Arden Partners plc
Annual Report 2016
Arden Partners plc
Arden is an established, multi-service stockbroker. We provide a range of financial services to
corporate and institutional clients.
We act as Nominated Adviser, Broker, Sponsor and Financial Adviser to AIM and Main Market
companies listed on the London Stock Exchange. Based in the United Kingdom and with strong
international links, Arden’s shares trade on London’s AIM market.
Contents
Page:
1
2
3
4
5
6
8
11
15
16
18
19
20
21
22
23
24
25
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 2016
HIGHLIGHTS
FINANCIAL
Year ended
31 October
2016
Year ended
31 October
2015
Revenue
£5.9m
£5.5m
Loss before tax
Share based payments, lease settlement credit
and reorganisation costs
Underlying loss before tax *
Loss per share:
Basic
Underlying Basic †
Diluted
Underlying Diluted ‡
Dividend per ordinary share:
Interim
Proposed final
(£0.4m)
(£0.1m)
(£0.5m)
(2.5p)
(3.2p)
(2.5p)
(3.2p)
Nil
Nil
(£2.1m)
£0.3m
(£1.8m)
(10.8p)
(9.4p)
(10.8p)
(9.4p)
Nil
Nil
Capital Adequacy Ratio
404%
392%
NON-FINANCIAL
Funds raised for clients
Retained corporate clients
Average number of staff
£61m
39
38
£44m
42
40
* Profit before tax as adjusted for the effect of share based payments, lease settlement credit and reorganisation
costs.
† Basic earnings per share as adjusted for the post-tax effect of share based payments, lease settlement credit
‡ Diluted earnings per share as adjusted for the post-tax effect of share based payments, lease settlement credit
and reorganisation costs, ignoring deferred tax
and reorganisation costs, ignoring deferred tax
- 1 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CHAIRMAN’S STATEMENT
Together with other small and mid-market stockbrokers, your company found trading conditions difficult in
2016.
However, the second half year delivered a better result than the first half, so that the full year loss was reduced
from that recorded at the half year, and helped deliver a better result than in 2015.
We continue to face challenges: commissions are under pressure, and the regulatory burden grows
remorselessly. All brokers like Arden will have to increasingly rely on their corporate client list to generate fees
in order to succeed.
Given these circumstances, the executive have managed the company’s cost base tightly. Cash is being
preserved. At the end of the year under review, Arden recruited a first-rate execution team from a rival firm.
Early indications are that they will add materially to equity trading commissions, and they are helping to grow
Arden’s corporate list in the current financial year.
I hope we will be able to announce further hires of able stockbrokers in the months to come. We will also look
to evaluate potential acquisitions of complementary businesses to take advantage of synergies and cost savings.
The industry must consolidate further if it is to prosper, and Arden has cash, and an excellent corporate client
list.
While the sector background and competitive forces remain ferocious, I am cautiously optimistic that in the
medium term Arden can achieve a satisfactory level of profitability.
Given the loss for the year it would be inappropriate to pay a dividend.
I would like to thank our institutional and corporate clients for their continued loyalty to Arden, and all the staff
for their hard work during the 2016 financial year.
Luke Johnson
Chairman
26 January 2017
- 2 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CHIEF EXECUTIVE’S STATEMENT
I am pleased to report that Arden ended the year on a positive note, producing a profit of £0.3m in the second
half, thereby reducing the H1 loss of £0.7m previously reported.
In October we were delighted to announce the hiring of a top rated small and mid cap Sales and Trading team.
Early indications are positive with a strong increase of revenues in this area and a number of corporate client
wins.
Financial Review
Revenue in the year ended 31 October 2016 was £5.9m compared to £5.5m in 2015. The underlying loss before
taxation, which is stated before adjusting for share-based payments, lease settlement credit and reorganisation
costs, was £0.5m and compares to a loss before taxation in 2015, of £1.8m.
Overheads continue to be managed tightly, resulting in a further £0.9m reduction year on year.
The Board has continued to buy back the Company’s shares, under the shareholders authority granted at the last
AGM. During the year ended 31 October 2016, the Company purchased net, 744,266 ordinary shares for a
consideration of £0.287m. At the financial year end the Company held 1,200,242 ordinary shares in treasury at a
total cost to the Company of £0.5m.
Outlook
Arden has managed its cost base tightly over the past two years, during what has been a difficult trading
environment for the small and mid cap sector. Notwithstanding the generally harsh industry backdrop, we are
encouraged by recent hires and are keen to recruit further quality individuals and teams on to what is a clean and
financially strong platform. This will be key to continuing the momentum generated in H2 2016 into Arden’s
current financial year.
Finally may I take this opportunity to thank all our clients for their continued support and our staff for their
dedication and hard work throughout the year.
James Reed-Daunter
Chief Executive Officer
26 January 2017
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ARDEN PARTNERS PLC ANNUAL REPORT 2016
STRATEGIC REPORT
Business Review
As in recent years, we have continued to focus on cost and capital management in order to offset continued
pressure on revenue streams and maximise operational cash flow.
Arden continues to offer a multi faceted product offering to our corporate clients and during the year has
enhanced its execution services with the addition of a bespoke trading team with strong institutional links.
Our financial position remains robust with strong cash balances at the year end, enabling Arden to withstand
market pressures and to capitalise, potentially, on any corporate opportunities that might arise from the market
and sector in which we operate.
Strategy
Our strategy is to become the institutional and corporate broker of choice for small and 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 offering
• 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 Financial Highlights and Chief Executive’s report above - these
being considered as extensions 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
26 January 2017
- 4 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
BOARD OF DIRECTORS
Luke Johnson (Non-Executive Chairman)
Luke is the Chairman of private equity house Risk Capital Partners LLP and holds numerous Board positions
across a diverse range of sectors. Former business interests include the Chairmanship of Channel 4 Television
Corporation from 2004 to 2010 and Pizza Express, where he grew the business from 12 owned restaurants to
over 250 in a six year period. Luke holds Board positions in a number of charities and interest groups and is
Chairman of The Institute of Cancer Research; Chairman of StageOne, the national campaign in support of
entrepreneurship and Chairman of Career Colleges, an organisation planning 40 vocational colleges for 14-19
year olds.
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 2015.
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 and was appointed to the plc
Board in December 2010.
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.
- 5 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
REPORT OF THE DIRECTORS
The Directors present their Annual Report and audited Financial Statements for the financial year ended 31
October 2016.
Principal Activities
Arden is an established, multi-service stockbroker. We provide a range of financial services to corporate and
institutional clients.
We act as Nominated Adviser, Broker, Sponsor and Financial Adviser to AIM and Main Market companies
listed on the London Stock Exchange. Based in the United Kingdom and with strong international links,
Arden’s shares trade on London’s AIM market.
Results and Dividends
The Consolidated Statement of Comprehensive Income for the year is set out on page 18.
The Directors are not proposing to pay a final dividend (2015: Nil) and did not pay an interim dividend (2015:
Nil).
Directors
The Directors of the Company who held office since 1 November 2015 were:
Current Directors as at 26 January 2017
Chairman
Luke Johnson
Executive Deputy Chairman
Jonathan Keeling
Chief Executive Officer
James Reed-Daunter
Chief Operating Officer and Company Secretary
Steve Wassell
Independent Non-Executive Director
Mark Ansell
Previous Directors:
Peter Moon
Previous Chairman and Non-Executive Director (resigned 07/03/2016)
Directors’ Interests
The interests of current Directors in shares and options are disclosed in the Directors’ Remuneration Report set
out on pages 11 to 14.
Significant Shareholdings
In addition to the current Directors’ interests shown on page 13 and 14, 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 26 January 2017:
Arden Partners Employee Benefit Trust
Richard Day
Alasdair Locke
Colin Kettle
Robert Griffiths
Tony Bartlett
%
7.62
7.04
7.03
6.31
5.66
5.49
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.
- 6 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
REPORT OF THE DIRECTORS
Treasury Shares
The Board continued buying back the Company’s shares during the year, under the authority granted by the
Shareholders.
The Company purchased 1,293,266 ordinary shares in the year ended 31st October 2016, for a consideration of
£0.4m, of which 549,000 shares were re-sold during the year.
At 31 October 2016 the Company held 1,200,242 shares in Treasury, at a cost of £0.5m (2015: 455,976 £0.3m).
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 2016 the Trust held
1,480,700 (7.62% of total voting rights) (2015: 1,480,700 (7.34% of total voting rights)) shares. The Trustees
have agreed to hold these shares to satisfy options granted under various share option schemes.
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 on a
periodic basis.
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 2016 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
26 January 2016
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ARDEN PARTNERS PLC ANNUAL REPORT 2016
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:
Luke Johnson
Jonathan Keeling
James Reed-Daunter
Steve Wassell
Mark Ansell
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 5.
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 2016 was as follows:
Total number of meetings
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Mark Ansell
Luke Johnson
Peter Moon1
Board
Audit
Committee
Remuneration
Committee
10
10
10
10
10
10
3
2
n/a
n/a
2
2
1
1
10
n/a
n/a
n/a
10
7
3
Notes:
1. Luke Johnson attended all Audit Committee and Remuneration Committee meetings required subsequent
to his appointment.
2. Peter Moon attended all Board meetings and Remuneration Committee meetings required prior to his
resignation.
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, Steve Wassell and Mark Ansell are required to retire at the forthcoming Annual
General Meeting and, being eligible, offer themselves for re-election. The Board supports their re-appointments
having assessed their performance and value to the Board.
- 8 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CORPORATE GOVERNANCE
Remuneration Committee
The Remuneration Committee, which comprises the 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 Non-Executive Directors and the Chief Operating Officer, 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 30. 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 Luke Johnson.
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 Board
also reviews financial performance against budgets and key performance indicators. The Operations 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.
- 9 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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.
- 10 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 senior 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.
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ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 2016 is set
out below:
Executive Directors
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Non-Executive Directors
Luke Johnson
Mark Ansell
Peter Moon1
Total
Salary,
fees and
benefits
£’000
Pension
contributions
£’000
Incentive
payments
£’000
Total
2016
£’000
161
152
125
-
35
20
493
9
18
-
-
-
-
27
-
-
-
-
-
-
-
170
170
125
-
35
20
520
Notes:
1.
An element of the remuneration was paid to a third party company, Hartnup Consulting Limited.
- 12 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
DIRECTORS’ REMUNERATION REPORT
A summary of the total remuneration paid to current Directors who served during the year ended 31 October
2015 is set out below:
Executive Directors
James Reed-Daunter
Jonathan Keeling
Steve Wassell
Non-Executive Directors
Peter Moon1
Mark Ansell
Luke Johnson
Total
Salary,
fees and
benefits
£’000
Pension
contributions
£’000
Incentive
payments
£’000
152
152
111
45
35
-
495
18
18
13
-
-
-
49
-
-
-
-
-
-
-
Total
2016
£’000
170
170
124
45
35
-
544
Notes:
1. An element of the remuneration was paid to a third party company, Hartnup 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
Luke Johnson
Mark Ansell
31 October
2016
Number
Percentage
Interest
31 October
2015
Number
2,353,644
2,079,834
763,743
2,195,112
111,750
11.41%
10.08%
3.70%
10.64%
0.54%
2,353,644
2,059,334
763,743
2,174,612
111,750
- 13 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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
2015
Number
Options
granted in
year
Number
Options
exercised in
year
Number
31 October
2016
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 2018, 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
26 January 2017
- 14 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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.
- 15 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARDEN
PARTNERS PLC
For the year ended 31 October 2016
We have audited the financial statements of Arden Partners plc for the year ended 31 October 2016 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 2016 and of the Group’s loss 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.
Opinion on others prescribed by the Capital Requirements (Country-by-Country Reporting) regulations
2013
In our opinion, the information given in note 25 to the financial statements for the year ended 31 October 2016
has been properly prepared, in all material, respects in accordance with the Capital Requirements (Country-by-
Country Reporting) Regulations 2013.
- 16 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARDEN
PARTNERS PLC
For the year ended 31 October 2016
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
26 January 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
- 17 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2016
Note
2
7
8
9
Revenue
Administrative expenses
Loss from operations
Finance income
Finance expense
Loss before taxation
Income tax charge
Loss 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
Deferred tax taken to equity
Total comprehensive income for the year attributable to
equity shareholders
2016
£’000
5,857
(6,323)
(466)
40
(3)
(429)
(41)
(470)
(5)
-
(475)
2015
£’000
5,486
(7,646)
(2,160)
65
(2)
(2,097)
-
(2,097)
(7)
6
(2,098)
Loss per share
Basic
Diluted
10
10
(2.5p)
(2.5p)
(10.8p)
(10.8p)
The notes on pages 25 to 48 form part of these financial statements
- 18 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2016
Note
2016
£’000
2016
£’000
2015
£’000
2015
£’000
1,489
552
2,544
58
5,170
-
(48)
(2,719)
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
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
27
50
77
9,813
9,890
(2,767)
(2,767)
7,123
2,063
700
2,933
(849)
(11)
2,836
7,672
(549)
7,123
1,703
507
2,138
120
5,372
16
(92)
(1,979)
25
84
109
9,856
9,965
(2,071)
(2,071)
7,894
2,063
700
2,933
(849)
(6)
3,348
8,189
(295)
7,894
The Financial Statements were approved by the Board of Directors and authorised for issue on 26 January 2017.
Steve Wassell
Company Secretary
Mark Ansell
Chairman of the Audit Committee
The notes on pages 25 to 48 form part of these financial statements
- 19 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
COMPANY STATEMENT OF FINANCIAL POSITION
At 31 October 2016
Note
2016
£’000
2016
£’000
2015
£’000
2015
£’000
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
Total current liabilities
Total liabilities
Net assets
11
13
14
15
16
24
17
1,489
552
2,732
58
5,161
-
18
18
(48)
(2,898)
19
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
27
50
77
9,992
10,069
(2,946)
(2,946)
7,123
2,063
700
2,933
(849)
(11)
2,836
7,672
(549)
7,123
6,756
1,703
507
2,326
120
5,363
16
(92)
(2,158)
25
84
109
10,035
10,144
(2,250)
(2,250)
7,894
2,063
700
2,933
(849)
(6)
3,348
8,189
(295)
7,894
The Financial Statements were approved by the Board of Directors and authorised for issue on 26 January 2017.
Steve Wassell
Company Secretary
Mark Ansell
Chairman of the Audit Committee
The notes on pages 25 to 48 form part of these financial statements
- 20 -
Note
2016
£’000
2015
£’000
(429)
(2,097)
(205)
23
(37)
22
(626)
88
683
(50)
-
95
10
105
(26)
37
11
(31)
133
(420)
-
(318)
(202)
5,372
5,170
287
25
(63)
111
(1,737)
2,976
(2,892)
(513)
466
(1,700)
-
(1,700)
(7)
63
56
-
10
(1,136)
(140)
(1,266)
(2,910)
8,282
5,372
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 October 2016
Operating activities before taxation
Loss 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 in operating assets
Increase/(decrease) in operating liabilities
Purchase of available for sale investments
Proceeds from disposal of available for sale investments
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
Exercise of share options
Proceeds from the sale of own shares
Purchase of own shares
Dividends paid to equity shareholders
Net cash flows from financing activities
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 25 to 48 form part of these financial statements
- 21 -
Note
2016
£’000
2015
£’000
(429)
(2,097)
(205)
23
(37)
22
(626)
88
683
(50)
-
95
10
105
(26)
37
11
(31)
133
(420)
-
(318)
(202)
5,363
5,161
287
25
(63)
111
(1,737)
2,976
(2,892)
(513)
466
(1,700)
-
(1,700)
(7)
63
56
-
10
(1,136)
(140)
(1,266)
(2,910)
8,273
5,363
ARDEN PARTNERS PLC ANNUAL REPORT 2016
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 October 2016
Operating activities before taxation
Loss 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 in operating assets
Increase/(decrease) in operating liabilities
Purchase of available for sale investments
Proceeds from disposal of available for sale investments
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
Exercise of share options
Proceeds from the sale of own shares
Purchase of own shares
Dividends paid to equity shareholders
Net cash flows from financing activities
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 25 to 48 form part of these financial statements
- 22 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2016
Own shares cancelled
(233)
Share
capital
£’000
2,296
Share
Premium
account
£’000
2,933
Capital
Redemption
Reserve
£’000
Own
shares
£’000
Employee
Benefit
Trust
Reserve
£’000
Available
for sale
Reserve
£’000
Retained
earnings
£’000
Total
£’000
467
(264)
(849)
(33)
6,597
11,147
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,136)
10
233
1,095
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7)
34
27
-
-
-
-
-
(2,097)
(2,097)
6
-
(34)
6
(7)
-
(2,125)
(2,098)
-
-
(1,095)
111
(1,136)
10
-
111
(140)
(140)
2,063
2,933
700
(295)
(849)
(6)
3,348
7,894
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(420)
134
-
32
-
-
-
-
-
-
-
-
-
-
(5)
(5)
-
-
-
-
(470)
(470)
-
-
-
(5)
(470)
(475)
-
-
22
(64)
(420)
134
22
(32)
2,063
2,933
700
(549)
(849)
(11)
2,836
7,123
Balance at
1 November 2014
Profit for year
Deferred tax taken to
equity
Revaluation of available
for sale financial assets
Transferred to retained
earnings on disposal of
available for sale assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Purchase of own shares
Sale of own shares
Share based payments
Dividends paid to equity
shareholders
Balance at
31 October 2015
Profit for year
Deferred tax taken to
equity
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Purchase of own shares
Sale of own shares
Share based payments
Share options exercised
Balance at
31 October 2016
Notes
1. The capital redemption reserve represents the nominal value of shares that have been cancelled that were
previously held as Own Shares.
2. Own Shares represents shares purchased to be held as treasury shares at historical cost.
3. 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.
The notes on pages 25 to 48 form part of these financial statements
- 23 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2016
Own shares cancelled
(233)
Share
capital
£’000
2,296
Share
Premium
account
£’000
2,933
Capital
Redemption
Reserve
£’000
Own
shares
£’000
Employee
Benefit
Trust
Reserve
£’000
Available
for sale
Reserve
£’000
Retained
earnings
£’000
Total
£’000
467
(264)
(849)
(33)
6,597
11,147
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,136)
10
233
1,095
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7)
34
27
-
-
-
-
-
(2,097)
(2,097)
6
-
(34)
6
(7)
-
(2,125)
(2,098)
-
-
(1,095)
111
(1,136)
10
-
111
(140)
(140)
2,063
2,933
700
(295)
(849)
(6)
3,348
7,894
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(420)
134
-
32
-
-
-
-
-
-
-
-
-
-
(5)
(5)
-
-
-
-
(470)
(470)
-
-
-
(5)
(470)
(475)
-
-
22
(64)
(420)
134
22
(32)
2,063
2,933
700
(549)
(849)
(11)
2,836
7,123
Balance at
1 November 2014
Profit for year
Deferred tax taken to
equity
Revaluation of available
for sale financial assets
Transferred to retained
earnings on disposal of
available for sale assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Purchase of own shares
Sale of own shares
Share based payments
Dividends paid to equity
shareholders
Balance at
31 October 2015
Profit for year
Deferred tax taken to
equity
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Purchase of own shares
Sale of own shares
Share based payments
Share options exercised
Balance at
31 October 2016
Notes
1. The capital redemption reserve represents the nominal value of shares that have been cancelled that were
previously held as Own Shares.
2. Own Shares represents shares purchased to be held as treasury shares at historical cost.
3. 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.
The notes on pages 25 to 48 form part of these financial statements
- 24 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 control over an investee, it is classified as a subsidiary. The Company controls
an investee if all three of the following elements are present: power over the investee, exposure to
variable returns from the investee, and the ability of the investor to use its power to affect those variable
returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in
any of these elements of control.
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 loss after
taxation for the financial year amounted to £470,000 (2015: loss £2,097,000).
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 2016 include:
Annual improvements to IFRSs 2012-2015 Cycle
Disclosure Initiative: Amendments to IAS 1
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
IFRS 16 Leases
1 Jan 2016
1 Jan 2016
1 Jan 2018
1 Jan 2018
1 Jan 2019
The Board is currently assessing the impact of IFRS 9 and IFRS 16. All other standards and
interpretations are not expected to have a material impact on the financial statements.
- 25 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED 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.
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 instruments, 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.
- 26 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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.
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 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.
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.
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.
- 27 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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. These 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.
- 28 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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.
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.
- 29 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2016
£’000
2,430
3,427
5,857
2015
£’000
2,172
3,314
5,486
Included within revenue of the Equities Division is a profit of £205,000 (2015: loss £287,000) 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 2016, none of the Group’s customers contributed 10% or more of the Group’s
revenue. In 2015 one of the Group’s customers contributed more than 10% of the Group’s revenue, the
amount was £914,000.
3)
Profit from operations
2016
£’000
23
211
35
1
6
15
4
22
(150)
-
2015
£’000
25
392
34
1
9
13
(2)
111
-
177
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/(gains)
Share based payments
Lease settlement (Note 10)
Reorganisation costs
- 30 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4)
Dividends
No dividends were recognised in the year.
Dividends recognised in the prior year consisted of the 2014 final dividend of £140,000 (0.75p 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
2016
£’000
3,088
25
22
385
173
3,693
2015
£’000
3,474
23
111
418
255
4,281
Staff costs include an amount of £Nil (2015: £177,000) in respect of reorganisation payments. The
average number of employees (including Directors) of the Group and Company during the year was 38
(2015: 40) of which 28 (2015: 30) are front-office and the remainder are administration.
6)
Directors' remuneration
Directors' emoluments including incentive payments
Company contributions to money purchase pension schemes
2016
£’000
493
27
520
2015
£’000
495
49
544
There were 2 Directors in defined contribution pension schemes during the year (2015: 3).
The total amount payable to the highest paid Director in respect of emoluments was £170,000 (2015:
£170,000) of this total Company pension contributions of £18,000 (2015: £18,000) 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 11 to 14.
7)
Finance income
Bank and other interest receivable
2016
£’000
40
2015
£’000
65
- 31 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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
Change in tax rate
Adjustment in respect of previous periods
Total deferred tax
Total income tax charge
2016
£’000
3
2015
£’000
2
2016
£’000
2015
£’000
-
7
7
26
8
-
-
34
41
-
(8)
(8)
5
(5)
-
8
8
-
The tax assessed for the year is higher (2015: lower) than the standard rate of corporation tax in the UK.
The differences are explained below:
Loss before tax
Loss on ordinary activities at the standard rate of corporation tax
in the UK of 20% (2015: 20%)
Effect of:
Losses carried forward
Expenses not deductible for tax purposes
Deferred tax on share options
Total income tax charge
2016
£’000
(429)
2015
£’000
(2,097)
(86)
(419)
94
25
8
41
405
19
(5)
-
A reduction in the UK corporation tax rate from 21% to 20% was substantively enacted in July 2014
and was effective from 1 April 2015. Further reductions to 19% from 1 April 2017 and 18% from 1
April 2020 were substantively enacted in November 2015. Accordingly, the deferred tax balances at
31 October 2016 have been stated at 19% as this is the expected prevailing rate when the temporary
differences are expected to reverse.
- 32 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 loss per share
Add: IFRS2 share-based payments
Add: Reorganisation payments
Less: Lease settlement credit
Year ended
31 October 2016
Year ended
31 October 2015
Pence per
Share
(2.5)
0.1
-
(0.8)
Numerator
£’000
(470)
22
-
(150)
Pence per
Share
(10.8)
0.5
0.9
-
Numerator
£’000
(2,097)
111
177
-
Underlying basic loss
(3.2)
(598)
(9.4)
(1,809)
Diluted loss per share
Add: IFRS2 share-based payments
Add: Reorganisation payments
Less: Lease settlement credit
Underlying diluted loss
(2.5)
0.1
-
(0.8)
(3.2)
(470)
22
-
(150)
(598)
(10.8)
0.5
0.9
-
(9.4)
(2,097)
111
177
-
(1,809)
Year ended
31 October 2016
Number
Year ended
31 October 2015
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
18,734,234
541,383
19,275,617
19,282,644
840,385
20,123,029
The 1,480,700 (2015: 1,480,700) shares held by the Arden Partners Employee Benefit and the
1,200,242 (2015: 455,976) shares held in Treasury have been excluded from the denominator.
No adjustment has been made to the diluted loss per share of 2.4p as the dilution effect of the weighted
average number of outstanding share options of 541,383 would be to decrease the loss per share.
- 33 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11) Property, plant and equipment
Group and Company as at 31 October 2016
Cost
At 1 November 2015
Additions
At 31 October 2016
Depreciation
At 1 November 2015
Charge for the year
At 31 October 2016
Net book value
At 31 October 2016
At 31 October 2015
Group and Company as at 31 October 2015
Cost
At 1 November 2014
Additions
At 31 October 2015
Depreciation
At 1 November 2014
Provided for the year
At 31 October 2015
Net book value
At 31 October 2015
At 31 October 2014
Improvements
to leasehold
buildings
£’000
Fixtures,
fittings and
computer
equipment
£’000
301
-
301
301
-
301
-
-
1,230
25
1,255
1,205
23
1,228
27
25
Improvements
to leasehold
buildings
£’000
Fixtures,
fittings and
computer
equipment
£’000
301
-
301
301
-
301
-
-
1,223
7
1,230
1,180
25
1,205
25
43
Total
£’000
1,531
25
1,556
1,506
23
1,529
27
25
Total
£’000
1,524
7
1,531
1,481
25
1,506
25
43
- 34 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12)
Investments
Company
Cost
At 1 November 2014, 31 October 2015 and 31 October 2016
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 2016, the Arden Partners Employee Benefit Trust held
1,480,700 ordinary shares in Arden Partners plc (2015: 1,480,700 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 – 2016
At 1 November 2015
(Charged)/credited to Statement of Comprehensive
Income
At 31 October 2016
Group and Company – 2015
At 1 November 2014
Adjustments in respect of previous periods
(Charged)/credited to Statement of Comprehensive
Income
Credited to equity
At 31 October 2015
Accelerated
capital
allowances Share options
£’000
45
£’000
39
Total deferred
tax asset
£’000
84
(9)
30
(25)
20
(34)
50
Accelerated
capital
allowances Share options
£’000
34
-
£’000
52
(8)
Total deferred
tax asset
£’000
86
(8)
(5)
-
39
5
6
45
-
6
84
The Company has unutilised tax losses of £2.4m (2015: £2.0m) on which a potential deferred tax asset
of £456k (2015: £406k) has not been recognised.
- 35 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14) Assets held at fair value
Group and Company
Held for trading:
Long market making equity positions
Derivative financial assets:
Options
At 31 October 2016
2016
£’000
2015
£’000
1,284
1,703
205
-
1,489
1,703
At 31 October 2016 the historical cost of long market making positions was £1,232,000 (2015
£2,238,000).
At 31 October 2016 the historical cost of derivative financial assets was £Nil (2015: £Nil).
15) Available for sale financial assets
Group and Company
At 1 November 2015
Purchased during the year
Disposed of during the year
Fair value losses
At 31 October 2016
2016
£’000
507
50
-
(5)
552
2015
£’000
467
513
(466)
(7)
507
At 31 October 2016 the historical cost of available for sale financial assets was £563,000 (2015:
£513,000).
Included within available for sale financial assets is a holding in United Kingdom Treasury Gilts of
£513,000 (2015: £513,000), which is pledged as security to BNP Paribas Securities Services.
- 36 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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
2016
£’000
1,409
598
198
339
2,544
2016
£’000
1,409
598
386
339
2,732
2015
£’000
661
819
254
404
2,138
2015
£’000
661
819
442
404
2,326
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
2016
£’000
5,170
2015
£’000
5,372
2016
£’000
5,161
2015
£’000
5,363
Included within cash and bank balances of the Group and the Company at 31 October 2016 is an
amount of $17,000 (£13,000) (2015: $51,000 (£33,000)) which is denominated in USD.
Included within cash and bank balances of the Group and the Company at 31 October 2016 is an
amount of €3,000 (£2,000) (2015: €Nil (£Nil)) which is denominated in EUR.
- 37 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18) Current 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 current liabilities
2016
£’000
2015
£’000
48
92
1,477
303
178
239
522
2,719
2,767
652
300
177
116
734
1,979
2,071
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
£1,918,000 (2015: £1,073,000).
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 current liabilities
2016
£’000
2015
£’000
48
92
1,477
303
178
418
522
2,898
2,946
652
300
177
295
734
2,158
2,250
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
£2,097,000 (2015: £1,252,000).
- 38 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19)
Share capital
Equity share capital
40,000,000 Ordinary shares of 10p each
20,628,935 (2015: 20,628,935) Ordinary shares
of 10p each
Authorised
2016
£’000
2015
£’000
Allotted, called up
and fully paid
2016
£’000
2015
£’000
4,000
4,000
-
-
-
-
2,063
2,063
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)
2016
26.9
(3.4)
47.8
(15.4)
31.9
Number of
Options
2016
1,964,158
(290,000)
359,908
(788,908)
1,245,158
Number of
Options
2015
2,014,158
(100,000)
100,000
(50,000)
1,964,158
Weighted
Average
Exercise price
(pence)
2015
26.7
(10.0)
-
-
26.9
At 1 November 2015
Exercised during the year
Granted during the year
Expired during the year
At 31 October 2016
The weighted average market price of the Company’s shares at the date of exercise of options during
the year was 27.2p (2015: 45.0p).
The share options outstanding at the year end have a weighted average exercise price and expected
remaining life as follows:
31 October 2016
31 October 2015
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
75,000
10.0
53
175,000
10.0
1,170,158
33.3
56
1,429,250
23.7
1,245,158
1,964,158
- 39 -
6
61
67
Arden
Partners Old
Scheme
Arden
Partners
Share Plan
2007
Arden
Partners
Share Plan
2013
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 2016 are as follows:
Grant dates
Weighted average fair value at grant date 1
Average exercise price
Exercise price range
Weighted average share price at date of grant
Expected volatility 2
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
Arden Partners
Share Plan 2013
Arden Partners
Share Plan 2007
23/07/2013 to
22/04/2016
16.4p
33.3p
0p – 47.8p
39.54p
30%
0.5%
5%
36-113
74
48
1,170,158
100%
454,158
24/03/2011
44.7p
10.0p
10.0p
54p
30%
4%
5%
120
120
53
75,000
100%
75,000
Notes:
1. 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.
2. 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
2016
£’000
22
2015
£’000
111
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 £173,000 (2015: £255,000).
Contributions amounting to £32,000 (2015: £48,000) remained outstanding to schemes and are included
in payables.
- 40 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 two and five years
Greater than five years
Land and buildings
2015
£’000
227
663
-
2016
£’000
242
469
-
711
890
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 11 to 14. 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
2016
£’000
493
27
3
523
Year ended
31 October
2015
£’000
495
49
14
558
The Group has paid £16,000 (2015: £18,000) to Hartnup Consulting Limited for the services of Peter
Moon as a Non-Executive Director, Peter Moon is a director of Hartnup Consulting Limited and was a
director of Arden Partners plc. At 31 October 2016, included within trade payables in note 18 is an
amount due to Hartnup Consulting Limited of £Nil (2015: £6,000).
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.
- 41 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
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 £38,000 in the profit shown in the
Consolidated Statement of Comprehensive Income. In the year ended 31 October 2015 a 10%
movement in the all share AIM index would have increased or decreased the profit before
taxation by approximately £160,000.
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 2016, the profit before taxation would have
been decreased or increased by approximately £20,000. In the year ended 31 October 2015 a
0.5% movement in rates would have increased or decreased the profit before taxation by
approximately £17,000.
Fixed rate cash financial assets of £4,800,000 (2015: £5,150,000) comprise sterling cash deposits
at an average rate of 0.15% (2015: 0.30%). 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.
Currency price risk
The Group and Company had an aggregate currency exposure at 31 October 2016 in respect of
US$16,000 (£13,000). There was a currency exposure for the Group and the Company at 31
October 2015 of US$51,000 (£33,000). The effect of a 10% movement in the US$/£ exchange
rate from the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £1,000 (2015: £3,000).
- 42 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
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
Total assets
Group
2016
£’000
1,409
58
598
198
2,263
5,170
7,433
2015
£’000
661
120
819
254
1,854
5,372
7,226
Company
2016
£’000
1,409
58
598
386
2,451
5,161
7,612
2015
£’000
661
120
819
442
2,042
5,363
7,405
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
- 43 -
31 October
2016
£’000
507
47
-
-
44
-
598
31 October
2015
£’000
287
32
46
25
429
-
819
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Movement in provision:
Opening balance
Amounts released
Amounts written off
Increase in provision
Closing balance
31 October
2016
£’000
-
-
-
-
-
31 October
2015
£’000
82
-
(97)
15
-
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.
The following table sets out the contractual maturities (representing undiscounted contractual
cash-flows) of financial liabilities:
Group as at 31 October 2016
Financial liabilities at fair value
through profit and loss
Trade and other payables
Group as at 31 October 2015
Financial liabilities at fair value
through profit and loss
Trade and other payables
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
44
44
-
-
-
-
-
-
-
-
-
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
36
36
-
-
-
-
-
-
-
-
-
Up to 3
months
£’000
48
1,826
1,874
Up to 3
months
£’000
92
945
1,037
- 44 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Company as at 31 October 2016
Financial liabilities at fair value
through profit and loss
Trade and other payables
Company as at 31 October 2015
Financial liabilities at fair value
through profit and loss
Trade and other payables
Up to 3
months
£’000
48
1,826
1,874
Up to 3
months
£’000
92
945
1,037
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
44
44
-
-
-
-
-
-
-
179
179
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
36
36
-
-
-
-
-
-
-
179
179
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 2015 and 2016 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 2016
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.
• 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 traded 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.
- 46 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Group’s and Company’s assets and liabilities that are measured
at fair value at 31 October 2016:
Group and Company as at 31 October 2016
Level 1
£’000
Level 2
£’000
Level 3
£’000
Assets
Long market making positions
Options
Available for sale financial assets
Stock borrowing collateral
Liabilities
Short market making equity positions
Group and Company as at 31 October 2015
1,284
-
552
58
1,894
48
-
-
-
-
-
-
Total
£’000
1,284
205
552
58
2,099
-
205
-
-
205
-
48
Assets
Long market making positions
Available for sale financial assets
Stock borrowing collateral
Liabilities
Short market making equity positions
Level 1
£’000
Level 2
£’000
Level 3
£’000
1,703
507
120
2,330
92
-
-
-
-
-
-
-
-
-
-
Total
£’000
1,703
507
120
2,330
92
Reconciliation of recurring fair value measurements categorised within level 3 of the fair
value hierarchy
At 1 November 2015
Transferred to Level 1 – Long Market Making Positions
Net unrealised profit/(loss) recognised in Statement of
Comprehensive Income
At 31 October 2016
Options
£’000
-
-
205
205
Total
£’000
287
(164)
(123)
-
The derivative financial assets are classified as level 3 within the fair value hierarchy and
comprise equity options over liquid listed securities.
- 47 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2016
£’000
Valuation
Technique
Unobservable
input
Range
Options
205
Black-Scholes
Model
Historical
Volatility
30-40%
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
£4,115 / decrease of £2,211 respectively in the profit shown in the Consolidated Statement of
Comprehensive Income.
25)
Country by Country Reporting
Arden Partners is required to comply with Article 89 of the Capital Requirements Directive IV (CRD
IV) country by country reporting in order to comply with this requirement. The information below
provides the relevant detail:-
Entity Name
Nature of Activities
Geographic Location
Turnover (£’000)
Average number of employees
Loss before tax (£’000)
Corporation tax paid
Public subsidies received
31 October 2016
Arden Partners plc
Institutional Stockbroker
UK
5,857
38
429
-
-
- 48 -
ARDEN PARTNERS PLC ANNUAL REPORT 2016
CORPORATE INFORMATION
Company Secretary
Steve Wassell
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Company Number
4427253
Nominated Advisor
Registrar
Lawyers
Auditors
Bankers
Registered Office
GCA Altium Limited
1 Southampton Street
London
WC2R 0LR
Capita Asset Services
40 Dukes Place
London
EC3A 7NH
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 -
125 Old Broad Street
London
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
www.arden-partners.co.uk
www.arden-partners.co.uk
www.arden-partners.co.uk
Bristol
London
Broad Quay House
125 Old Broad Street
Prince Street
London
Bristol
EC2N 1AR
BS1 4DJ
Birmingham
London
Arden House
125 Old Broad Street
17 Highfield Road
London
Edgbaston
EC2N 1AR
Birmingham
B15 3DU
Bristol
Broad Quay House
Prince Street
Bristol
BS1 4DJ
Birmingham
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Bristol
Broad Quay House
Prince Street
Bristol
BS1 4DJ
Tel 020 7614 5900
Fax 020 7614 5901
Tel 020 7614 5900
Fax 020 7614 5901
Tel 020 7614 5900
Fax 020 7614 5901
Tel 0121 423 8900
Fax 0121 423 8901
Tel 020 7614 5900
Fax 020 7614 5901
Tel 0121 423 8900
Fax 0121 423 8901
Tel 020 7614 5900
Fax 020 7614 5901
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www.arden-partners.co.uk
www.arden-partners.co.uk
125 Old Broad Street
London
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
London
Broad Quay House
125 Old Broad Street
Prince Street
London
Bristol
EC2N 1AR
BS1 4DJ
Birmingham
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Bristol
Broad Quay House
Prince Street
Bristol
BS1 4DJ
Tel 020 7614 5900
Tel 020 7614 5900
Fax 020 7614 5901
Fax 020 7614 5901
Tel 0121 423 8900
Fax 0121 423 8901
Tel 020 7614 5900
Fax 020 7614 5901
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www.arden-partners.co.uk
www.arden-partners.co.uk
125 Old Broad Street
London
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
London
Broad Quay House
125 Old Broad Street
Prince Street
London
Bristol
EC2N 1AR
BS1 4DJ
Birmingham
Arden House
17 Highfield Road
Edgbaston
Birmingham
B15 3DU
Bristol
Broad Quay House
Prince Street
Bristol
BS1 4DJ
Tel 020 7614 5900
Tel 020 7614 5900
Fax 020 7614 5901
Fax 020 7614 5901
Tel 0121 423 8900
Fax 0121 423 8901
Tel 020 7614 5900
Fax 020 7614 5901
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