (i.e., the client lists). The assets are
assessed for their useful life on a client by client basis in order
to determine amortisation rates. There are currently £67.6m of
intangible assets being amortised over 20 years and £0.6m over 15
years.
The addition in 2023 and 2022 to intangible assets
represents the value of assets under management and associated
client lists acquired from business combinations in each of the two
years.
17 Deferred tax Group
The following are the major deferred tax assets and
liabilities recognised by the Group and movements thereon during
the current and prior year:
Intangibles - customer
relationships and brand recognised
|
|
At 1 January
|
|
Movement in
|
|
upon
acquisition of
|
|
At
31 December
|
|
2023
|
|
year
|
|
subsidiaries
|
|
2023
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Assets
|
4,492
|
|
(2,434)
|
|
-
|
|
2,058
|
|
Liabilities
|
(12,584)
|
|
(40)
|
|
(4,852)
|
|
(17,476)
|
|
|
(8,092)
|
|
(2,474)
|
|
(4,852)
|
|
(15,418)
|
|
|
|
|
|
|
Intangibles - customer relationships and brands recognised
upon
|
|
At
|
|
|
At 1 January
|
|
Movement in
|
|
acquisition of
|
|
31 December
|
|
|
2022
|
|
year
|
|
subsidiaries
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Assets
|
-
|
|
4,492
|
|
-
|
|
4,492
|
|
Liabilities
|
(4,577)
|
|
10
|
|
(8,018)
|
|
(12,584)
|
|
|
(4,577)
|
|
4,502
|
|
(8,018)
|
|
(8,092)
|
Deferred tax assets and liabilities may only be
offset where the Group has a legally enforceable right to do so. At
the Statement of Financial Position date, the Group has unused tax
losses of £11.4m in the UK (2022: £17.9m) available for offset
against future profits.
A deferred tax asset has been recognised in respect
of tax losses for the year ended 31 December 2023 of £8.6m arising
after 1 April 2017. No deferred tax asset has been recognised in
respect of the remaining tax losses of £2.8m which arose prior to 1
April 2017, due to the utilisation of these losses being more
restrictive.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
18 Trade and other receivables
|
|
|
|
2023
|
|
2022
(Restated)
|
|
Current
|
£ 000
|
|
£ 000
|
|
Trade receivables
|
7,837
|
|
4,554
|
|
Prepayments
|
6,267
|
|
258
|
|
Other receivables
|
191
|
|
-
|
|
|
14,295
|
|
4,812
|
The Directors consider that the carrying amount of
trade and other receivables is approximately equal to their fair
value. All trade and other receivables represent current
receivables which are due within 12 months.
19 Subsidiaries
Details of the subsidiaries as at 31 December 2023
are as follows:
|
Name of subsidiary
|
Activity
|
Ownership 2023
|
|
KW US Holdings Limited (Guernsey)
*
|
Holding Company
|
100%
|
|
KW Wealth Group Ltd (England)
*
|
Management Services
|
100%
|
|
KW UK Financial Holdings Limited
(Guernsey) *
|
Holding Company
|
100%
|
|
KW UK Bidco Limited (Guernsey)
|
Holding Company
|
100%
|
|
KW UK Wealth Planning HoldCo
Limited (Guernsey)
|
Holding Company
|
100%
|
|
KW UK Investment Management HoldCo
Limited (Guernsey)
|
Holding Company
|
100%
|
|
KW Wealth Planning Limited
(England)
|
Wealth Planning
|
100%
|
|
Admiral Wealth Management Limited
(England)
|
Wealth Planning
|
100%
|
|
Regency Investment Services
Limited (England)
|
Wealth Planning
|
100%
|
|
Money Matters (North East) Limited
(England)
|
Wealth Planning
|
100%
|
|
Allotts Financial Services Limited
(England)
|
Wealth Planning
|
100%
|
|
Vincent & Co Financial Ltd
(England)
|
Wealth Planning
|
100%
|
|
Eurosure Limited (England)
|
Wealth Planning
|
100%
|
|
AIM Wealth Holdings (England)
|
Holding Company
|
100%
|
|
AIM Independent Limited
(England)
|
Wealth Planning
|
100%
|
|
Casson Beckman Wealth Management
(England)
|
Wealth Planning
|
100%
|
|
Sterling Trust Financial
Consulting Limited (England)
|
Holding Company
|
100%
|
|
STP Wealth Management Limited
(England)
|
Wealth Planning
|
100%
|
|
Sterling Trust Professional
Limited (England)
|
Wealth Planning
|
100%
|
|
Sterling Trust Professional (North
East) Limited (England)
|
Wealth Planning
|
100%
|
|
Sterling Trust Professional
(Sheffield) Limited (England)
|
Wealth Planning
|
100%
|
|
NHA Financial Services Limited
(England)
|
Holding Company
|
100%
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
Name of subsidiary
|
|
Activity
|
Ownership 2023
|
|
Sterling Trust Professional (York)
Limited (England)
|
|
Wealth Planning
|
100%
|
|
Strategic Asset Managers Limited
(England)
|
|
Wealth Planning
|
100%
|
|
Employee Benefit Solutions Limited
(England)
|
|
Wealth Planning
|
100%
|
|
JCH Investment Management Limited
(England)
|
|
Wealth Planning
|
100%
|
|
JFP Holdings Limited (England)
|
|
Holding Company
|
100%
|
|
JFP Financial Services Limited
(England)
|
|
Wealth Planning
|
100%
|
|
KW Investment Management Limited
(England)
|
|
Investment Management
|
100%
|
|
EIM Nominees Limited (England)
|
|
Nominee Company
|
100%
|
|
XCAP Nominees Limited (England)
|
|
Nominee Company
|
100%
|
|
Joseph R Lamb Independent
Financial Advisers (England)
|
Limited
|
Investment Management
|
100%
|
|
Metnor Holdings Limited
(England)
|
|
Holding Company
|
100%
|
|
IPN Partners Limited (England)
|
|
Management Services
|
100%
|
|
Novus Financial Services Limited
(England)
|
|
Wealth Planning
|
100%
|
|
IBOSS Limited (England)
|
|
Investment Management
|
100%
|
|
IBOSS Asset Management Limited
(England)
|
|
Investment Management
|
100%
|
|
Kingswood US Holdings Inc
(USA)
|
|
Holding Company
|
50.1%
|
|
Kingswood Investments LLC
(USA)
|
|
Holding Company
|
50.1%
|
|
Kingswood Capital Partners LLC
(USA)
|
|
Independent Broker Dealer
|
50.1%
|
|
Kingswood Investments LLC
(USA)
|
|
Independent Broker Dealer
|
50.1%
|
|
Moloney Investments Limited
(Ireland)
|
|
Wealth Planning
|
70%
|
|
Barry Fleming and Partners (Tax,
Trusts and Investments Planning Ltd)
|
|
Wealth Planning
|
100%
|
|
* Direct investment
|
|
|
|
Profits attributable to non-controlling interests in
KW US (formerly MHC) and its subsidiaries as at 31 December 2023
were £1,171,093 (US$1,461,250) (2022: £1,304,652 (US$1,606,157)).
Dividends paid to non-controlling interest in the year were
£491,000 (US$623,750). The accumulated non-controlling interest of
KW US and its subsidiaries as at 31 December 2023 were £3,737,014
(US$2,931,680). (as at 31 December 2022: £2,390,686
(US$2,878,386)).
Profits attributable and accumulated non-controlling
interests in Moloney Investments Limited and its subsidiaries as at
31 December 2023 was £459,695 (€400,012),
(2022: £nil (€nil)). No dividends were paid to non-controlling
interest in the year.
Kingswood Holdings
Limited
Notes to the Financial Statements for the Year Ended 31
December 2023
Summarised financial information (material
subsidiaries with non-controlling interests) before intra-group
adjustments:
|
|
2023
|
2023
|
2022
|
2022
|
|
$ 000
|
£ 000
|
$ 000
|
£ 000
|
|
US
|
|
|
|
|
|
As at 31 December:
|
|
|
|
|
|
Current assets
|
16,646
|
13,059
|
15,400
|
12,792
|
|
Non-current assets
|
3,241
|
2,543
|
158
|
132
|
|
Current liabilities
|
(6,507)
|
(5,105)
|
(9,731)
|
(8,083)
|
|
Non-current liabilities
|
(59)
|
(47)
|
(59)
|
(49)
|
|
|
|
|
|
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
$ 000
|
£ 000
|
$ 000
(Restated)
|
£ 000
(Restated)
|
|
12 months ended 31 December:
|
|
|
|
|
|
Revenue
|
49,379
|
39,574
|
54,638
|
28,717
|
|
Profit after tax
|
2,706
|
2,169
|
3,104
|
2,018
|
|
Other comprehensive income
|
-
|
-
|
-
|
-
|
|
Total comprehensive income
|
2,706
|
2,169
|
3,104
|
2,521
|
|
|
|
|
|
|
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
€ 000
|
£ 000
|
€ 000
|
£ 000
|
|
|
Ireland
|
|
|
|
|
|
|
As at 31 December:
|
|
|
|
|
|
|
Current assets
|
7,551
|
6,548
|
-
|
-
|
|
|
Non-current assets
|
4,585
|
3,976
|
-
|
-
|
|
|
Current liabilities
|
(935)
|
(811)
|
-
|
-
|
|
|
Non-current liabilities
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
2023
|
2023
|
2022
|
2022
|
|
|
|
€ 000
|
£ 000
|
$ 000
|
£ 000
|
|
|
12 months ended 31 December:
|
|
|
|
|
|
|
Revenue
|
7,109
|
6,186
|
-
|
-
|
|
|
Profit after tax
|
1,761
|
1,532
|
-
|
-
|
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
|
|
Total comprehensive
income
|
1,761
|
1,532
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 Cash and cash equivalents
|
|
|
|
|
|
|
|
|
2023
|
2022
(Restated)
|
|
|
|
|
£ 000
|
£ 000
|
|
Cash at bank and in hand
|
|
|
18,704
|
16,726
|
|
Client money
|
|
|
|
|
|
|
|
|
|
|
In November 2020, the Group's subsidiary KWIM moved
to a Model B structure and transferred its CASS obligations to a
third party service provider. Consequently, no client money was
held in segregated bank accounts at 31 December 2023 (31 December
2022: £nil).
|
21 Trade and other payables
|
|
|
|
2023
|
|
2022
(Restated)
|
|
|
£ 000
|
|
£ 000
|
|
Trade payables
|
2,792
|
|
2,483
|
|
Accrued expenses
|
8,847
|
|
6,909
|
|
Social security and other
taxes
|
849
|
|
1,283
|
|
Lease liability and dilapidations
provision
|
1,590
|
|
1,467
|
|
Other borrowings
|
1,576
|
|
59
|
|
|
15,654
|
|
12,201
|
The Directors consider that the carrying amount of
trade payables approximates their fair value.
The group's exposure to market and liquidity risks,
including maturity analysis, relating to trade and other payables
is disclosed in note "Financial risk review".
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
22 Leases liabilities
The lease liabilities are included in trade and
other payables and other non-current liabilities in the statement
of financial position.
|
|
Land and
buildings
|
|
Land and
Buildings
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
At 1 Jan
|
4,274
|
|
3,274
|
|
Additions
|
446
|
|
1,705
|
|
Other adjustments
|
17
|
|
-
|
|
Interest expense
|
150
|
|
147
|
|
Lease payments
|
(940)
|
|
(852)
|
|
|
3,947
|
|
4,274
|
The Group recognises a right-of-use asset and a
lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, and subsequently at cost less
any accumulated depreciation and impairment losses and adjusted for
certain re-measurements of the lease liability.
The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date, discounted using the Group's incremental
borrowing rate.
The lease liability is subsequently increased by the
interest cost on the lease liability and decreased by lease payment
made.
The Group has applied judgement to determine the
lease term for some lease contracts in which it is a lessee that
includes renewal options. The assessment of whether the Group is
reasonably certain to exercise such options impacts the lease term,
which significantly affects the amount of lease liabilities and
right-of-use assets recognised.
A maturity analysis of lease liabilities based on
undiscounted gross cash flow is reported in the table below:
|
|
2023
|
|
2022
|
|
£ 000
|
|
£ 000
|
|
Due within one year
|
1,590
|
|
1,467
|
|
Due after more than one
year
|
2,357
|
|
2,806
|
|
At 31 December
|
3,947
|
|
4,273
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Dilapidations provisions relating to lease liabilities
|
|
|
|
|
Due within one year
|
7
|
|
7
|
|
Due after more than one
year
|
559
|
|
559
|
|
At 31 December
|
566
|
|
566
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
Total cash outflows related to leases
|
|
|
|
|
Total cash outflows related to
leases are presented in the table below:
|
|
|
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Low value lease expense
|
105
|
|
99
|
|
Short term lease expense
|
4
|
|
14
|
|
23 Deferred consideration payable
|
|
|
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
- falling due within one
year
|
23,905
|
|
20,771
|
|
- due after more than one
year
|
2,369
|
|
9,228
|
|
Deferred consideration payable on
acquisitions:
|
26,274
|
|
29,999
|
The deferred consideration payable on acquisitions
is due to be paid in cash.
The deferred consideration liability is contingent
on performance requirements during the deferred consideration
period. The value of the contingent consideration is determined by
EBITDA and/or revenue targets agreed on the acquisition of each
asset, as defined under the respective Share or Business Purchase
Agreement. As at the reporting date, the Group is expecting to pay
the full value of its deferred consideration as all acquisitions
are on target to meet the requirements, and there were additional
payments for Sterling and Regency due to the Sellers achieving
these contractual requirements.
In circumstances where the payment of deferred
consideration is contingent on the seller remaining within the
employment of the Group during the deferred period, the contingent
portion of deferred consideration is not included in the fair value
of consideration paid, rather is treated as remuneration and
accounted for as a charge against profits over the deferred
period.
During the year, deferred consideration expensed as
remuneration through profit or loss was £474,312 (2022:
£1,852,225).
|
24 Loans and borrowings
|
|
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Lease liability and dilapidations
provision
|
2,358
|
|
2,806
|
|
Other borrowings
|
62,879
|
|
24,343
|
|
|
65,237
|
|
27,149
|
|
|
|
|
|
|
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
25 Share capital
Allotted, called up and fully paid shares
|
|
|
|
No. 000
|
2023
|
£ 000
|
2022
No. 000
|
£ 000
|
|
Fully paid of £0.05 each
|
216,921,720
|
|
10,846
|
216,921,720
|
10,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
ordinary
|
|
|
|
Share
|
|
|
|
Share capital and share premium
|
|
shares
'000
|
|
Par value
£ 000
|
|
premium
£ 000
|
|
Total
£
000
|
|
At 1 January 2022
|
|
216,921
|
|
10,846
|
|
8,224
|
|
19,070
|
|
At 31 December 2022
|
|
216,921
|
|
10,846
|
|
8,224
|
|
19,070
|
|
At 1 January 2023
|
|
216,921
|
|
10,846
|
|
8,224
|
|
19,070
|
|
At 31 December 2023
|
|
216,921
|
|
10,846
|
|
8,224
|
|
19,070
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares have a par value of £0.05 per share.
They entitle the holder to participate in dividends, and to share
in the proceeds of winding up the company in proportion to the
number of, and amounts paid on, shares held. On a show of hands,
every holder of ordinary shares present at a meeting in person or
by proxy, is entitled to one vote and upon a poll each share is
entitled to one vote.
Kingswood Holdings Limited does not have a limit on
the amount of authorised capital.
As at 31 December 2023, KPI (Nominees) Limited held
144,125,262 Ordinary Shares, representing 66.44 per cent of
ordinary shares in issue at year end.
26 Preference share capital
|
Irredeemable convertible preference
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
shares
|
Shares
|
|
Shares
|
|
£ 000
|
|
£ 000
|
|
Fully paid
|
77,428,443
|
|
77,428,443
|
|
70,150
|
|
70,150
|
|
|
77,428,443
|
|
77,428,443
|
|
70,150
|
|
70,150
|
|
Preference share capital movements
are as follows:
|
|
|
|
Number of shares
|
|
Par value
£ 000
|
|
At 1 January 2022
|
77
|
|
77
|
|
Issued during year
|
-
|
|
-
|
|
At 31 December 2022
|
77
|
|
77
|
|
Issued during year
|
-
|
|
-
|
|
At 31 December 2023
|
77
|
|
77
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
|
|
2023
|
|
2022
|
|
|
£ 000
|
|
£ 000
|
|
Equity component
Liability component
|
70,150
-
|
|
70,150
-
|
|
|
70,150
|
|
70,150
|
All irredeemable convertible preference shares
convert into new ordinary shares at Pollen Street Capital's option
at any time from the earlier of an early conversion trigger or a
fundraising, or automatically on 31 December 2023. Preferential
dividends on the irredeemable convertible preference shares accrue
daily at a fixed rate of 5% pa from the date of issue. They do not
hold any voting rights. Effective 17 December 2021 onwards, these
will be settled via the issue of additional ordinary shares,
thereby extinguishing the liability component.
At 31 December 2023 the conversion was conditional
upon regulatory approvals in a number of jurisdictions which were
in the process of being obtained. Upon satisfaction of all
conditions outstanding relating to Conversion, application will be
made to the London Stock Exchange for the required new Ordinary
Shares to be admitted to trading ("Admission"). The new Ordinary
Shares will rank pari passu with the existing Ordinary Shares.
On the 31 May 2024 the Company
announced that, following the grant of the anticipated approvals by
the applicable regulatory authorities in the US, UK and
the Republic of Ireland, the Convertible Preference Shares are
converting, at the agreed conversion price of 16.5
pence per Ordinary Share, into a total of 469,263,291 new
Ordinary Shares in the Company ("Conversion"). Please refer to Note
37 Events after the balance sheet note for more details.
27 Notes to the cash flow statement
Cash and cash equivalents comprise cash and cash
equivalents with an original maturity of three months or less. The
carrying amount of these assets is approximately equal to their
fair value. Cash and cash equivalents are detailed in note 20.
|
|
2023
|
|
2022
|
|
£ 000
|
|
£ 000
|
|
Loss before tax
|
(13,897)
|
|
(10,972)
|
|
Adjustments for:
|
|
|
|
|
Depreciation and amortisation
|
6,046
|
|
4,507
|
|
Finance costs
|
12,966
|
|
6,398
|
|
Remuneration charge (deferred
consideration)
|
474
|
|
1,852
|
|
Acquisition of investments
|
-
|
|
586
|
|
Share-based payment expense
|
456
|
|
878
|
|
Other losses / (gains)
|
(224)
|
|
23
|
|
Gain on disposal of businesses,
net of disposal costs
|
(1,039)
|
|
-
|
|
Other non cash items
|
846
|
|
-
|
|
Taxation
|
-
|
|
(22)
|
|
Operating cash flows before
movements in working capital
|
5,268
|
|
3,250
|
|
(Increase)/decrease in
receivables
|
(9,804)
|
|
1,821
|
|
Increase/(decrease) in
payables
|
8,769
|
|
(7,775)
|
|
Net cash inflow / (outflow) from
operating activities
|
4,593
|
|
(2,704)
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
28 Share-based remuneration Employee
Option Plan
Scheme details and movements
The Group has the following share option schemes
established for employees and Directors:
• The European Wealth Group Limited EMI Scheme 2014, 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 Group.
• The 2019 Kingswood Group LTIP scheme under which options are
granted over ordinary shares of the Group to employees and
Directors. 39,750,000 options were issued with an exercise price of
5p. The vesting date of these share options is 31 December 2021.
Vesting conditions include a mixture of performance and
market-based conditions, tailored to the employee or
director.
• The 2021 Kingswood Group LTIP scheme under which options are
granted over ordinary shares of the Group to employees and
Directors. 15,708,333 options were issued with an exercise price of
16.5p. The vesting date of these share options is 31 December 2023.
Vesting conditions include a mixture of performance and
market-based conditions, tailored to the employee or
director.
• The 2022 Kingswood Group LTIP scheme under which options are
granted over ordinary shares of the Group to employees and
Directors. 6,700,000 options were issued with an exercise price of
16.5p. The vesting date of these share options is 31 December 2024.
Vesting conditions include a mixture of performance and
market-based conditions, tailored to the employee or
director.
• The 2023 Kingswood Group LTIP scheme under which options are
granted over ordinary shares of the Group to employees and
Directors. 5,230,000 options were issued with an exercise price of
16.5p. The vesting date of these share options is 31 December 2024.
Vesting conditions include a mixture of performance and
market-based conditions, tailored to the employee or
director.
If options granted under any of the schemes remain
unexercised for a period of 10 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 company. 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/her.
In the event of cessation of employment or
engagement of the option holder by reason of his/her death, his/her
personal representatives will be entitled to exercise the option
within twelve months following the date of his/her 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. .
The movements in the number of share options during
the year were as follows:
|
|
2023
Number
|
2022
Number
|
|
Outstanding, start of period
|
18,156,389
|
16,799,167
|
|
Granted during the period
|
5,230,000
|
6,700,000
|
|
Forfeited during the period
|
(
5,047,001)
|
(5,342,778)
|
|
Outstanding, end of period
|
18,339,388
|
18,156,389
|
|
Exercisable, end of period
|
1,090,833
|
1,090,833
|
|
No share options were exercised
during the year.
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
28 Share-based
remuneration (continued)
|
|
2023
pence
|
2022
pence
|
|
Outstanding, start of period
|
16.78
|
16.78
|
|
Granted during the period
|
16.50
|
16.50
|
|
Forfeited during the period
|
16.50
|
16.50
|
|
Outstanding, end of period
|
16.76
|
16.76
|
|
Exercisable, end of period
|
20.85
|
20.85
|
Share options outstanding at the end of the year
have the following expiry date and exercise prices:
|
|
|
Share options
|
Share options
|
|
2023
|
2022
|
|
105,000
|
105,000
|
|
152,500
|
152,500
|
|
833,334
|
833,334
|
|
2,682,443
|
3,076,667
|
|
3,333,333
|
3,333,333
|
|
2,386,111
|
3,288,889
|
|
166,667
|
666,667
|
|
733,333
|
1,500,000
|
|
-
|
75,000
|
|
666,667
|
1,000,000
|
|
-
|
1,050,000
|
|
2,000,000
|
3,000,000
|
|
50,000
|
75,000
|
|
600,000
|
|
|
2,950,000
|
|
|
50,000
|
|
|
750,000
|
|
|
880,000
|
|
|
18,339,388
|
18,156,389
|
|
7.91 years
|
8.59 years
|
|
|
|
Grant date
|
Expiry date
|
Exercise
price Pence
|
|
04 August 2014
|
03 August 2024
|
100.00
|
|
01 August 2016
|
31 July 2026
|
53.00
|
|
15 February 2019
|
14 February 2029
|
5.00
|
|
12 April 2021
|
11 April 2031
|
16.50
|
|
25 June 2021
|
24 June 2031
|
16.50
|
|
05 July 2021
|
04 July 2031
|
16.50
|
|
06 September 2021
|
05 September 2031
|
16.50
|
|
16 March 2022
|
15 March 2032
|
16.50
|
|
12 April 2022
|
11 April 2032
|
16.50
|
|
03 May 2022
|
02 May 2032
|
16.50
|
|
06 May 2022
|
05 May 2032
|
16.50
|
|
28 June 2022
|
27 June 2032
|
16.50
|
|
11 July 2022
|
12 July 2032
|
16.50
|
|
09 January 2023
|
08 January 2033
|
16.50
|
|
10 February 2023
|
09 February 2033
|
16.50
|
|
20 February 2023
|
19 February 2033
|
16.50
|
|
24 April 2023
|
23 April 2023
|
16.50
|
|
12 June 2023
|
11
June 2033
|
|
|
TOTAL
|
|
|
Weighted average contractual life of options
outstanding at end of period
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
28 Share-based remuneration (continued)
The following information is relevant to the
determination of the fair value of options granted during the year
under equity settled share based remuneration schemes operated by
the Group.
2023
Option pricing model used
Monte Carlo
Weighted average share price at grant date
(p)
23.88
Exercise price (p)
16.50
Weighted average contractual life (in days)
2,892
Expected volatility (12 April 2021 tranche)
-
Expected volatility (25 June 2021 tranche)
-
Expected volatility (5 July 2021 tranche)
-
Expected volatility (6 September 2021 tranche)
-
Expected volatility (16 Mar 2022 tranche)
60%
Expected volatility (12 Apr 2022 tranche)
60%
Expected volatility (3 May 2022 tranche)
60%
Expected volatility (6 May 2022 tranche)
60%
Expected volatility (28 Jun 2022 tranche)
60%
Expected volatility (1 Jul 2022 tranche)
60%
Expected volatility (11 Jul 2022 tranche)
60%
Expected dividend growth rate
N/A
Risk-free interest rate
3.72% - 4.14%
The volatility assumption, measured at the standard
deviation of expected share price returns, is based on a
statistical analysis of daily share prices over the last three
years.
The dividend growth rate has been assumed to be 0%
as no dividends have been paid.
Total (expense) / gain arising from share-based
transactions recognised during the period as part of employee
benefit expense is as follows:
|
|
2023
|
2022
|
|
£ 000
|
£ 000
|
|
Options issued under employee
option plan
|
456
|
852
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
29 Financial instruments
The following table states the classification of
financial instruments and is reconciled to the Statement of
Financial Position:
|
|
2023
Carrying
amount
£ 000
|
|
2022
(Restated)
Carrying
amount
£ 000
|
|
Financial assets measured at amortised cost
|
|
|
|
|
Trade and other receivables
|
14,295
|
|
4,812
|
|
Cash and cash equivalents
|
18,704
|
|
16,726
|
|
Financial liabilities measured at amortised cost
|
|
|
|
|
Trade and other payables
|
(15,654)
|
|
(12,201)
|
|
Other non-current liabilities
|
(62,879)
|
|
(2,806)
|
|
Lease liability
|
(2,357)
|
|
(1,467)
|
|
Financial liabilities measured at fair value through profit
and loss
|
|
|
|
|
Deferred consideration
payable
|
(23,274)
|
|
(29,999)
|
|
|
(71,165)
|
|
(24,935)
|
Financial instruments not measured at fair value
includes cash and cash equivalents, trade and other receivables,
trade and other payables, and other non-current liabilities.
Due to their short-term nature, the carrying value
of cash and cash equivalents, trade and other receivables, and
trade and other payables approximates fair value.
Item
Fair value
Valuation
technique
Fair value hierarchy level
£'000
Deferred consideration
payable 23,274
Fair value of deferred consideration payable is
estimated by discounting the future cash flows using the IRR
inherent in the company's acquisition price.
Level 3
There have been no transfers between levels during
the period.
The potential profit or loss impact in relation to
deferred consideration payable of a reasonably possible change to
the discount rate is as follows:
|
Assumption
|
Reasonably possible
|
Profit or (loss)
Increase
|
impact
Decrease
|
|
|
|
£'000
|
£'000
|
|
Discount rate change
|
(+ / - 5%)
|
(17)
|
16
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Credit risk
Credit risk represents the potential that a
counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the Group.
Credit risk is monitored on a regular basis by the finance team
along with support from back office functions with the respective
business divisions.
The carrying amounts of financial assets best
represent the maximum credit risk exposure at the Statement of
Financial Position date.
At the reporting date, the Group's financial assets
exposed to credit risk were as follows:
|
|
2023
|
|
2022
(Restated)
|
|
£ 000
|
|
£ 000
|
|
Cash
|
18,704
|
|
16,726
|
|
Trade and other receivables
|
14,295
|
|
4,812
|
|
|
32,999
|
|
21,538
|
The Group's exposure to credit risk on cash and cash
equivalents is considered by the Directors to be low as the Group
holds accounts at banks with strong credit ratings. The majority of
funds are held with A rated (S&P) institutions, with a minimum
rating of BBB+. See Note 20 for further detail on cash and cash
equivalents.
Liquidity risk
Liquidity risk represents the potential that the
Group will be unable to meet its financial obligations as they fall
due. The controls and limits surrounding the Group's credit risk
together with cash monitoring processes ensure that liquidity risk
is minimised. The table below illustrates the maturity profile of
all financial liabilities outstanding at 31 December 2023.
|
2023
Non-derivative liabilities
|
Repayable
between
0-12
months
£ 000
|
|
Repayable after more than
12
months
£ 000
|
|
Trade payables
|
2,792
|
|
-
|
|
Other payables
|
11,272
|
|
-
|
|
Deferred consideration
payable
|
23,905
|
|
2,369
|
|
Lease liabilities
|
1,590
|
|
2,357
|
|
|
39,559
|
|
4,726
|
|
|
3 months - 1
|
|
|
2022 (Restated)
|
year
|
1-5 years
|
|
Non-derivative liabilities
|
£ 000
|
£ 000
|
|
Trade payables
|
2,483
|
-
|
|
Other payables
|
8,251
|
24,343
|
|
Deferred consideration
payable
|
20,771
|
9,228
|
|
Lease liabilities
|
1,467
|
2,806
|
|
|
32,972
|
36,377
|
|
|
|
|
|
|
|
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Market risk
Market risk arises from the Group's use of interest
bearing, tradable and foreign currency financial instruments. It is
the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in interest rates
(interest rate risk), foreign exchange rates (currency risk) or
other market factors (other price risk).
Price risk
As with other firms in our sector, the Group is
vulnerable to adverse movements in the value of financial
instruments. The Group's business will be partially dependent on
market conditions and adverse movements may have a significant
negative effect on the Group's operations through reducing
off-Balance Sheet assets under management, given its fees are
largely calculated at a percentage of these client assets.
It is not practicable to quantify the price risk to
our business, owing to variability in how fees are charged.
Interest rate risk
Interest rate risk is the risk of financial loss as
a result of an increase in interest rates on borrowings.
Sensitivity analysis has been performed on the
Group's variable interest-bearing instrument. The Group's
interest-bearing instrument includes a variable rate component
based on the Sterling Overnight Index Average (SONIA).
Consequently, a 10% movement in interest rates would result in an
impact of approximately £357,000 on the financial statements.
Foreign exchange risk
Foreign exchange risk is the risk that the fair
value or future cash flows of financial instruments will fluctuate
because of changes in foreign exchange rates. The Group has minimal
exposure to foreign exchange risk, operating as it does in stable
currencies - namely Sterling, US dollar, and the Euro
The Group aims to fund expenses and investments in
the respective currency and to manage foreign exchange risk at a
local level by matching the currency in which revenue is generated
and expenses are incurred.
The effect of a 5% strengthening of the US dollar
against Sterling, based on 2023 figures, would have increased the
US division's overall profit as recognised in the Statement of
Comprehensive Income by £115,858. A 5% weakening of the US dollar,
conversely, would have decreased the profit contribution by
£104,824.
Assessment of exposure to foreign exchange
risk
Individual Group companies infrequently enter into
transactions denominated in a currency other than their functional
currencies, and these are typically immaterial in value. The
primary risk is foreign currency rates will move adversely,
reducing on consolidation the carrying value of financial assets or
increasing the financial liabilities recognised by the US division.
The Group does not consider this risk to be material.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
30 Business combinations
a. Acquisition of Barry Fleming &
Partners
On the 15th December 2022, Kingswood Holdings Ltd
agreed to acquire, the business assets of Barry Fleming &
Partners. The acquisition completed on the 6th January 2023.
Barry Fleming & Partners advises individuals,
companies, trustees and charities. This capability allows Barry
Fleming & Partners to use its strength in tax advice to take a
360-degree-view of a financial situation to give much broader, more
comprehensive advice. The team have three advisers and a total of
six employees.
Founded in 1975, Barry Fleming & Partners looks
after over 415 clients with over c.£140m AUA. The business will be
acquired for total cash consideration of up to £5.9m, payable over
a two-year period, £3.4m paid on completion and the balance paid on
a deferred basis which is subject to the achievement of pre-agreed
performance targets.
|
|
Book value
|
|
Adjustment
|
|
Fair value
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Property, plant and equipment
|
8
|
|
-
|
|
8
|
|
Goodwill & Intangibles
|
|
|
3,786
|
|
3,786
|
|
Investments in subsidiaries
|
1
|
|
-
|
|
1
|
|
Receivables
|
147
|
|
-
|
|
147
|
|
Cash
|
614
|
|
(4)
|
|
610
|
|
Payables
|
(64)
|
|
(187)
|
|
(251)
|
|
Deferred tax liability
|
-
|
|
(947)
|
|
(947)
|
|
Total identifiable net
assets
|
706
|
|
2,648
|
|
3,354
|
The trade and other receivables were recognised at
fair value, being the gross contractual amounts.
Fair value of consideration paid
The acquisition has been accounted for using the
acquisition method and details of the purchase consideration are as
follows:
2023
£ 000
|
Initial cash paid
|
3,368
|
|
Deferred consideration
|
2,565
|
|
Total purchase consideration
|
5,933
|
|
Goodwill recognised on
acquisition
|
2,579
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
The main factors leading to the recognition of
goodwill are:
· the
strategic foothold the Barry Fleming & Partners team and
business gives the Group in the Hampshire market.
· the
ability to leverage the Barry Fleming & Partners and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
Total purchase consideration
3,368
Less: Deferred
consideration
(2,565)
Cash paid to acquire Barry Fleming
&
Partners
803
Less: cash held by Barry Fleming &
Partners
(610)
Net cash outflow
193
b. Acquisition of Moloney Investments Ltd
On 3 March 2023, the Company completed the
acquisition of Moloney Investments Ltd (MMPI), a leading financial
advice firm based in Dublin, Ireland. A 70% shareholding of MMPI
was acquired for a total cash consideration of £21.6m (EUR 25.8m),
with the existing shareholders retaining the remaining 30% and
benefiting from the growth in the business as both management teams
work together to grow MMPI and the wider Kingswood group both
organically and through further acquisitions.
Established in 1993, MMPI is a leading financial
advisory group based in Dublin, Ireland providing
financial planning, general and protection insurance, as well as
investments, pensions, and mortgage advice to principally mass
affluent and high net worth individuals. MMPI currently employs 45 people, including 18
advisors. MMPI continues to operate from its existing premises and
be led by the same experienced team that have served its clients
since inception in 1993.
The Acquisition of MMPI presents a highly strategic
acquisition for Kingswood for the following key reasons:
· Entry into Ireland -
Ireland is a EUR 40bn wealth management market that shares many
similar market and cultural similarities to the UK with the mass
affluent segment of the market in particular experiencing
persistent growth;
· High quality platform
- MMPI offers an opportunity to acquire a high quality, full
service, and scaled financial advisory group with a long term track
record of growth. The business is run by an experienced and high
calibre management team that have strong cultural alignment to the
rest of Kingswood;
· Further consolidation
opportunity - with the Irish wealth management market experiencing
many similar trends to the UK, MMPI offers an attractive platform
for further consolidation in addition to Kingswood's existing
strategy in the UK;
· Product cross-sell -
opportunity for MMPI's clients to benefit from Kingswood's leading
in-house investment proposition and Kingswood's clients to
conversely benefit from MMPI's insurance and other product
distribution capabilities.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
Details of the fair value of identifiable assets and
liabilities acquired the purchase consideration and goodwill are as
follows:
|
|
Book value
|
|
Adjustment
|
|
Fair value
|
|
£ 000
|
|
£ 000
|
|
£ 000
|
|
Property, plant and
equipment
|
153
|
|
-
|
|
153
|
|
Goodwill and intangibles
|
221
|
|
16,502
|
|
16,723
|
|
Receivables
|
2,778
|
|
-
|
|
2,778
|
|
Cash
|
2,286
|
|
-
|
|
2,286
|
|
Payables
|
(1,023)
|
|
-
|
|
(1,023)
|
|
Investments in
subsidiaries
|
3,834
|
|
(3,834)
|
|
-
|
|
Deferred tax liability
|
-
|
|
(4,126 )
|
|
(4,126)
|
|
Total identifiable net
assets
|
8,249
|
|
8,542
|
|
16,791
|
The trade and other receivables were recognised at
fair value, being the gross contractual amounts.
Fair value of consideration paid
The acquisition has been accounted for using the
acquisition method and details of the purchase consideration are as
follows:
2023
£ 000
|
Initial cash paid
|
21,645
|
|
Deferred cash consideration
|
-
|
|
Total purchase consideration
|
21,645
|
|
Goodwill recognised on
acquisition
|
3,843
|
|
Acquisition costs have been
recognised as transaction costs under acquisition-related
adjustments in the Consolidated Statement
of Comprehensive Income.
|
|
The main factors leading to the
recognition of goodwill are:
|
|
|
• the strategic foothold the MMPI team and business gives the
Group in Ireland, Dublin; and
• the ability to leverage MMPI platform and achieve economies of scale.
|
|
|
Consideration
|
|
|
|
2023
|
|
|
£ 000
|
|
Net cash outflow arising on acquisition:
|
|
|
Total purchase consideration
|
21,645
|
|
Less: Deferred consideration
|
-
|
|
Initial cash paid to acquire
MMPI
|
21,645
|
|
Less: cash held by MMPI
|
(2,286)
|
|
Net cash outflow
|
19,359
|
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
31 Sale of subsidiary
On November 9th, Kingswood US sold the entire share
capital of wholly owned subsidiary Benchmark Investments, LLC (BMI)
for a consideration of $5m to EF Hutton Holdings. The consideration
comprised of $2.5m received in cash, cash installments totaling
$1.5m, and a contingent consideration of $1m. The contingent
consideration is conditional on post-closing monthly affiliate
broker/dealer monthly payment equal to 5% of BMI revenues for six
consecutive months following sale. The full and timely payment of
each of the mandatory payments post close is a condition for the
forgiveness an of $1m principal in the note (i.e. contingent
consideration). Post year-end, all of mandatory post-closing
payments have been received, making it virtually certain that the
$1 million note would be forgiven. Therefore, the deferred gain on
the contingent consideration has been written off at the year
end.
|
|
2023
|
|
|
£ 000
|
|
|
|
|
Initial cash received
|
2,035
|
|
Note receivable
|
1,221
|
|
Contingent
consideration
|
814
|
|
Total consideration
|
4,071
|
|
|
|
|
Less: Net assets disposed:
|
|
|
Cash and cash
equivalents
|
(656)
|
|
Trade and other
receivables
|
(1,547)
|
|
Prepayments and other
debtors
|
(43)
|
|
Property, plant and
equipment
|
(8)
|
|
Accrued expenses
|
1,743
|
|
Investment in
subsidiaries
|
(1,213)
|
|
|
(1,724)
|
|
Less: Costs in relation to business sold
|
(494)
|
|
Less: Contingent consideration write off
|
(814)
|
|
Gain on disposal
|
1,039
|
|
|
|
|
Cash flow from the disposal of the business
sold
|
2023
|
|
|
£ 000
|
|
Initial cash received and cash
installments received on note receivable
|
2,096
|
|
Cash and cash equivalents
disposed
|
(656)
|
|
Costs in relation to business
sold
|
(494)
|
|
Costs in relation to business
sold
|
946
|
|
|
|
The gain on disposal of £1,039,000 forms part of
transaction costs on the statement of comprehensive income.
BMI was classified as a
discontinued operation and details of the results of this
discontinued operation can be found in Note 2 and Note 6 in the
financial statements.
32 Assets and Liabilities held for
sale
At 31 December 2022, £7.4m assets
and £5.4m liabilities relates to the BMI subsidiary sold in the
year, which was classified as a discontinued operation, see Note 6
for details.
33 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.
|
|
2023
|
2022
|
|
£ 000
|
£ 000
|
|
Salaries and other short term
employee benefits
Other related parties
|
943
|
678
|
KHL incurred fees of £104,000 (2022: £116,555) from
KPI (Nominees) Limited in relation to Non-Executive Director
remuneration. At 31 December 2023, £nil of these fees remained
unpaid (2022: £nil).
Fees received from Moor Park Capital Partners LLP,
in which Gary Wilder and Jonathan Massing hold a beneficial
interest through one of the members, KPI (Nominees) Limited,
relating to property related services provided by KHL totaled £nil
for the year ended 31 December 2023 (2022: £23,708), of which £nil
(2022:
£nil) was outstanding at 31 December 2023.
Fees paid for financial and due diligence services
to Kingswood LLP and Kingswood Corporate Finance Limited, in which
Jonathan Massing holds a beneficial interest as LLP members,
totaled £171,353 for the year to 31 December 2023 (2022: £479,955),
of which £nil (2022: £nil) was outstanding at 31 December
2023.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
34 Capital management
The Group considers all of its equity to be capital,
and sets the amount of capital it requires in proportion to risk.
The Group manages its capital structure and makes adjustments in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt, if any exists.
The primary objective of the Group's capital
management plan is to ensure that it maintains a strong capital
structure in order to protect clients' interests, meet regulatory
requirements, protect creditors' interests, support the development
of its business and maximise shareholder value. Each subsidiary
manages its own capital, to maintain regulatory solvency. Details
of the management of this risk can be found in the Strategic
Report.
The Group's capital management policy is, for each
subsidiary, to hold the higher of:
• the capital required by any relevant supervisory body;
or
• the capital required based on each subsidiary's internal
assessment.
The following entities are subject to regulatory
supervision and must comply with capital adequacy rules and
regulations:
Entity
Regulatory body and jurisdiction
KW Investment Management Limited
FCA Investment Management Firm
Joseph R. Lamb Financial Advisers
Limited
FCA Investment Management Firm
KW Investment Management
Limited
FSCA South Africa: Financial Services Provider KW Wealth Planning
Limited
FCA Personal Investment Firm
Sterling Trust Professional Limited
FCA Personal Investment Firm
Regency Investment Services Limited
FCA Personal Investment Firm
Admiral Wealth Management Limited
FCA Personal Investment Firm
Money Matters (North East) Limited
FCA Personal Investment Firm
IBOSS Asset Management Limited
FCA Investment Management Firm
Strategic Asset Managers Limited
FCA Personal Investment Firm
Employee Benefit Solutions
FCA Personal Investment Firm
JCH Investment Management Limited
FCA Personal Investment Firm
Allots Financial Services Limited
FCA Personal Investment Firm
Vincent & Co Financial Ltd
FCA Personal Investment Firm
Eurosure
Limited
FCA Personal Investment Firm
AIM Independent Limited
FCA Personal Investment Firm
JFP Financial Services Limited
FCA Personal Investment Firm
Barry Fleming and Partners (Tax, Trusts and
Investments Planning
Ltd)
FCA Investment Management Firm
Kingswood Capital Partners, LLC
FINRA-regulated brokerage firm (USA)
Benchmark Investments, LLC
FINRA-regulated brokerage firm (USA) *
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
34 Capital management (continued)
Benchmark Advisory Services, LLC
SEC-regulated advisory firm (USA)
Kingswood Wealth Advisors, LLC
SEC-regulated advisory firm (USA)
*Benchmark
Investments, LLC was sold on 9 November 2023
The regulatory capital requirements of companies
within the Group, and the associated solvency of the Group, are
assessed and monitored by the Board of Directors. Ultimate
responsibility for an individual company's regulatory capital lies
with the relevant subsidiary Board. There has been no material
change in the level of capital requirements of individual companies
during the year, nor in the Group's management of capital. All
regulated entities exceeded the minimum solvency requirements at
the reporting date and during the year.
The debt-to-equity ratios at 31 December 2023 and 31
December 2022 were as follows:
Loans and borrowings Lease liabilities
Less: cash and cash equivalents Net debt
Total equity
Debt to equity ratio (%)
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
35 Financial commitments
No financial commitments were in place at 31st
December 2023 (2022: nil).
|
|
|
2023
|
2022
|
|
£ 000
|
£ 000
|
|
-
|
-
|
|
|
Commitments
36 Ultimate controlling party
As at the date of approving the financial
statements, the ultimate controlling party of the Group was HSQ
Investment Limited, a wholly owned indirect subsidiary of funds
managed and/or advised by Pollen Street Capital Limited. HSQ
Investment Limited, which holds 68.40% of the voting rights and
issued share capital of the Group.
37 Events after the reporting date
a) Acquisition of BasePlan
Ltd
On the 16th February 2024, Kingswood Holdings Ltd's
Irish subsidiary, Moloney Investments Ltd ("MMPI"), has completed
the acquisition of BasePlan Limited ("BasePlan"), a retirement
planning advice firm based in Dublin, Ireland, following regulatory
approval.
Based in Dublin, Ireland, BasePlan is a long
established and leading financial advisory firm which has been
providing client led financial and retirement planning and wealth
management services for over 30 years. The BasePlan principals
Rhona Burke QFA & Gordon Mellon FCA have successfully grown the
business since inception, they manage client assets of €130m, and
have successfully maintained excellent long term client
relationships. Upon completion there will be a managed handover and
some of the team will remain, allowing for a seamless transition
for clients.
b) New Debt
Facility
On the 16th February and 7th
May 2024 Kingswood Holdings Limited, entered into a
new unsecured debt with funds managed by Pollen Street of
£8m and £3m respectively. The Facility Agreements will be used to
support the Company's capital requirements and growth agenda. The
headline terms of the Facility Agreements were:
i.
£8.0m debt facility;
- Expiry date of
the earlier of 17 October 2030; and
- Interest rate or 12% rolled up and
paid on maturity.
ii.
£3.0m debt facility:
-
£3.0m facility;
- Repayment date of
earlier of 29 October 2030 or date of an exit or partial
exit; and
- Interest rate of 12%,
paid at maturity.
Kingswood Holdings
Limited
Notes to the Financial
Statements for the Year Ended 31 December 2023
c) Conversion of
Convertible Preference Shares
On the 31 May 2024 the Company
announced that, following the grant of the anticipated approvals by
the applicable regulatory authorities in the US, UK and
the Republic of Ireland, the Convertible Preference Shares are
converting, at the agreed conversion price of 16.5
pence per Ordinary Share, into a total of 469,263,291 new
Ordinary Shares in the Company ("Conversion").
On completion of
Conversion:
· the
Company's enlarged issued share capital was 686,184,011 Ordinary
Shares, all of which will be admitted to trading on AIM;
and
· HSQ
Investment Limited, a wholly owned indirect subsidiary of funds
managed and/or advised by Pollen Street Capital Limited, was
beneficially interested in a total
of 469,263,291 Ordinary Shares representing approximately
68.4 per cent of the enlarged issued share capital of the
Company.