TIDMKWG
RNS Number : 4273A
Kingswood Holdings Limited
24 May 2023
24 May 2023
KINGSWOOD HOLDINGS LIMITED
("Kingswood", the "Company" or the "Group")
2022 Results
2022: exceptional progress against its strategic objectives and
its medium-term targets.
Group AuA/M of GBP10.5bn at December 2022 increased by GBP3.7bn
compared to the prior year. The completion of Barry Fleming
Partners and Moloney Investments Ltd (MMPI) acquisitions in Q1 2023
supported a further increase in AuA/M to GBP11.4bn at March
2023.
Kingswood completed the acquisition of ten businesses in the UK
in 2022. Collectively, these businesses have added GBP1.7bn AuA, 28
advisers and GBP11.8m revenue to the Group in 2022 and will add a
further GBP6.0m incremental revenue in 2023.
The Group FY2022 operating profit is GBP8.7m, an increase of
GBP2.3m year on year.
UK reports operating profit of GBP11.5m an increase of GBP5.4m
year on year.
Kingswood client retail assets under our own Management (AuM) in
IBOSS AM MPS and Personal DFM now total GBP1.0bn, up from GBP565m
at December 2021.
Kingswood Holdings Limited (AIM: KWG), the international, fully
integrated wealth and investment management group, is pleased to
announce its audited financial results for the year ended 31
December 2022.
David Lawrence, Kingswood Chief Executive Officer, commented: "I
am delighted to present our financial results for 2022 which was
another transformative year for the Kingswood Group. As reported in
our trading statement in March, Kingswood continues to make strong
progress across organic growth, positive net asset flows and
acquisition activity, contributing to record levels of operating
profit for the Group in 2022. I believe that successful firms in
this sector will be client centric, colleague focused and embracing
of technology. These three elements are present in all of our
drivers of value and underpin the results now being seen."
Strategic Highlights
-- Group AuA/M of GBP10.5bn at December 2022 increased by
GBP3.7bn compared to the prior year. The completion of Barry
Fleming Partners and Moloney Investments Ltd (MMPI) acquisitions in
Q1 2023 supported a further increase in AuA/M to GBP11.4bn at March
2023.
-- Completed the acquisition of 10 UK IFA businesses in the year
under review, having completed five acquisitions in 2021. The 15
acquisitions have added GBP11.8m of additional revenue in 2022.
-- UK Assets under Advice and Management (AuA/M) increased by
GBP3.2bn, which includes GBP1.5bn from the acquisition of Metnor
Holdings Limited on 31 December 2021, to GBP8.1bn in 2022 driven by
inorganic growth and positive net inflows across all business
divisions.
-- Our UK market leading 'Kingswood Go' app, launched in March
2022, has over 6,000 registered clients and we continue to focus on
enhancing the client experience and developing the technology to
provide additional in-app services.
-- As we build a business more representative of our society,
good progress has been made to address diversity imbalances across
the organisation - 40% of UK adviser hires in 2022 were female
compared to an adviser community where c.19% of our advisers are
female.
-- Kingswood US added 21 new registered representatives, which
further expanded our US footprint and grew our total AuM/A in the
US division by $0.3bn to $3bn (GBP2.4bn). The US Investment Banking
operating segment recruited two new high quality investment banking
groups in 2022 focused on mid-market equity capital markets.
2022 Financial Highlights
-- Group Revenue was GBP145.9m, GBP3.7m or 2.5% lower than 2021
as macro-economic headwinds and market volatility led to a slowdown
in capital market activity in the US Investment Banking
business.
-- 88% of UK's revenue is recurring in nature, providing a
strong, annuity-style fee stream. Investment Banking fees are a
larger portion of Kingswood US revenues, and transactional in
nature, which means that recurring revenue in the US was 15%.
Combined, Group recurring revenue was 32% compared to 19% in
2021.
-- Group Operating Profit of GBP8.7m was GBP2.3m higher than 2021.
David Hudd, Kingswood Chairman, commented: "I am pleased to
report that 2022 has been another year of outstanding performance
by the Kingswood Group. Despite challenging market conditions, we
have made good progress against our UK inorganic growth strategy
and have also generated organic growth across the Group. The
business delivered record levels of operating profit and completed
a further 10 acquisitions in the year under review. 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."
Prospects
Our near-term target remains building our AUA/M to in excess of
GBP10bn in UK&I and GBP12bn for the Group. With the full year
effect of the acquisitions made to date, current Group FY2023 run
rate operating profit is approximately GBP14.7m.
The Group continues to enjoy strong long term investment support
from Pollen Street Capital, KPI Nominees and other minority
investors which has fuelled its growth to date. It continues to
explore sources of additional investment from both public and
private sources to maintain a trajectory of accelerated growth.
The growth opportunity for Kingswood remains strong and through
organic growth and further acquisitions (where Kingswood has a
strong pipeline), we are building a trajectory to deliver an
operating profit in excess of GBP20m.
An abridged presentation of Kingswood's results and strategic
direction is available on the website
https://www.kingswood-group.com/financial-reports/
The annual report will shortly be available and can be viewed or
downloaded from the Company's website:
https://www.kingswood-group.com/financial-reports/
For further details, please contact:
Kingswood Holdings Limited +44 (0)20 7293 0730
David Lawrence www.kingswood-group.com
finnCap Ltd (Nomad & Broker)
Simon Hicks / Abigail Kelly +44 (0)20 7220 0500
Houlihan Lokey (Financial Adviser)
Christian Kent +44 (0)20 7907 4200
GreenTarget (for Kingswood media) +44 (0)20 7324 5498
Jamie Brownlee / Ellie Basle Jamie.Brownlee@greentarget.co.uk
About Kingswood
Kingswood Holdings Limited (trading as Kingswood) is an
AIM-listed (AIM: KWG) international fully integrated wealth
management group with circa GBP9 billion of assets under advice and
management. It services circa 19k 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.
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 focussed on becoming a leading
participant in its sector through targeted acquisitions in the UK
and US, complemented by strong organic growth to create a global
wealth management business.
-- The Group's core proposition centres on primary offerings in
wealth planning and investment management to deliver best in class
financial solutions for clients
2022 Highlights
Strategic Highlights
-- Group AuM/A of GBP10.5bn at December 2022 increased by
GBP3.7bn compared to the prior year. The completion of Barry
Fleming Partners and Moloney Investments Ltd (MMPI) acquisitions in
Q1 2023 supported a further increase in AuM/A to GBP11.4bn at March
2023;
-- Completed the acquisition of 10 UK IFA businesses in the year
under review, having completed 5 acquisitions in 2021. The 15
acquisitions have added GBP11.8m of additional revenue in 2022;
-- UK Assets under Management and Advice (AuM/A) increased by
GBP3.2bn, which includes GBP1.5bn from the acquisition of Metnor
Holdings Limited on 31 December 2021, to GBP8.1bn in 2022 driven by
inorganic growth and positive net inflows across all business
divisions;
-- Kingswood places clients at the heart of everything we do and
we are extremely proud to have a 4.8 out of 5 star rating on
VouchedFor, home to the UK's most trusted advisers
-- Secured a debt facility with a leading global financial
institution to accelerate our strategic growth plans, providing
additional capital to fund future acquisitions as well as fund
existing deferred consideration payments;
-- Our UK market leading 'Kingswood Go' app, launched in March
2022, has over 6,000 registered clients and we continue to focus on
enhancing the client experience and developing the technology to
provide additional in-app services;
-- Continued to build out our UK service offering and investment
proposition, signing a national distribution agreement with a UK
law firm to provide financial advice to Court of Protection clients
and launching a new AIM portfolio in December 2022
-- As we build a business more representative of our society,
good progress has been made to address diversity imbalances across
the organisation - 40% of UK adviser hires in 2022 were female
compared to an adviser community where c.19% of our advisers are
female;
-- Kingswood US added 21 new registered representatives, which
further expanded our US footprint and grew our total AuM/A in the
US division by $0.3bn to $3bn (GBP2.4bn);
-- Continued to build on the growth experienced in the US
Investment Banking operating segment seen in 2021, recruiting two
new high quality investment banking groups in 2022 focused on
mid-market equity capital markets;
-- Our US industry-leading automated alternative investment
platform has surpassed 1,200 subscriptions, representing $129m in
investments in three years
2022 Financial Highlights
-- Group Revenue was GBP145.9m, GBP3.7m or 2.5% lower than 2021
as macro-economic headwinds and market volatility led to a slowdown
in capital market activity in the US Investment Banking
business
-- 88% of UK's revenue is recurring in nature, providing a
strong, annuity-style fee stream. Investment Banking fees are a
larger portion of Kingswood US revenues, and transactional in
nature, which means that recurring revenue in the US was 15%.
Combined, Group recurring revenue was 32% compared to 19% in
2021.
-- Group Operating Profit of GBP8.7m was GBP2.3m higher compared
to 2021. The Kingswood Board believes Operating Profit is the most
appropriate indicator of underlying performance of the Group. The
definition of Operating Profit is profit before finance costs,
amortisation and depreciation, gains and losses, and exceptional
costs (business re-positioning and transaction costs).
Kingswood Holdings Limited 2022 Highlights
GBP000's (Unless otherwise
stated) 2022 2021 2020
Total Revenue 145,998 149,716 25,477
Group Recurring Revenue % 32.0% 19.0% 61.0%
Operating Profit 8,697 6,327 862
Total Equity 73,979 76,898 50,152
AUM/A (GBPm) * 10,453 6,772 5,912
# of Advisers - UK 100 70 64
# of Authorised Representatives
- US 232 211 174
* The US AUM/A is based on actuals and proforma assets from
registered representatives as at 31 December 2022.
Kingswood Holdings Limited
Chairman Statement
I am pleased to report that 2022 has been another year of
outstanding performance by the Kingswood Group. Despite challenging
market conditions, we have made good progress against our UK
inorganic growth strategy and have generated organic growth across
the Group. The business delivered record levels of Operating Profit
and completed a further 10 acquisitions in the year under review.
The closing AuM/A figure for the year is
GBP10.5bn with assets acquired during the year contributing an
additional GBP3.2bn. Across the UK and US, net inflows grew
organically 12% year over year.
We are delivering our growth strategy set out in 2019 to create
a leading integrated wealth and investment management business. The
UK wealth management sector continues to exhibit strong, long-term
growth characteristics supported by demographic trends, a complex
regulatory environment, and ongoing consolidation within a
fragmented industry. Our acquisition strategy takes advantage of
this by providing a seamless transition process with a centralised
support service and investment proposition that allows advisers to
spend more of their time with their clients. 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 20 UK
wealth management businesses which are projected to deliver strong,
sustainable revenues and operating profit. We now have 120
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.
In the UK we reported record levels of revenue and operating
profit with significant growth across Wealth Planning (WP) and
Investment Management (IM). Under the leadership of David Lawrence,
growth is supported by a strong and unrelenting focus on our client
experience, supported by a progressive investment in technology and
an equal investment in our colleagues, all of which is underpinned
by strong integration and operational excellence.
Under the leadership of Mike Nessim, our US CEO, the US business
delivered another year of growth and business expansion, adding 21
new registered representatives and growing total assets under
management by
$0.3bn to $2.9bn. The registered investment advisor (RIA) and
broker/dealer business delivered organic revenue growth of 25% year
over year. The US Investment Banking business is dependent on
capital market activity to deliver revenues which are transactional
in nature. Due to fewer IPOs in the Americas region in 2022
compared to 2021, the US investment banking business saw a year
over year reduction in revenue of 23% to $110.1m.
We have a strong, well-capitalised balance sheet and have
benefited from our partnership with Pollen Street Capital which has
invested GBP77.4m to enable our acquisition and growth strategies.
We have also entered into a new debt facility with a leading global
financial institution to provide funding to accelerate strategic
growth as well as to fund existing deferred consideration
liabilities. As at 31 March 2023 we employ over 400 people across
the globe and manage GBP11.4bn of client assets.
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 consider environmental, social and governance
issues. We are committed to creating a workplace and culture that
is welcoming and inclusive for everyone and have taken steps to
enhance this in 2022 through the creation of an employee-led
Diversity and Inclusion Forum. 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 are investing in our client experience through technology and
other means. We launched our client portal in 2022 in the UK,
Kingswood Go, which has transformed 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.
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.
We were delighted to have recently announced that Gemma Godfrey
and Jane Millar have been appointed to the board of Kingswood
Holdings Limited as independent Non-Executive Directors. Gemma
Godfrey is a Non-Executive Director and advisor, having founded two
digital businesses, acquired by or built on behalf of publicly
listed organisations. Jane Millar has over 30 years' financial
services experience in Non-Executive Director, Board and Chief
Executive Officer roles across the wealth management industry.
These are important appointments in supporting our growth and
ambitions and in enhancing the Board's diversity.
Turning to 2023, the UK macroeconomic outlook in the short term
remains highly uncertain, with high inflation, a cost of living
crisis, increasing interest rates, and recessionary risks.
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: 23 May 2023
Kingswood Holdings Limited
Chief Executive Officer Statement
Introduction
I am delighted to present our financial results for 2022 which
was another transformative year for Kingswood Group. As with
previous years, I will limit my comments to that of the UK business
and am accordingly grateful to Mike Nessim (US CEO) for his
comments on our US business.
Market Overview
2022 saw huge turbulence in both the global economy and
financial markets. A confluence of deteriorating macro-economic
trends, not least increased energy prices, rising inflation and
then interest rates have had a material impact on the lives of both
clients and colleagues. If I then add Putin's invasion of Ukraine
and political impacts resulting from changes in leadership in
Number 10 Downing Street, saying that 2022 was a turbulent year is
arguably an understatement.
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. This has
never been truer than over the last twelve months where we have
increased our client interaction, at times to provide reassurance
and also to revise our advice where necessary.
We have seen an increase in demand for financial advice in some
cases from clients who have previously self-served some or all of
their investment needs. On this point, our diversified investment
approach has provided some good insulation for our clients from the
more volatile movements across global indices too.
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 and
consolidation opportunities continue to be a strong feature of the
sector. These features are opportunities that Kingswood is in a
strong position to take competitive advantage from and play to our
strengths as a business.
Business Overview
Our strategic focus is single-mindedly on both Financial Advice
/ Planning and Investment Management activity, relying on leading
market 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. We have taken early steps during 2022 to create a
complementary low-cost digital advice channel for clients with
straightforward needs and we are excited about how this can help
more clients access financial advice. Led by our Co-Heads of Wealth
Planning, Hayley Burton and Jeff Grantham, 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
of 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 this now comprises:
-- IBOSS Model Portfolio Service - in addition to a core range
of actively managed risk-rated portfolio's, we provide passive,
income and ESG variants too. This is our Central Investment
Proposition (CIP) and is available on most of the recognised
third-party platforms
-- 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 focussed on building a leading business in
the sector. Our delivery of this is through the optimising of a
series of value drivers:
1. Acquisition
I am delighted that we were able to complete the purchase of 10
businesses in 2022:
-- Strategic Asset Managers Limited
-- Employee Benefit Solutions Limited
-- Vincent & Co. Financial Ltd
-- D.J. Cooke (Life & Pensions) Limited
-- AIM Independent Limited
-- Joseph R Lamb Independent Financial Advisers Limited
-- Allotts Financial Services Limited
-- Eurosure Limited
-- JCH Investment Management Limited
-- JFP Holdings Limited
Collectively, these businesses have added GBP1.7bn AuA, 28
advisers and GBP6.1m Operating Profit to the Group. In Q1 2023,
Kingswood purchased a further 2 businesses:
-- Barry Fleming & Partners
-- Moloney Investments Limited
These two businesses have added a further GBP0.7bn AuA; 21
advisers and GBP3.8m Operating Profit to the Group.
The acquisition of Moloney Investments Limited, based in Dublin,
creates for Kingswood an exciting entry point into the Irish market
which displays similar features to those seen in the UK and some
strong growth opportunities. We expect to commence a programme of
acquisition and organic led growth in Ireland to complement that in
the UK once this acquisition is embedded. We continue to seek
strategic and tactical acquisition opportunities in the UK to
further support the growth seen to date.
2. Integration
Effective integration is critical to an acquiring business. 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. Successfully led by our
COO Harriet Griffin, we are now able to substantially integrate a
business within three months of purchase where so desired.
3. Organic Growth
Organic growth has a number of strands to it and in this regard,
Kingswood is different to other businesses undertaking similar
activity to ourselves:
-- Growth in Financial Advice activity - 7% organic growth in
adviser numbers, excluding acquisitions
We are actively hiring new financial advisers as well as
developing colleagues in other roles 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 a 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 are able to foster an
environment of organic growth. In addition to this, other
initiatives to support organic growth range from strategic
alliances with professional firms to introduce clients to early
digital lead creation.
-- Growth from vertical integration - GBP650m at December
2022
Acquiring IBOSS gave Kingswood a Managed 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, though
from the individual customer appraisal process we consider it will
be more suitable than their existing investment platform in a large
minority of cases.
-- Onboarding of IFA firms into IBOSS - 9 new IFA firms
onboarded
IBOSS core activity is the provision of out-sourced DFM services
to IFA firms. 2022 has been challenging as existing client IFA
firms have needed greater re-assurance and investment of time and
new target IFA firms have had increased reluctance to move whilst
the markets remain turbulent. However, the pipeline is strong, and
we expect 2023 to deliver a healthy increase in IFA firms using
IBOSS.
-- Institutional Growth - GBP130m AuM net inflows in the year,
or 12% growth year-over-year
Kingswood's excellent reputation with UK universities and
similar institutions enables the onboarding of new clients each
year and 2022 was no different. This part of Kingswood demonstrates
c.10% growth p.a.
4. Building a Leading Business
a. Under the leadership of Rachel Bailey (CPO), 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,
further adviser academy graduations and the completion of our first
leadership development programme. Diversity is a challenge in our
sector. We are significantly more effective for the diversity seen
across our senior leadership team and are actively working to
address imbalance elsewhere, especially in the adviser community
where we aspire that at least 25% of our financial advisers will be
female in the medium term, compared to c.19% at 2022. We are
publishing our gender pay gap report for the first time with these
results.
b. We continue to invest in our client experience through
technology and other means. We launched our client portal -
Kingswood Go in 2022 allowing clients to have single sign-on and
single client view across multiple platforms which has transformed
our client experience. During the first half of 2023, we expect to
deploy further digitalise processes and open up new propositions
for our existing and target clients.
c. We have invested in our Finance and Compliance functions
under the leadership of Jon Millam and Richard Bernstein to create
centres of excellence in the support of our core and acquired
businesses. During 2022, we secured a facility with a leading
global financial institution to support our ongoing growth.
Dimensions
As at December 2022, the UK business employed 335 people, of
which 100 are client facing financial advisers / investment
managers operating from 17 locations across the UK with GBP3.2bn
asset under management and as further GBP4.9bn asset under advice /
influence.
As at 31 March 2023, this had increased to 396 employees across
the UK and Ireland of which 120 are client facing financial
advisers / investment managers operating from 19 locations with
GBP5.2bn asset under management and as further GBP5.7bn assets
under advice / influence.
KPIs Now 2022 2021 2020
Employees 396 335 203 185
Advisers 120 100 70 64
Locations 19 17 14 11
AUM (GBPbn) 3.3 3.2 1.7 1.4
AUA (GBPbn) 5.7 4.9 3.2 2.8
Total AUM/A (GBPbn) 9.0 8.1 4.9 4.2
Outlook
Building on the 17 acquisitions completed under my leadership to
date and those that came before, we have 4 transactions in
exclusive due diligence comprising a total of GBP3.5m operating
profit. We expect to conclude these transactions during 2023. In
addition, we have 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
Jon Millam, Group CFO goes into more detail on financial
performance in his section but total revenue for the year was
GBP33.8m, a 54% increase on the prior year reflecting the impact of
recent acquisitions. 88% of UK revenue is recurring in nature
providing a strong, annuity style fee stream which is critical to
delivering sustainable, long term returns to shareholders.
GBP000's (Unless otherwise
stated) 2022 2021 2020
Total Revenue 33,844 21,889 17,155
Recurring Revenue % 88% 87% 84%
WP & IM Operating Profit 11,488 6,144 4,273
AUM/A (GBPm) 8,073 4,883 4,378
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
23 May 2023
Kingswood Holdings Limited
US Chief Executive Officer Statement
Introduction
Kingswood US is a premier wealth management firm with around
$3bn in assets and offices throughout the United States. The AUM/A
values is based on actuals and proforma assets managed by the
representatives as at the year end. With both an SEC-registered
registered investment advisor (RIA) and a FINRA-licensed
broker/dealer in-house alongside an institutional-quality product
offering and a personal approach to service, Kingswood US 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.
2022 was another year of growth and business expansion for
Kingswood US. We added 21 new registered representatives, which
further expanded our US footprint and grew our total assets under
management by
$0.9bn. 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.
Our automated alternative investment platform surpassed 1,200
subscriptions representing $129m in investments in three years.
This automated subscription system streamlines operations and
enables straight-through processing, reducing the time between
initiation and completion of the investment from weeks to days.
Lastly, we consolidated our two SEC-registered RIAs, Benchmark
Advisory Services, LLC and Kingswood Wealth Advisors, LLC, under
the Kingswood Wealth Advisors (KWA) brand to streamline back-office
processes and regulatory oversight while delivering an improved
experience to advisors and their clients.
Market Overview
The US Wealth Management market is large and fragmented,
comprised of standard broker-dealers, RIAs, and traditional,
private wealth managers.
M&A activity in the US continued at record levels with a
total of 340 wealth management M&A transactions completed,
compared to 307 in 2021 and 205 in 2020. The robust level of deal
flow was primarily driven by the continued prevalence of
private-equity-backed consolidator models in addition to several
favourable tailwinds forcing consolidation among small-to-mid sized
wealth advisors.
Firm mix continues to shift from commission-oriented businesses
towards fee-based, independent financial advisors as advisors adapt
to the fast-evolving consumer needs and behaviours, driven by
demographic shifts. Additionally, advisors are increasingly seeking
complete independence, primarily due to the ability to retain a
greater share of the economics associated with the wealth
management services they provide, leading to a significant growth
in advisors associated with hybrid and independent RIAs.
As a hybrid independent BD/RIA, Kingswood is ideally positioned
to capitalize on these market trends, becoming an attractive
proposition for advisors who want greater flexibility and ownership
over their practices without sacrificing support systems and
centralized resources.
Our Core Propositions
Our FINRA-supervised IBD platforms buy and sell securities on
behalf of clients on a commission basis, executing trades and
custody of assets. We offer fast, smooth service with access to
many investment products and sectors including equities, fixed
income, alternatives, and mutual funds. We also offer insurance
products and related services.
Through our SEC-registered RIA, we provide ongoing wealth,
estate, philanthropic, tax and succession planning services. We
generate predictable and recurring revenue streams from advice and
management of our client assets through these programs.
Our strategy for growth can be broken down into four key
pillars:
1. Revenue growth
a. Enhanced advisor recruitment efforts supported by the
continued build-out of our in-house recruitment team and
relationships with third party recruiters
b. Expansion of product offering for advisors with a particular
focus on alternative investments, which can deliver yield and
diversification benefits to investors.
c. Continued build-out of advisory services and the transition
existing commission-based assets to fee-based assets
1. Margin Expansion
a. Recognize synergies across broker-dealers to drive down
costs
b. Expand upon shared services to enhance efficiency and provide
more product offerings to advisers
c. Transition away from low margin investment banking and
capital markets revenue towards higher margin banking and fee-based
revenue streams
2. Lift-outs & Acquisitions
a. Expand advisor network via pipeline of potential
lift-outs
b. Continue to add scale through vertical and horizontal
consolidation, with a particular focus on the IBD and RIA channels
where valuation multiples are more attractive and where
justification for consolidation is more pressing
3. Technology
a. Continue to build upon tech stack through modernization and
digitalisation
b. Drive scale through technology products
Key Performance Indicators
$000's (Unless otherwise
stated) 2022 2021 2020
Total Revenue 138,074 175,545 35,318
Gross Profit 13,209 13,347 6,878
Operating Profit 3,651 7,035 2,232
AUM/A ($m) 2,857 2,545 2,071
# of Authorised Representatives 232 211 174
* The US AUM/A is based on actuals and proforma assets from
registered representatives as at 31 December 2022.
Mike Nessim
Kingswood US Chief Executive Officer
23 May 2023
Kingswood Holdings Limited Group
Chief Financial Officer
Introduction
The Group delivered another strong set of results in 2022
against the backdrop of market volatility following the Russian
invasion of Ukraine and the announcement of the mini budget in late
September. The 2 UK Divisions reported a material improvement in
financial performance supported by the completion of 10 further
acquisitions in 2022. The US Division reported a year over year
reduction in revenue due to lower transactional Investment Banking
revenues resulting from a slowdown in capital markets activity.
However, RIA/BD revenues, recurring in nature and driven by AuM/A,
grew by 25% compared to 2021. All 3 segments have reported strong
net inflows of assets onto our platforms, delivered both
organically and through acquisitions, with pleasing improvements in
the percentage of recurring revenues.
We have maintained both cost and balance sheet discipline in
2022. Excluding the impact of acquisitions, operating expenditure
is broadly flat year-over-year and our balance sheet remains well
capitalised with strong support from Pollen Street Capital. We also
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.
In Wealth Management, we provide holistic financial advice to
our clients that generate both initial and ongoing fees. We provide
a tailored IM offering, across an MPS and Personal Portfolio
Service (PPS). This includes an open market advisory and
discretionary portfolio service to more than 100 IFA firms. The
acquisition of IBOSS has driven increased flows into Kingswood
funds. Our Fixed Income business, included within IM, is a leading
provider of liquidity and treasury services, to principally
universities, that continues to generate growth in AuM. UK business
performance is underpinned by organic growth in assets, greater
than 85% of recurring revenues and a predictable cost base. Our
acquisitions complement our offering and provide the opportunity to
deliver both revenue and cost synergies.
Kingswood US operates across three core divisions; Independent
Broker Dealers (IBD), Registered Independent Advisers (RIA), and
Investment Banking (IB). IB serves mid-market corporate clients and
helps raise capital. Our IBD business offers our clients investment
opportunities across Alternatives, Mutual Funds and Equities. Our
RIA business provides holistic financial advice to our clients,
with similar characteristics to our Wealth Management business in
the UK. Kingswood US has quickly produced significant amounts of
revenue and Operating Profit.
Financial Performance
The Group's financial performance for the year was resilient.
Group AuM/A of GBP10.5bn at December 2022 represents a GBP3.7bn, or
55%, increase compared to the prior year with 6% driven by organic
growth and 49% from acquisitions. Group revenue was GBP145.9m, a
2.5% decrease compared to 2021, reflecting lower US Investment
Banking revenues as macro-economic headwinds and market volatility
led to a slowdown in capital market activity partially offset by a
55% increase in UK revenue achieved through a combination of
acquisitions and organic growth. Operating Profit of GBP8.6m is
37.5% higher than 2021 reflecting acquisitions and organic growth
in the UK partly offset by the drop through to profits of lower IB
revenues in the US. Operating Expenditure of GBP33.4m was GBP10.5m
higher than the prior year, supported by the impact of UK
acquisitions (GBP6.6m), higher costs in the US (GBP3.2m) and higher
Central Costs (GBP0.8m).
The result for the period to 31 December 2022 was a Loss of
GBP10.2m reflecting GBP1.9m of acquisition related deferred
consideration expense, GBP4.5m amortisation and depreciation,
GBP5.6m finance costs and GBP6.9m business re-positioning and
transaction costs.
The Group's balance sheet reflects the growth of the business.
The Group had GBP19.6m of cash at December 2022, a decrease of
GBP23.3m since 31 December 2021. This decrease is largely driven by
GBP43.9m of acquisition payments and a GBP5.4m reduction due to the
timing in settlement of US Investment Banking commission payments.
This is partly offset by GBP23.9m debt funding and GBP1.3m positive
cashflow in the UK from operating activities. Net Assets were
GBP73.9m, a decrease of GBP3.0m compared to the prior year.
Segmental Analysis
The table below provides a breakdown of the annual financial
performance of the 3 Operating Segments within the Kingswood Group:
Investment Management, Wealth Planning 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 GBP3.2bn in the year supported by the
acquisition of Metnor Holdings Limited on 31 December 2021 and 12%
organic net inflows largely through growth in the Fixed Income
business. Vertical Integration assets, where an existing Wealth
Planning client chooses a Kingswood investment product or service
(MPS/PPS), increased to GBP650m (2021: GBP565m). Revenue was
GBP7.2m, an increase of 54.4% compared to prior year and Operating
Profit was GBP2.1m compared to GBP365k in 2021. Operating
Expenditure of GBP3.8m increased by
GBP1.0m as a result of the IBOSS acquisition, partly offset by
cost reductions delivered in the year. Recurring revenue increased
to 87.0% in 2022 compared to 81.1% in 2021, due to the higher
recurring nature of IBOSS revenues.
Wealth Planning
AuA of GBP4.9bn increased by 50.7% compared to prior year and
included GBP1.6bn of acquisition related inflows and 6% growth from
organic net inflows. Revenue was GBP26.7m, an increase of 54.4%
compared to 2021 and Operating Profit was GBP9.3m, an increase of
60.6%. Recurring Revenue was 88.7% an increase of 0.6% year over
year.
US
AuM/A of GBP2.4bn increased by 46% in 2022 on a reported
currency basis and revenue of GBP112.1m represented a decrease
compared to the prior year (2021: GBP127.8m). IB revenues were
GBP77.3m in the period, impacted by a slowdown in capital market
activity, reducing by 31% compared to 2021 and the BD/RIA business
delivered revenues of GBP32.8m, a 25% increase year-over-year. The
Kingswood US wealth management business increased its advisor
representatives to 232 by December 2022, with $3.0bn of client
assets. Due to Investment Banking revenues being transactional in
nature, recurring revenue in the US (2022: 29.8%, 2021: 7.4%) is
lower than the UK but increased year over year due to the growth in
RIA/BD revenues.
Central Costs were GBP5.8m in 2022 (2021: GBP4.9m). The Group
continued to apply prudency to the management of its cost base in
2022. However, costs increased year over year as a result of the
strengthening of the Executive Team and central functions to
support a larger business, as well as higher audit fees.
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 2022 with comparatives is
shown in the table below:
Group
2022 2021
GBP 000 GBP 000
Operating Profit 8,696 6,327
Business Re-positioning Costs (1,964) (1,564)
Transaction Costs (4,924) (1,836)
Finance Costs (6,398) (4,927)
Other Finance Costs (4,507) (2,399)
Remuneration Charge (Deferred Consideration) (1,852) (7,009)
(23) (3,056)
Other Gains / (Losses) - -
---------------------- ----------------------
Profit / (Loss) before Tax (10,972) (14,464)
-- 2022 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)
-- Finance costs reflect GBP1.6m dividends that have accrued on
the Group's preference shares in issue. The remaining GBP3.9m of
finance costs charged to the P&L in 2022 largely comprise of
costs related to the cost of deferred consideration and interest
accrued from the debt facility
-- Amortisation and Depreciation charges represent GBP3m from
the amortisation of intangible assets and GBP1.5m depreciation of
Right of Use Assets, property, and IT/office equipment
-- GBP1.9m 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
Balance Sheet
Net Assets at 31 December 2022 were GBP73.9m (2021: GBP76.9m).
Non-current assets were GBP132.3m for the year-ended 2022 (2021:
GBP83.9m), an increase of GBP48.4m compared to the prior year
reflecting increases to intangible assets and goodwill from
acquisitions completed in 2022. Current assets were GBP28.9m (2021:
GBP48.8m) reflecting a GBP19.9m reduction in cash as a result of
acquisition and deferred consideration payments as well as timing
of US Investment Banking commission payments. This is partly offset
by a GBP3.5m increase in trade receivables and a GBP4.4m deferred
tax asset.
Current liabilities were GBP38.3m at 31 December 2022 (2021:
GBP33.8m). The increase of GBP4.5m reflects a GBP13.1m increase in
deferred consideration partially offset by a reduction in US IB
commission accruals. Non-current liabilities were GBP48.9m as at 31
December 2022 (2021: GBP22.0m). The increase of GBP26.9m year over
year reflects a GBP24.3m new debt facility, an increase of GBP8.0m
in acquisition related deferred tax liabilities, partly offset by
a
GBP5.4m reduction in deferred consideration payments.
Cashflow
Cash at 31 December 2022 was GBP19.6m (2021: GBP42.9m). The
GBP23.3m reduction year over year reflects GBP20.1m of acquisition
payments (initial and deferred consideration, transaction and deal
fees, net of funds received from the debt facility), a GBP5.4m
reduction in US cash due to timing of Investment Banking commission
payments, partly offset by a positive GBP1.5m UK operating
cashflow.
Acquisitions
We are pleased with the progress made in expanding Kingswood in
the UK and US, with ten regional businesses acquired in the UK in
2022. We have strong private equity experience across the senior
management and have developed a strong internal capability to
complete transactions quickly and efficiently, with a standardised
documentation and process to simplify due diligence, execution, and
subsequent integration.
Our selection process is rigorous, and we look at many factors
including cultural fit, client focus and dedication, key personnel
retention to preserve and grow those client relationships. Our
model is to free up adviser time to focus on their clients, and
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 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. The table below summarises acquisitions
completed in 2022. The average multiple paid is 8.0x EBITDA. The
Group's 2022 Weighted Average Cost of Capital (WACC) is 13.7% and
each acquisition targets an ROI that is greater than the WACC.
Date Acquisition AUM/A GBPm No. of Advisers Acquired
Operating
Profit
GBPm
Feb- 22 Allotts 140 3
Feb- 22 Lamb 393 7 2
Feb- 22 AIM 217 5 1
Jul- 22 Vincent 25 -
Feb- 22 DJ Cooke 70 -
Jul- 22 Eurosure Ltd 70 2 0.3
Employee Benefit
Oct- 22 Solutions 135 3 0.8
Oct- 22 JCH Investment 105 3 0.4
Dec- 22 JFP Holdings Limited 360 2 1.5
Nov- 22 Strategic Asset Managers 200 3 0.5
Total 1,715 28 6
Outlook
2022's resilient financial performance has demonstrated the
fundamental strengths of the Kingswood growth strategy and we
continue to be well positioned for further growth in 2023. 2
further acquisitions have completed in 2023, Barry Fleming &
Partners and Moloney Investments Ltd. As outlined in the Chairman's
Statement, the UK macroeconomic outlook in the short term remains
highly uncertain, with high inflation, a cost of living crisis,
increasing interest rates, and recessionary risks. Despite these
short-term headwinds, the Group is well placed to deliver on our
strategy in the medium term. During 2023 we will continue to focus
on integration, organic growth and to deliver against our
acquisition strategy. Our near-term target is to build our AuM/A
to
GBP12.5bn globally.
Our medium-term target remains GBP20m Operating Profit and we
believe that with our current acquisition pipeline and organic
growth trajectory this is achievable. This medium-term target
includes delivering Operating Profit margins for the UK of c.30%
and ongoing margin improvement in the US.
Kingswood's financial strategy is to maintain a robust and
disciplined balance sheet to ensure no deferred liability remains
uncovered from a funding perspective, and we will continue to have
a disciplined approach to expense management.
Jon Millam
Group Chief Financial Officer
23 May 2023
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 to regularly review 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.
Industry Risks
Regulatory Risk
There remains a significant amount of regulatory change to be
implemented and/or managed. Failure to correctly identify,
interpret or implement regulatory change may result in an adverse
impact for Kingswood
-- Professionally staffed compliance department monitoring,
interpreting and with business leaders implementing the latest FCA
developments.
-- A Risk & Compliance Committee takes place on a monthly
basis which is attended by all Executive Committee members.
-- Board level Audit & Risk Committee providers oversight
and challenge.
-- A suite of mandatory compliance training modules is in place
for all staff
Market Risk
Macroeconomic pressures such as inflation and geopolitical
tensions such as the conflict in Ukraine are impacting economic and
financial markets and volatility. This may adversely affect advice
and other services provided in addition to trading volumes and the
value of client assets under management from which we derive fee
revenue
-- Broad range of client solutions offered to clients enabling
them to protect assets through diversification, and continuing to
generate revenues
-- Our Investment Committee governance structure closely
monitors and manages market movements
Operational Risks
Operational Resilience
Risk of a negative impact on clients, firm profitability, staff,
and other stakeholders because of operational disruption (e.g. due
to internal or external factors)
-- Kingswood has benefited from robust cloud based operating
systems allowing staff to seamlessly transition to remote
working
-- Core systems are cloud based allowing for ease of remote
access
-- The Company continues to invest in improved IT connectivity
and leading-edge systems to improve resilience and ensure continued
service to clients
Integration Risk
Risk that we fail to deliver high-quality service to advisers
and clients as acquisitions are integrated
-- Senior management oversight and governance mechanisms in
place
-- Project management team in place to oversee integration
-- Clear and transparent client communication ahead of any
material changes
-- Continue to embed and enhance the processes required to
successfully integrate acquisitions into the Group's procedures and
corporate governance.
Suitability of Advice
There is a risk of providing unsuitable advice or a failure to
confirm ongoing suitability
-- We maintain a skilled wealth planning workforce, trained to
the highest industry standards
-- A professional compliance team provides training, oversight,
and ongoing monitoring to ensure that high standards are
maintained
-- Additional assurance is provided through specialist third
party review
-- Senior management provide direct oversight to ensure ongoing
suitability of advice to clients
Reliance on Third Party Service Providers
Kingswood partners with best-in-class experts for certain key
services- a financial or operational failure of our strategic
partners could result in an adverse impact on our ability to
service clients
-- A third-party management framework is in place and overseen
by the Group COO and Group CRO. This framework ensures extensive
financial and operational due diligence is undertaken at the outset
of 3rd party relationships and is continually monitored on an
ongoing basis
-- Contracts are in place with clear Service Level Agreements
(SLAs) for all key suppliers
Business Conduct
The risk of poor business conduct resulting in client outcomes
that do not meet their needs and circumstances
-- Training & Competence programme in place for all client
facing staff
-- Kingswood culture is focused on client outcomes
-- Consumer Duty project team in place to ensure the delivery of
good outcomes for clients.
Data Protection & Cyber Security
External attacks on information technology systems could lead to
loss of client data and breaches of data protection laws likely,
resulting in regulatory fines, reputational damage, and financial
remediation claims from clients
-- Continual focus on data security, including penetration
testing and 'phishing' exercises
-- IT security & awareness training regularly conducted for
all staff
-- Senior management oversight of IT capability and
resilience
People Risk
Increasing workloads, key person risk or inability to adequately
staff key roles could result in adverse business impact
-- Competitive pay and benefits
-- HR policies and procedures overseen by HR director
-- Several HR initiatives aimed at improving employing
wellbeing
-- Training and development programme in place to help staff
advance their careers
-- Investment in learning and development programmes for all
staff including training on culture and conduct
Financial Crime
Risk of Fraud, Money Laundering, Bribery & Corruption,
Sanctions, Terrorism Financing, Tax Evasion, Market Abuse, Insider
Dealing
-- The Money Laundering Reporting Officer (MLRO) oversees the
implementation of financial crime prevention policies and
procedures
-- An MLRO report is reviewed annually by the Risk &
Compliance Committee. The number of high-risk clients is low
-- An electronic ID verification system is in place for all new
clients
-- Awareness of Financial Crime policies & procedures across
the Group is maintained through regular training
Investment Restrictions
There is a risk of breaching regulatory, product or client
driven investment restrictions. This could result in the need to
compensate clients and/or lead to regulatory censure
-- Mandate restrictions are well understood by experienced
investment management team
-- Pre & Post trade alerts in place
-- Investment Committee structure monitors ongoing adherence to
portfolio strategies
-- Independent compliance monitoring in place
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 focussing 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 recognize the potential risks and
opportunities associated with these issues and have prioritized 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.
The ever-increasing uptake of the 'Kingswood Go' app by clients
and colleagues enables documents to be shared with prospects and
clients digitally, which eliminates the need for printing and
mailing of documents and enhances the security of data for our
stakeholders. This digital solution not only saves costs and
reduces paper waste, but also enables our customers to access
information more quickly and conveniently. Moreover, the enhanced
security features of the software protect the privacy and
confidentiality of our stakeholders' information, which is of
paramount importance to us.
We believe that a flexible working policy is an important way to
reduce our carbon footprint and promote sustainability, while also
providing greater flexibility and work-life balance for all our
employees. Research shows that by 2025, 60% of the UK wealth pool
will belong to women - it is crucial that we have appropriate
female representation in our organisation. We recognize 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. As part of this commitment, we will be focusing
on increasing diversity across the organization, with a particular
emphasis on recruitment, training, and development of our
employees.
Our Performance
During 2022, 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
-- A 17.5% increase in DocuSign usage compared to the prior year
has helped to reduce our carbon emissions by 12.5k lbs of CO2 and
reduce our water consumption by 15.7k gallons.
-- Increased the number of client registrations on Kingswood Go
to over 6,000 since launching in March 2022.
-- Introduced Ecologi, a climate solution which enabled us to
offset our entire carbon footprint through supporting a broad range
of carbon avoidance and reforestation around the globe.
Social
-- Increased the female population and representation in our UK adviser community by 4% to 19%.
-- 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. Onboarded four of our colleagues onto to the
Kingswood Academy, which provides a structured programme to nurture
and build the talent within our adviser population.
-- 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 VouchedFor and regularly survey our clients, achieving
a Net Promoter Score of +46 in December 2022 (2021: +35). In the US
we are proud to have been named as one of the best Financial
Advisory firms of 2023 by USA today, recognising the hard work our
colleagues put in every day for our clients.
-- In the UK we committed all fundraising activities to two
charities, which were chosen by our colleagues: Great Ormond Street
Hospital (GOSH) and SANDS. In the US, our growing partnership with
A Friend's House enabled the re-modelling of living and recreation
spaces for vulnerable children living in temporary living
facilities.
We currently have 421 employees across our global
operations:
Governance
-- Strengthened corporate governance structures and
decision-making processes through the appointment of two
independent Non-Executive Directors to our Board in October 2022,
bringing a broad range of skills and expertise to the Board and
providing additional oversight and challenge to our management
teams.
-- Demonstrated our commitment to improving our diversity and
inclusion practices through increasing the female representation of
our Board from 14% to 33%. 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-over-year.
-- Providing further educational based training for colleagues
to learn more about diversity and behavioural issues in the
workplace.
-- Increase the female representation of our UK adviser
population to at least 25% in the medium term.
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 Holdings Limited Board.
During 2022, the Board of Kingswood Holdings Limited
restructured its subsidiary companies to create the directly owned
KW US Holdings Limited, and KW UK Financial Holdings Limited in
order to 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 the newly incorporated 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. The objective of this
restructure was to allow for expert oversight of each set of
businesses by experienced Wealth Planning and Investment Management
professionals.
Kingswood Holdings Limited'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 set out
below.
During the year ended 31 December 2022, 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 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 (Non-Executive Director)
-- Howard Garland (Non-Executive Director)
-- David Hudd (Non-Executive Chairman)
-- Jonathan Massing (Deputy Non-Executive Chairman)
-- Lindsey McMurray (Non-Executive Director)
-- Robert Suss (Non-Executive Director)*
-- Gary Wilder (Group Chief Executive Officer)**
-- David Lawrence ** (Executive Director, Group Chief Executive
Officer)
-- Gemma Godfrey*** (Independent Non-Executive Director)
-- Jane Millar *** (Independent Non-Executive Director)
*Robert Suss resigned from the board on 28 February 2022.
**In April 2022, Gary Wilder stepped back into a Non-Executive
director role and David Lawrence was appointed to the Board as
Chief Executive Officer.
*** In October 2022, Gemma Godfrey and Jane Millar joined the
Board as independent Non-Executive Directors.
The Board has scheduled meetings at least quarterly with
additional meetings taking place as required. The Board formally
met four times throughout the year. Meetings of the Board are held
at the Group's offices in London or via video call. In person
meetings of the Subsidiary Boards take place at least quarterly.
The number of main Board meetings and committees held in 2022 and
individual attendance was as follows:
Nomination
Director Board Audit Committee & Remuneration
Committee
Jonathan Freeman 4/4 4/4 1/1
Howard Garland 4/4
David Hudd 4/4 4/4 1/1
Jonathan Massing 4/4 4/4
Lindsey McMurray 4/4
Gary Wilder 3/4
David Lawrence 4/4
Gemma Godfrey 1/1
Jane Millar 1/1
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.
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 Risk
Officer and Howard Garland (Non-Executive Director) sit on each of
the operating subsidiary boards, with Howard Garland chairing them.
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 KHL 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 and a formal tender
process was undertaken in the second half of 2022 with the result
being a change of auditor to PKF Littlejohn. 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 6 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:
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 2022.
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.
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 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 and the Directors' Remuneration Report.
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.
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.
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
was also the senior independent non-executive director of Futura
Medical plc during the year under review.
Jonathan joined the Board in June 2018.
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.
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
Directors' Report for the Year Ended 31 December 2022
The directors present their report and the consolidated
financial statements for the year ended 31 December 2022. The
Corporate Governance Statement is set out below. 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 below.
Results and dividends
The Group's performance during the year is discussed in the
Strategy section above. The results for the year are set out in the
audited Consolidated Statement of Comprehensive Income. The
Directors do not recommend the payment of a dividend for the year
ended 31 December 2022 (31 December 2021: GBPnil).
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 24 and 25.
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 four US
regulated entities - two are 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 below.
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.
Directors interests
Directors who held office during 2022 had the following
beneficial interests in the ordinary shares of the Company as of 31
December 2022:
No. Ordinary shares held
Description 2022 2021
Jonathan Freeman 87,750 87,780
David Hudd 650,000 500,000
Gary Wilder 1,115,051 1,115,051
Gary Wilder and Jonathan Massing 144,125,262 143,720,906
----------------- -----------------
145,978,063 145,423,737
** 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 January 2023:
Name of Shareholder Percentage of voting rights and No. of ordinary
issues share capital
shares
KPI (Nominees) Limited 66.44% 144,125,262
Monecor (ETX Capital) 4.83% 10,476,969
All Shareholdings stated are beneficial. KPI (Nominees) Limited
is owned and controlled by Gary Wilder and Jonathan Massing
The Company had issued 77,428,443 irredeemable, convertible
preference shares at GBP1 per share to HSQ INVESTMENT LIMITED, a
wholly owned indirect subsidiary of funds managed and/or advised by
Pollen Street Capital at 31 December 2022.
The preference shares are convertible into Kingswood Holdings
Limited ordinary shares at 16.5p per share on or before 31 December
2023.
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.
The Directors have reviewed the cash flow forecast for the next
12 months 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 next 12 months in all modelled
scenarios. The Group operates centralised treasury arrangements and
shares banking arrangements between the parent and its
subsidiaries.
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 Kingswood Holdings
Limited and its subsidiaries to continue as a going concern or its
ability to continue with the current banking arrangements.
On the basis of their assessment of the Group's financial
position and of the enquiries made of the Directors of Kingswood
Holdings Limited, 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 on and signed on its behalf by:
David Hudd
Chairman
Date: 23 May 2023
Kingswood Holdings Limited Directors' remuneration report
Option
Pension value of
Base salary and LTIP 2022 2021
inc. NIC benefits shares Total Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Executive
- - - - -
David Lawrence 208 - 204 412 -
Non-Executive
Gary Wilder 63 - - 63 100
Jonathan Freeman 53 - - 53 61
David Hudd 75 - - 75 73
Jonathan Massing 50 - - 50 38
Jane Millar 11 - - 11 -
Gemma Godfrey 11 - - 11 -
Robert Suss (resigned
28/02/2022) - - - - 27
Aggregate emoluments 471 - 204 675 299
23/5/2023 | 7:16 PM BST
Approved by the board on and signed on its behalf by:
David Hudd Chairman
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 on and signed on its behalf by:
David Hudd Chairman
Kingswood Holdings Limited
Independent Auditor's Report to the Members of Kingswood
Holdings Limited
Opinion
We have audited the financial statements of Kingswood Holdings
Limited (the 'Parent Company') and its subsidiaries (the 'Group')
for the year ended 31 December 2022, which comprise the
Consolidated Statement of Total Comprehensive Income, Consolidated
Statement of Financial Position, Consolidated Statement of Changes
in Equity, Consolidated Statement of Cash Flows, and Notes to the
Financial Statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied
in their preparation of the Group financial statements 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 2022 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 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 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 GBP1,460,000 for the consolidated financial
statements using 1% of Group revenue based on the 31 December 2022
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 GBP1,022,0000.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of 5% of overall
materiality at GBP73,000 as well as differences below that
threshold that, in our view, warranted reporting on qualitative
grounds.
Whilst materiality for the Group's financial statements as a
whole was set at GBP1,460,000, each significant component of the
group was audited to an overall materiality ranging between
GBP97,700 and GBP900,650 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") and the United States of America ("US"). 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. Two components were financially significant
to the Group, with one located in the UK and one 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 nine 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.
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 parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company 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' responsibility
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 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 in the UK, UK adopted international accounting
standards and rules from the Financial Industry Regulatory
Authority (FINRA) in respect of certain US 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 and FINRA.
-- 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 Parent 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
23/5/2023
Consolidated Statement of Total Comprehensive Income for the
Year Ended 31 December 2022
2022 2021
Note GBP 000 GBP 000
Revenue 4 145,998 149,716
Cost of sales (103,878) (120,497)
--------- ---------
Gross profit 42,120 29,219
Administrative expenses 7 (23,720) (15,157)
Other operating expenses (9,704) (7,735)
--------- ---------
Operating profit 8,696 6,327
Non-operating costs:
Business re-positioning costs 4 (1,964) (1,564)
Finance costs 8 (6,398) (4,927)
Other finance costs 4 (4,507) (2,399)
Acquisition-related items:
Transaction costs 4 (4,924) (1,836)
Remuneration charge (deferred consideration) 22 (1,852) (7,009)
Other gains or losses 9 (23) (3,056)
--------- ---------
Loss before tax (10,972) (14,464)
Income tax receipt/(expense) 10 4,480 (761)
--------- ---------
Loss for the year (6,492) (15,225)
========= =========
2022 2021
GBP 000 GBP 000
Loss for the year (6,492) (15,225)
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Foreign currency translation gains - 367
--------- ---------
Total comprehensive income for the
year (6,492) (14,858)
========= =========
Loss after tax is attributable to:
Owners of the company (7,797) (17,432)
========= =========
Non-controlling interests 1,305 2,207
========= =========
Total comprehensive income attributable
to:
Owners of the parent company (7,797) (17,065)
========= =========
Non-controlling interests 1,305 2,207
========= =========
2022 2021
Note GBP 000 GBP 000
- Basic loss per share 12 (0.04) (0.08)
- Diluted loss per share 12 (0.01) (0.03)
The above results were derived from continuing operations.
Consolidated Statement of Financial Position as at 31 December
2022
2022 2021
Note GBP 000 GBP 000
Assets
Non-current assets
Property, plant and equipment 13 832 941
Right of use assets 14 3,553 2,719
Intangible assets 15 123,469 80,255
Deferred tax assets 16 4,492 -
-------- --------
132,346 83,915
-------- --------
Current assets
Trade and other receivables 17 9,274 5,749
Short term investments 52 65
Cash and cash equivalents 19 19,624 42,933
-------- --------
28,950 48,747
-------- --------
Total assets 161,296 132,662
======== ========
Equity and liabilities
Equity
Share capital 24 (10,846) (10,846)
Share premium 24 (8,224) (8,224)
Preference share capital 25 (70,150) (70,150)
FX reserve 422 488
Other reserves (14,373) (11,041)
Retained earnings 31,595 23,800
-------- --------
Equity attributable to owners
of the company (71,576) (75,973)
Non-controlling interests (2,391) (925)
-------- --------
Total equity (73,967) (76,898)
-------- --------
Non-current liabilities
Other non-current liabilities 23 (2,806) (2,915)
Loans and borrowings 23 (24,343) -
Deferred tax liabilities 16 (12,584) (4,577)
Deferred consideration 22 (9,228) (14,482)
-------- --------
(48,961) (21,974)
-------- --------
Current liabilities
Trade and other payables 20 (17,597) (26,084)
Deferred consideration 22 (20,771) (7,706)
-------- --------
(38,368) (33,790)
-------- --------
Total liabilities (87,329) (55,764)
-------- --------
2022 2021
Note GBP 000 GBP 000
Total equity and liabilities (161,296) (132,662)
Approved by the board and signed on
its behalf by
David Hudd Chairman
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2022
Equity
attributable
Share Foreign to the Non-
capital owners of
and share Preference currency Other Retained the parent controlling
premium share capital reserve reserves earnings Company interests Total equity
GBP 000 GBP 000 GBP GBP GBP GBP 000 GBP 000 GBP 000
000 000 000
At 1 January
2021 19,070 37,550 (855) (519) (6,159) 49,087 1,065 50,152
(Loss)/profit
for the
year - - - - (17,432) (17,432) 2,207 (15,225)
Dividends due to
non-controlling
interests - - - - - - (2,402) (2,402)
Issue of
preference
share
capital - 32,600 - - - 32,600 - 32,600
Other adjustment - - - - (209) (209) - (209)
Share based
remuneration - - - 94 - 94 - 94
Preference share
capital
reserve - - - 11,466 - 11,466 - 11,466
Foreign
exchange gain - - 367 - - 367 55 422
----------------- ----------------- -------------------- ---------------- ----------------- ---------------- ------------------ ----------------
At 31 December
2021 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)
Other
adjustment - - - - - - 21 21
Share based
remuneration - - - 852 - 852 - 852
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
Note 24 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.
Consolidated Statement of Cash Flows for the Year Ended 31
December 2022
2022 2021
Note GBP 000 GBP 000
Net cash from/(used in) operating
activities 26 (2,704) 1,741
-------- --------
Investing activities
Property, plant and equipment purchased (113) (127)
Business Combinations (32,272) (12,720)
Deferred consideration (10,774) (738)
-------- --------
Net cash outflow from investing
activities (43,159) (13,585)
-------- --------
Financing activities
Proceeds from issue of shares - 52,600
Interest paid (21) (58)
Lease payments (852) (650)
Dividends paid to non-controlling
interests (811) (1,272)
New loans received / loans repaid 23,784 18
-------- --------
Net cash generated from financing
activities 22,100 50,638
-------- --------
Net (decrease)/increase in cash
and cash equivalents (23,763) 38,794
Cash and cash equivalents at 1 January 42,933 3,899
Effect of exchange rate fluctuations
on cash held 454 240
-------- --------
Cash and cash equivalents at 31
December 19 19,624 42,933
======== ========
Notes to the Financial Statements for the Year Ended 31 December
2022
1 General information
Kingswood Holdings Limited 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 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 23 May 2023.
2 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 27 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.
The subsidiaries of the Group are detailed in note 18.
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.
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.
Accordingly, the Directors continue to adopt the going concern
basis of accounting in preparing the financial statements.
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.
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.
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.
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.
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.
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 19.
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.
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 27.
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.
Share capital
Ordinary shares are classified as equity. Equity instruments are
measured at the fair value of the cash or other resources received
or receivable, net of the direct costs of issuing the equity
instruments. If payment is deferred and the time value of money is
material, the initial measurement is on a present value basis.
3 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
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 Manhattan Harbor Capital 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 15.
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 27.
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.
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.
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 2022. 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:
Investment Wealth US
management planning operations Group Total
2022 2022 2022 2022 2022
Continuing operations: GBP 000 GBP 000 GBP 000 GBP 000 GBP'000
Revenue (disaggregated
by timing):
Point in time 931 3,018 95,042 - 98,991
Over time 6,252 23,644 17,111 - 47,007
----------- ------------- ----------------- -----------
External sales 7,183 26,662 112,153 - 145,998
Direct expenses (1,277) (1,183) (101,425) 7 (103,878)
----------- ------------- ----------------- -----------
Gross profit 5,906 25,479 10,728 7 42,120
Operating profit / (loss) 2,135 9,353 2,966 (5,758) 8,696
Business re-positioning
costs (282) (378) - (1,304) (1,964)
Finance costs - (130) - (6,268) (6,398)
Amortisation and depreciation (3) (1,092) (37) (3,375) (4,507)
Other gains / (losses) - - (23) - (23)
Remuneration charge (deferred
consideration) - - - (1,852) (1,852)
Transaction costs 191 (1,389) (593) (3,133) (4,924)
----------- ------------- ----------------- -----------
Profit / (loss) before
tax from continuing
operations 2,041 6,364 2,313 (21,690) (10,972)
Tax - - 22 (4,502) (4,480)
----------- ------------- ----------------- -----------
Profit / (loss) after
tax from continuing
operations 2,041 6,364 2,291 (17,188) (6,492)
Investment Wealth US
management planning operations Group Total
2021 2021 2021 2021 2021
Continuing operations: GBP 000 GBP 000 GBP 000 GBP 000 GBP'000
Revenue (disaggregated
by timing):
Point in time 881 2,045 118,396 - 121,322
Over time 3,771 15,169 9,431 23 28,394
----------- ------------- ----------------- -----------
External sales 4,652 17,214 127,827 23 149,716
Direct expenses (1,476) (913) (118,108) - (120,497)
----------- ------------- ----------------- -----------
Gross profit 3,176 16,301 9,719 23 29,219
Operating profit / (loss) 365 5,779 5,123 (4,940) 6,327
Business re-positioning
costs (177) (239) (263) (885) (1,564)
Finance costs - (72) 2 (4,857) (4,927)
Amortisation and depreciation - (1,197) (212) (990) (2,399)
Other gains / (losses) - - - (3,056) (3,056)
Deferred payments - (3,691) - (3,318) (7,009)
Transaction costs - (4) - (1,832) (1,836)
----------- ------------- ----------------- -----------
Profit / (loss) before
tax from continuing
operations 188 576 4,650 (19,878) (14,464)
Investment Wealth US
management planning operations Group Total
2021 2021 2021 2021 2021
Continuing operations: GBP 000 GBP 000 GBP 000 GBP 000 GBP'000
Tax - 16 317 428 761
--------- ----------- ---------- ----------
Profit / (loss) after
tax from continuing operations 188 560 4,333 (20,306) (15,225)
Investment Wealth US
management planning operations Group Total
2022 2022 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Additions
to
non-current
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
Investment Wealth US
management planning operations Group Total
2021 2021 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Additions
to
non-current
assets 2,113
Reportable segment 839 3,995 27,994 34,941
assets 6,581 41,819 26,653 57,609 132,662
Tax assets -
Total Group assets
Reportable segment 132,662
liabilities 2,560 13,694 19,516 19,994 55,764
Total Group liabilities 55,764
5 Loss after tax
Loss after tax for the year is stated after
charging
2022 2021
GBP 000 GBP 000
Depreciation of property, plant and equipment
(incl right of use asset) 1,069 925
Amortisation of intangible assets 2,944 1,474
Staff costs 23,720 15,953
See Directors' Remuneration Report 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 Auditors' remuneration
The analysis of fees payable to the Group's
auditor is as follows:
2022 2021
GBP 000 GBP 000
Audit of Company 320 200
Audit of Subsidiaries 135 200
CASS audit 31 25
------------------------ ------------------------
Total auditor's remuneration 486 425
7 Staff costs
The average monthly number of persons (including as follows:
Executive Directors) is
2022 2021
No. No.
Management 4 6
Client advisers 93 49
Operations 173 99
Finance 17 13
Risk and Compliance 8 10
Human resources 10 4
------------------------ ------------------------
Average number of employees 305 181
Aggregate staff remuneration comprised:
2022 2021
GBP 000 GBP 000
Wages and salaries 18,567 13,199
Social security costs 2,160 1,400
Pension costs, defined contribution scheme 1,364 602
Other short-term employee benefits 664 658
Redundancy costs 113 -
Share-based remuneration 852 94
------------------------ ------------------------
Total staff costs 23,720 15,953
2022 2021
GBP 000 GBP 000
Operating staff costs 22,936 15,157
Business re-positioning costs 250 739
Acquisition team costs 534 57
---------------------- ----------------------
Total staff costs 23,720 15,953
8 Finance costs
2022 2021
GBP 000 GBP 000
Interest cost on external borrowings 456 -
Finance cost in relation to lease liability
(note 21) 147 108
Finance cost in relation to deferred consideration 3,109 672
Preference share dividends 2,481 4,101
Other finance costs 205 46
-------------------------- ------------------------
Total finance costs 6,398 4,927
9 Other gains and losses
2022 2021
GBP 000 GBP 000
Additional payments due on acquired businesses - (2,983)
Unrealised gain/(loss) on investment (23) (73)
-------------------------- ------------------------
(23) (3,056)
10 Taxation
Tax charged/(credited) in the income statement
2022 2021
GBP 000 GBP 000
Current taxation
Current year tax expense - 317
Write off of historical corporation tax
balance - (17)
-------------------------- ------------------------
- 300
Foreign tax adjustment to prior periods 22 -
-------------------------- ------------------------
Total current income tax 22 300
Deferred taxation
Movement in deferred tax (note 16) (4,502) 461
-------------------------- ------------------------
Tax (receipt)/expense in the income statement (4,480) 761
Factors affecting tax charge for the year
The tax on profit before tax for the year is the same as the
standard rate of corporation tax in the UK of 19%(2021 - 19%).
The differences are reconciled below:
2022 2021
GBP 000 GBP 000
Loss before tax (10,972) (14,464)
Corporation tax at standard rate (2,085) (2,748)
Expenses not deductible for tax purposes 2,823 3,531
Adjustments for Statement of Financial Position
items 210 133
Benefit of superdeduction (6) (2)
Prior year true-up 22 (17)
Adjustment for revenue ineligible for tax
purposes (48) (250)
Unrelieved tax losses carried forward (417) 202
Movement in deferred tax (4,502) 461
Different tax rates applied in overseas
jurisdictions (477) (549)
----------------------- ------------------------
Total tax (credit)/charge (4,480) 761
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.
11 Dividends
The Directors are not proposing to pay a dividend to ordinary
shareholders in respect of the year ended 31 December 2022 (year
ended 31 December 2021: GBPnil).
12 Earnings per share
2022 2021
GBP 000 GBP 000
Loss from continuing operations for the
purposes of basic loss per share, being
net loss attributable to owners of the Group (7,797) (17,432)
Number of shares
Weighted average number of ordinary shares
assuming above
conversion events 216,920,724 216,920,724
Convertible preference shares in issue 512,407,029 271,986,413
Share options 5,897,018 5,702,567
----------------- -----------------
Weighted average number of ordinary shares
assuming conversion 735,224,771 494,609,704
Owing to the Group being in a loss-making position for the years
ending 31 December 2021 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 of GBP0.04 (2021: loss per share GBP0.08).
13 Property, plant and equipment
Furniture,
fittings
and Total
equipment
GBP 000 GBP 000
Cost or valuation
At 1 January 2021 1,380 1,380
Additions 275 275
----------------
At 31 December 2021 1,655 1,655
----------------
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
----------------
At 31 December 2022 3,303 3,303
----------------
Depreciation
At 1 January 2021 453 453
Charge for year 261 261
----------------
At 31 December 2021 714 714
----------------
At 1 January 2022 714 714
Charge for the year 310 310
Reclassifications 1,438 1,438
Foreign exchange movements 9 9
----------------
At 31 December 2022 2,471 2,471
----------------
Carrying amount
At 31 December 2022 832 832
================ =======
At 31 December 2021 941 941
================ =======
Current year reclassification is due to the disclosing of cost
and deprecation for acquisitions.
14 Right of use assets
Property Total
GBP 000 GBP 000
Cost or valuation
At 1 January 2021 3,534 3,534
Additions 555 555
-------- ------------------
At 31 December 2021 4,089 4,089
-------- ------------------
At 1 January 2022 4,089 4,089
Current year adjustment (137) (137)
Additions 1,705 1,705
-------- ------------------
At 31 December 2022 5,657 5,657
-------- ------------------
Depreciation
At 1 January 2021 706 706
Charge for year 664 664
-------- ------------------
At 31 December 2021 1,370 1,370
-------- ------------------
At 1 January 2022 1,370 1,370
Current year adjustment (25) (25)
Charge for the year 759 759
-------- ------------------
At 31 December 2022 2,104 2,104
-------- ------------------
Carrying amount
At 31 December 2022 3,553 3,553
======== ==================
At 31 December 2021 2,719 2,719
======== ==================
Current year adjustment is in relation to a lease held within
the Metnor Holdings Limited group of companies.
15 Goodwill and other intangible
assets
Other intangible
assets
Goodwill Total
GBP 000 GBP 000 GBP 000
Cost or valuation
At 1 January 2021 25,684 27,968 53,652
Additions 19,439 14,647 34,086
Revaluation of acquisition (40) - (40)
Exchange adjustments 67 - 67
---------- ----------------------------- -------
At 31 December 2021 45,150 42,615 87,765
---------- ----------------------------- -------
At 1 January 2022 45,150 42,615 87,765
Additions 18,402 33,491 51,893
Revaluation of acquisition (see
below) (6,364) - (6,364)
Exchange adjustments 629 - 629
---------- ----------------------------- -------
At 31 December 2022 57,817 76,106 133,923
---------- ----------------------------- -------
Amortisation
At 1 January 2021 2,279 3,757 6,036
Charge for year - 1,474 1,474
---------- ----------------------------- -------
At 31 December 2021 2,279 5,231 7,510
---------- ----------------------------- -------
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
---------- ----------------------------- -------
Carrying amount
At 31 December 2022 55,538 67,931 123,469
========== ============================= =======
At 31 December 2021 42,871 37,384 80,255
========== ============================= =======
Following the acquisition of Metnor Holdings Limited on the 31st
December 2021 new information has been obtained related to
reduction in earn-out by this company. As such there has been an
adjustment in the provisional amount by means of a decrease in
goodwill.
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 four CGUs at 31 December 2022 analysed
between Investment Management, Wealth Planning 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 ninth 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 acquired KW Wealth Group
Limited (KWWG) in 2014. KWWG has been split between investment
management and wealth planning CGUs depending on which CGU the
relevant assets are allocated to.
Investment Wealth
Management Planning US Operations Total
GBP 000 GBP 000 GBP 000 GBP 000
16,338 33,291 5,909 55,538
The carrying value of goodwill at 31 December 2022 is allocated
as follows:
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 13.6% for the
investment management and wealth planning CGUs and 15.1% 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.
The US group of CGUs exceeded its carrying amount by GBP19.6m.
The value of the investment management and the wealth planning CGUs
exceeded their carrying value by GBP13.0m and GBP12.8m
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.
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 GBP67.2m of intangible
assets being amortised over 20 years and GBP0.7m over 15 years.
The addition in 2022 and 2021 to intangible assets represents
the value of assets under management and associated client lists
acquired from business combinations in each of the two years.
16 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
upon At
At 1 January Movement acquisition 31 December
in of
2022 year subsidiaries 2022
GBP 000 GBP 000 GBP 000 GBP 000
Assets - 4,492 - 4,492
Liabilities (4,577) 10 (8,018) (12,584)
----------------------- ------------------------- -----------------------
(4,577) 4,502 (8,018) (8,092)
Intangibles
- customer
relationships
and brands
recognised At
upon
At 1 January Recognised acquisition 31 December
in of
2021 income subsidiaries 2021
GBP 000 GBP 000 GBP 000 GBP 000
Assets 392 (392) - -
Liabilities (1,889) (69) (2,619) (4,577)
----------------------- ------------------------- -----------------------
(1,497) (461) (2,619) (4,577)
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
GBP17.9m in the UK (2021:
GBP19.3m) available for offset against future profits. A
deferred tax asset has been recognised in respect of tax losses for
the year ended 31st Dec 2022 (2021: GBPnil was recognised) as there
is no longer uncertainty as to the timing of future expected
profits.
17 Trade and other receivables
2022 2021
Current GBP 000 GBP 000
Trade receivables 7,440 1,844
Prepayments 1,834 1,307
Other receivables - 2,598
----------------------- -----------------------
9,274 5,749
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.
18 Subsidiaries
Details of the subsidiaries as at 31 December 2022 are as
follows:
Name of subsidiary Activity Ownership
2022
KW US Holdings Limited (Guernsey)
* Holding Company 100%
Management
KW Wealth Group Ltd (England) * 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%
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%
Manhattan Harbor Capital LLC
(USA) Holding Company 50.1%
Kingswood Capital Partners LLC Independent
(USA) Broker Dealer 50.1%
Independent
Benchmark Investments LLC (USA) Broker Dealer 50.1%
* Direct investment
Profits attributable to non-controlling interests in KW US
(formerly MHC) and its subsidiaries as at 31 December 2022 were
GBP1,304,652 (US$1,606,157) (2021: GBP2,206,889 (US$3,030,793)).
Dividends paid to non-controlling interest in the year were
GBP810,646 (US$998,000) (period post-acquisition to 31 December
2021 were GBP1,271,724 (US$1,746,459))
Accumulated non-controlling interest of KW US and its
subsidiaries as at 31 December 2022 were GBP2,390,686
(US$2,878,386). (as at 31 December 2021: GBP924,858
(US$1,246,431)).
Summarised financial information (material subsidiaries with
non-controlling interests) before intra-group adjustments:
2022 2022 2021 2021
$ 000 GBP 000 $ 000 GBP 000
As at 31 December:
Current assets 15,400 12,792 21,318 15,818
Non-current assets 158 132 204 151
Current liabilities (9,731) (8,083) (19,049) (14,135)
Non-current liabilities (59) (49) (59) (44)
2022 2022 2021 2021
$ 000 GBP 000 $ 000 GBP 000
12 months ended 31 December:
Revenue 138,074 112,154 174,367 126,967
Profit after tax 3,104 2,521 5,740 4,180
Other comprehensive income - - - -
Total comprehensive income 3,104 2,521 5,740 4,180
19 Cash and cash equivalents
2022 2021
GBP 000 GBP 000
Cash at bank and in hand 19,624 42,933
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 2022 (31 December 2021:
GBPnil).
20 Trade and other payables
2022 2021
GBP 000 GBP 000
Trade payables 2,976 789
Accrued expenses 11,812 22,967
Social security and other taxes 1,283 1,581
Lease liability and dilapidations provision 1,467 677
Other borrowings 59 70
---------------------- ----------------------
17,597 26,084
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".
21 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 Land and
buildings Buildings
2022 2021
GBP 000 GBP 000
At 1 Jan 3,274 3,234
Additions 1,705 582
Interest expense 147 108
Lease payments (852) (650)
----------------------- -----------------------
4,274 3,274
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:
2022 2021
GBP 000 GBP 000
Due within one year 1,467 677
Due after more than one year 2,806 2,597
------------------------ ------------------------
At 31 December 4,273 3,274
2022 2021
GBP 000 GBP 000
Dilapidations provisions relating to lease
liabilities
Due within one year 7 28
Due after more than one year 559 538
------------------------ ------------------------
At 31 December 566 566
Total cash outflows related to leases
Total cash outflows related to leases are
presented in the table below:
2022 2021
GBP 000 GBP 000
Low value lease expense 99 96
Short term lease expense 14 10
22 Deferred consideration payable
2022 2021
GBP 000 GBP 000
- falling due within one year 20,771 7,706
- due after more than one year 9,228 14,482
---------------------- ----------------------
Deferred consideration payable on acquisitions: 29,999 22,188
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 GBP1,852,225 (2021:
GBP7,008,600.
23 Other non-current liabilities
2022 2021
GBP 000 GBP 000
Lease liability and dilapidations provision 2,806 2,597
Other borrowings 24,343 318
---------------------- -----------------------
27,149 2,915
24 Share capital
Allotted, called up and
fully paid shares
2022 2021
No. GBP 000 No. 000 GBP 000
000
Fully paid of GBP0.05 each 216,921 10,846 216,921 10,846
Number
of Share
ordinary
shares Par value premium Total
Share capital and '000 GBP 000 GBP 000 GBP 000
share premium
At 1 January 2021 216,921 10,846 8,224 19,070
----------------- ------------------
At 31 December 2021 216,921 10,846 8,224 19,070
At 1 January 2022 216,921 10,846 8,224 19,070
At 31 December 2022 216,921 10,846 8,224 19,070
Ordinary shares have a par value of GBP0.05 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 2022, KPI (Nominees) Limited held 144,125,262
Ordinary Shares, representing 66.4 per cent of ordinary shares in
issue at year end.
25 Preference share capital
Irredeemable convertible
preference 2022 2021 2022 2021
shares Shares Shares GBP 000 GBP 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 Par value
shares GBP 000
At 1 January 2021 45 45
Issued during year 32 32
------------------------- -------------------------
At 31 December 2021 77 77
Issued during year - -
------------------------- -------------------------
At 31 December 2022 77 77
2022 2021
GBP 000 GBP 000
Equity component 70,150 70,150
Liability component - -
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.
26 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 19.
2022 2021
GBP 000 GBP 000
Loss before tax (10,972) (14,464)
Adjustments for:
Depreciation and amortisation 4,507 2,399
Finance costs 6,398 4,927
Remuneration charge (deferred consideration) 1,852 234
Acquisition of investments 586 -
Share-based payment expense 878 94
Other losses / (gains) 23 1,281
Foreign exchange gain - (6)
Tax paid (22) (318)
----------------------- -----------------------
Operating cash flows before movements in
working capital 3,250 (5,853)
(Increase)/decrease in receivables 1,821 (449)
Increase/(decrease) in payables (7,775) 8,043
----------------------- -----------------------
Net cash inflow / (outflow) from operating
activities (2,704) 1,741
27 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.
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:
2022 2021
Number Number
Outstanding, start of period 16,799,167 19,949,167
Granted during the period 6,700,000 15,708,333
Forfeited during the period (5,342,778) (18,858,333)
Outstanding, end of period 18,156,389 16,799,167
Exercisable, end of period 1,090,833 1,090,833
No share options were exercised during
the year.
2022 2021
pence pence
Outstanding, start of period 16.78 5.87
Granted during the period 16.50 16.50
Forfeited during the period 16.50 5.50
Outstanding, end of period 16.76 16.78
Exercisable, end of period 20.85 20.85
Share options Share options
2022 2021
105,000 105,000
152,500 152,500
833,334 833,334
3,076,667 4,775,000
3,333,333 5,000,000
3,288,889 4,933,333
666,667 1,000,000
1,500,000 -
75,000 -
1,000,000 -
1,050,000 -
3,000,000 -
75,000 -
18,156,389 16,799,167
8.59 years 3.22 years
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
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
Total 12 July 2032 16.50
Weighted average contractual life of options outstanding at end
of period
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.
2022
Option pricing model used Monte Carlo
Weighted average share price at grant date (p) 25.85
Exercise price (p) 16.50
Weighted average contractual life (in days) 3,134
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 1.50% - 2.71%
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:
2022 2021
GBP 000 GBP 000
Options issued under employee option
plan 852 (94)
28 Financial instruments
The following table states the classification of financial
instruments and is reconciled to the Statement of Financial
Position:
2022 2021
Carrying Carrying
amount amount
GBP 000 GBP 000
Financial assets measured at amortised
cost
Trade and other receivables 9,273 4,308
Cash and cash equivalents 19,624 42,933
Financial liabilities measured at amortised
cost
Trade and other payables (16,130) (23,826)
Other non-current liabilities (2,806) (318)
Lease liability (1,467) (3,274)
Financial liabilities measured at fair
value through profit and loss
Deferred consideration payable (29,999) (22,188)
(21,505) (2,365)
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
GBP'000
Deferred consideration payable 29,999
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 impact
(loss) Decrease
Increase
GBP'000 GBP'000
Discount rate change (+ / - 5%) (133) 155
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:
Total prior
Total year
GBP 000 GBP 000
Cash 19,624 42,933
Trade and other receivables 9,274 5,749
---------------------- ----------------------
28,898 48,682
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 19 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 2022.
Repayable Repayable
2022 between 0-12 after more
Non-derivative liabilities months than 12
GBP 000 months
GBP 000
Trade payables 2,976 -
Other payables 13,154 24,343
Deferred consideration payable 20,771 9,228
Lease liabilities 1,467 2,806
---------------------- ----------------------
38,368 36,377
3 months - 1
2021 year 1-5 years
Non-derivative liabilities GBP 000 GBP 000
Trade payables 789 -
Other payables 23,037 318
Deferred consideration payable 8,466 19,430
Lease liabilities 725 2,248
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 not been performed on the Group as the
Group's only interest-bearing instrument is at a fixed rate until
maturity. As such, a 10% movement in interest rates would have no
impact 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 2022 figures, would have increased the US
division's overall profit as recognised in the Statement of
Comprehensive Income by GBP126,057. A 5% weakening of the US
dollar, conversely, would have decreased the profit contribution by
GBP120,054.
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.
29 Business combinations
29.1 Acquisition of AIM Independent Ltd
On 16 February 2022, the Company completed the acquisition of
AIM Independent Ltd, an independent financial advice business based
in Eastleigh serving clients throughout Hampshire
AIM has 5 advisers providing financial advice to over 750
clients holding around GBP217m AuA/M. In the year ending 31 July
2021, AIM generated revenue of GBP1.2m and profit before tax of
GBP479k.
The business was acquired for a total cash consideration of up
to GBP3.6m, payable over a 2-year period. GBP1.8m was paid at
closing and the balance will be paid on a deferred basis subject to
the achievement of pre-agreed performance targets. The fair value
of this final cash consideration is detailed further in the below
tables.
The acquisition was funded by the issue of convertible
preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly
owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, the AIM group
contributed GBP0.456 million to Group revenues and GBP0.042 million
to Group profit before tax.
Details of the fair value of identifiable assets and liabilities
acquired the purchase consideration and goodwill are as
follows:
Book value Adjustment Fair value
GBP 000 GBP 000 GBP 000
Property, plant and equipment 13 - 13
Goodwill & Intangibles 1 2,278 2,279
Investments in subsidiaries 1 - 1
Receivables 83 - 83
Cash 88 - 88
Payables (147) - (147)
Deferred tax liability - (570) (570)
------------------------- ----------------------- -----------------------
Total identifiable net assets 39 1,708 1,747
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:
2022
GBP 000
Initial cash paid 1,711
Deferred consideration 1,318
-----------------------
Total purchase consideration 3,029
Goodwill recognised on acquisition 1,281
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the AIM team and business gives the
Group in the Hampshire market.
-- the ability to leverage the AIM platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
Cash outflows
GBP 000
Total purchase consideration 3,029
Less: Deferred consideration (1,318)
Cash paid to acquire AIM Independent Ltd 1,711
Less: cash held by AIM Independent Ltd (88)
Net cash outflow 1,623
29.2 Acquisition of Allotts Financial Services Ltd
On 4 February 2022, the Company completed the acquisition of
Allotts Business Services Ltd, a high-quality long established
financial advisory firm based in Rotherham and serves clients
covering primarily in South Yorkshire.
Allots provides independent financial advice to over 400 active
clients and currently employs 3 advisers covering clients primarily
in South Yorkshire with approximately GBP140m AuA. In the year
ended 31 March 2021, AFS generated revenue of GBP791k and profit
before tax of GBP355k
The business was acquired for total cash consideration of up to
GBP2.5m, payable over a two-year period. GBP1.25m was paid at
closing and the balance will be paid on a deferred basis, some of
which is subject to the achievement of pre-agreed performance
targets. The fair value of this final cash consideration is
detailed further in the below tables.
The acquisition was funded by the issue of convertible
preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly
owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Allotts Financial
Services Limited contributed GBP0.276 million to Group revenues and
GBP0.066 million loss to Group profit before tax.
Details of the fair value of identifiable assets and liabilities
acquired the purchase consideration and goodwill are as
follows:
Book value Adjustment Fair value
GBP 000 GBP 000 GBP 000
Goodwill and intangibles - 1,294 1,294
Receivables 78 - 78
Cash 149 - 149
Payables (67) - (67)
Taxation (67) - (67)
Deferred tax liability - (324) (324)
------------------------- ------------------------ -----------------------
Total identifiable net assets 93 970 1,063
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:
2022
GBP 000
Initial cash paid 1,287
Deferred cash consideration 879
Total purchase consideration 2,166
Goodwill recognised on acquisition 1,103
Acquisition costs have been recognised as transaction adjustments
costs under acquisition-related Consolidated Statement in the
of Comprehensive Income.
The main factors leading to the recognition of goodwill
are:
-- the strategic foothold the Allots team and business market; and
gives the Group in the South Yorkshire
-- the ability to leverage Allots platform and achieve
economies of scale.
Consideration
2022
GBP 000
Net cash outflow arising on acquisition:
Total purchase consideration 2,166
Less: Deferred consideration (879)
Initial cash paid to acquire Allotts Financial Services
Ltd 1,287
Less: cash held by Allotts Financial Services Ltd (149)
Net cash outflow 1,138
29.3 Acquisition of Joseph R Lamb Independent Financial Advisors
Ltd
On 7 February 2022, the Company completed the acquisition of
Joseph R Lamb Independent Financial Advisors Ltd "Joseph Lamb", a
long established advisory business based in Rayleigh, Essex.
Established in 1970, Joseph Lamb provides financial advice to
over 1930 active clients and currently employs 7 advisors covering
clients primarily in Essex with approximately GBP393m AuA. On an
underlying basis for the 12 month period to 30 June 2021, Joseph
Lamb generated revenue of GBP3.8m and EBITDA of GBP1.5m.
The business was acquired for total cash consideration of up to
GBP17.5m, payable over a 2 year period, GBP10.7m was paid at
closing and the balance will be paid on a deferred basis, some of
which is subject to the achievement of pre-agreed performance
targets. The fair value of this final cash consideration is
detailed further in the below tables.
The acquisition was funded by the issue of convertible
preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly
owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Joseph R Lamb
Independent Financial Advisers Limited contributed GBP2.82 million
to Group revenues and GBP0.199 million to Group profits before
tax.
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Book value Adjustment Fair value
GBP'000 GBP'000 GBP'000
Property, plant and equipment 47 - 47
Goodwill & Intangibles 350 9,834 10,183
Receivables 2,062 - 2,062
Cash 1,670 - 1,670
Payables (976) - (976)
Deferred tax liability - (2,458) (2,458)
Total identifiable net assets 3,153
7,376 10,528 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:
2022
GBP 000
Initial cash consideration 10,715
Deferred cash consideration 5,641
Total purchase consideration 16,356
Goodwill recognised on acquisition 5,828
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the Joseph Lamb team and business
gives the Group in the Essex market.
-- the ability to leverage the Joseph Lamb platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 16,356
Less: Deferred cash consideration (5,641)
Initial cash paid to acquire Joseph R Lamb 10,715
Less: cash held by Joseph R Lamb (1,670)
Net cash outflow 9,045
29.4 Acquisition of Eurosure Ltd
On 29 July 2022, the Company completed the acquisition of
Eurosure Ltd, an independent financial advice company based in
Hampshire.
Established for over 30 years, Eurosure Ltd have been offering a
tailored and bespoke approach to enabling their clients to achieve
their financial goals. The company looks after 240 clients with
around GBP70m in AuA. In the year ending 30th April 2021, Eurosure
Ltd generated revenue of GBP514k.
Eurosure was acquired for total cash consideration of up to
GBP1.7m, payable over a 2 year period, GBP1.02m will be paid at
closing and the balance on a deferred basis, some of which is
subject to the achievement of pre-agreed performance targets. The
fair value of this final cash consideration is detailed further in
the below tables.
The acquisition was funded by the issue of convertible
preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly
owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Eurosure Limited
contributed GBP0.165 million to Group revenues and GBP0.019 million
loss to Group profit before tax.
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
1,029 1,029
22 22
165 165
(49) (49)
(67) (67)
(257) (257)
71 772 843
Intangibles Receivables Cash Payables Taxation
Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 1,036
Deferred cash consideration 323
Total purchase consideration 1,359
Goodwill recognised on acquisition 517
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the Eurosure team and business gives
the Group in the Hampshire market.
-- the ability to leverage the Eurosure platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 1,359
Less: Deferred cash consideration (323)
Initial cash paid to acquire Eurosure Ltd 1,036
Less: cash held by Eurosure Ltd (165)
Net cash outflow 871
29.5 Acquisition of Vincent & Co Financial Ltd
On 15 June 2022, the Company completed the acquisition of
Vincent & Co Financial Ltd, a privately owned independent
financial adviser based in Lincolnshire.
Established for over 20 years, Vincent & Co Ltd provide
financial advice to over 130 clients in the Lincolnshire area. They
hold GBP25m AuA and in the year ending 31 October 2021 generated
revenue of GBP135k and a profit before tax of GBP83k.
Vincent & Co was acquired for total cash consideration of up
to GBP421k, payable over a 2 year period, GBP211k was paid upon
completion of the transaction and the balance will be paid on a
deferred basis, some of which is subject to the achievement of
pre-agreed performance targets. The fair value of this final cash
consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible
preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly
owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Vincent & Co
Financial Limited contributed GBP0.117 million to Group revenues
and GBP0.004 million loss to Group profit before tax.
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
467 467
71 71
(31) (31)
(12) (12)
(117) (117)
28 350 378
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Intangibles Cash Payables Taxation
Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 211
Deferred cash consideration 174
Total purchase consideration 385
Goodwill recognised on acquisition 7
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the Vincent & Co team and business
gives the Group in the Lincolnshire market; and
-- the ability to leverage the Vincent & Co platform and
achieve economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 385
Less: Deferred cash consideration (174)
Initial cash paid to acquire Vincent & Co 211
Less: cash held by Vincent & Co (71)
Net cash outflow 140
29.6 Acquisition of Employee Benefit Solutions (EBS) Ltd
On 2 November 2022, the Company completed the acquisition of
Employee Benefit Solutions Ltd, a financial planning firm based in
Buckinghamshire.
Established for over 30 years, EBS offer a wide range of
financial planning services including: retirement planning, savings
and investment advice, protection and inheritance tax planning.
With three lead advisers and seven colleagues in total, EBS hold
over GBP135m AuA. In the year ending March 2022 EBS generated
revenue of
GBP1.56m and profit before tax of GBP806k.
EBS was acquired for total cash consideration of up to GBP5.08m,
payable over a 5 year period, GBP2.75m will be paid at closing and
the balance paid on a deferred basis, some of which is subject to
the achievement of pre-agreed performance targets. The fair value
of this final cash consideration is detailed further in the below
tables.
Kingswood satisfied the consideration through the utilisation of
its new funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, Employee Benefit
Solutions Limited contributed GBP0.277 million to Group revenues
and GBP0.230 million to Group profit before tax.
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
3 3
3,640 3,640
71 71
1,114 1,114
(148) (148)
(18) (18)
(910) (910)
1,022 2,730 3,752
Property, plant and equipment Intangibles
Receivables Cash Payables Taxation
Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 3,556
Deferred cash consideration 1,226
Other 500
Total purchase consideration 5,282
Goodwill recognised on acquisition 1,530
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the (EBS) team and business gives the
Group in the Buckinghamshire market.
-- the ability to leverage the (EBS) platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 5,282
Less: Deferred cash consideration (1,226)
Less: Other (500)
Initial cash paid to acquire EBS 3,556
Less: cash held by EBS (1,114)
Net cash outflow 2,442
29.7 Acquisition of Strategic Asset Managers (SAM) Ltd
On 11 November 2022, the Company completed the acquisition of
Strategic Asset Managers Ltd ('SAM'), a leading financial advice
firm based in Glasgow. SAM works with families, businesses, and
professional partners. The company consists of 3 advisers managing
over 400 clients, with over GBP200m of AUA. In the year ending 31
March 2022 SAM generated revenue of GBP1.2m and profit before tax
of GBP517k.
SAM was acquired for total cash consideration of up to GBP5.1m,
payable over a 2 year period, GBP3.1m paid on completion and the
balance paid on a deferred basis, which is subject to the
achievement of pre-agreed performance targets. The fair value of
this final cash consideration is detailed further in the below
tables.
Kingswood satisfied the consideration through the utilisation of
its new funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, Strategic Asset
Managers Limited contributed GBP0.144 million to Group revenues and
GBP0.083 million loss to Group profit before tax.
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
3 3
3,349 3,349
15 15
455 455
(8) (8)
(154) (154)
(837) (837)
311 2,512 2,823
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Property, plant and equipment Intangibles
Receivables Cash Payables
Taxation & Social security Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 3,210
Deferred cash consideration 1,696
Total purchase consideration 4,906
Goodwill recognised on acquisition 2,084
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the (SAM) team and business gives the
Group in the Scottish market.
-- the ability to leverage the (SAM) platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 4,906
Less: Deferred cash consideration (1,696)
Initial cash paid to acquire SAM 3,210
Less: cash held by SAM (455)
Net cash outflow 2,755
29.8 Acquisition of JCH Investment Management Ltd
On 30 November 2022, the Company completed the acquisition of
JCH Investment Management Ltd ('JCH'), a leading financial advice
firm based in Lincoln. The company has 3 advisers managing over
GBP105m of AuA with over 240 clients. In the year ending 31 July
2022 JCH generated revenue of GBP901k and profit before tax of
GBP406k.
JCH will be acquired for Total Cash consideration of up to
GBP3.5m, payable over a 2 year period, GBP2.1m of which will be
paid upon receipt of regulatory approval and the balance paid on a
deferred basis which is subject to the achievement of pre-agreed
performance targets. The fair value of this final cash
consideration is detailed further in the below tables.
Kingswood will satisfy the consideration due to the shareholders
of JCH through the utilisation of its new funding facility, as
announced on 17 October 2022.
From the acquisition date to 31 December 2022, JCH Investment
Management Limited contributed GBP0.076 million to Group revenues
and GBP0.048 million to Group profit before tax.
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
4 4
2,341 2,341
414 414
350 350
(299) (299)
(585) (585)
469 1,756 2,225
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Property, plant and equipment Intangibles
Receivables Cash Payables
Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 2,100
Deferred cash consideration 1,158
Total purchase consideration 3,258
Goodwill recognised on acquisition 1,033
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the (JCH) team and business gives the
Group in Lincolnshire market
-- the ability to leverage the (JCH) platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 3,258
Less: Deferred cash consideration (1,158)
Initial cash paid to acquire JCH 2,100
Less: cash held by JCH (350)
Net cash outflow 1,750
29.9 Acquisition of JFP Financial Services Ltd
On 30 November 2022, the Company completed the acquisition of
JFP Holdings Ltd ('JFP'), a leading financial advisory firm based
in Macclesfield, Cheshire. Established over 40 years ago, JFP
manages GBP360m AuA across 1,295 clients. In the year ending 31
March 2022, JFP generated revenue of GBP2.5m and profit before tax
of
GBP1.5m.
JFP was acquired for total cash consideration of up to GBP12.4m,
payable over a 2 year period, GBP7.44m of which will be paid upon
receipt of regulatory approval and the balance paid on a deferred
basis which is subject to the achievement of pre-agreed performance
targets. The fair value of this final cash consideration is
detailed further in the below tables.
Kingswood satisfied the consideration through the utilisation of
its funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, JFP Financial
Services Limited contributed GBP0.183 million to Group revenues and
GBP0.107 million to Group profit before tax.
Book Value Adjustment Fair value
GBP 000 GBP 000 GBP 000
10 10
7,892 7,892
2,828 2,828
570 570
(77) (77)
(457) (457)
(1,973) (1,973)
2,874 5,919 8,793
Details of the fair value of identifiable assets and liabilities
acquired, the purchase consideration and goodwill are as
follows:
Property, plant and equipment Intangibles
Receivables Cash Payables Taxation
Deferred tax liability
Total identifiable net assets
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:
2022
GBP 000
Initial cash consideration 10,153
Deferred cash consideration 3,766
Total purchase consideration 13,919
Goodwill recognised on acquisition 5,126
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the (JFP) team and business gives the
Group in the Cheshire market
-- the ability to leverage the (JFP) platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 13,919
Less: Deferred cash consideration (3,766)
Initial cash paid to acquire JFP 10,153
Less: cash held by JFP (570)
Net cash outflow 9,583
29.10 Purchase of trade and assets of D.J.Cooke Ltd
On 21 February 2022, the Company completed the purchase of the
trade carried on by and business assets of D.J.Cooke (Life &
Pensions) Ltd, an independent financial planning business servicing
clients across South Yorkshire.
The company looks after c.340 client households with around
GBP70m AuA. On an underlying basis for the 12 month period up to
the end of December 2021, DJ Cooke Ltd generated unaudited revenue
of approximately
GBP474k and unaudited EBITDA of approximately GBP227k.
Following Completion, around GBP1.5m is payable over a 2 year
period. GBP749k was paid at closing and the balance paid on a
deferred basis, some of which is subject to the achievement of
pre-agreed performance targets. The fair value of this final cash
consideration is detailed further in the below tables.
The purchase was funded by the issue of convertible preference
shares, under the terms of its Convertible Preference Share
subscription agreement with HSQ Investment Limited, a wholly owned
indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, DJ Cooke
contributed GBP0.330 million to Group revenues and
GBP0.275 million to Group profit before tax.
Fair value of consideration paid
The purchase has been accounted for using the acquisition method
and details of the purchase consideration are as follows:
2022
GBP 000
Initial cash consideration 749
Deferred cash consideration 619
Total consideration 1,368
The main factors leading to the recognition of goodwill are:
-- the strategic foothold the (D.J.Cooke) team and business
gives the company in the South Yorkshire market
-- the ability to leverage the (D.J.Cooke) platform and achieve
economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
GBP 000
Total purchase consideration 1,368
Less: Deferred cash consideration (619)
Initial cash paid to acquire D.J Cooke 749
Net cash outflow 749
30 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.
2022 2021
GBP 000 GBP 000
Salaries and other short term employee
benefits
Other related parties 678 340
KHL incurred fees of GBP116,000 (2021: GBP137,500) from KPI
(Nominees) Limited in relation to Non-Executive Director
remuneration. At 31 December 2022, GBPnil of these fees remained
unpaid (2021: GBPnil).
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 totalled GBP23,708 for the year
ended 31 December 2022 (2021: GBP23,090), of which GBPnil
(2021:
GBPnil) was outstanding at 31 December 2022.
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, totalled
GBP479,955 for the year to 31 December 2022 (2021: GBP384,750).
31 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 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 Firm
Novus Financial Services Limited FCA Personal Investment Firm
(De-registered on 8
March 2022)
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 Joseph R Lamb
Financial Advisers Limited FCA Investment Firm
AIM Independent Limited FCA Personal Investment Firm
JFP Financial Services Limited FCA Personal Investment Firm
Benchmark Investments, Inc FINRA-regulated brokerage firm
(USA)
Kingswood Capital Partners, LLC FINRA-regulated brokerage firm
(USA)
Benchmark Advisory Services, LLC SEC-regulated advisory firm
(USA)
Kingswood Wealth Advisors, LLC SEC-regulated advisory firm
(USA)
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.
2022 2021
GBP'000 GBP'000
24,402 388
4,273 3,274
(19,624) (42,933)
- -
73,966 76,898
0% 0%
The debt-to-equity ratios at 31 December 2022 and 31 December
2021 were as follows:
Loans and borrowings Lease liabilities
Less: cash and cash equivalents Net debt
Total equity
Debt to equity ratio (%)
32 Financial commitments
2022 2021
GBP 000 GBP 000
- 5,936
Subject to conditions being met, Kingswood Holdings Limited had
committed to contributing GBP5.9m (US$8.0m) of additional growth
equity to the Kingswood US Holdings Inc group before 31 December
2022, to further build US distribution channels through active
adviser recruitment and acquisitions. Following further review
throughout this fiscal year it was confirmed this commitment was no
longer required and as such no commitment was noted for 31st
December 2022
Commitments
33 Ultimate controlling party
As at the date of approving the financial statements, the
ultimate controlling party of the Group was KPI (Nominees) Limited.
KPI (Nominees) Limited, which holds 66.44% of the voting rights and
issued share capital of the Group, is owned and controlled by Gary
Wilder and Jonathan Massing.
34 Events after the reporting date
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.GBP140m AUA. In the year ending 28 February
2022, Barry Fleming & Partners generated revenue of GBP1.4m and
profit before tax of GBP190k. The business will be acquired for
total cash consideration of up to GBP6.2m, payable over a two-year
period, GBP3.1m paid on completion and the balance paid on a
deferred basis which is subject to the achievement of pre-agreed
performance targets
Kingswood satisfied the consideration through the utilisation of
its funding facility, as announced on 17 October 2022.
Acquisition of Moloney Investments Ltd (MMPI)
On the 3rd March 2023, Kingswood Holdings Ltd agreed upon, and
completed, the acquisition of the business assets of Moloney
Investments Ltd (MMPI).
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 54 people, including 18
advisors.
On a pro forma basis, for the 12 months to 30 April 2022, MMPI
had EBITDA of EUR 4.0m and in excess of EUR 700m assets under
advice. Following receipt of regulatory approval, Kingswood will
acquire 70% of MMPI for a total cash consideration of 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. Post-Acquisition,
MMPI will continue to operate from its existing premises and be led
by the same experienced team that have served its clients since
inception in 1993.
Kingswood satisfied the consideration due to the shareholders of
MMPI through a new debt facility it completed prior to the closing
of the Acquisition.
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END
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