Arden Partners plc
Annual Report 2014
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Arden Partners plc
Arden Partners plc is an established stockbroker which provides a range of financial services to
corporate and institutional clients. Based in the United Kingdom and with strong international
links, Arden Partners plc’s shares trade on London's AIM market, part of the London Stock
Exchange.
Contents
Page:
1
2
3
5
6
7
9
12
16
17
19
20
21
22
23
24
25
26
49
Highlights
Chairman’s Statement
Chief Executive’s Statement
Strategic Report
Board of Directors
Report of the Directors
Corporate Governance
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Corporate Information
ARDEN PARTNERS PLC ANNUAL REPORT 2014
HIGHLIGHTS
FINANCIAL
Year ended
31 October
2014
Year ended
31 October
2013
Revenue
£8.0m
£10.1m
Profit before tax
Share based payments
Underlying profit before tax *
Earnings per share:
Basic
Underlying Basic †
Diluted
Underlying Diluted ‡
Dividend per ordinary share:
Interim
Proposed final
NON-FINANCIAL
£0.08m
£0.07m
£0.15m
0.5p
0.9p
0.5p
0.9p
-
0.75p
£1.3m
£0.07m
£1.4m
4.7p
5.1p
4.5p
4.9p
1.25p
1.75p
Funds/Debt issuances raised for clients
£457m
£283m
Retained corporate clients
Average number of staff
44
40
39
39
* Profit before tax as adjusted for the effect of share based payments
† Basic earnings per share as adjusted for the post-tax effect of share based payments, ignoring deferred tax
‡ Diluted earnings per share as adjusted for the post-tax effect of share based payments, ignoring deferred tax
- 1 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CHAIRMAN’S STATEMENT
After a slower than expected first half, the second half of the financial year saw a rebound in revenue, allowing
a small profit to be reported for the full year.
As mentioned previously, the sector is undergoing structural change and commission revenues continue to
decline. The Board continues to evolve the Arden business model to reflect these changes and to be more
focussed on the range of corporate and research services offered. Proactive recruitment of personnel has been
and is being undertaken to reflect this.
As was announced at the time, the Company bought back in aggregate 661,087 of its own Ordinary shares in
November 2013 and subsequent to this, 200,000 of these shares were re-sold, with the balance being currently
held, for the time being, in Treasury. The Board is minded in due course to make further market purchases of its
own Ordinary shares into Treasury, with a view, ultimately, to cancelling these shares.
Although the scope for dividend payments, in the Board’s view, has been limited during the year, in line with
the Board’s stated policy to reward stakeholders in the business and shareholders equally, a final dividend of
0.75 pence per share is recommended (interim dividend Nil per share), which if approved will result in a total
dividend for the year of 0.75 pence per share (2013: 3.0 pence per share).
Finally, I would like to thank all concerned for their contribution during the year.
Peter Moon
Chairman
14 January 2015
- 2 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CHIEF EXECUTIVE’S STATEMENT
After a difficult first half of the financial year I am pleased to report an improved performance and a good return
to profit in the second half. The profit before tax result of £0.08m for the full year should be read within the
context of a first half loss of £0.5m.
The above reflects the structural change happening in the industry, in particular to commission income driven
by new top down guidelines and compliance regulations. Over the past 12 months we have been positioning the
business to reflect this and will continue to do so in the first half of 2015.
We have invested into those areas of the business at the core of our strategy and believe we have a strong
platform to deliver growing and sustainable revenues within the corporate finance division of the business. In
support of this it is encouraging to see our retained client base increasing in number to 44 at the year end (2013:
39).
Whilst the Board expects no significant recovery in commission revenues we do expect a better performance
from market making and trading and this remains a cornerstone of our service offering to both institutional and
corporate clients.
Financial Review
Revenue in the year ended 31 October 2014 was £8.0m compared to £10.1m in 2013. The underlying profit
before tax was £0.15m compared to £1.4m in 2013. The profit before tax which is stated after charging share-
based payments was £0.08m and compares to a profit before tax in 2013 of £1.3m.
The basic earnings per share was 0.5p compared to 4.7p in 2013. Arden’s capital adequacy at the period end
was significantly ahead of regulatory requirements.
At the year end the Company held 461,087 ordinary shares of 10 pence each in Treasury, the total value of
which was £0.2m.
Equities Division
The equities division revenue fell from £5.1m in 2013 to £2.6m this year, further reflecting the reduced
commission rates in the industry.
Trading Investments
As reported at the interim stage, certain long term investments saw a decline in mark to market book accounting
values during the first half and whilst these are non-cash items, they resulted in a loss for the full year of £0.4m
against a profit of £0.3m in 2013.
Corporate Finance
Corporate Finance fees, including retainers, increased to £5.3m in the year, from £5.1m in 2013.
During the year we were involved in 18 transactions, compared to 11 in 2013. In aggregate we placed £93m
(2013: £283m) in equity, in addition to £364m (2013: Nil) of debt issuances, for corporate clients.
- 3 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CHIEF EXECUTIVE’S STATEMENT
Outlook
The current year has started satisfactorily. Arden has completed one IPO to date and is mandated on several
other corporate finance transactions which, subject to market conditions, will deliver in the first half.
Further out the corporate finance pipeline of work is very encouraging and although still market dependant,
gives confidence for a significantly improved performance for the year.
Finally, I would like to take this opportunity to thank all our staff and clients for their continued support and
commitment to the business.
James Reed-Daunter
Chief Executive Officer
14 January 2015
- 4 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
STRATEGIC REPORT
Business Review
Arden is pleased to report that the Group made a profit for the year. Our focus on cost and capital management
has enabled Arden to maximise operational cash flow and underlying profitability, despite continued pressures
on revenue streams particularly from institutional commissions.
A healthy statement of financial position and cash balances at the year-end maintains Arden’s strong position to
withstand market pressures and provides a platform to capitalise on potential opportunities within the market
and the sector in which we operate.
Strategy
Our strategy is to become the institutional and corporate broker of choice for (small / mid cap) companies
trading on London based markets. We aim to achieve this through:
• Providing incisive research material in a number of key sectors
• Providing an efficient execution and trading platform to institutional clients
• Providing a premium corporate broking service to an optimum number of corporate clients
• Selective and proactive recruitment into key areas to support and enhance the quality of our offer
• Growing sustainable revenue streams, both organically and generically
• Managing cost and risk exposure
This will then enable us to provide shareholder value through earnings growth and dividend distribution.
Key Performance Indicators (KPI’s)
Arden Partners Key Performance Indicators include the following measures:
• Profit before Tax
• Earnings per share
• Corporate Client Base
• Funds Raised / Debt issuances, for clients
• Maintaining capital adequacy ahead of regulatory requirements
Comparables against KPI’s are included in the Chief Executive’s report above - this is considered as an
extension of the Strategic Report.
Principal Risks and Uncertainties
By far the major risk the business faces is stock market conditions. Adverse market conditions may have a
significant negative effect on revenues and profitability. The Group mitigates some of this risk by targeting
revenues across a number of sectors of the market and by careful control of overheads.
Other risks include credit risk, liquidity risk and operational risk and an explanation of these is set out in note
24.
By order of the Board
Steve Wassell
Company Secretary
14 January 2015
- 5 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
BOARD OF DIRECTORS
Peter Moon (Independent Chairman and Non-Executive Director)
Peter has been involved in the institutional investment business for many years. In 2009 he retired from the
Universities' Superannuation Scheme Limited where he was Chief Investment Officer running a fund of some
£27.5 billion. Previous institutions where he has worked include British Airways Pensions, National Provident
and Slater Walker Investment Management. Peter has also acted as adviser to a number of Councils including
Lincolnshire and Middlesbrough. He has served as Chairman of the NAPF Stock Exchange Sub-Committee and
as a member of the NAPF Investment Committee.
Jonathan Keeling (Executive Deputy Chairman)
Jonathan is one of the founder members of Arden Partners. A graduate in economics, he joined Albert E Sharp
as an Equity Salesman in 1985, was made a Director in 1989 and Head of Small Cap Sales in the early 1990s.
Jonathan left Albert E Sharp in 2001 and then briefly worked for Harris Allday and Old Mutual Securities
before joining the team to form Arden Partners. Jonathan was Chief Executive Officer from January 2008 until
31 December 2012 when he became Executive Deputy Chairman.
James Reed-Daunter (Chief Executive Officer)
James is a Business Economics and Accountancy graduate of Southampton University. He joined Albert E
Sharp in 1992 in their private clients unit working on their unit trust and fund management desk. In 1995 he
moved to become an equity sales director selling small-mid cap stocks to UK investing institutions. James is a
founding partner of Arden Partners, joining in November 2002 as Head of Equity Sales, and was appointed
Chief Executive Officer on 1 January 2013.
Steve Wassell (Chief Operating Officer and Company Secretary)
Having established and developed his own business in the outdoor leisure sector over a fifteen year period prior
to it being acquired by Tandem Group plc in 2000, Steve subsequently held a number of senior operational roles
in private and publicly quoted companies within a diverse range of sectors, including Automotive, Leisure and
Social Care. Steve joined Arden Partners as Operations Director in January 2009.
Mark Ansell (Independent Non-Executive Director)
Mark is a Chartered Accountant and has significant experience as a business consultant and director involved in
strategic and corporate finance advice and in management and leadership roles. Mark has previously held
senior roles in many organisations including being the Deputy Chief Executive and Finance Director of Aston
Villa plc, Interim Chief Executive of Marketing Birmingham and as a Senior Partner and Partner in charge of
Corporate Finance of Deloitte in Birmingham and the Midlands. Mark is the Senior Independent Director.
- 6 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
The Directors present their Annual Report and audited Financial Statements for the financial year ended 31
October 2014.
Principal Activities
Arden is an established stockbroker which provides a range of financial services to corporate and institutional
clients. Based in the United Kingdom and with strong international links, Arden’s shares trade on London’s
AIM market, part of the London Stock Exchange.
Results and Dividends
The Consolidated Statement of Comprehensive Income for the year is set out on page 19.
The Directors propose to pay a final dividend of 0.75p per share (2013: 1.75p). This, when taken with the
interim dividend of Nil (2013: 1.25p per share) per share gives a total dividend of 0.75p per share in respect of
the year ended 31 October 2014 (2013: 3.00p per share).
The final dividend, if approved, will be paid on the 27 March 2015 to shareholders on the register at close of
business on 27 February 2015, with an ex-dividend of 26 February 2015.
Directors
The Directors of the Company who held office since 1 November 2013 were:
Jonathan Keeling
James Reed-Daunter
Steve Wassell
Mark Ansell
Peter Moon
Executive Deputy Chairman
Chief Executive Officer
Chief Operating Officer and Company Secretary
Non-Executive Director
Independent Chairman and Non-Executive Director
Directors’ Interests
The interests of current Directors in shares and options are disclosed in the Directors’ Remuneration Report set
out on pages 12 to 15.
Significant Shareholdings
In addition to the current Directors’ interests shown on page 14 and 15, the Directors have been notified that the
following shareholders had interests in 3% or more of the Company’s ordinary share capital (total voting rights)
at 14 January 2015:
Luke Johnson
Arden Partners Employee Benefit Trust
Richard Day
Alasdair Locke
Tony Bartlett
Mark Braddock
Robert Griffiths
Colin Kettle
Benjamin Thefaut
Unicorn Asset Management
%
9.67
6.58
6.08
6.07
5.41
5.11
4.89
4.56
3.19
3.02
Share Capital
Information relating to the Company’s ordinary share capital (including share repurchase and cancellation) is
shown in note 19 to the Financial Statements.
- 7 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
Treasury Shares
The board continued its programme of buying back the Company’s shares in order to enhance earnings under
the authority granted by the Shareholders.
During the year ended 31 October 2014 the Company purchased 661,087 ordinary shares for a consideration of
£0.3m, of these purchases 200,000 shares were subsequently re-sold to satisfy share options.
At 31 October 2014 the Company held 461,087 shares in Treasury at a value of £0.2m (2013: Nil).
Employee Share Trusts
The Group currently operates one Employee Benefit Share Trust, the Arden Partners Employee Benefit Trust,
which administers the Arden Partners plc share schemes as Trustee. At 31 October 2014 the Trust held
1,480,700 (6.58% of total voting rights) (2013: 1,823,868 (7.94% of total voting rights)) shares. The Trustees
have agreed to hold these shares to satisfy options granted under various share option scheme’s.
Employment Policies
Employees are encouraged to participate in the success of the Group through a performance based incentive
scheme incorporating bonus and share option arrangements. Employees are kept informed of progress at
regular review meetings.
Directors’ and Officers’ Liability Insurance
The Company purchases and maintains liability insurance for its Directors and Officers as permitted by the
Companies Act 2006. This insurance was in force throughout the year ended 31 October 2014 and remains in
force at the date of this Report.
Financial Instruments
Details of the use of financial instruments by the Group and Company are contained in note 24 of the Financial
Statements.
Auditors
The Directors have taken all the steps that they ought to have taken to make themselves aware of any
information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors
are aware of that information. The Directors are not aware of any relevant audit information of which the
auditors are unaware.
The Audit Committee reviews and approves the appointment of external auditors and monitors their
independence. BDO LLP have expressed their willingness to continue in office and an ordinary resolution re-
appointing them as auditors and authorising the Directors to determine their remuneration, will be proposed at
the forthcoming Annual General Meeting.
By order of the Board
Steve Wassell
Company Secretary
14 January 2015
- 8 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CORPORATE GOVERNANCE
Introduction
The company has not applied the “comply or explain” principles of the UK Corporate Governance Code (“the
Code”) and the information in this report does not explain how the Code has been applied. The company refers
to the Code in order to ascertain best practice.
The Directors and the Board
The composition is as follows:
Peter Moon
Jonathan Keeling
James Reed-Daunter
Steve Wassell
Mark Ansell
Independent Chairman (Non-Executive)
Chairman of Nominations Committee
Executive Deputy Chairman
Chief Executive Officer
Chief Operating Officer and Company Secretary
Senior Independent Director (Non-Executive)
Chairman of Audit Committee
Chairman of Remuneration Committee
Biographical details of all the Directors are set out on page 6.
Board meetings
The Board has regular scheduled full meetings and will meet at other times as necessary. The Board is
responsible for strategic and major operational issues affecting the Group. It reviews financial performance,
regulatory compliance, and monitors key performance indicators. All directors receive appropriate information
on a timely basis to enable them to discharge their duties accordingly. The Board will consider any ad hoc
matters of significance to the Group including corporate activity. Attendance at meetings by members of the
Board during the year ended 31 October 2014 was as follows:
Total number of meetings
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Mark Ansell
Peter Moon
Board
Audit
Committee
Remuneration
Committee
9
9
9
9
9
9
2
n/a
n/a
2
2
2
1
n/a
n/a
n/a
1
1
Re-election of Directors
In accordance with the Company’s Articles, and to ensure compliance with the UK Corporate Governance
Code, certain of the Directors are required to be re-elected at Annual General Meetings of the Company. In
accordance with the Articles, Jonathan Keeling is required to retire at the forthcoming Annual General Meeting
and, being eligible, offers himself for re-election. The Board supports this re-appointment having assessed
performance and value to the Board.
- 9 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CORPORATE GOVERNANCE
Remuneration Committee
The Remuneration Committee, which comprises the Independent Non-Executive Directors, is chaired by Mark
Ansell and has responsibility for determining remuneration of Executive Directors and senior members of staff.
This Committee makes decisions in consultation with the Chief Executive Officer and no Director plays a part
in any decision about their own remuneration. This Committee also reviews bonus and equity arrangements for
the Group’s senior employees and in addition has responsibility for supervising the Arden Partners Share
Option Scheme and the grant of options under its terms.
The remuneration of all Non-Executive Directors is fixed by the Board.
Audit Committee
The Audit Committee, which comprises the Independent Non-Executive Directors, is chaired by Mark Ansell
and has responsibilities which include the review of:
• The Group’s internal control environment.
•
•
Financial risks (including market risk in relation to the Group’s market making activities).
Financial statements, reports and announcements, including whether the Board’s responsibility to present
an annual report that is fair, balanced and understandable. The Audit Committee evidences this review in a
report to the Board following its meeting with the auditors to discuss their Report to the Audit Committee
and includes an assessment of the information provided in support of the Board’s statement on going
concern and on any significant issues and how those issues were addressed.
Independence of auditors, including a review of the non-audit services provided and the level of such fees
relative to the audit fee. The Audit Committee is satisfied that the independence of BDO LLP as auditors
has not been impaired through the provision of non-audit services. Details of auditor’s fees are shown in
note 3 of the financial statements on page 31. A review is also carried out on the effectiveness of external
audit.
•
• Ensuring the Group has a policy which allows any member of staff to raise, in confidence, any concern
about possible impropriety in matters of financial reporting or other matters, and to ensure that suitable
arrangements are in place for a proportionate independent investigation of such matters including any
follow-up action required.
Nominations Committee
The Committee’s responsibilities include ensuring that the size and composition of the Board is appropriate for
the needs of the Group including an assessment of diversity profile, selecting the most suitable candidate or
candidates for the Board and to oversee succession planning aspects for the Board. This Committee is chaired
by Peter Moon.
Operations Board
The Group is managed by an Operations Board which has responsibility for implementation of strategy and
monitoring progress of delivery against key objectives, along with management of operational risk. The
Committee also reviews financial performance against budgets and key performance indicators. The Operation
Board is chaired by the Chief Operating Officer.
Risk Committee
The Risk Committee is chaired by the Chief Operating Officer and has the Director of Compliance and the Head
of Corporate Finance (and Technical Director) as permanent members. This Committee is charged with
monitoring risk exposures including those which arise through trading and holding financial instruments,
corporate finance business, regulatory and compliance, capital adequacy and financial reporting risk. This
Committee also has responsibility for monitoring the Group’s internal control environment.
A further explanation of risks which are faced by the Group, is set out in note 24 to the Financial Statements.
- 10 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CORPORATE GOVERNANCE
Internal Control
The Board confirms that there is an ongoing process for identifying, evaluating and managing significant risks
faced by the Group, which complies with the guidance “Internal Control: Guidance for Directors on the
Combined Code”. This has been in place throughout the year and up to the date of approval of the Financial
Statements. The process is regularly reviewed by the Board.
The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness.
However, such a system can only provide reasonable, but not absolute, assurance against material misstatement
or loss. The Group’s system of internal control includes appropriate levels of authorisation and segregation of
duties. Financial information is presented to the Board each month comprising management accounts and other
financial data which allows for a rigorous review of performance.
Insurance
The Group maintains appropriate insurance cover in respect of litigation against the Directors and Officers of
the Group.
Going Concern
After making enquiries, the Directors have a reasonable expectation that the Group will have adequate resources
to continue in operational existence for the foreseeable future. For this reason, they continue to believe it is
appropriate to adopt the going concern basis in preparing the Financial Statements.
- 11 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
DIRECTORS’ REMUNERATION REPORT
Introduction
Whilst the Group is not obliged to comply with The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, the Directors have agreed to adopt the ethos of those regulations and to disclose
certain information relating to the current Directors. The Directors are not intending to comply fully with
Schedule VIII of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008, but are providing disclosures on a voluntary basis and therefore full disclosure required by the regulations
have not been made.
This Report also describes how the Board has applied the Principles of Good Governance relating to Directors’
remuneration. This Report is not subject to audit and a resolution to approve it will be proposed at the Annual
General Meeting of the Company at which the Financial Statements are to be approved.
On 1 January 2013 the Group became subject to the conditions of the Financial Conduct Authority’s (“the
FCA’s”) Remuneration Code (“the Remuneration Code”). The Remuneration Committee believes that the
Group’s Remuneration Policies and procedures are both relevant and proportionate to the Remuneration Code
requirements. The Group is classified as a “Tier 3” entity and to that extent is not subject to the detailed
provisions relating to deferral and retained shares.
Remuneration Policy
Arden Partners has a policy to attract, motivate and reward individuals of the highest calibre who are committed
to grow the value of the business and to maximise returns to shareholders.
This policy is as relevant to Executive Directors as it is to employees and the rewards of Executive Directors are
aligned with those of shareholders in reflecting the performance of the Group.
The Group operates in a business environment where it is common practice to pay bonuses. The Group’s policy
is predicated on a principle that all bonuses are discretionary and are based on a measure of Group profitability.
The Group’s business is such that profits and losses from trading are essentially of a short-term nature and can
be accurately measured. Where appropriate the bonus pool is adjusted to take account of any unrealised profits
and, given the Group’s risk policies and associated controls, the Remuneration Committee is of the opinion that
the bonus policy does not encourage behaviour that may conflict with the Group’s overall approach to risk.
Whilst the Group is not subject to Remuneration Code guidelines regarding deferral and retained shares, the
Remuneration Committee believes that an element of deferral and claw-back of bonus is appropriate in certain
circumstances including the level of bonus.
The Remuneration Committee does not believe that bonuses should be capped by reference to salary levels for
any employee, including Executive Directors, as this could have an adverse impact on performance. Basic
salary levels for Executive Directors are set at reasonable levels by reference to observable peer group
comparators and when compared to similar salary levels elsewhere in the business.
Where appropriate, an employee’s overall remuneration package may involve the grant of options under the
Group’s share option scheme as noted below.
Directors’ Service Contracts
No Director has a service contract for longer than twelve months and no contract contains provisions for sums
to be paid on termination. Copies of Directors’ service contracts will be available for inspection at the Annual
General Meeting.
- 12 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
DIRECTORS’ REMUNERATION REPORT
Pension Arrangements
The Group does not operate a final salary pension scheme. Executive Directors who are entitled to receive
pension contributions may nominate a defined contribution pension scheme into which the Company makes
payments on their behalf.
Share Options
Details of the Arden Partners plc Share Option Scheme are given in note 19 to the Financial Statements. The
Remuneration Committee has responsibility for supervising the scheme and the grant of options under its terms.
The Company’s policy is to use the Share Option Scheme to attract and retain key senior employees including
the Executive Directors. Any grant of options is at the discretion of the Remuneration Committee and will take
into account individual performance and responsibilities. Where appropriate, a grant of options will incorporate
performance criteria and for Executive Directors may incorporate earnings per share, total shareholder return
and return on capital employed. Some of these aspects will be bench-marked against a pool of similar
competitors. Where appropriate such measures may include non-financial performance measures. All
remuneration incentives are set in context to the Group’s risk policies.
Directors’ Remuneration
A summary of the total remuneration paid to Directors who served during the year ended 31 October 2014 is set
out below:
Executive Directors
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Non-Executive Directors
Peter Moon
Mark Ansell1
Total
Salary,
fees and
benefits
£’000
Pension
contributions
£’000
Incentive
payments
£’000
Total
2014
£’000
152
152
112
50
40
506
18
18
12
-
-
48
-
-
-
-
-
-
170
170
124
50
40
554
Notes:
1.
An element of the remuneration was paid to a third party company, Mark Ansell Consulting Limited.
- 13 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
DIRECTORS’ REMUNERATION REPORT
A summary of the total remuneration paid to current Directors who served during the year ended 31 October
2013 is set out below:
Executive Directors
James Reed-Daunter1
Jonathan Keeling1
Steve Wassell
Non-Executive Directors
Peter Moon
Mark Ansell2
Total
Salary,
fees and
benefits
£’000
Pension
contributions
£’000
Incentive
payments
£’000
Gain on
exercise of
share options
£’000
Total
2013
£’000
157
172
120
35
29
513
19
20
12
-
-
51
80
90
25
-
-
195
46
-
73
-
-
119
302
282
230
35
29
878
Notes:
1.
2.
The incentive payments to James Reed-Daunter and Jonathan Keeling reflected their ongoing sales roles.
An element of the remuneration was paid to a third party company, Mark Ansell Consulting Limited.
Directors’ Interests in Ordinary Shares of Arden Partners plc
The Directors in office at the year-end had interests in the ordinary share capital of the Company (all of which
were beneficial) as shown below:
Executive Directors
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Non-Executive Directors
Peter Moon
Mark Ansell
31 October
2014
Number
Percentage
Interest
31 October
2013
Number
2,853,644
2,459,334
763,743
112,500
111,750
12.43%
10.71%
3.33%
0.49%
0.49%
2,853,644
2,534,334
763,743
112,500
111,750
- 14 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
DIRECTORS’ REMUNERATION REPORT
Directors’ Interests in Share Options
The following Directors had interests in options over ordinary shares of the Company as shown below:
Executive Directors
James Reed-Daunter1
31 October
2013
Number
Options
granted in
year
Number
Options
exercised in
year
Number
31 October
2014
Number
500,000
-
-
500,000
Notes:
1.
These options were granted on 23 July 2013 under the Arden Partners Share Plan 2013 and are
exercisable subject to the achievement of Company performance related conditions. These options
cannot be exercised until 31 December 2015, and have an expiry date of 31 December 2022.
Further details of option schemes are set out in note 19 to the Financial Statements.
Approval
This Report was approved by the Remuneration Committee and signed on its behalf by:
Mark Ansell
Chairman of Remuneration Committee
14 January 2015
- 15 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report (Including Director’s Report and Strategic
Report) and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the Group and Company financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union. Under company law the directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the state
of affairs of the Group and Company and of the profit or loss of the Group for that period. The directors are
also required to prepare financial statements in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union,
subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on
a website. Financial statements are published on the Company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility
of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements
contained therein.
- 16 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARDEN
PARTNERS PLC
For the year ended 31 October 2014
We have audited the financial statements of Arden Partners PLC for the year ended 31 October 2014 which
comprise the Group and Company statement of financial position, the group statement of comprehensive
income, the Group and Company statement of cash flows, the Group and Company statement of changes in
equity and the related notes. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the 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 Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and the parent Company’s
affairs as at 31 October 2014 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
- 17 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARDEN
PARTNERS PLC
For the year ended 31 October 2014
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 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
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Neil Fung-On (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
14 January 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
- 18 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2014
Revenue
Administrative expenses
Profit from operations
Finance income
Finance expense
Profit before taxation
Income tax credit/(expense)
Profit after taxation
Other comprehensive income for the year:
Items that will or may be reclassified subsequently to
profit or loss:
Decrease in fair value of available for sale financial assets
Total comprehensive income for the year attributable to
equity shareholders
Earnings per share
Basic
Diluted
Note
2
7
8
9
10
10
2014
£’000
7,955
(7,936)
19
61
(5)
75
40
115
(12)
103
0.5p
0.5p
2013
£’000
10,103
(8,829)
1,274
71
(4)
1,341
(351)
990
(11)
979
4.7p
4.5p
- 19 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2014
Note
2014
£’000
2014
£’000
2013
£’000
2013
£’000
2,350
467
4,770
102
8,282
8
(75)
(4,886)
-
11
13
14
15
16
24
17
18
18
19
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Assets held at fair value
Available for sale financial assets
Trade and other receivables
Stock borrowing collateral
Cash and cash equivalents
Corporation tax asset
Total current assets
Total assets
Current liabilities
Financial liabilities held at fair value
Trade and other payables
Corporation tax liability
Total current liabilities
Total liabilities
Net assets
Shareholders’ equity
Called up share capital
Capital redemption reserve
Share premium account
Employee Benefit Trust reserve
Available for sale reserve
Retained earnings
Total equity before deduction of own
shares
Own shares
Total equity
43
86
129
15,979
16,108
(4,961)
(4,961)
11,147
2,296
467
2,933
(849)
(33)
6,597
11,411
(264)
11,147
6,756
479
18,578
1,098
3,733
-
(178)
(18,893)
(315)
92
83
175
30,644
30,819
(19,386)
(19,386)
11,433
2,296
467
2,933
(1,046)
(21)
6,804
11,433
-
11,433
The Financial Statements were approved by the Board of Directors and authorised for issue on 14 January 2015.
Steve Wassell
Company Secretary
Mark Ansell
Chairman of the Audit Committee
The notes on pages 26 to 48 form part of these financial statements
- 20 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
COMPANY STATEMENT OF FINANCIAL POSITION
At 31 October 2014
Company number: 4427253
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Assets held at fair value
Available for sale financial assets
Trade and other receivables
Stock borrowing collateral
Cash and cash equivalents
Corporation tax asset
Total current assets
Total assets
Current liabilities
Financial liabilities held at fair value
Trade and other payables
Corporation tax liability
Total current liabilities
Total liabilities
Net assets
Shareholders’ equity
Called up share capital
Capital redemption reserve
Share premium account
Employee Benefit Trust reserve
Available for sale reserve
Retained earnings
Total equity before deduction of own
shares
Own shares
Total equity
Note
2014
£’000
2014
£’000
2013
£’000
2013
£’000
2,350
467
4,958
102
8,273
8
(75)
(5,065)
-
11
13
14
15
16
24
17
18
18
19
43
86
129
16,158
16,287
(5,140)
(5,140)
11,147
2,296
467
2,933
(849)
(33)
6,597
11,411
(264)
11,147
6,756
6,756
479
18,766
1,098
3,728
-
(178)
(19,076)
(315)
92
83
175
30,827
31,002
(19,569)
(19,569)
11,433
2,296
467
2,933
(1,046)
(21)
6,804
11,433
-
11,433
The Financial Statements were approved by the Board of Directors and authorised for issue on 14 January 2015.
Steve Wassell
Company Secretary
Mark Ansell
Chairman of the Audit Committee
The notes on pages 26 to 48 form part of these financial statements
- 21 -
Note
2014
£’000
2013
£’000
75
1,341
538
82
(57)
77
715
18,673
(14,111)
5,277
(286)
4,991
(33)
57
24
222
(322)
-
(366)
(466)
4,549
3,733
8,282
193
123
(67)
76
1,666
(11,514)
10,001
153
(116)
37
(24)
67
43
332
(1,322)
25
(264)
(1,229)
(1,149)
4,882
3,733
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 October 2014
Operating activities before taxation
Profit before tax
Adjustments for:
Fair value adjustments of derivative financial assets
Depreciation of fixtures, fittings and computer equipment
Net interest receivable
Share based payments
Operating cash flow before changes in working capital
Decrease/(increase) in operating assets
(Decrease)/increase in operating liabilities
Cash generated from operations
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchases of property, plant and equipment
Net interest received
Net cash flows from investing activities
Financing activities
Proceeds from the sale of own shares
Purchase of own shares
Issue of shares
Dividends paid to equity shareholders
Net cash flows from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
The notes on pages 26 to 48 form part of these financial statements
- 22 -
Note
2014
£’000
2013
£’000
75
1,341
538
82
(57)
77
715
18,673
(14,115)
5,273
(286)
4,987
(33)
57
24
222
(322)
-
(366)
(466)
4,545
3,728
8,273
193
123
(67)
76
1,666
(11,513)
10,001
154
(116)
38
(24)
67
43
332
(1,322)
25
(264)
(1,229)
(1,148)
4,876
3,728
ARDEN PARTNERS PLC ANNUAL REPORT 2014
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 October 2014
Operating activities before taxation
Profit before tax
Adjustments for:
Fair value adjustments of derivative financial assets
Depreciation of fixtures, fittings and computer equipment
Net interest receivable
Share based payments
Operating cash flow before changes in working capital
Decrease/(increase) in operating assets
(Decrease)/increase in operating liabilities
Cash generated from operations
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchases of property, plant and equipment
Net interest received
Net cash flows from investing activities
Financing activities
Proceeds from the sale of own shares
Purchase of own shares
Issue of shares
Dividends paid to equity shareholders
Net cash flows from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
The notes on pages 26 to 48 form part of these financial statements
- 23 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2014
Share
capital
£’000
Share
Premium
account
£’000
Capital
Redemption
Reserve
£’000
Own
shares
£’000
Employee
Benefit
Trust
Reserve
£’000
Available
for sale
Reserve
£’000
Retained
earnings
£’000
Total
£’000
2,501
2,933
237
(661)
(607)
(10)
7,214
11,607
-
-
-
25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,296
2,933
467
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(696)
299
230
1,058
-
-
-
-
-
-
-
-
-
-
(322)
58
-
-
-
-
-
-
-
(626)
-
-
-
187
-
-
(11)
(11)
-
-
-
-
-
-
-
990
-
990
-
-
-
(1,058)
76
(154)
990
(11)
979
25
(1,322)
299
-
76
33
(264)
(264)
(1,046)
(21)
6,804
11,433
-
-
-
-
-
-
197
-
-
(12)
(12)
-
-
-
-
-
115
-
115
-
-
77
115
(12)
103
(322)
58
77
(33)
164
(366)
(366)
Own shares cancelled
(230)
Balance at
1 November 2012
Profit for year
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Issue of shares
Purchase of own shares
Sale of own shares
Share based payments
Sale of shares by
Employee Benefit Trust to
satisfy employee share
schemes
Dividends paid to equity
shareholders
Balance at
31 October 2013
Profit for year
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Purchase of own shares
Sale of own shares
Share based payments
Sale of shares by
Employee Benefit Trust to
satisfy employee share
schemes
Dividends paid to equity
shareholders
Balance at
31 October 2014
2,296
2,933
467
(264)
(849)
(33)
6,597
11,147
Notes
1.
The capital redemption reserve represents the nominal value of shares that have been cancelled that were
previously held as Own Shares.
2.
3.
Own Shares represents shares purchased to be held as treasury shares at historical cost.
The Employee Benefit Trust reserve represents shares held in the parent Company by the Arden Partners
Employee Benefit Trust which is consolidated in these financial statements in accordance with the
accounting policy in note 1.
During the year 343,168 ordinary shares were issued from the employee benefit trust to satisfy employee
share options (2013: 325,000).
The notes on pages 26 to 48 form part of these financial statements
- 24 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2014
Share
capital
£’000
Share
Premium
account
£’000
Capital
Redemption
Reserve
£’000
Own
shares
£’000
Employee
Benefit
Trust
Reserve
£’000
Available
for sale
Reserve
£’000
Retained
earnings
£’000
Total
£’000
2,501
2,933
237
(661)
(607)
(10)
7,214
11,607
-
-
-
25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,296
2,933
467
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(696)
299
230
1,058
-
-
-
-
-
-
-
-
-
-
(322)
58
-
-
-
-
-
-
-
(626)
-
-
-
187
-
-
(11)
(11)
-
-
-
-
-
-
-
990
-
990
-
-
-
(1,058)
76
(154)
990
(11)
979
25
(1,322)
299
-
76
33
(264)
(264)
(1,046)
(21)
6,804
11,433
-
-
-
-
-
-
197
-
-
(12)
(12)
-
-
-
-
-
115
-
115
-
-
77
115
(12)
103
(322)
58
77
(33)
164
(366)
(366)
Own shares cancelled
(230)
Balance at
1 November 2012
Profit for year
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Issue of shares
Purchase of own shares
Sale of own shares
Share based payments
Sale of shares by
Employee Benefit Trust to
satisfy employee share
schemes
Dividends paid to equity
shareholders
Balance at
31 October 2013
Profit for year
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Purchase of own shares
Sale of own shares
Share based payments
Sale of shares by
Employee Benefit Trust to
satisfy employee share
schemes
Dividends paid to equity
shareholders
Balance at
31 October 2014
2,296
2,933
467
(264)
(849)
(33)
6,597
11,147
Notes
1.
The capital redemption reserve represents the nominal value of shares that have been cancelled that were
previously held as Own Shares.
2.
3.
Own Shares represents shares purchased to be held as treasury shares at historical cost.
The Employee Benefit Trust reserve represents shares held in the parent Company by the Arden Partners
Employee Benefit Trust which is consolidated in these financial statements in accordance with the
accounting policy in note 1.
During the year 343,168 ordinary shares were issued from the employee benefit trust to satisfy employee
share options (2013: 325,000).
The notes on pages 26 to 48 form part of these financial statements
- 25 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
1)
Accounting policies
Arden Partners plc is a public limited company incorporated in the United Kingdom under the
Companies Act 2006. The address of the Company’s registered office is set out on page 49.
Basis of preparation
The principal accounting policies applied in the preparation of the financial statements are set out
below. The policies have been consistently applied to the Group and Company to all the years
presented.
These policies are in accordance with International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively, “IFRS”) issued by the International Accounting
Standards Board as endorsed for use in the European Union. The Group and Company Financial
Statements have been prepared in accordance with IFRS. These financial statements have also been
prepared in accordance with those parts of the Companies Act 2006 that are applicable to companies
preparing their financial statements in accordance with IFRS.
The Consolidated and Company Financial Statements have been prepared under the historical cost
convention as modified by the revaluation of certain financial assets, financial liabilities and derivative
instruments to fair value.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating
policies of another entity or business so as to obtain benefits from its activities, it is classified as a
subsidiary. The consolidated financial statements present the results of the Company and its
subsidiaries (the “Group”) as if they formed a single entity. Intercompany transactions and balances
between Group companies are therefore eliminated in full.
The Company has taken advantage of Section 408 of the Companies Act 2006, and the Statement of
Comprehensive Income of the parent Company is not presented. The parent Company’s profit after
taxation for the financial year amounted to £115,000 (2013: £990,000).
New standards effective during the year
None of the new standards, interpretations or amendments, which are effective for the first time in these
financial statements, has had a material impact on these financial statements.
Standards that have been issued, but are not yet effective for the year ended 31 October 2014 include:
IFRS 10 Consolidated Financial Statements
Offsetting Financial Assets and Liabilities (Amendments to IAS 32)
Annual improvements to IFRSs 2010-2012 Cycle
Annual improvements to IFRSs 2011-2013 Cycle
Annual improvements to IFRSs 2012-2014 Cycle
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
Disclosure Initiative: Amendments to IAS 1
1 Jan 2014
1 Jan 2014
1 Feb 2015
1 Jul 2014
1 Jan 2016
1 Jan 2017
1 Jan 2018
1 Jan 2016
The Board is currently assessing the impact of IFRS 9. All other standards and interpretations are not
expected to have a material impact on the financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently by the
Group to all periods presented in these consolidated financial statements.
- 26 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Revenue
Revenue comprises the net realised and unrealised trading gains or losses of shares traded on a principal
basis, commissions and fees earned from trading shares on an agency basis, together with fees derived
from corporate finance activities, broking services and retainers.
Revenue is recognised at the fair value of the consideration receivable, to the extent that it is probable
that the economic benefits associated with the transaction will flow to the Group. Where consideration
includes financial instruments or other non-cash items, revenue is measured at fair value using an
appropriate valuation method.
Corporate Finance Division
The Group recognises revenue at the point of completing an assignment to the extent that it has
obtained the right to consideration through performance of its services to clients.
Deal fees and placing commissions are only recognised once there is certainty of the contractual
entitlement for the Group to receive them.
Corporate retainer fees relate to revenue arising from advisory services provided to retained clients and
are recognised on an accruals basis.
Equities Division
Institutional commissions are recognised on trade dates. Net trading gains or losses are the realised and
unrealised profits and losses from market making long and short positions on a trade date basis.
Interest receivable
Finance income, which comprises principally interest received, is recognised using the effective interest
rate method.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and impairment in value.
Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and
equipment evenly over their expected useful lives on a straight line basis. It is calculated at the
following rates:
Improvements to leasehold buildings
Fixtures, fittings and computer equipment
-
-
33.33% per annum
33.33% per annum
Investments
Investments in subsidiaries are stated at cost less, where appropriate, provision for impairment.
Financial assets
Financial assets comprise held for trading instrument, those designated at fair value through profit or
loss, available for sale assets, and loans and receivables. The Group classifies its financial assets into
one of the categories discussed below, depending on the purpose for which the asset was acquired. The
Group has not classified any of its financial assets as held to maturity.
- 27 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
The Group's accounting policy for each category is as follows:
•
•
•
Assets held at fair value: Held for trading instruments represent long market making positions
and are measured at fair value with gains and losses from changes in fair value being taken to the
Statement of Comprehensive Income. Derivative financial assets may include options which are
valued using the Black-Scholes model, which management intends to hold in the short term and
any change in fair value are taken to the Statement of Comprehensive Income. The derivative
financial instruments are not designated as hedging instruments.
Assets designated at fair value through profit and loss are valued with reference to current quoted
prices in active markets. They are designated as fair value through profit and loss as
management review performance of the asset as part of a portfolio of assets at fair value.
Loans and receivables: These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise principally through
the provision of services to customers (e.g. trade receivables), but also incorporate other types of
contractual monetary asset. They are initially recognised at fair value plus transaction costs that
are directly attributable to their acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant
financial difficulties on the part of the counterparty or default or significant delay in payment)
that the Group will be unable to collect all of the amounts due under the terms receivable, the
amount of such a provision being the difference between the net carrying amount and the present
value of the future expected cash flows associated with the impaired receivable. For trade
receivables, which are reported net, such provisions are recorded in a separate allowance account
with the loss being recognised within administrative expenses in the 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.
Included within loans and receivables are market receivables which comprise of sold security
transactions awaiting settlement at year end. These balances are shown gross and are recognised
on trade date at cost.
Available for sale assets: Non-derivative financial assets not included in the above categories
are classified as available for sale. They are carried at fair value with changes in fair value
recognised directly in a separate component of equity (available for sale reserve) these are
temporary differences which will be recognised in the Statement of Comprehensive Income upon
sale.. Where there is a significant or prolonged decline in the fair value of an available for sale
financial asset (which constitutes objective evidence of impairment), the full amount of the
impairment, including any amount previously charged to equity, is recognised in the income
statement. Purchases and sales of available for sale financial assets are recognised on trade or
settlement date with any change in fair value between trade date and the reporting date being
recognised in the revaluation reserve. On sale, the amount held in the available for sale reserve
associated with that asset is removed from equity and recognised in the Statement of
Comprehensive Income.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances that are readily convertible to a known
amount of cash and are not subject to a significant risk of changes in value. Cash and cash equivalents
all have original dates to maturity of three months or less.
- 28 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Financial liabilities
The Group classifies its financial liabilities into one of the categories discussed below, depending on the
purpose for which the liability was acquired. The Group's accounting policy for each category is as
follows:
•
•
Fair value through profit or loss: These financial liabilities represent short market-making
positions and are stated at fair value. Gains and losses from changes in fair value are taken to the
Statement of Comprehensive Income.
For financial liabilities which are quoted in active markets, fair values are determined by
reference to the current quoted offer price.
Other financial liabilities: These comprise market payables, trade payables, other payables and
accruals. They are initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Included within other financial liabilities are market payables which comprise of purchased
security transactions awaiting settlement at the year end. These balances are shown gross and are
recognised on trade date at cost.
Stock borrowing collateral
The Group may enter into stock borrowing arrangements with certain institutions which are entered into
on a collateralised basis with securities or cash advances received as collateral.
Under such arrangements a security is purchased with a commitment to return it at a future date at a
future agreed price. The securities purchased are not recognised on the Statement of Financial Position
and the transaction is treated as a secured loan made for the purchase price.
Where cash has been used to effect the purchase, the cash collateral amount is recorded as a pledged
asset on the Statement of Financial Position.
Foreign currency transactions
Transactions in foreign currencies are translated into sterling at the exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated into sterling at the exchange rate ruling at the reporting date. Foreign exchange
differences arising on translation are recognised in the Statement of Comprehensive Income within
administrative expenses.
Taxation
Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income
tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided based upon temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
- 29 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is
no longer probable that the related tax benefit will be realised.
Dividends
Dividends are recognised when they become legally payable. Interim dividends are recognised when
paid. Final dividends are recognised when approved by shareholders at an Annual General Meeting.
Dividends unpaid at the reporting date are only recognised as a liability at that date to the extent that
they are appropriately authorised and are no longer at the discretion of the Company.
Own Shares
The cost of purchasing Treasury Shares held by the Company are shown as a deduction against equity
and are declared as Own Shares.
Leased assets
Operating lease rentals are charged to the Statement of Comprehensive Income on a straight line basis
over the period of the lease.
Pension costs
Contributions to defined contribution pension schemes are charged to the Statement of Comprehensive
Income in the period in which they become payable.
Employee Benefit Trust
Arden Partners Employee Benefit Trust is a trust established by Trust deed in 2006 and the assets and
liabilities are held separately from the Company. Its assets and liabilities are fully consolidated in the
consolidated and Company Statements of Financial Position, and holdings of Arden Partners plc shares
by the Arden Partners Employee Benefit Trust are shown as a deduction from Company and
consolidated equity under the heading “Employee Benefit Trust reserve”.
Share based payments – equity settled
All options granted are recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value is measured using the Black-Scholes model,
taking into account the terms and conditions upon which the options were granted.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments
expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. Vesting conditions for all the share option schemes
relate to service conditions and profit, which are non market conditions the features of which are not
incorporated not the fair value of the option. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market conditions are satisfied. The cumulative expense is
not adjusted for failure to achieve a market vesting condition.
- 30 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Critical accounting estimates
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expense. The estimates
and associated assumptions are based on historical experience and various other factors that are
believed to be reasonable in the circumstances, the results of which form the basis of judgements about
carrying amounts of assets and liabilities. Actual results may differ from those amounts.
Judgements made by management that may have a significant effect on the financial statements relate
principally to the Group’s equity-settled share-based remuneration schemes for employees. Employee
services received, and the corresponding increase in equity, are measured by reference to the fair value
of the equity instruments at the date of grant. The fair value of share options is estimated by using
valuation models, such as Black-Scholes, on the date of grant based on certain assumptions.
Those assumptions are described in note 19 and include, among others, the dividend growth rate and
expected volatility.
2)
Revenue
Revenue is wholly attributable to the principal activity of the Group and arises solely within the United
Kingdom.
Equities Division
Corporate Finance Division
Total revenue
2014
£’000
2,689
5,266
7,955
2013
£’000
5,046
5,057
10,103
Included within revenue of the Equities Division is a loss of £538,000 (2013: loss £190,000) relating to
the fair value adjustment of derivatives held within assets that are fair valued through profit or loss.
The Directors are of the opinion that there are only two operating segments and while segment revenues
are reviewed internally business resources are not allocated to segments for the purposes of deriving
either profit or assets. In 2014, none of the Group’s customers contributed 10% or more of the Group’s
revenue.
3)
Profit from operations
This is arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Operating lease costs
Auditor’s remuneration:
Audit services:
Company
Subsidiaries
Tax services
Audit related assurance services
Foreign currency losses
Share based payments
- 31 -
2014
£’000
82
241
34
1
6
17
(2)
77
2013
£’000
123
244
35
1
6
12
(2)
76
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
4)
Dividends
Dividends recognised in the year consisted of the 2013 final dividend of £366,000 (1.75p per share).
Dividends recognised in the prior year consisted of the 2013 interim dividend of £264,000 (1.25p per
share).
5)
Employees
Staff costs (including Directors) of the Group and Company consist of:
Wages and salaries
Incentive payments
Share based payments (see note 19 for further details)
Social security costs
Other pension costs
2014
£’000
3,210
250
77
428
251
4,216
2013
£’000
3,116
838
76
504
218
4,752
The average number of employees (including Directors) of the Group and Company during the year
was 40 (2013: 39) of which 30 (2013: 25) are front-office and the remainder are administration.
During the previous year a pension accrual of £41,000 which had been accrued in previous years has
been released to the Statement of Comprehensive Income.
6)
Directors' remuneration
Directors' emoluments including incentive payments
Company contributions to money purchase pension schemes
Gain on exercise of share options
2014
£’000
506
48
-
554
2013
£’000
708
51
119
878
There were 3 Directors in defined contribution pension schemes during the year (2013: 3).
The total amount payable to the highest paid Director in respect of emoluments was £170,000 (2013:
£302,000) of this total Company pension contributions of £18,000 (2013: £19,000) were provided
towards a money purchase scheme on his behalf.
Further details of Directors’ remuneration are set out in the Report on Directors’ Remuneration on
pages 12 to 15.
7)
Finance income
Bank and other interest receivable
2014
£’000
61
2013
£’000
71
- 32 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
8)
Finance expense
Bank overdrafts
9)
Income tax (credit)/expense
UK Corporation tax
Current tax on profit of the year
Adjustment in respect of previous periods
Total current tax
Deferred tax
Origination and reversal of timing differences
Deferred tax on share options
Re-measurement upon change in tax rate
Adjustment in respect of previous periods
Total deferred tax
Total income tax (credit)/expense
2014
£’000
5
2013
£’000
4
2014
£’000
2013
£’000
(8)
(29)
(37)
(3)
-
-
-
(3)
(40)
304
(3)
301
7
41
6
(4)
50
351
The tax assessed for the year is lower (2013: higher) than the standard rate of corporation tax in the UK.
The differences are explained below:
Profit before tax
Profit on ordinary activities at the standard rate of corporation tax
in the UK of 21.8%% (2013: 23%)
Effect of:
Expenses not deductible for tax purposes
Prior year current tax over provision
Prior year deferred tax over provision
Re-measurement on deferred tax upon change in tax rate
Deferred tax on share options
Total income tax (credit)/expense
2014
£’000
75
2013
£’000
1,341
16
(27)
(29)
-
-
-
(40)
304
3
(3)
(4)
6
41
351
- 33 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
A reduction in the UK corporation tax rate from 24% to 23% was substantively enacted in July 2012
and was effective from 1 April 2013. Reductions from 23% to 21% were substantively enacted in July
2013 and were effective from 1 April 2014. Further reductions from 21% to 20% were also
substantively enacted in July 2013 and will be effective from 1 April 2015. Accordingly, the
substantively enacted rate of 20% has been applied in the measurement of the Group’s deferred tax
assets at 31 October 2014
10) Earnings per share
In addition to the basic earnings per share, underlying earnings per share has been shown because the
Directors consider that this gives a more meaningful indication of the underlying performance of the
Group. Where applicable, all adjustments are stated after taking into consideration current tax
treatment ignoring deferred tax.
Basic earnings per share
Add: IFRS2 share-based payments
Underlying basic earnings
Diluted earnings per share
Add: IFRS2 share-based payments
Underlying diluted earnings
Year ended
31 October 2014
Pence per
Share
0.5
0.4
Numerator
£’000
115
77
0.9
0.5
0.4
0.9
192
115
77
192
Year ended
31 October 2013
Pence per
Share
4.7
0.4
5.1
4.5
0.4
4.9
Numerator
£’000
990
76
1,066
990
76
1,066
Year ended
31 October 2014
Number
Year ended
31 October 2013
Number
Denominator
Weighted average number of shares in
issue for basic earnings calculation
Weighted average dilution for
outstanding share options
Weighted average number for diluted
earnings calculation
20,818,253
1,132,883
21,951,136
21,008,130
740,730
21,748,860
The 1,480,700 (2013: 1,823,868) shares held by the Arden Partners Employee Benefit and the 461,087
(2013: Nil) shares held in Treasury have been excluded from the denominator.
- 34 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
11) Property, plant and equipment
Group and Company as at 31 October 2014
Improvements
to leasehold
buildings
£’000
Fixtures,
fittings and
computer
equipment
£’000
301
-
301
301
-
301
-
-
1,190
33
1,223
1,098
82
1,180
43
92
Improvements
to leasehold
buildings
£’000
Fixtures,
fittings and
computer
equipment
£’000
494
-
(193)
301
479
15
(193)
301
-
15
1,581
24
(415)
1,190
1,405
108
(415)
1,098
92
176
Total
£’000
1,491
33
1,524
1,399
82
1,481
43
92
Total
£’000
2,075
24
(608)
1,491
1,884
123
(608)
1,399
92
191
Cost
At 1 November 2013
Additions
At 31 October 2014
Depreciation
At 1 November 2013
Charge for the year
At 31 October 2014
Net book value
At 31 October 2014
At 31 October 2013
Group and Company as at 31 October 2013
Cost
At 1 November 2012
Additions
Disposals
At 31 October 2013
Depreciation
At 1 November 2012
Provided for the year
Disposals
At 31 October 2013
Net book value
At 31 October 2013
At 31 October 2012
- 35 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
12)
Investments
Company
Cost
At 1 November 2012, 31 October 2013 and 31 October 2014
Group
undertakings
£
42
The Company owns the whole of the issued share capital of Arden Partners Nominees Limited, a
company registered in England. This Company's sole activity is the holding of investments for clients
of Arden Partners plc. The Company has not traded during the current or prior year.
The Company also owns the whole of the issued share capital of Arden Partners EBT Limited, a
company registered in England. The Company's sole activity is to act as payment agent for the Arden
Partners Employee Benefit Trust. At 31 October 2014, the Arden Partners Employee Benefit Trust held
1,480,700 ordinary shares in Arden Partners plc (2013: 1,823,868 ordinary shares).
The Company also owns the whole of the issued share capital of Arden Partners Asset Management
Limited, a company registered in England which was formed as a name protection company. The
Company has not traded during the current or prior year.
13) Deferred tax asset
Group and Company – 2014
Accelerated
capital
allowances Share options
£’000
£’000
Total deferred
tax asset
£’000
At 1 November 2013
Credited to Statement of Comprehensive Income
At 31 October 2014
49
3
52
34
-
34
83
3
86
Group and Company – 2013
Accelerated
capital
allowances Share option
£’000
£’000
Total deferred
tax asset
£’000
At 1 November 2012
Adjustments in respect of previous periods
Charged to Statement of Comprehensive Income
Re-measurement upon Change in tax rate – charged
to Statement of Comprehensive Income
At 31 October 2013
58
(4)
(5)
-
49
76
-
(39)
(3)
34
134
(4)
(44)
(3)
83
The Company has no unutilised tax losses on which a deferred tax asset has not been recognised.
- 36 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
14) Assets held at fair value
Group and Company
Held for trading:
Long market making equity positions
Financial assets designated at fair value through profit and loss:
Convertible loan note
Derivative financial assets:
Options
2014
£’000
2013
£’000
1,863
5,732
200
201
287
823
2,350
6,756
At 31 October 2014 the historical cost of long market making positions was £3,032,000 (2013
£6,246,000).
At 31 October 2014 the historical cost of convertible loan note was £200,000 (2013 £200,000).
At 31 October 2014 the historical cost of other investments was £86,000 (2013: £86,000).
15) Available for sale financial assets
Group and Company
At 1 November 2013
Fair value losses
At 31 October 2014
2014
£’000
479
(12)
467
2013
£’000
490
(11)
479
At 31 October 2014 the historical cost of the listed investments was £500,000 (2013: £500,000).
Listed investments relates to a holding in Treasury Gilts which is pledged as security to BNP Paribas
Securities Services.
- 37 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
16) Trade and other receivables
Group
Market receivables
Trade receivables
Other receivables
Prepayments and accrued income
Company
Market receivables
Trade receivables
Other receivables
Prepayments and accrued income
2014
£’000
3,458
576
245
491
4,770
2014
£’000
3,458
576
433
491
4,958
2013
£’000
16,345
756
1,018
459
18,578
2013
£’000
16,345
756
1,206
459
18,766
The fair value of market, trade and other receivables approximates to amortised cost as they are short
term in nature.
An analysis of past due trade receivables is shown in note 24. No other receivables are past due. Trade
receivables are shown net of impairment.
17) Cash and cash equivalents
Group
Cash and bank balances
Company
Cash and bank balances
2014
£’000
8,282
2013
£’000
3,733
2014
£’000
8,273
2013
£’000
3,728
Included within cash and bank balances of the Group and the Company at 31 October 2014 is an
amount of $146,000 (£90,000) (2013: $15,000 (£9,000)) which is denominated in USD.
- 38 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
18) Financial liabilities
Group
Financial liabilities at fair value through profit and loss
Short market making equity positions
Trade and other payables
Market payables
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Total trade and other payables
Total financial liabilities
2014
£’000
2013
£’000
75
178
3,492
288
164
381
561
4,886
16,307
365
151
1,461
609
18,893
4,961
19,071
There are no differences between the fair values and the amortised cost of any of the trade and other
payables as they are short term in nature. Included in the above are financial liabilities amounting to
£4,070,000 (2013: £18,084,000).
Company
Financial liabilities at fair value through profit and loss
Short market making equity positions
Trade and other payables
Market payables
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Total trade and other payables
Total financial liabilities
2014
£’000
2013
£’000
75
178
3,492
288
164
560
561
5,065
16,307
365
151
1,644
609
19,076
5,140
19,254
There are no differences between the fair values and the amortised cost of any of the trade and other
payables as they are short term in nature. Included in the above are financial liabilities amounting to
£4,249,000 (2013: £18,266,000).
- 39 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
19)
Share capital
Equity share capital
40,000,000 Ordinary shares of 10p each
22,959,065 (2013: 22,959,065) Ordinary shares
of 10p each
Authorised
2014
£’000
2013
£’000
Allotted, called up
and fully paid
2014
£’000
2013
£’000
4,000
4,000
-
-
-
-
2,296
2,296
Options over the Company’s shares outstanding
Movements in the number of share options and their weighted average exercise prices are as follows:
Weighted
Average
Exercise price
(pence)
2014
33.0
Number of
Options
2013
2,025,475
(40.8)
(580,000)
-
(9.5)
26.7
1,068,250
(167,399)
2,346,326
Weighted
Average
Exercise price
(pence)
2013
28.1
(10.0)
32.2
47.8
33.0
Number of
Options
2014
2,346,326
(543,168)
316,000
(105,000)
2,014,158
At 1 November 2013
Exercised during the year
Granted during the year
Expired during the year
At 31 October 2014
The weighted average market price of the Company’s shares at the date of exercise of options during
the year was 89.2p (2013: 47.0p).
The share options outstanding at the year end have a weighted average exercise price and expected
remaining life as follows:
31 October 2014
31 October 2013
Weighted
Average
exercise
price
(pence)
Weighted
average
expected
remaining
life
(months)
Number of
share
options
Weighted
average
exercise
price
(pence)
Weighted
average
expected
remaining
life
(months)
Number of
share
options
359,908
47.8
18
803,076
47.8
275,000
10.0
75
475,000
10.0
30
87
1,379,250
24.6
70
1,068,250
32.2
117
2,014,158
2,346,326
- 40 -
Arden
Partners Old
Scheme
Arden
Partners
Share Plan
2007
Arden
Partners
Share Plan
2013
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
The number of options outstanding by issue date and exercise price, together with the vesting periods,
fair values, and the assumptions used to calculate the fair value, and the actual remaining contractual
life as at 31 October 2014 are as follows:
Arden Partners
Share Plan 2013
Arden Partners
Share Plan 2007
Arden Partners
Old Scheme
Grant dates
Weighted average fair value at grant date 1
Average exercise price
Exercise price range
Weighted average share price at date of grant 2
Expected volatility 3
Risk free interest rate
Dividend yield
Option life (months)
Weighted average option life (months)
Weighted average life remaining (months)
Number of options outstanding
Percentage of options expected to vest
Number of options vested but unexercised
23/07/2013 to
23/10/2014
8p to 74p
24.5p
0p – 48.5p
45.9p
30%
0.5%
5%
43-70
64
56
1,379,250
100%
-
17/04/2008 to
24/03/2013
45p to 148p
10.0p
10.0p
63.9p
30%
4% to 5.75%
5%
120
120
75
275,000
100%
275,000
21/4/2006
3.5p
47.8p
47.8p
30.0p
30%
5%
5%
120
120
18
359,908
100%
359,908
Notes:
1.
2.
3.
The estimate of the fair value of the services received is measured based on the Black-Scholes
model. The contractual life is the life of the option in question and growth in dividend yield is
based on the best current estimate of future yields over the contractual period.
The Arden Partners Old Scheme was established in April 2006 with the stock price having been
agreed with the Inland Revenue Share Valuation Office.
Expected volatility is based on historic information adjusted to take effect of future trends in
economic conditions, behavioural considerations and exercise restrictions.
The total expense recognised for the year arising from share based payments is as follows:
Expensed during the year (equity settled)
(included within employee costs as set out in note 5)
20) Pensions
2014
£’000
77
2013
£’000
76
The Company operates a defined contribution pension scheme. The assets of the scheme are held
separately from those of the Company in an independently administered fund. Where members of staff
do not join the Company scheme, contributions are made to their own nominated schemes all of which
are defined contribution. The pension charge for the year amounted to £251,000 (2013: £218,000).
Contributions amounting to £42,000 (2013: £27,000) were payable to schemes and are included in
payables.
- 41 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
21) Commitments under operating leases
The Group and the Company were committed to making the following payments under non-cancellable
operating leases as set out below:
Within one year
Between one and two years
Land and buildings
2013
£’000
227
213
2014
£’000
213
-
213
440
22) Related party disclosures
The key management are considered to be the Board of Directors of Arden Partners plc, whose
remuneration can be seen in the Directors’ Remuneration Report on pages 12 to 15. The compensation
in total for each category required by IAS 24 is as follows:
Salaries and short term employee benefits
Pension Contributions
Share-based payments
Year ended
31 October
2014
£’000
506
48
17
571
Year ended
31 October
2013
£’000
708
51
4
763
The Group has paid £5,000 (2013: £15,000) to Mark Ansell Consulting Limited for the services of
Mark Ansell as a Non-Executive Director, Mark Ansell is a director of both Mark Ansell Consulting
Limited and Arden Partners plc. At 31 October 2014 there were no amounts due to Mark Ansell
Consulting Limited (2013: Nil).
23) Events after the reporting period
There have been no significant events between the end of the year and the date the Financial Statements
were approved.
- 42 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
24)
Financial instruments and risk profile
The Group and Company’s financial instruments comprise cash and cash equivalents, assets held at
fair value, trade receivables and trade payables arising from operations. The Group and Company
have recognised the following risks arising from these financial instruments:
•
•
Market risk
Credit risk
•
•
Liquidity risk
Operational risk
24.1 Market risk
Equity price risk
The Group and Company face risk arising from holding trading assets in markets that fluctuate.
The Group and Company manage equity price risk by establishing individual stock limits and
overall investment criteria, and management reports are prepared daily in support of a review
regime. The Board reviews trading assets on a monthly basis.
Equity price sensitivity analysis
A sensitivity analysis based on a 10% increase/decrease in the all share AIM index shows the
impact of such a movement would be an increase/decrease of £179,000 in the profit shown in the
Consolidated Statement of Comprehensive Income.
Interest price risk
If the average level of interest received on cash deposits had been 0.5% higher or lower than the
level actually received in the year ended 31 October 2014, the profit before taxation would have
been decreased or increased by approximately £10,000. In the year ended 31 October 2013 a
0.5% movement in rates would have increased or decreased the profit before taxation by
approximately £5,000.
Currency price risk
The Group and Company had an aggregate currency exposure at 31 October 2014 in respect of
US$146,000 (£90,000). There was a currency exposure for the Group and the Company at 31
October 2013 of US$15,000 (£9,000). The effect of a 10% movement in the US$/£ exchange
rate from the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £6,000 (2013: £1,000).
Fixed rate cash financial assets of £7,428,000 (2013: £3,610,000) comprise sterling cash deposits
at an average rate of 0.50% (2013: 0.50%). Remaining cash was held on current accounts
attracting interest based on LIBOR. Other financial assets do not have maturity dates and do not
currently attract interest.
24.2 Credit risk
Credit risk represents the possibility that the Group or Company will suffer a loss from a
counterparty failing to meet its obligations. Credit risk is managed as follows:
•
•
•
•
•
robust client account opening and vetting procedures
general policy to deal only with FCA registered counterparties
general policy on limiting exposure to concentration risk
control over timely settlement of market receivables
review of daily settlement reports by the Risk Committee
- 43 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Exposure to credit risk
The carrying value of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Market receivables
Collateral deposits
Trade receivables
Other receivables
Total loans and receivables
Cash and cash equivalents
Group
2014
£’000
3,458
102
576
245
4,381
8,282
2013
£’000
16,345
1,098
756
1,018
19,217
3,733
Company
2014
£’000
3,458
102
576
433
4,569
8,273
2013
£’000
16,345
1,098
756
1,206
19,405
3,728
Total assets
12,663
22,950
12,842
23,133
The Group and Company hold their cash and cash equivalents with a reputable financial
institution. All cash and cash equivalents are short-term, highly liquid investments that are
readily convertible into known amounts of cash.
Collateral deposits relate to stock borrowing arrangements which are entered into on a
collateralised basis, with third party institutions, with securities or cash advances received as
collateral. Under such arrangements a security is purchased with a commitment to return it at an
agreed future date and price. In the event of a default the institution can exercise its right to retain
the collateral deposit.
The ageing of trade receivables at the reporting date was:
Not past due
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due 121+ days
Provisions
Total
31 October
2014
£’000
465
14
-
179
-
(82)
576
31 October
2013
£’000
698
7
14
62
-
(25)
756
- 44 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Movement in provision:
Opening balance
Amounts released
Amounts written off
Increase in provision
Closing balance
31 October
2014
£’000
25
-
(25)
82
82
31 October
2013
£’000
-
-
-
25
25
No receivables have been renegotiated and no non trade receivables are past due or impaired.
24.3 Liquidity risk
Liquidity risk is the risk that the Group and Company are unable to raise sufficient funding to
enable them to meet their obligations and is managed as follows:
•
•
•
•
•
•
•
maintaining a strong capital base
forecasting future cash-flow requirements
monitoring of cash positions on a daily basis
monitoring of market making positions on a daily basis
control over timely settlement of trade receivables
control over timely settlement of market receivables and payables.
trade and other payables are short term in nature and are due for payment within one year.
Capital risk management
The Group and Company’s policy in respect of capital risk management is to maintain a strong
capital base so as to retain investor, creditor and market confidence. During the years ended 31
October 2013 and 2014 capital has been maintained at a level above minimum FCA
requirements. Such levels have been established by reference to an internal ICAAP assessment.
The Group and Company’s capital resources consist of Tier 1 equity capital and Tier 3 retained
earnings.
24.4 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, staff or
systems, or from external causes whether deliberate, accidental or natural. This would also
include risk from changes in legislation, regulation, currency or interest rate risk.
Operational risk is managed by the Operations Committee with day-to-day control exercised by
the Chief Operating Officer. The Group and Company also has contingency plans in place to
cover loss of systems, property and other eventualities.
- 45 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
24.5 Fair value estimation
All financial instruments carried at fair value are categorised into three categories defined as
follows:
• Level 1 – Quoted market price
Financial instruments with quoted prices for identical instruments in active markets. The
convertible loan note contains an option to convert the debt instrument into equity and
therefore is fair valued by reference to quoted prices.
• Level 2 – Valuation technique using observable inputs
Financial instruments with quoted prices for similar instruments in active markets or quoted
prices for identical or similar instruments in inactive markets and financial instruments valued
using models where all significant inputs are observable.
• Level 3 – Valuation technique with significant non-observable inputs
Financial instruments valued using models where one or more significant inputs are not
observable. The best evidence of fair value is a quoted price in an actively trade market. In
the event that the market for a financial instrument is not active, a valuation technique is used.
The majority of valuation techniques employ only observable market data and so the
reliability of the fair value measurement is high. However, certain financial instruments are
valued on the basis of valuation techniques that feature one or more significant market inputs
that are not observable. For these instruments, the fair value derived is more judgemental.
‘Not observable’ in this context means that there are few or no current market data available
from which to determine the level at which an arm’s length transaction would be likely to
occur. It generally does not mean that there is absolutely no market data available upon which
to base a determination of fair value (for example, historical data may be used). Furthermore,
the assessment of hierarchy level is based on the lowest level of input that is significant to the
fair value of the financial instrument.
The following table presents the Group’s and Company’s assets and liabilities that are measured
at fair value at 31 October 2014:
Group and Company as at 31 October 2014
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,863
200
287
467
102
2,919
-
-
287
-
-
287
-
75
Assets
Long market making positions
Convertible loan note
Options
Available for sale financial assets
Stock borrowing collateral
Liabilities
Short market making equity positions
1,863
200
-
467
102
2,632
75
-
-
-
-
-
-
-
- 46 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Group and Company as at 31 October 2013
Level 1
£’000
Level 2
£’000
Level 3
£’000
Assets
Long market making positions
Convertible loan note
Options
Available for sale financial assets
Stock borrowing collateral
Liabilities
Short market making equity positions
5,732
201
-
479
1,098
7,510
178
-
-
-
-
-
-
-
Total
£’000
5,732
201
824
479
1,098
8,334
-
-
824
-
-
824
-
178
Reconciliation of recurring fair value measurements categorised within level 3 of the fair
value hierarchy
At 1 November 2013
Transferred to Level 1 – Long Market Making Positions
Net unrealised loss recognised in Statement of Comprehensive
Income
At 31 October 2014
Options
£’000
824
(83)
(454)
287
Total
£’000
824
(83)
(454)
287
The derivative financial assets are classified as level 3 within the fair value hierarchy and
comprise equity options over liquid listed securities.
On 23 June 2014 an element of the options were exercised and transferred to long market
making positions, no other options were exercised or expired during the period.
Determination of fair value
The valuation models used where quoted market prices are not available incorporate certain
assumptions that the Group anticipates would be used by a third party market participant to
establish fair value.
Fair value as at
31 October
2014
£’000
Valuation
Technique
Unobservable
input
Range
287
Black-
Scholes
Model
Historical
Volatility
30-40%
Options
- 47 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Notes to the Consolidated Financial Statements
Impact of reasonably possible alternative assumptions
A sensitivity analysis based on a 10% increase/decrease in the volatility measure used as an input
in the valuation of the options shows the impact of such a movement would be an increase of
£7,436 / decrease of £3,379 respectively in the profit shown in the Consolidated Statement of
Comprehensive Income.
- 48 -
ARDEN PARTNERS PLC ANNUAL REPORT 2014
Corporate Information
Company Secretary
Steve Wassell
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Direct Line: 0121 423 8993
Company Number
4427253
Nominated Advisor
Registrar
Lawyers
Auditors
Bankers
Registered Office
Altium Capital Limited
30 St James’s Square
London
SW1Y 4AL
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Eversheds LLP
1 Wood Street
London
EC2V 7WS
BDO LLP
55 Baker Street
London
W1U 7EU
HSBC Bank plc
1st Floor
60 Queen Victoria Street
London
EC4N 4TR
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
- 49 -
www.arden-partners.co.uk
London
125 Old Broad Street
London
EC2N 1AR
Tel 020 7614 5900
Fax 020 7614 5901
Birmingham
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Tel 0121 423 8900
Fax 0121 423 8901
Bristol
Broad Quay House
Prince Street
Bristol
BS1 4DJ
Tel 020 7614 5900
Fax 020 7614 5901
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