REG - Peel Hunt Limited - Half-year Results
05/12/2023 07:15
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RNS Number : 6374V Peel Hunt Limited 05 December 2023
5 December 2023
Peel Hunt Limited
Half-Year Results for the six months ended 30 September 2023
Revenue in line with market expectations
Peel Hunt Limited ('Peel Hunt', the 'Company') together with its subsidiaries
(the 'Group') today announces unaudited interim results for the period ended
30 September 2023 ('H1 FY24'). FY24 refers to the financial year ending on 31
March 2024.
Highlights
· Strong balance sheet maintained, supporting the Group's overall
financial resilience
o Group revenue £42.7m (H1 FY23: £41.1m), an increase of 3.9% year on year
o Loss before tax of £0.8m (H1 FY23: profit before tax of £0.1m),
reflecting the challenging macroeconomic environment and inflationary
increases in costs
o Net assets of £92.8m (FY23: £93.1m) and cash balances of £22.6m (FY23:
£27.4m)
o Capital comfortably in excess of regulatory requirements
o Long term debt reduced to £15m (FY23: £21m), partly offsetting increases
in interest costs
· Good strategic progress made across all business divisions and
the Group as a whole
o Investment Banking:
§ Added nine new corporate clients
§ Progressed our diversification strategy acting as financial adviser on
several UK public M&A transactions, both buyside and sellside, and
expanding our pipeline of private capital markets and debt advisory mandates
o Research & Distribution: Institutional electronic trading revenues
doubled year-on-year and key senior hires have joined the team during the
period
o Execution Services: Revenues remain above pre-Covid levels despite lower
market volumes
o RetailBook: Application for regulatory approval is currently being
assessed by the Financial Conduct Authority
o European office: Copenhagen office now fully staffed and expected to be
operational shortly
· Strength of our platform and considerable operational gearing
position us well for when market conditions recover
Financial and operating highlights
Financial highlights H1 FY24 H1 FY23 Change
Revenue £42.7m £41.1m 3.9%
(Loss)/profit before tax (£0.8m) £0.1m (900)%
(Loss)/profit after tax (£0.7m) £0.0m (700)%
Compensation ratio 58.6% 58.5% 0.1ppts
Operating highlights H1 FY24 FY23 Change
Cash £22.6m £27.4m (17.5)%
Net assets £92.8m £93.1m (0.3)%
Investment Banking clients 154 155 (0.6)%
Average market cap of clients £622.6m £690.5m (9.8)%
Steven Fine, Chief Executive Officer, commented:
"Despite the continued challenging market backdrop, our performance has
remained resilient. Revenue for the first six months was in line with
expectations, and slightly up on the same period last year. Our performance
was not quite enough to offset the high inflationary environment and its
impact on costs but our balance sheet remains strong, demonstrating the
Group's financial resilience.
Our integrated full-service investment banking offering is a significant
differentiator for Peel Hunt. We continued to make good progress with our
strategic priority to diversify our investment banking capabilities, winning
new mandates in M&A advisory and developing a growing pipeline in private
capital markets and debt advisory. This diversified business model, coupled
with a solid financial position, means we are well positioned for when market
conditions improve."
For further information, please contact:
Peel Hunt: via Powerscourt
Steven Fine, CEO
Sunil Dhall, CFOO
Powerscourt (Financial PR): +44 (0)20 7250 1446
Justin Griffiths
Gilly Lock
Russ Lynch
peelhunt@powerscourt-group.com
Grant Thornton UK LLP (Nominated Adviser): +44 (0)20 7728 2942
Colin Aaronson
Enzo Aliaj
Keefe, Bruyette & Woods (Corporate Broker): +44 (0) 20 7710 7600
Alistair McKay
Alberto Moreno Blasco
Fred Walsh
Akshman Ori
Notes to editors
Peel Hunt is a leading UK investment bank that specialises in supporting
mid-cap and growth companies. It provides integrated investment banking advice
and services to UK corporates, including equity capital markets, private
capital markets, M&A, debt advisory, investor relations and corporate
broking. The company's joined up approach combines these services with expert
research and distribution and an execution services hub that provides
liquidity to the UK capital markets, delivering value to global institutions
and trading counterparties alike. The company is admitted to trading on AIM
(LON: PEEL) and has offices in London, New York and Copenhagen.
Market conditions
Throughout H1 FY24, macroeconomic factors continued to have an impact across
the investment banking sector and the prolonged period of subdued capital
markets activity continued. As a consequence, the capital markets transaction
fee pool remained diminished, particularly in respect of IPOs. Revenue from
M&A transactions was ahead of the previous year, however, as low
valuations and weak sterling sustained bid activity for UK companies. The FTSE
100, FTSE 250 and AIM All-share were down 0.3%, 3.4% and 10.6% respectively
and market volumes remained low.
UK-focused equity funds continued to experience net outflows, although towards
the end of the period there were indications that this trend might be starting
to change, and we saw some encouraging signs that interest rates may be
nearing their peak as UK inflation has started to come under control. We saw
progress on the market reform agenda, which is critical to increasing the
attractiveness of UK Plc and reversing the structural trend of
de-equitisation, and the FCA provided some much-needed certainty on the timing
of rule reforms.
Overview of results
Group revenue for the period was £42.7m (H1 FY23: £41.1m) with a loss before
tax of £0.8m (H1 FY23: profit before tax of £0.1m), reflecting the
challenging macroeconomic environment and inflationary increases in costs. Our
balance sheet remained strong, with net assets of £92.8m as at 30 September
2023 (FY23: £93.1m), capital comfortably in excess of regulatory requirements
and cash balances of £22.6m (FY23: £27.4m).
Divisional reviews
Investment Banking
H1 FY24 H1 FY23 Change
Investment Banking fees £12.9m £7.5m 72.0%
Investment Banking retainers £4.4m £4.4m 0.0%
Investment Banking revenue £17.3m £11.9m 45.4%
Whilst overall deal activity has remained subdued, revenues in Investment
Banking were ahead of the same period last year.
Our strategic priority to diversify our investment banking capabilities is
progressing well. We acted as financial adviser on several UK public M&A
transactions in the period, both buyside and sellside, and expanded our
pipeline of private capital markets and debt advisory transactions. In
addition, we added nine new corporate clients and at 30 September 2023 were
appointed as an adviser to 154 companies, of which 37 are in the FTSE 350. The
aggregate market capitalisation of our corporate clients has increased by 4.6%
year on year, to approximately £96bn.
Although levels of capital markets activity were low in the period, REX has
won a number of mandates from third party banks, brokers and financial
advisers.
Research & Distribution
H1 FY24 H1 FY23 Change
Research payments and execution commission £10.5m £11.8m((1)) (11.0)%
Notes
(1) To better reflect how the business is managed, we have changed the
way we allocate certain revenues between Research & Distribution and
Execution Services. As a result, we have reclassified £1.9m of execution
commission as Execution Services revenue. This was also reclassified in the
FY23 financial statements.
Over the period, revenue from our Research and Distribution business decreased
broadly in line with the market. Our Research team has focused on delivering
differentiated and highly relevant mid-cap and growth company research to our
institutional clients. Following further initiations in the period we now
provide insightful analysis on over 200 FTSE 350 companies.
Institutional electronic trading revenues have more than doubled year on year
and we have continued to invest in talent, with key senior hires joining the
team during H1.
Our Copenhagen office, which will broaden our international distribution
capability, received regulatory approval during the first half of 2023 and is
now fully staffed and expected to be operational shortly.
Execution Services
H1 FY24 H1 FY23 Change
Execution Services revenue £14.8m £17.4m((1)) (14.9)%
Notes
(1) To better reflect how the business is managed, we have changed the
way we allocate certain revenues between Research & Distribution and
Execution Services. As a result, we have reclassified £1.9m of execution
commission as Execution Services revenue. This was also reclassified in the
FY23 financial statements.
During the period the FTSE 250 and AIM All-Share declined 3.4% and 10.6%
respectively and trading volumes remained much lower across the market as a
whole. Despite this, our trading books continue to perform well versus market
drawdowns and, overall, Execution Services revenue was £14.8m. Trading in
fixed income, investment companies and exchange traded funds contributed to
revenues, volumes and LSE market share that remain above pre-Covid levels. We
continue to focus on adding incremental liquidity and driving efficiencies.
RetailBook
During the period further progress was made by RetailBook to establish
operations, and its application for regulatory approval is currently being
assessed by the FCA.
Capital and liquidity
Net assets remained strong at £92.8m (FY23: £93.1m) as at 30 September 2023.
Our cash position also remained healthy, at £22.6m as at 30 September 2023,
although this decreased from £27.4m at the end of FY23, largely due to the
accelerated reduction of long-term debt by £6.0m during the period. Long-term
debt is now £15.0m, and we have access to a £30.0m revolving credit facility
('RCF'), which was renewed just before the end of the period. The RCF was
undrawn at the end of the period (FY22: £10.0m).
We continue to operate well in excess of our regulatory capital requirements
with own funds requirements coverage over net assets of 567% at the end of H1
FY24 compared to 555% at the end of FY23. The increase in coverage from FY23
was achieved by maintaining risk exposures within the agreed limits despite
the minimal reduction in Group net assets.
Costs and people
H1 FY24 H1 FY23 Change
Staff costs £25.0m £24.0m 4.2%
Non-staff costs £17.9m £16.2m 10.5%
Total admin costs £42.9m £40.2m 6.7%
Compensation ratio 58.6% 58.5% 0.1ppts
Non-staff costs ratio 41.9% 39.3% 2.6ppts
Change in headcount((1)) (1.8)% 5.7% (7.5)ppts
Notes:
(1) Change in average headcount when compared to respective previous
financial year ends
Despite the macro-economic challenges, we continued to invest in our people to
enable us to pursue our strategic priorities and be well positioned when the
capital market cycle turns.
Overall, average headcount decreased by 1.9% in the first half of the
financial year. We made selected hires into our Copenhagen office, which will
broaden our international distribution capability, and key strategic hires
into our electronic execution team that broadens our product offering and
provides further diversification of revenues.
Staff costs were higher in H1 FY24 than H1 FY23, partly due to one off costs
relating to headcount rationalisation and targeted salary increases for our
lower-paid employees to help support those disproportionately affected by the
rising cost of living.
Non-staff costs, particularly technology costs, increased in line with
inflation. We also incurred costs from continued progress on our strategic
priorities, including the establishment of a fully-staffed office in
Copenhagen.
Given the ongoing macroeconomic challenges, we will continue to monitor costs
in H2 FY24, whilst remaining focused on our strategic priorities.
Responsible business
We are committed to ensuring our business is run responsibly. Throughout the
period our board-level ESG Committee continued to focus on our sustainability
priorities, particularly our targets for gender diversity and carbon
reduction. We continued to work towards our target of 40% female employees by
2035. As part of our ongoing commitment to fostering an inclusive and
supportive work environment, we have reviewed and updated our enhanced
maternity and paternity pay provisions.
Our first Carbon Reduction Plan is due for publication shortly, and in H1 FY24
we implemented an electric car scheme to encourage employees to make their
commute as low carbon as possible.
We were pleased to announce that our employees selected Become, the only
national charity focused solely on supporting children in care and young care
leavers, to be our new charity partner, and we have a number of fundraising
events planned. All employees are encouraged to participate in a day of
charity work and we offered a number of ongoing volunteering opportunities
throughout the period.
Current trading and outlook
Trading in the first two months of our second half has been broadly in line
with the first half. Since the start of the second half, macroeconomic and
geopolitical concerns have continued to weigh on equity markets and, whilst
there are some signs of positivity, market activity remains relatively
subdued. IPO and private fundraising activity continues to be muted.
Take-private activity continues as valuations for UK quoted companies remain
attractive, particularly to strategic bidders, and we have been delighted to
support our corporate clients in raising equity finance to fund M&A
transactions during the period.
Against the backdrop of prolonged subdued market activity and de-equitisation,
we continue to support efforts to reinvigorate UK equity markets through a
combination of supply and demand side reforms, and in particular those
initiatives designed to encourage investment into small and mid-cap companies
that are the lifeblood of the UK economy.
Steven Fine
Chief Executive Officer
5 December 2023
The information, statements and opinions contained in this announcement do not
constitute a public offer under any applicable legislation or an offer to buy
or sell any securities or financial instruments nor any advice or
recommendation with respect to such securities or other financial instruments.
There are a number of key judgement areas, which are based on models and which
are subject to ongoing modification and alteration. The reported numbers
reflect our best estimates and judgements at the given point in time.
Forward-looking statements
This announcement contains forward-looking statements. Forward-looking
statements sometimes use words such as 'may', 'will', 'seek', 'continue',
'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', 'on track', 'achieve' or other words of similar
meaning. Such statements and forecasts involve risk and uncertainty because
they are based on current expectations and assumptions but relate to events
and depend upon circumstances in the future and you should not place reliance
on them. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by
forward-looking statements and forecasts. Forward-looking statements and
forecasts are based on the Directors' current view and information known to
them at the date of this announcement.
Subject to our obligations under the applicable laws and regulations of any
relevant jurisdiction, in relation to disclosure and ongoing information, we
undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Nothing in this announcement constitutes or should be construed as
constituting a profit forecast.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
Unaudited for the six months ended 30 September 2023
Six months ended Six months ended Year ended
30 Sep 2023 30 Sep 2022 31 Mar 2023
Unaudited Unaudited Audited
Continuing activities Note £'000 £'000 £'000
Revenue 2 42,677 41,067 82,337
Administrative expenses 3 (42,866) (40,164) (82,377)
(Loss)/profit from operations 3 (189) 903 (40)
Finance income 5 510 170 692
Finance expense 5 (1,139) (1,110) (2,320)
Other income 60 98 180
Operating (loss)/profit for the period (758) 61 (1,488)
Share of loss from associate 8 (15) - -
(Loss)/profit before tax for the period (773) 61 (1,488)
Tax 94 (15) 166
(Loss)/profit for the period (679) 46 (1,322)
Other comprehensive income for the period - - -
Total comprehensive (expense)/ income for the period (679) 46 (1,322)
Attributable to:
Owners of the Company (679) 46 (1,322)
Non-controlling interests 7 - - -
(Loss)/profit for the period (679) 46 (1,322)
Attributable to:
Owners of the Company (679) 46 (1,322)
Non-controlling interests 7 - - -
Total comprehensive (expense)/income for the period (679) 46 (1,322)
Earnings per share - attributable to owners of the Company
Basic 6 (0.6p) 0.0p (1.1p)
Diluted 6 (0.6p) 0.0p (1.1p)
Consolidated Balance Sheet
Unaudited as at 30 September 2023
As at 30 Sep 2023 As at 30 Sep 2022 As at 31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 7,299 8,920 8,092
Intangible assets 1,849 718 1,152
Right-of-use assets 14,869 17,156 15,889
Investments in associates 535 - -
Deferred tax asset 322 322 273
Total non-current assets 24,874 27,116 25,406
Current assets
Securities held for trading 62,772 55,180 54,144
Market and client debtors 376,408 451,633 471,504
Trade and other debtors 15,853 13,777 15,546
Cash and cash equivalents 22,554 41,352 27,410
Total current assets 477,587 561,942 568,604
LIABILITIES
Current liabilities
Securities held for trading (33,100) (27,604) (32,062)
Market and client creditors (336,135) (399,465) (421,953)
Amounts due to members - (5,041) -
Trade and other creditors (4,856) (4,095) (4,214)
Borrowings - (10,000) -
Lease liabilities (2,757) (2,907) (2,867)
Long-term loans (3,000) (6,000) (6,000)
Provisions (642) (518) (576)
Total current liabilities (380,490) (455,630) (467,672)
Net current assets 97,097 106,312 100,932
Non-current liabilities
Long-term loans (12,000) (18,000) (15,000)
Lease liabilities (17,196) (19,482) (18,192)
Total non-current liabilities (29,196) (37,482) (33,192)
Net assets 92,775 95,946 93,146
Consolidated Balance Sheet
Unaudited as at 30 September 2023
As at 30 Sep 2023 As at 30 Sep 2022 As at 31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
EQUITY
Ordinary share capital 40,099 40,099 40,099
Other reserves 52,676 55,847 53,047
Total equity 92,775 95,946 93,146
Consolidated Statement of Changes in Equity
Unaudited for the six months ended 30 September 2023
Ordinary Share Capital Other reserves Consolidated
£'000 £'000 £'000
Balance as at 31 March 2022 40,099 60,035 100,134
Profit for the period - 46 46
Other comprehensive income - - -
Total comprehensive income - 46 46
Transactions with owners
Share Based Payments - 305 305
Purchase of Company shares - (807) (807)
Dividends paid - (3,732) (3,732)
Balance as at 30 September 2022 40,099 55,847 95,946
Loss for the period - (1,368) (1,368)
Other comprehensive income - - -
Total comprehensive expense - (1,368) (1,368)
Transactions with owners
Share Based Payments - 342 342
Purchase of Company shares - (1,774) (1,774)
Balance as at 31 March 2023 40,099 53,047 93,146
Loss for the period - (679) (679)
Other comprehensive income - - -
Total comprehensive expense - (679) (679)
Transactions with owners
Share Based Payments - 324 324
Purchase of Company shares - (16) (16)
Balance as at 30 September 2023 40,099 52,676 92,775
Consolidated Statement of Cash Flows
Unaudited for the six months ended 30 September 2023
Six months ended 30 Sep 2023 Six months ended 30 Sep 2022 Year ended 31 Mar 2023
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Net cash generated from/(used in) operations 9 5,019 (34,697) (30,899)
Cash flows from investing activities
Purchase of tangible assets (60) (493) (511)
Purchase of intangible assets (815) (623) (1,087)
Investment in associate (550) - -
Net cash used in investing activities (1,425) (1,116) (1,598)
Cash flows from financing activities
Interest paid (727) (603) (1,382)
Short term borrowings - 10,000 -
Lease Liability payments (1,707) (1,412) (3,117)
Purchase of Company shares (16) (807) (2,581)
Dividends paid - (3,732) (3,732)
Repayment of Long-term loan (6,000) (3,000) (6,000)
Net cash (used in)/generated from financing activities (8,450) 446 (16,812)
Net decrease in cash and cash equivalents (4,856) (35,367) (49,309)
Cash and cash equivalents at start of period 27,410 76,719 76,719
Cash and cash equivalents at end of period 22,554 41,352 27,410
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
Peel Hunt Limited (the 'Company') is a non-cellular company limited by shares
having its shares admitted to trading on AIM, a market operated by London
Stock Exchange plc, on 29 September 2021. The Company is registered in
Guernsey. Its registered office is Mont Crevelt House, Bulwer Avenue, St
Sampson, Guernsey GY2 4LH. The consolidated interim financial information of
the Company comprises the Company and its subsidiaries, together referred to
as the 'Group'.
The financial information contained within these condensed consolidated
interim financial statements is unaudited and has been prepared in accordance
with International Accounting Standard 34 Interim Financial Reporting ('IAS
34'). The Financial Statements should be read in conjunction with the annual
financial statements for the year ended 31 March 2023, which have been
prepared in accordance with UK-adopted international accounting standards
(International Financial Reporting Standards ('IFRS') and International
Financial Reporting Interpretations Committee ('IFRIC')) and with the
requirements of the Companies (Guernsey) Law, 2008.
The preparation of the condensed consolidated interim financial statements in
conformity with IAS 34 requires the use of certain critical accounting
judgements and significant estimates. It also requires the Board of Directors
to exercise its judgement in the application of the Group's accounting
policies. The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 March 2023.
The financial information is presented in pounds sterling and all values are
rounded to the nearest thousand (£'000), except where indicated otherwise.
The financial information has been prepared on the historical cost basis,
except for derivatives, financial assets and liabilities measured at Fair
value through profit and loss ('FVTPL') and at Fair value through other
comprehensive income ('FVTOCI'). Historical cost is generally based on the
fair value of the consideration given in exchange for the assets.
These condensed consolidated interim financial statements have been prepared
on a going concern basis as the Directors have satisfied themselves that, at
the time of approving these condensed consolidated interim financial
statements, the Company and the Group have adequate resources to continue in
operational existence for at least the next twelve months.
During the period, there were no new standards or amendments to IFRS that
became effective and were adopted by the Company and the Group with a material
impact.
2. Revenue
Six months ended 30 Sep 2023 Six months ended 30 Sep 2022 Year ended
31 Mar 2023
Restated
Unaudited Unaudited Audited
£'000 £'000 £'000
Research payments & Execution commission 10,503 11,785 25,116
Execution services revenue 14,834 17,416 33,810
Investment Banking revenue 17,340 11,866 23,411
Total revenues for the period 42,677 41,067 82,337
To better reflect how the business is managed, we have changed the way we
allocate certain revenues between Research & Distribution and Execution
Services. As a result, we have reclassified £1.9m of execution commission as
Execution Services revenue. This was also reclassified in the FY23 financial
statements.
3. Profit from operations
The following items have been included in arriving at profit from operations:
Six months ended 30 Sep 2023 Six months ended 30 Sep 2022 Year ended
31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Depreciation and amortisation 970 892 1,805
Lease depreciation 1,172 1,309 2,446
Staff costs (see note 4) 24,996 24,010 48,252
Other non-staff costs 15,728 13,953 29,874
Total administrative costs 42,866 40,164 82,377
Other non-staff costs comprise expenses incurred in the normal course of
business, including technology costs, professional and regulatory fees,
auditors' fees, brokerage, clearing and exchange fees.
4. Staff costs
Six months ended 30 Sep 2023 Six months ended 30 Sep 2022 Year ended 31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Wages and salaries 20,731 20,034 39,946
Social security costs 2,848 2,682 5,597
Pensions costs 1,368 1,251 2,623
Other costs 49 43 86
Total staff costs charged as an expense for the period 24,996 24,010 48,252
The average number of employees of the Group during the period has decreased
to 310 (H1 FY23: 316). The number of employees of the Group at the end of the
period has decreased to 308 (H1 FY23: 319).
5. Net finance expense
Six months ended 30 Sep 2023 Six months ended 30 Sep 2022 Year ended
31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Finance income:
Bank interest received 510 170 692
Finance expense:
Bank interest paid (28) (14) (52)
Interest on lease liabilities (412) (507) (938)
Interest accrued on long-term loan (699) (589) (1,330)
Finance expense for the period (1,139) (1,110) (2,320)
Net Finance expense for the period (629) (940) (1,628)
6. (Loss)/earnings per share
Six months ended 30 Sep 2023 Six months ended Year ended
30 Sep 2022 31 Mar 2023
Number of shares Number of shares Number of shares
Unaudited Unaudited Audited
Weighted number of ordinary shares in issue during the period 117,239,017 119,986,084 119,197,519
Dilutive effect of share option grants 7,574,291 1,605,000 1,605,000
Diluted weighted average number of ordinary shares in issue during the period 124,813,308 121,591,084 120,802,519
Basic (loss)/earnings per share is calculated on total comprehensive
(loss)/income for the six-month period, attributable to owners of the Company,
of (£0.7m) (H1 FY23: £0.0m) and 117,239,017 (H1 FY23: 119,986,084) ordinary
shares, being the weighted average number of shares in issue during the
period. Diluted (loss)/ earnings per share is calculated after adjusting for
the number of options expected to be exercised from the share option grants.
The calculations exclude Company shares held by the Employee Benefit Trust on
behalf of the Group.
The Company has 7,574,291 (H1 FY23: 1,605,000) of dilutive equity instruments
outstanding as at 30 September 2023.
7. Non-controlling interest
The non-controlling interest in H1 FY23 relates to the individual members of
Peel Hunt LLP prior to admission of the Company to trading on AIM; these
amounts are included in Amounts due to members on the Statement of Financial
Position. The Group no longer has non-controlling interests from FY23.
8. Balance sheet items
(a) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and impairment losses. Depreciation is charged to the Income Statement on a
straight-line basis over the estimated useful economic lives of each item.
(b) Intangible assets
Intangible assets represent internal software intellectual property, computer
software and sports debentures. Amortisation is charged to the Income
Statement on a straight-line basis over the estimated useful economic lives of
each item. Internal software intellectual property is amortised over 3 years,
computer software is amortised over five years and sports debentures are
amortised over the life of the ticket rights.
Internal software intellectual property represents internally-generated
intangible assets and it comprises of capitalised development costs for
certain technology developments for key projects in the Group. The costs
incurred in the research phase of these internal projects are expensed.
Intangible assets are recognised from the development phase if certain
specific criteria are met in order to demonstrate the asset will generate
probable future economic benefits and that its costs can be reliably measured.
Amortisation begins when the asset is available for use.
(c) Right-of-use asset and lease liabilities
The right-of-use asset and lease liabilities (current and non-current)
represent the two property leases that the Group currently uses for its
offices in London and New York and car rental leases.
(d) Investments in associates
The Group applies IAS 28 Investments in Associates and joint ventures.
Associates are entities in which the Group has significant influence over the
financial and operating policy decisions of the investee but does not have
control or joint control of those policies. The Group holds directly or
indirectly through subsidiaries, 20 per cent or more of the voting power of
the investee.
The Group applies the equity method to account for its investments in
associates. Under the equity method, on initial recognition the investment in
an associate is recognised at cost, and the carrying amount is increased or
decreased to recognise the Group's share of the profit or loss of the investee
after the date of acquisition. The Group's share of the investee's profit or
loss is recognised in the investor's profit or loss. The investment in
associates relate to the Group's investment in Peel Hunt Fintech Ventures LLP
£0.6m (H1 FY23: £nil) which was made during the period.
Peel Hunt Fintech Ventures LLP is incorporated in England and Wales and its
registered office is 100 Liverpool Street, London, United Kingdom, EC2M 2AT.
The Group indirectly (through a subsidiary) has a 25% shareholding in the
entity.
(e) Market and client debtors and creditors
The market and client debtor and creditor balances represent unsettled sold
securities transactions and unsettled purchased securities transactions, which
are recognised on a trade date basis. The majority of open bargains were
settled in the ordinary course of business (trade date plus two days). Market
and client debtor and creditor balances in these financial statements include
agreed counterparty netting of £25.6m (FY23: £11.9m).
(f) Financial instruments
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when the Group becomes a party to the contractual
provisions of the financial instrument. The fair valuation hierarchy applied
is consistent with that outlined in the FY23 audited Financial Statements. The
value of 'Level 1' financial assets held by the Group at the end of H1 FY24
was £61.3m (FY23: £53.0m), 'Level 2' £0.1m (FY23: £0.1m) and 'Level 3'
£1.4m (FY23: £1.0m). The value of 'Level 1' financial liabilities held by
the Group at the end of H1 FY24 was £32.9m (FY23: £31.6m), 'Level 2' £0.0m
(FY23: £0.0m) and 'Level 3' £0.2m (FY23: £0.5m).
(g) Stock borrowing collateral
The Group enters into stock borrowing agreements with a number of institutions
on a collateralised basis. Under such agreements securities are purchased with
a commitment to return them at a future date. The securities purchased are not
recognised on the Statement of Financial Position. The cash advanced is
recorded on the Statement of Financial Position as cash collateral within
trade and other debtors, the value of which is not significantly different
from the value of the securities purchased. The total value of cash collateral
held on the Statement of Financial Position is £3.6m (FY23: £2.4m).
(h) Borrowings
The Group has a committed Revolving Credit Facility ('RCF') of up to £30m in
order to further support its general corporate and working capital
requirements. As at 30 September 2023 the RCF was undrawn (FY23: £nil).
(i) Long-term loans
During the period we accelerated £6.0m of the principal repayments of the
Senior Facilities Agreement ('SFA'). As at 30 September 2023 £15.0m (FY23:
£21.0m) was outstanding.
(j) Post balance sheet events
There are no material post balance sheet events.
9. Reconciliation of (loss)/profit before tax to cash from operating
activities
Six months ended 30 Sep 2023 Six months ended Year ended
30 Sep 2022 31 Mar 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
(Loss)/profit for the period (773) 61 (1,488)
Adjustments for:
Depreciation and amortisation 2,142 2,201 4,251
Expected credit loss on financial assets held at amortised cost 71 (40) 277
Increase/(decrease) in provisions 66 (22) 37
Movement on deferred tax asset 49 16 -
Share based payments - IFRS 2 Charge 324 305 647
Revaluation of Right-of-use asset and Lease liabilities 38 (147) (71)
Net finance costs 629 940 1,628
Changes in working capital:
Increase in net securities held for trading (7,590) (9,940) (4,446)
Decrease in net market and client debtors 9,278 1,841 4,458
Increase in trade and other debtors (378) (537) (2,339)
Decrease in net amounts due to members (0) (16,790) (21,837)
Increase/(decrease) in trade and other creditors 642 (12,623) (12,572)
Cash generated from/( used in) operations 4,498 (34,735) (31,455)
Interest received 510 170 692
Corporation tax paid 11 (132) (136)
Net cash generated from/(used in) operations 5,019 (34,697) (30,899)
END
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