REG - European Wealth Grp European Wealth-EWGL - Audited results for 12 month to 31 December 2015 <Origin Href="QuoteRef">EWGE.L</Origin> - Part 2
22/06/2016 07:05
- Part 2: For the preceding part double click ID:nRSV8877Ba
Segment result - presents full year 373 491 864
Central administrative expenses - presents full year (1,661)
Operating result of trading segments (797)
Finance costs (509)
Forex 15
Share based payments (6)
Amortisation and depreciation (424)
Loss before tax and extraordinary items (1,721)
Tax and extraordinary items 730
Loss after tax (991)
.
.
7. Business and geographical segments (continued)
Products and services from which reportable segments derive their revenues
The following is an analysis of the Group's revenue and results by reportable
segment for the year to 31 December 2014. The table below details full year's
worth of revenue and results for the principal business divisions, which has
then reconciled to the results included in the Statement of Comprehensive
Income:
Investment Management Financial Planning Consolidated
Year ended 31 December 2014 Year ended 31 December 2014 Year ended 31 December 2014
£'000 £'000 £'000
Revenue
External sales - presents full year 3,900 2,773 6,673
Result
Segment result - presents full year 540 595 1,135
Central administrative expenses - presents full year (1,372)
Operating result of trading segments (237)
Post acquisition contribution of P&C Global 69
Re-valuation of EWMG investment 830
European Wealth Group Limited central costs (442)
Removal of pre-acquisition EWMG Group result 238
Finance costs (232)
Amortisation and depreciation (204)
Profit before tax and extraordinary items 22
Tax and extraordinary items (370)
Loss after tax (348)
8. Loss for the year
Loss for year ended 31 December 2015 has been arrived at after charging:
Year ended 31 December 2015 £'000 Year ended 31 December 2014 £'000
£'000
Depreciation of fixtures and equipment 39 25
Amortisation of intangibles 385 179
Operating lease - property and equipment 39 23
Staff costs 4,937 2,715
See Directors' remuneration report for details of Directors' remuneration
during the year.
9. Exceptional items
Year ended31 December 2015 Year ended31 December 2014
£'000 £'000
Costs in relation to the reverse acquisition of EWMG - (359)
Adjustments to deferred consideration 719 -
Total exceptional items 719 (359)
The deferred consideration adjustments relate to amounts recognised in respect
of the Compass and the EW Switzerland acquisitions. For Compass, the amount of
deferred consideration payable is £0.9 million compared to £0.5 million that
was held on the prior year balance sheet. The difference of £0.4 million has
been taken as a debit to the consolidated statement of comprehensive income.
For EW Switzerland, the amount of deferred consideration paid was £0.2 million
compared to £1.3 million that was held on the prior year balance sheet. The
difference of £1.1 million has been taken as a credit to the consolidated
statement of comprehensive income. The net effect of both of these
transactions is a credit of £0.7 million to the consolidated Statement of
Comprehensive Income.
10. Earnings per share
The calculation of the basic and diluted loss per share is based on the
following data:
Losses
Year ended31 December 2015 Year ended31 December 2014
£'000 £'000
Losses for the purposes of basic loss per share being net loss attributable to owners of the Group (991) (348)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per share 21,625,149 13,339,002
Effect of dilutive potential ordinary shares:
Share options 274,500 274,500
Convertible loan notes in issue 4,166,250 4,228,750
Weighted average number of ordinary shares for the purposes of diluted loss per share 26,065,899 17,842,252
The loss per share is (0.05)p (2014: loss per share 0.03p) diluted loss per
share is (0.04)p (2014: loss per share 0.02p). The number of ordinary shares
for the year ended 31 December 2013 has been restated based on the 60 for 1
share consolidation that occurred on 7 May 2014.
11. Business combinations
During the period under review, the Group completed three acquisitions.
On 1 July 2015, EWG acquired 100 per cent of the issued share capital of
Greensnow Limited, the IFA business that trades under the name ISM Solutions
("ISM").
Based in the City of London, the clients of ISM are made up of predominantly
young, aspiring professionals in both the legal and accountancy professions.
For the full year to 31 March 2015 ISM had turnover of £1.1 million of which
approximately 92 per cent was recurring income and profit before tax of
£114,986. As at 31 March 2015, ISM had aggregate net assets of £29,000.
The aggregate maximum consideration for the acquisition of ISM is £3.0 million
(the "Maximum Consideration"), of which 50 per cent. is to be satisfied in
cash and 50 per cent. in new ordinary shares of 5p each of the Company
("Ordinary Shares"). The initial consideration payable on completion to ISM is
£1.25 million and has been paid in cash and Ordinary Shares.
During the post acquisition period from 1 July 2015 to 31 December 2015, ISM
generated revenue of £0.4 million and made a loss before tax of £0.01
million.
On 21 September 2015, EWG acquired the financial planning business of legal
firm Bells Solicitors Limited ("Bells Financial Planning") based in Farnham,
Surrey. This was the acquisition of a book of business rather than a company.
Bells Financial Planning business, established in 1999 and expanded in 2012
through the acquisition of local IFA company Biggs Hart, primarily advises
high net worth individuals and private clients in the Farnham area who may
have financially benefitted as a result of the legal firm's work.
In the financial year to 31 August 2015, Bells Financial Planning clients
accounted for approximately £43 million of funds under influence and generated
approximately £185,000 of revenue, of which approximately 91% was recurring.
The maximum consideration payable for the Acquisition is £675,000 ("Maximum
Consideration"), of which 80% is to be satisfied in cash and 20% in new
Ordinary Shares of 5p each of the Company.
On 22 November 2015, EWG acquired XCAP Nominees Limited, the nominee account
of Hume Capital Securities plc.
The acquisition brings a further £30 million of assets to European Wealth's
Manchester office, opened in late 2014. The total consideration paid was
£10,000.
As at 31 December 2015, in relation to all the previous acquisitions made by
the Group, a total of £2.0 million of deferred consideration was due to paid
in a mixture of cash and shares (2014: £1.9 million).
12. Intangible assets and goodwill
Acquisition of 100 per cent of the issued share capital of Greensnow Limited,
the IFA business that trades under the name ISM Solutions ("ISM").
On 1 July 2015, European Wealth Group Limited acquired 100 per cent of the
issued share capital of ISM.
ISM is a Financial Planning business with £70 million of funds under
influence.
£'000
Financial assets
Net liabilities (68)
Identifiable intangible assets 1,619
Total identifiable assets 1,551
Goodwill 478
Total expected consideration 2,029
Satisfied by:
Ordinary shares of European Wealth Group Limited 625
Initial cash consideration 625
Deferred ordinary shares of European Wealth Group Limited 389
Deferred cash consideration 390
Goodwill and intangible assets acquired 2,029
Pre-acquisition financial details of the companies acquired are as follows:
Company Date of latest pre-acquisition audited accounts Revenue(£'000) Pre tax loss (£'000) Net liabilities (£'000)
ISM Year to 31 March 2015 1,100 115 (67)
Acquisition of the financial planning client book of Bells Solicitors Limited
("Bells Financial Planning")
On 21 September 2015, EWG acquired the financial planning business of legal
firm Bells Solicitors Limited ("Bells Financial Planning") based in Farnham,
Surrey. This was the acquisition of a book of business rather than a company.
Bells Financial Planning business, established in 1999 and expanded in 2012
through the acquisition of local IFA company Biggs Hart, primarily advises
high net worth individuals and private clients in the Farnham area who may
have financially benefitted as a result of the legal firm's work.
Bells Financial Planning clients accounted for approximately £43 million of
funds under influence.
£'000
Financial assets
Identifiable intangible assets - client list and funds under influence 585
Total identifiable assets 585
Total expected consideration 585
Satisfied by:
Ordinary shares of European Wealth Group Limited 45
Initial cash consideration 179
Deferred ordinary shares of European Wealth Group Limited 72
Deferred cash consideration 289
Intangible assets acquired - client list and funds under influence 585
Acquisition of XCAP Nominees Limited ("XCAP Nominees")
On 22 November 2015, EWG acquired XCAP Nominees. This was effectively the
acquisition of the client list of Hume Capital Securities plc which brought in
approximately £30 million of Funds under Management to the Group.
£'000
Financial assets
Identifiable intangible assets - client list and funds under management 10
Total identifiable assets 10
Total expected consideration 10
Satisfied by:
Initial cash consideration 10
Intangible assets acquired - client list and funds under management 10
Goodwill
European Wealth Group Limited has recognised goodwill its various acquisitions
as per the table below. The factors that make up the goodwill recognised
include but are not limited to, the greater P/E ratio valuations placed on
firms with assets under management compared to assisting in delivering the
benefits of recurring and non-trading dependent revenue.
Group
£'000
Cost
At 1 January 2015 15,644
Additions 478
At 31 December 2015 16,122
Impairment
At 1 January 2015 -
Charge for the year -
At 31 December 2015 -
Net book values
At 31 December 2015 16,122
At 31 December 2014 15,644
For statutory accounting impairment review purposes, the Group has identified
two cash generating units ("CGUs"): investment management and financial
planning.
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. The smallest identifiable group of assets in
European Wealth are the 2 divisions that the business is analysed across,
being investment management and financial planning. All key management
information is divided across these two divisions and when acquisitions are
made they are analysed in either of those divisions. The different groups of
assets that are within those two divisions do not generate independent
cashflows that would enable them to be classed as separate CGUs. This is the
first year in which the CGUs have been analysed in this format due to the
Group only being formed during the year ended 31 December 2014.
The Company acquired European Wealth Management Group Limited ("EWMG") in
2014. EWMG has been split between the two CGUs depending on which CGU the
relevant assets are allocated to by the internal management information.
Compass, ISM and Bells were acquired post the EWMG acquisition and have been
allocated to the financial planning CGU. EW Switzerland and XCAP Nominees were
allocated to the investment management CGU.
The Group tests, for each CGU, at least annually for goodwill impairment. The
recoverable amount of a CGU is determined as the higher of fair value less
costs to sell of the value in use. For both CGUs the fair value less costs to
sell is greater than the carrying value and therefore no further assessment of
value in use has been performed.
Valuations are based on an assets under management multiple (the Investment
Management CGU) and recurring revenue multiple (financial planning CGU) and
look at industry standard valuation metrics in order to analyse out the
individual CGUs. Neither CGU valuation reflects an impairment of goodwill
would be necessary as at 31 December 2015.
The amounts recognised in respect of the identifiable assets required and
liabilities assumed are as set out in the table below:
Intangible assets
Group
£'000
Cost
At 31 December 2014 6,972
Additions 2,214
At 31 December 2015 9,186
Amortisation
At 31 December 2014 179
Charge for the year 385
At 31 December 2015 563
Net book values
At 31 December 2015 8,622
At 31 December 2014 6,793
The above addition to intangible assets represents the value of the funds
under management acquired and client base acquired as part of the acquisitions
of EWMG, Compass, EW Switzerland, ISM, Bells and XCAP Nominees.
The intangible assets are valued using the value applied to the assets under
management (i.e. the client lists).
The assets are assessed for their useful life on an asset by asset basis in
order to determine amortisation rates. There are currently £8.3 million of
intangible assets being amortised over 20 years, £0.6 million over 15 years,
and £0.3 million have been assessed to have an infinite useful life. The
assets assessed to have an indefinite useful life represent institutional
clients with an indefinite lifespan.
13. Short term borrowings
Group Company
31 December 2015 31 December 2014 31 December 2015 31 December 2014
£'000 £'000 £'000 £'000
Short term borrowing 662 500 300 500
In August and December 2013, loans of £300,000 and £200,000, respectively of
two-year non-convertible unsecured loans were taken out, both attracting
interest at 10% p.a. The £300,000 loan has been extended by 1 year and is
therefore repayable in August 2016 and is classed as short term. The £200,000
loan has been extended by 2 years and is therefore repayable in December 2017
and is classed as non-current. Both loans remain outstanding as at the date of
these financial statements.
On 30 June 2015 European Financial Planning Ltd entered into a sterling
variable rate loan facility agreement with Clydesdale Bank PLC for an amount
of £500,000. This loan is repayable on a fully amortising basis over 3 years.
The interest rate charged is 3.75% over the London interbank offered rate
("LIBOR").
On 20 September 2015 European Financial Planning Ltd entered into a sterling
variable rate loan facility agreement with Clydesdale Bank PLC for an amount
of £150,000. This loan is repayable on a fully amortising basis over 3 years.
The interest rate charged is 3.75% over LIBOR.
Of the 2 combined amounts, as at 31 December 2015 £559,302 was outstanding of
which £211,424 is repayable within 12 months. The balance of £347,878 is
recognised in non-current liabilities.
In December 2015 European Wealth (Switzerland) SA received a loan of £151,072.
The loan is repayable after 12 months and attracts an interest rate of 10% per
annum.
14. Convertible loan note
Group Company
31 December 2015 31 December 2014 31 December 2015 31 December 2014
£'000 £'000 £'000 £'000
Convertible loan note - all due between 1-5 years 3,963 4,025 3,963 4,025
On 7 May 2014 as part of the acquisition of EWMG, £5,750,390 worth of
convertible loan notes ("CLS") were issued. The CLS is available in individual
units worth £10 and CLS attracts a coupon rate of 10 per cent. per annum
payable half yearly. The CLS has stepped conversion terms, which along with
all other terms, are detailed in the Admission Document which is available on
the Company's website.
On the first conversion date in November 2014, 222,789 CLS units (representing
£2,227,890 in nominal amount) converted into Ordinary shares in the Company at
a price of 72 pence per share.
In December 2014 a further 70,625 CLS units (representing £706,250 in nominal
amount) were issued in respect of deferred consideration due to Mr Peter
Mullins pursuant to the agreement for the acquisition of Bradley Stuart, dated
18 October 2012.
In June 2015 a further 6,250 CLS units (representing £62,500 in nominal
amount) converted into Ordinary shares in the Company at a price of 85 pence
per share.
As a result there are currently 416,625 CLS units in issue (representing
£4,166,250 in nominal amount). Of this total amount £203,135 has been taken to
the capital reserves in accordance with IAS 32. This is based on an assumed
effective interest rate of 12 per cent. per annum.
15. Other non-current liabilities
Group Company
31 December 2015£'000 31 December 2014£'000 31 December 2015£'000 31 December 2014£'000
Directors loan (note 37) 90 200 - -
Other Loans 548 - 200 -
Hire purchase creditor 51 109 - -
Deferred consideration 119 426 - -
808 735 200 -
16. Share capital
Share capital
£'000
Authorised, allotted, issued and fully paid:
As at 1 January 2014
633.7 million ordinary shares of £0.001 each 634
Issue of shares 455
Share capital re-organisation (106)
As at 31 December 2014:
19.8 million ordinary shares of £0.05 each 983
Issue of shares 188
As at 31 December 2015 1,171
23.4 million ordinary shares of £0.05 each
On 7 May 2014, the Company undertook a share capital re-organisation due to
the relatively large number of shares that were in existence. The share
reorganisation was effected by:
1. The consolidation and conversion of each block of 60 Existing EWG Shares
into one New Ordinary Share and one New Deferred Share; and
2. Where any Existing Shareholder's holding of Existing EWG Shares is not
divisible by 60, the compulsory redemption of all of the remaining
unconsolidated Existing EWG Shares held by that Existing Shareholder.
The effect of the re-organisation was to reduce the number of ordinary shares
in issue from 633,712,300 Existing EWG shares of 0.1p each to 10,561,858 New
Ordinary Shares of 5p each.
On 7 May 2014, as part of the consideration for European Wealth Management
Group Limited, 2,611,084 new ordinary shares of 5p each were issued to the
former shareholders of European Wealth Management Group Limited.
On 25 June 2014, as part of the consideration for Compass Financial Benefits
Limited ("Compass"), 269,575 ordinary shares of 5p each were issued to the
former shareholders of Compass at a price of 100p per share.
On 25 June 2014 the Company raised a total of £674,000 via the issue of
749,303 ordinary shares of 5p each in the Company at a price of 90p per
share.
On 25 June 2014 Hearth Investments Limited ("Hearth") agreed to convert a loan
plus interest, amounting to £40,997, into 56,940 ordinary shares at a price of
72p, being the price agreed in the original agreement dated 25 March 2014.
On 25 June 2014, a number of directors subscribed for 56,251 ordinary shares
of 5p each in the Company, in aggregate, at a price of 90p per share raising a
total of approximately £51,000 for the Company.
On 25 June 2014, Buzz West agreed to convert his entire loan plus interest to
EWMG, amounting to £61,512, into 68,346 ordinary shares of the Company at a
price of 90p.
On 25 July 2014 as part of the deferred consideration for Bradley Stuart,
43,488 ordinary shares of 5p each were issued to Mr Peter Mullins at a price
of 100p per share.
On 14 November 2014 the Company issued 1,309,620 ordinary shares of 5p each at
an issue price of 104.9p per share as part of the consideration for the
acquisition of P&C Global Wealth Managers SA and GTI Fund Investment Ltd.
On 28 November 2014 the Company issued 3,094,288 ordinary shares of 5p each at
an issue price of 72p per share as a result of the conversion of 222,789
convertible loan note units (representing £2,227,890 in nominal amount).
On 23 December 2014 as part of the deferred consideration for Bradley Stuart,
943,750 ordinary shares of 5p each were issued to Mr Peter Mullins at a price
of 100p per share.
On 2 June 2015 the Company issued 73,529 ordinary shares of 5p each at an
issue price of 85p per share as a result of the conversion of 6,250
convertible loan note units (representing £62,500 in nominal amount).
On 12 June 2015 the Company announced the completion of a placing of 2,527,095
ordinary shares of 5p each at an issue price of to 80p per share to raise
approximately £2.0 million.
On 22 June 2015 as part of the deferred consideration for Bradley Stuart,
88,014 ordinary shares of 5p each were issued to Mr Peter Mullins at a price
of 88.5p per share.
On 1 July 2015 Company issued 706,214 ordinary shares of 5p each at an issue
price of 88.5p per share as part of the consideration for the acquisition of
ISM.
On 1 July 2015 Company issued 53,333 ordinary shares of 5p each at an issue
price of 84p per share as part of the consideration for the acquisition of
Bells.
On 11 December 2015 following the calculation of the deferred consideration
payable to Bruce Albrecht and Iain Little, the vendors of European Wealth
(Switzerland) SA (formerly known as P&C Global Wealth Managers SA) (the
"Vendors"), a further 234,184 ordinary shares of 0.5p each in the Company were
issued to the Vendors in equal amounts at a price of 104.9p.
17. Share premium account
Group and Company£'000
Balance at 31 December 2013 2,899
Premium arising on issue of equity shares 7,105
Transaction costs associated with the issue of shares (153)
Balance at 31 December 2014 9,851
Premium arising on issue of equity shares 2,893
Transaction costs associated with the issue of shares (90)
Balance at 31 December 2015 12,654
18. Capital reserve
Group and Company£'000
Balance at 31 December 2013 34
Equity portion of Convertible loan note 203
Capital element of deferred consideration due 1,374
Share based payments liability taken to equity 2
Deferred share capital 106
Balance at 31 December 2014 1,719
Reversal of deferred consideration paid in period (1,374)
Transaction costs associated with the issue of shares -
Share based payments liability taken to equity 6
Balance at 31 December 2015 351
19. Retained earnings
Group£'000 Company£'000
Balance at 31 December 2013 4,441 4,441
Net (loss)/profit for the year (348) 127
Balance at 31 December 2014 4,093 4,568
Net (loss)/profit for the year (991) 451
Balance at 31 December 2015 3,102 5,019
In the year to 31 December 2015 the Company made a profit after tax of
£451,000 (2014: £127,000).
20. 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.
Group Company
Year ended31 December2015£'000 Year ended31 December2014£'000 Year ended31 December 2015£'000 Year ended31 December 2014£'000
(Loss)/profit for the year (991) (348) 451 127
Adjustments for:
Finance costs 509 232 448 269
Interest income (101) - (292)
Forex (15) - - -
Tax charge (11) 11 - -
Expenses charged to capital - - - -
Depreciation and amortisation 424 224 - -
Share-based payment expense 6 2 6 2
Profit on disposal of subsidiary - (830) - (830)
Movements in deferred consideration (719) - (1,128) -
Operating cash flows before movements in working capital (797) (810) (223) (724)
Decrease/(Increase) in receivables (82) (608) 1 (2)
Decrease/(Increase) in payables (193) 982 (323) 356
Net cash In/(out)flow from operating activities (1,072) (436) (545) (370)
21. Post Balance Sheet Events
Post year end European Financial Planning Limited acquired the client list of
Phoenix Invest Limited, a financial planning business that generates over
£93,000 of recurring revenue. The total consideration payable is £268,000
spread over a 4 year period.
This information is provided by RNS
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