TIDMHUME
RNS Number : 1628I
Hume Capital Securities PLC
28 May 2014
Hume Capital Securities plc ("Hume" or the "Company")
Interim results for the six months ended 28 February 2014
Hume (AIM: HUME) (together with its subsidiaries the "Group"),
presents its unaudited results for the six months ended 28 February
2014.
Highlights:
-- Revenues for the period of GBP3.5 million (H1 2013: GBP2.9 million)
-- Cost cutting efforts that commenced in 2013 are now being
reflected in the Group's Income Statement, with administrative
expenses falling to GBP4.2 million (H1 2013: GBP4.7 million);
-- Both Capital Markets and Wealth Management have shown
improved results in the period under review with Capital Markets
making a positive contribution of GBP0.9 million (H1 2013: GBP0.05
million)
-- Loss for the period of GBP0.7 million (H1 2013: loss of GBP1.9 million);
-- Loss per share for the period of 0.04 pence (H1 2013: loss per share of 0.2 pence)
Commenting on the results, Jonathan Freeman, Interim CEO
commented: "We continue to make progress towards the creation of a
profitable financial services group that has a reasonable spread of
diversified revenues and anticipate that the second half of the
current financial year will show further improvement towards that
goal."
Enquiries:
Hume Capital Securities Plc
Jonathan Freeman (Interim CEO)
+44 (0)20 3693 1470
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / Melanie Frean / Jamie Barklem
+44 (0)20 7383 5100
Chief Executive Officer's Statement
I present the Company's unaudited results for the six months
ended 28 February 2014.
The period under review has been one of steady improvement in
the results of the Group. Revenues for the period were GBP3.5
million (H1 2013: GBP2.9 million), representing an increase of 20
per cent. In addition, the cost cutting efforts that commenced in
2013 are now being reflected in the Group's Income Statement, with
administrative expenses falling to GBP4.2 million (H1 2013: GBP4.7
million).
However this improvement in the results of both revenues and
costs were not enough to prevent us reporting an operating loss,
albeit much reduced, for the period of GBP0.7 million (H1 2013:
loss of GBP1.9 million). Our loss per share for the period under
review was 0.04 pence (H1 2013: loss per share of 0.2 pence).
We are continuing our efforts to improve our revenues and reduce
our costs further and so hope to be able to report a further
improvement in our results for the second half of the current
financial year.
Both Capital Markets and Wealth Management have shown improved
results in the period under review. Capital Markets, which
comprises Corporate Finance, Corporate Broking and Market Making
made a positive contribution of GBP0.9 million (H1 2013: GBP0.05
million). This has been principally driven by the corporate team
completing several larger transactions in the period.
As announced on 14 April 2014, the Group has ceased its market
making activities in the short term.
Progress has been made on the Wealth Management side of the
business and on 8 April 2014 it was announced that the Group had
been appointed the Investment Manager of the newly created
Peterborough Infrastructure Fund (the "Fund"). Hume will be
responsible for establishing the Fund which is targeted to be
GBP130 million. Both Hume Capital Management Limited and Hume
Capital Guernsey Limited have been consistently profitable since
April 2013.
On 8 May 2014 Nitin Parekh, CEO and a director of the Company,
resigned with immediate effect. He has been replaced by Jonathan
Freeman, a non-executive director of the company, as Interim CEO
until a permanent replacement can be found.
During the period under review the Group completed a fundraising
for GBP0.9 million and post year end the Group has raised a further
GBP0.25 million, both through the issue of new equity. As announced
on 8 May 2014 the Group is in advanced discussions with a group of
investors who have indicated that they are willing to provide
funding into the Group should this be necessary in either the short
or medium term. Even with the improved results in the period under
review, the Group has still made a loss and has had to restructure
some of its operations in order to secure its liquidity and capital
positions during the financial year. We refer the going concern
section of note 1 of the accounts for further information.
We continue to make progress towards the creation of a
profitable Financial Services Group that has a reasonable spread of
diversified revenues and anticipate that the second half of the
current financial year will show further improvement towards that
goal.
Jonathan Freeman
Interim Chief Executive Officer
Director's Responsibility statement
The following statement is given by each of the directors. The
directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial information has
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union;
-- the Half-year Financial Report includes a fair review of the
information required by DTR 4.2.7 (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the Half-year Financial Report includes a fair view of the
information required by DTR 4.2.8 (disclosure of related parties'
transactions and changes therein).
The directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Independent review report to the members of Hume Capital
Securities plc
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 28 February 2014 which comprises the condensed
consolidated statement of comprehensive income, the consolidated
balance sheet, the consolidated statement of changes in equity, the
consolidated cash flow statement and related notes 1 to 12. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review 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 Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 28
February 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the AIM Rules of the London Stock
Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, United Kingdom
27 May 2014Hume Capital Securities plc
Condensed Consolidated Statement of Comprehensive Income
Statement
For the half year ended 28 February 2014
Delto plc31 December 20XX2006[insert]LondonDeloitte & Touche
LLP1 January 200631 December 20051 January 20051 January31
December
Unaudited Unaudited Audited
Half year ended Half year Year ended
28 February ended 29 February 31 August
2014 2013 2013
Note GBP'000 GBP'000 GBP'000
Revenue 3 3,527 2,887 5,971
Administrative expenses (4,217) (4,745) (9,683)
Share based payments - (28) 116
Operating loss (690) (1,886) (3,596)
Profit on disposal of fixtures
and equipment - - 23
Other income 55 - -
Finance costs (57) (39) (90)
Interest income - 2 3
Loss before tax (692) (1,923) (3,660)
Tax 9 - - (312)
Total loss for the period (692) (1,923) (3,972)
Total comprehensive loss
for the period (692) (1,923) (3,972)
Loss per share
Basic and diluted 4 (0.04p) (0.2p) (0.3p)
All the Group's revenue and operating loss was derived from
continuing operations.
The loss and total comprehensive loss for the period is
attributable to the equity holders.
Hume Capital Securities plc
Consolidated Balance Sheet
As at 28 February 2014
Unaudited Unaudited Audited
28 February 29 February 31 August
2014 GBP'000 2013 GBP'000 2013
Note GBP'000
Non-current assets
Fixtures and equipment 285 505 382
Intangible assets and
goodwill 1,383 1,383 1,383
Deferred tax asset 9 480 792 480
2,148 2,680 2,245
Current assets
Trade and other receivables 26,138 24,574 33,156
Trading portfolio assets 5 312 406 298
Investments 61 61 61
Cash and bank balances 6 441 560 830
26,952 25,601 34,345
Total assets 29,100 28,281 36,590
Current liabilities
Trade and other payables (26,610) (24,224) (34,454)
Trading portfolio liabilities 5 (277) (169) (136)
Total liabilities (26,887) (24,393) (34,590)
Net current assets 65 1,208 (245)
Net assets 2,213 3,888 2,000
Equity
Share capital 7 2,088 1,589 1,764
Share premium account 8 11,164 10,453 10,583
Retained loss (12,796) (9,911) (12,104)
Deferred share reserve 1,757 1,757 1,757
Total equity 2,213 3,888 2,000
Hume Capital Securities plc has five subsidiaries, EPIC
Investment Partners Limited, Hume Capital Management Limited and
Hume Capital Guernsey Limited, XCAP Securities (Middle East and
India) Limited and XCAP Nominees Limited. The financial statements
of Hume Capital Securities plc (registered number 6920660) were
approved by the Board of Directors and authorised for issue on 27
May 2014. They were signed on its behalf by:
Michael Andrew Frame
Finance Director
27 May 2014Hume Capital Securities plc
Consolidated Statement of Changes in Equity
For the half year ended 28 February 2014
Share Share Other Retained Total
Capital Premium reserves Earnings
Account
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 August
2012 2,196 7,632 - (8,016) 1,812
Audited
Loss for the period - - - (1,923) (1,923)
Issue of share capital 1,150 2,821 - - 3,971
Credit to equity
for equity-settled
share 28 28
based payments
Share capital re-organisation (1,757) - 1,757 - -
Balance at 28 February
2013 1,589 10,453 1,757 (9,911) 3,888
Unaudited
Loss for the period - - - (2,049) (2,049)
Issue of share capital 175 130 - 305
Debit to equity for
equity-settled share
based payments - - - (144) (144)
Balance at 31 August
2013 1,764 10,583 1,757 (12,104) 2,000
Audited
Loss for the period - - - (692) (692)
Issue of share capital 324 581 - - 905
Balance at 28 February
2014 2,088 11,164 1,757 (12,796) 2,213
Unaudited
--------- --------- ---------- ---------- --------
Hume Capital Securities plc
Consolidated Cash Flow Statement For the half year ended 28
February 2014
Unaudited Unaudited Audited
Half year Half year
ended 28 ended 28 Year ended
February February 31 August
2014 2013 2013
Note GBP'000 GBP'000 GBP'000
Net cash used in operating activities 10 (1,231) (1,697) (763)
Investing activities
Purchases of fixtures and equipment (6) (82) (89)
Goodwill and intangible assets acquired
in exchange for shares issued less
cash acquired - - (1,133)
Net cash used in investing activities (6) (82) (1,222)
Financing activities
Net proceeds on issue of shares 905 2,376 2,900
Finance costs (57) (39) (90)
Interest income - 2 3
Net cash from financing activities 848 2,339 2,813
Net (decrease)/increase in cash
and cash equivalents (389) 560 830
Cash and cash equivalents at beginning
of period 830 - -
Cash and cash equivalents at end
of period 6 441 560 830
Hume Capital Securities plc
Notes to the Financial Statements
For the half year ended 28 February 2014
1. Basis of preparation
The interim financial information has been prepared in
accordance with International Accounting Standard ("IAS") 34 -
"Interim Financial Reporting". The same accounting policies,
presentation and methods of computation are followed in these
condensed financial statements as were applied in the preparation
of the Group's financial statements for the year ended 31 August
2013.
The Group has a new revenue recognition policy in respect of
larger corporate deals that are now being undertaken. This updated
policy is in line with IAS 18 and reflects revenue being recognised
in line with when work was actually performed. Revenue is only
recognised when the amount of revenue can be measured reliably, it
is probable that the economic benefits will flow to the Group, the
stage of completion at the balance sheet date can be measured
reliably and the costs incurred, or to be incurred, in respect of
the transaction can be measured reliably. Revenue will only be
recognised when there is sufficient certainty that the deal will be
completed.
The information for the period ended 28 February 2014 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for the year
ended 31 August 2013 has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not
qualified, did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying the
report and did not contain statements under section 498(2) or (3)
of the Companies Act 2006. However, the information for the period
ended 28 February 2014 has been reviewed by the Company's auditors,
Deloitte LLP and their report appears above.
Going concern
The Group has made a loss in the period and has had to
restructure some of its operations in order to secure its liquidity
and capital positions during the financial year.
In light of the fundraisings during and following the period
end, the Directors have prepared detailed forecasts for the
enlarged Group for the foreseeable future, which consider the
liquidity and capital position of the Group. These forecasts assume
an immediate increase in profitability based on the cost cutting
measures already implemented. If these forecasts are not achieved
then the Group would need to rebuild its capital base, which has
been impacted by the retained losses in the period, within the
going concern period in order to meet its regulatory capital
requirements. In this respect the directors expect that the Group
will be able to secure sufficient capital resources and funding
through the injection of new capital from the placement of new
shares, as well as it having the ability to bring additional
capital and cash in through further restructuring, and the
redistribution of resources currently tied up in existing business
divisions.
Taking these factors into account, the Directors have a
reasonable expectation that the Group has adequate resources and
has sufficient liquidity to continue in existence for the
foreseeable future. Accordingly, the Directors have adopted the
going concern basis in preparing these financial statements.
2. Key risks affecting the business
There are a number of potential risks and uncertainties that
could have an impact on the performance of the Group. Whilst there
are others identified (and approved by the Group's Risk and
Compliance Committee (comprising only non-executive directors) and
subsequently the Board in terms of their management through its
systems and controls) in the Group's documented risk management
framework, the key risks include:
Key risks affecting the business
There are a number of potential risks and uncertainties that
could have an impact on the performance of the Group. Whilst there
are others identified (and approved by the Board in terms of their
management through its systems and controls) in the Group's
documented risk management framework, the key risks include:
Liquidity risk
The Group maintains a mixture of cash and cash equivalents that
is designed to meet the Group's operational and trading activities.
Having prepared detailed forecasts, the Group is confident that it
has sufficient liquidity for the foreseeable future.
Solvency risk
The Directors understand the risk of not being able to meet the
long term and short term obligations of the business, especially
with regards to its capital requirements. In order to mitigate this
risk the Group's finance team analyses cashflow on a regular basis
and has implemented strong internal controls so that all outgoings
are budgeted for. The business has robust plans in place that will
enable it to bring in new capital and restructure the existing
capital base if forecasted targets are not achieved and additional
capital is required.
Market risk
As with other firms in our sector, Hume is vulnerable to adverse
movements in the value of financial instruments. The Group's market
making team takes long and short positions in equities. To mitigate
this risk, limits apply to the overall long and short positions
that the market making team are permitted to commit to. These
limits are monitored in accordance with policies approved by the
Board. In addition the Group has a risk framework in place that
analyses concentration and correlation risk.
Credit risk
Credit risk is the risk that the Group suffers a financial loss
following a client or counterparty failing to meet their
contractual settlement obligations. The Group's market making
business contracts with other market counterparties. Counterparties
and the level of credit that they are granted are reviewed on a
regular basis and the Group is never materially exposed at any time
to any one particular counterparty.
The Wealth Management division look carefully at counterparty
risk in the execution of client trades. Further portfolio
management policy ensures portfolios are run through standard risk
metrics to ensure they are in accordance with client
guidelines.
Hume does not extend credit to its retail clients and these
clients are expected to trade within predetermined credit and
collateral limits. These limits are monitored by the Group's
compliance team and any adverse findings notified to the firm's
executive management for action.
Operational risk
This is defined as the risk of loss arising from inadequate or
failed internal processes, people, systems or external events. The
Group has embedded a risk management framework that identifies and
assesses risks in order to manage and mitigate them in an efficient
manner.
2. Key risks affecting the business (continued)
Regulatory risk
Regulatory risk is the risk that the Company fails to comply
with any of the regulations set by the various regulatory bodies
that the Company operates under. Regulatory risk is best achieved
by managing all other risks satisfactorily. Key to this is:
1. Adopting a robust "top down" system of corporate governance
headed by the non-executive Risk and Compliance committee which is
Chaired by the Company's senior non-executive director. The
committee meets in person every two months and on an ad-hoc basis
in between. A compliance team member attends all meetings of the
committee day with senior members of the firm's finance
function;
2. A non-executive board of 3 (currently 2 but will be back to 3
once a full time CEO has been appointed) directors bringing
significant business expertise in the financial services sector and
seeking to enhance an independent and balanced decision making
process, particularly around regulatory matters;
3. An effective risk and compliance team handling day to day
management of regulatory risk for the Group and monitoring of its
business to ensure compliance with the rules of the Financial
Conduct Authority at the London Stock Exchange.
3. Business and geographical segments
Products and services from which reportable segments derive
their revenues
Information reported to the Group's Chief Executive Officer for
the purposes of resource allocation and assessment of segment
performance is focussed on the category of customer for each type
of activity. The Group's reportable segments under IFRS 8 are as
follows:
-- Capital Markets
-- Wealth Management*
Information regarding the Group's operating segments is reported
below. The following is an analysis of the Group's revenue and
results by reportable segment for the 6 months to 28 February
2014:
Capital Markets Wealth Management Consolidated
Half year Half year Half year
ended 28 ended 28 ended 28
February February February
2014 2014 2014
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,689 1,838 3,527
Result
Segment result 928 (379) 549
Central administrative
expenses (1,239)
-------------
Operating loss (690)
Finance costs (57)
Other income 55
Loss before tax (692)
Tax -
Loss after tax (692)
-------------
Geographical information
The Group's revenue is materially generated within the UK.
*This division includes the stockbroking division from previous
reporting periods
3. Business and geographical segments (continued)
The following is an analysis of the Group's revenue and results
by reportable segment for the 6 months ended 29 February 2013:
Capital Markets Wealth Management Consolidated
Half year Half year Half year
ended 28 ended 28 ended 28
February February February
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue
External sales 902 1,985 2,887
Result
Segment result 47 (501) (454)
Central administrative
expenses (1,432)
-------------
Operating loss (1,886)
Finance costs (39)
Interest income 2
Loss before tax (1,923)
Tax -
Loss after tax (1,923)
-------------
3. Business and geographical segments (continued)
The following is an analysis of the Group's revenue and results
by reportable segment for the year to 31 August 2013:
Capital Wealth Management Consolidated
Markets
Year ended Year ended Year ended
31 August 31 August 31 August
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,931 4,040 5,971
Result
Segment result 391 (828) (437)
Central administrative expenses (3,159)
-------------
Operating loss (3,596)
Profit on disposal of fixed
assets 23
Finance costs (90)
Interest income 3
Loss before tax (3,660)
Tax (312)
Loss after tax (3,972)
-------------
4. Earnings per share
The calculation of the basic and diluted loss per share is based
on the following data:
Unaudited Unaudited Audited
Year ended
Half year Half year 31 August
ended 28 February ended 28 February 2013
2014 GBP'000 2013 GBP'000 GBP'000
Loss for the purposes of basic loss
per share being net loss attributable
to owners of the Group (692) (1,923) (3,972)
Number of shares '000 '000 '000
Weighted average number of ordinary
shares for the purposes of basic
loss per share 1,964,324 884,841 1,273,527
Effect of dilutive potential ordinary
shares:
Share options 64,050 66,300 49,600
Ordinary shares issued post period
end - - 323,214
Weighted average number of ordinary
shares for the purposes of diluted
loss per share 2,028,374 951,141 1,646,341
Share options and ordinary shares issued post period end are
antidilutive and therefore are disregarded in the calculation of
diluted loss per share.
5. Trading Investments
Trading portfolio assets
Unaudited Unaudited Unaudited
Half year Half year Year ended
ended 28 ended 29 31 August
February February 2013
2014 GBP'000 2013 GBP'000 GBP'000
Long positions in market
making and dealing operations 312 406 298
The long trading portfolio assets are shares listed on LSE
Official List and AIM market.
5. Trading Investments (continued)
Trading portfolio liabilities
Unaudited Unaudited Audited
Year ended
Half year ended Half year 31 August
28 February ended 29 February 2013
2014 GBP'000 2013 GBP'000 GBP'000
Short positions in market making
and dealing operations 277 169 136
The short trading portfolio assets are shares listed on LSE
Official List and AIM market.
Trading portfolio assets and liabilities are classified as held
for trading and are repayable on demand.
Other financial instruments not disclosed in these notes are
level 1 and the carrying value is considered to be an appropriate
approximation for fair value. Level 1 financial instruments are
based on quoted prices in active markets for identical assets or
liabilities.
There have been no movements between Level 1 and Level 2 between
the periods.
6. Cash, cash equivalent
Half year Half year Year ended
ended 28 ended 29 31 August
February February 2013
2014 GBP'000 2013 GBP'000 GBP'000
Cash at bank and in hand 441 560 830
441 560 830
Client Money
Client money, held in segregated accounts not included in the
balance sheet, was GBP3.21 million (28 February 2013 - GBP2.53
million, 31 August 2013 - GBP2.37 million).
7. Share capital
Share capital
GBP'000
Authorised, allotted, issued and fully paid:
As at 29 February 2013
1,589.324 million ordinary shares of 0.1 pence each 1,589
Issue of shares 175
As at 31 August 2013:
1,764.324 million ordinary shares of 0.1 pence each 1,764
Issue of shares 324
As at 28 February 2014:
2,087.538 million ordinary shares of 0.1 pence each 2,088
The Company has one class of ordinary shares which carries no
right to fixed income.
On 8 November 2013 the Company raised a total of GBP905,000 via
the issue of 323,214,285 new ordinary shares of 0.1p each in the
Company at 0.28p per share.
Post period end on 3 April 2014 the Company raised a total of
GBP250,000 via the issue of 111,111,111 new ordinary shares of 0.1p
each in the Company at 0.225p per share
8. Share premium account
Share
premium
GBP'000
Balance at 31 August 2012 7,632
Premium arising on issue of equity
shares 2,821
Balance at 29 February 2013 10,453
Premium arising on issue of equity
shares 130
Balance at 31 August 2013 10,583
Premium arising on issue of equity
shares 581
Balance at 28 February 2014 11,164
---------
9. Tax
Half year Half year Year ended
ended 28 ended 28 31 August
February February 2013
2013 GBP'000 2013 GBP'000 GBP'000
Current tax:
UK Corporation tax - - -
- - -
Deferred tax:
Current period - - 312
The deferred tax asset recognised in the balance sheet of
GBP480,000 (28 February 2013: GBP792,000) is consistent with the
balance as at 31 August 2013. This is due to the bases and
forecasts on which the asset is calculated remaining consistent
with the year-end calculation.
10. Notes to the cash flow statement
Half year Half year Year ended
ended 28 ended 28 31 August
February February 2012
2014 GBP'000 2013 GBP'000 GBP'000
Loss for the period (692) (1,923) (3,972)
Adjustments for:
Finance costs 57 39 90
Interest income - (2) (3)
Deferred tax asset - - 312
Depreciation of fixtures and equipment 103 103 211
Share-based payment expense - 28 (116)
Shares issued for non-cash consideration - 366 1,650
Share premium write off - (275)
Gain on disposal of fixtures and equipment - 23
Operating cash flows before movements
in working capital (532) (1,389) (2,080)
Net assets acquired on acquisition of
Hume - (154) -
Decrease/(increase) in receivables 7,018 (7,995) (16,195)
Decrease in net long and short positions 127 9 84
Increase in investments - (51) (51)
(Decrease)/increase in payables (7,844) 7,883 17,479
Net cash from operating activities (1,231) (1,697) (763)
11. Acquisition, intangible assets and goodwill
On 14 December 2012, Hume acquired 100% of the issued share
capital of EPIC Investment Partners Limited and 100% of the issued
share capital of Hume Capital Guernsey Limited, obtaining control
of both companies. EPIC Investment Partners Limited owns 100% of
the issued share capital of Hume Capital Management Limited.
These companies were the trading or fund management companies
within the Hume Capital LLP group of companies. They are
multi-asset, multi-disciplinary firms with a focus on equities,
fixed income, absolute return strategies and multi-manager products
with total assets under management in excess of GBP100 million.
The Group believes that the financial stability that this
transaction provides will create opportunities for the enlarged
group to gain critical mass and to increase both assets under
management and the level of trading and corporate advisory work we
undertake.
Hume has recognised goodwill in respect of the Hume Capital
Management businesses acquisition as per the table below. The
factors that make up the goodwill recognised include but are not
limited to, the greater P/E ratio valuations placed on firms with
assets under management compared to pure trading houses and
assisting in delivering the benefits of recurring and non-trading
dependent revenue. In addition, goodwill was attributable to the
synergies from the Group's ability to combine clients and contact
bases and reduce head office costs to enhance shareholder
returns.
Group
GBP'000
Cost
At 31 August 2012 -
Additions 932
At 31 August 2013 and 28 February
2014 932
Impairment
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Charge for the period -
At 28 February 2014 -
Net book values
At 31 August 2013 and 28 February
2014 932
At 1 September 2012 -
The Group tests, for each Cash Generating Unit (CGU), at least
annually for goodwill impairment. The recoverable amount of a CGU
is determined based on value-in-use calculations. These
calculations use pre-tax cash flows based on financial budgets
prepared by management covering a five year period and then
extrapolated for the remaining useful economic life based on
relevant estimated growth rates of 9.8% for revenue and 6.7% for
costs. This is then adjusted for the anticipated terminal growth
value of 5% per annum. This net cash flow is then discounted by an
appropriate cost of capital of 11% in order to estimate their
present value.
11. Acquisition, intangible assets and goodwill (continued)
The key assumptions for the value-in-use calculations are those
regarding the discount rate, growth rates and expected changes to
revenues and costs in the period. Management has made these
assumptions based on past experience and future expectations in the
light of anticipated market conditions, combined with the actions
taken during this and last year to streamline the Group's
operations whilst maximising revenue potential.
Where the value-in-use exceeds the carrying value of the
goodwill asset, it has been concluded that no impairment is
necessary. However, where this is not the case, goodwill is written
down to the net present value of cash flows at the balance sheet
date.
The amounts recognised in respect of the identifiable assets
required and liabilities assumed are as set out in the table
below:
Intangible assets
Group
GBP'000
Cost
At 31 August 2012 -
Additions 451
At 31 August 2013 and 28 February
2014 451
Amortisation
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Charge for the year -
At 28 February 2014 -
Net book values
At 31 August 2013 and 28 February
2014 451
At 1 September 2012 -
The above addition to intangible assets represents the value of
the funds under management acquired and client base acquired as
part of the Hume acquisition. The Board has assessed the carrying
value of this intangible asset and confirms it remains appropriate.
This intangible asset is assumed to have an indefinite useful
life.
The asset was valued using a combination of the value applied to
the assets under management and a discounted cashflow model.
12. Related party transactions
Hume Capital Securities plc charges Hume Capital Management
Limited a monthly management fee. During the period under review
these fees totalled GBP245,000 (H1 2013: GBPnil). The monthly fees
are at the discretion of the Hume Capital Securities plc and Hume
Capital Management Limited's respective boards. As at the balance
sheet date GBPnil was outstanding (28 February 2013: GBPnil) in
relation to these fees.
Hume Capital Management Limited charges Hume Capital Guernsey
Limited a monthly management fee in relation to investment
management services. During the period under review these fees
totalled GBP113,513 (H1 2013: GBP56,755 (post acquisition only)).
The monthly fees are based on value of assets under management.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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