Arden Partners plc
Annual Report 2017
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
6
7
10
13
17
18
23
24
25
26
27
28
29
30
55
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 2017
HIGHLIGHTS
FINANCIAL
Year ended
31 October
2017
Year ended
31 October
2016
Revenue
£10.5m
£5.9m
Profit/(loss) before tax
Share based payments, restructuring costs and
lease settlement credit
Underlying profit/(loss) before tax *
Profit/(loss) per share:
Basic
Underlying Basic †
Diluted
Underlying Diluted ‡
Dividend per ordinary share:
Interim
Proposed Final
£0.7m
£0.5m
£1.2m
3.3p
5.6p
3.2p
5.5p
Nil
1.0p
(£0.4m)
(£0.1m)
(£0.5m)
(2.5p)
(3.2p)
(2.5p)
(3.2p)
Nil
Nil
Capital Adequacy Ratio
652%
404%
NON-FINANCIAL
Funds raised for clients
Retained corporate clients
Average number of staff
£150m
38
39
£61m
39
38
* Profit before tax as adjusted for the effect of share based payments, restructuring costs (including non recurring costs
related to the appointment and termination of personnel) and lease settlement credit.
† Basic earnings per share as adjusted for the post-tax effect of share based payments, restructuring costs (including non
recurring costs related to the appointment and termination of personnel) and lease settlement credit, ignoring deferred
tax
‡ Diluted earnings per share as adjusted for the post-tax effect of share based payments, restructuring costs (including
non recurring costs related to the appointment and termination of personnel) and lease settlement credit, ignoring
deferred tax
- 1 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CHAIRMAN’S STATEMENT
The last few years have been challenging for the broking industry, and in particular for small and mid-cap
stockbrokers. A sustainable revival in corporate performance is dependent on confidence amongst fund
managers and a significant indicator of this is their willingness to invest in their brokers.
Arden Partners announced in June this year that it raised £5m of inward investment to reinforce our already
strong balance sheet, and I am pleased that we now have some of the major names in the fund management
industry as shareholders.
We were delighted to announce the appointment of Donald Brown as our new Chief Executive Officer in May
2017. Our enlarged balance sheet has heightened our profile in the sector and enabled us to attract key new
appointments - including experienced and senior staff. We have taken the opportunity to reshape our equities
operation and the new structure has already had a demonstrably positive impact on our revenues.
We are confident that the business is in the midst of a successful turnaround. A new executive team has been
appointed, and they have rapidly taken the business from losses into net profits for the full year. There is still
much to be done, but I believe that Arden now has the resources and the people to deliver.
The Company continues to monitor its cost base carefully and our staff numbers remain steady. Our corporate
client numbers also remained consistent and we aim to both deepen existing relationships and develop new
ones.
The broking industry is in need of further consolidation and we are always prepared to explore opportunities to
combine with complementary businesses to facilitate cost savings and revenue expansion. Meanwhile our
healthy balance sheet puts us in an excellent position for possible expansion.
As a demonstration of our confidence in the future we are pleased to propose a 1p per share final dividend.
I would like to thank my Board, our corporate and institutional clients and all our hard-working staff for the
support during this year. We look forward to the future with considerable anticipation.
Luke Johnson
Chairman
16 January 2018
- 2 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CHIEF EXECUTIVE’S STATEMENT
In my first statement as Chief Executive of Arden Partners plc, I am pleased to report a pre-tax profit for the
year ended 31 October 2017 of £700,000 and underlying profit before tax of £1.2 million. The Company was
loss-making in 2016 with figures of £400,000 and £500,000 respectively.
Financial Review
Revenue for the full year totalled £10.5 million, a 79% increase on 2016 and the highest figure in five years.
The Company’s results were significantly weighted towards the second half of the year with a revenue
contribution of £7.6 million.
Basic earnings per share were 3.3p and the Company is pleased to propose a final dividend to shareholders for
the first time since 2014 of 1p per share.
I joined the Company on 24 May 2017 and subsequently secured the services of a number of highly experienced
staff. Our results demonstrate the immediate impact this has had and I am confident that our team, whose
overall number has remained broadly consistent year on year, can maintain the positive trend in transactions and
revenue.
During the year we raised £150 million in funds for our corporate clients, an increase of 145% on 2016. Our
total number of corporate clients has remained broadly in line with previous years at 38.
Outlook
After the strong second half, the Company’s momentum has carried over into 2018. We recognise that the
broking services industry will experience challenges in the year ahead, especially in the light of the introduction
of the MiFIDII regulations on January 3 2018. We will continue to hire experienced staff where we see
complementary opportunities and I look forward to the forthcoming year with confidence.
I would like to thank all our clients and shareholders for their continued support and to express the appreciation
of the entire Board for the considerable hard work and commitment of our staff.
Donald Brown
Chief Executive Officer
16 January 2018
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ARDEN PARTNERS PLC ANNUAL REPORT 2017
STRATEGIC REPORT
Business Review
Following a period of cost reduction within the Group, Arden has recently made significant changes to the
platform to move into a period of driving revenues. With the appointment of a number of high quality
individuals the business is now appropriately staffed to deliver on medium term profitability targets.
After a successful first year we have now integrated the specialist trading team fully onto the platform and the
introduction of MIFID II has provided the opportunity to extend significantly, our research offering in a number
of targeted sectors.
Post the £5m fundraise in June our net assets of £12.5m at the year end enable Arden to withstand any market
pressures and offer us the ability to capitalise on any corporate opportunities that may arise.
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 taxation
Profit/(loss) before taxation
2017
£’000
747
2016
£’000
(429)
This is a key indicator of business performance. The main driver of this year’s performance is the increase
in revenue of £4.6m with Corporate Finance fees increasing by £3.3m compared to the prior year.
• Earnings per share
Basic earnings/(loss) per share
2017
£’000
3.3
2016
£’000
(2.5p)
The objective is to grow earnings per share for our shareholders, basic earnings per share have gone from a
loss per share of 2.5p in 2016 to earnings of 3.3p this year.
- 4 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
STRATEGIC REPORT
• Corporate client base performance
Funds raised
Retained corporate clients
2017
2016
£150m
38
£61m
39
The Group has raised £150m for clients during the financial year compared to £51m last year. This has
driven increased revenues and profitability.
• Maintaining capital adequacy ahead of regulatory requirements
Capital Adequacy Ratio
2017
2016
652%
404%
This measure indicates the strength of the Group’s balance sheet. With the funds raised during the
financial year this has further strengthened the balance sheet.
Comparables against KPI’s are also 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, operational risk and regulatory risk and an explanation of these is
set out in note 24.
James Reed-Daunter
Executive Director
16 January 2018
- 5 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 appointments include the Chairmanship of Channel 4 Television
Corporation from 2004 to 2010 and PizzaExpress plc during the 1990’s. Luke holds Board positions in a
number of charities and is Chairman of The Institute of Cancer Research.
Donald Brown (Chief Executive Officer)
Donald is a senior investment banking executive with over 25 years' experience of working in the small cap and
mid cap broking sector. Most recently he was a Managing Director at the Royal Bank of Canada and previously
held senior positions at Collins Stewart and Evolution Securities. He has specialist knowledge of fundraisings at
primary and secondary levels and many years' experience of advising CEOs and boards across a wide range of
industries on corporate strategies within the public and private markets.
James Reed-Daunter (Executive Director)
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 the 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, joining in 2002 as Head of Equity Sales, and served as CEO from 2012 to 2017. He
is now Head of ECM and looks after several key client relationships.
Mark Ansell (Independent Non-Executive Director)
Mark is a Chartered Accountant and has significant experience as a business consultant and director involved in
strategic and corporate finance advice and in management and leadership roles. Mark has previously held
senior roles in many organisations including being the Deputy Chief Executive and Finance Director of Aston
Villa plc, Interim Chief Executive of Marketing Birmingham and as a Senior Partner and Partner in charge of
Corporate Finance of Deloitte in Birmingham and the Midlands. Mark is the Senior Independent Director.
- 6 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
REPORT OF THE DIRECTORS
The Directors present their Annual Report and audited Financial Statements for the financial year ended 31
October 2017.
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 23.
The Directors propose to pay a final dividend of 1p per share (2016: Nil). This, when taken with the interim
dividend of Nil (2016: Nil) per share gives a total dividend of 1p per share in respect of the year ended 31
October 2017 (2016: Nil).
The final dividend, if approved, will be paid on 22 March 2018 to shareholders on the register at close of
business on 2 March 2018, with an ex-dividend date of 1 March 2018.
Going Concern
The Directors believe that, taking into account the available cash and liquid assets, 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.
Risk Management
The Group’s policies for managing risk arising from activities are set out in note 24 of the Financial Statements.
Directors
The Directors of the Company who held office since 1 November 2016 were:
Current Directors:
Luke Johnson
Donald Brown
James Reed-Daunter
Mark Ansell
Previous Directors:
Jonathan Keeling
Steve Wassell
Chairman
Chief Executive Officer (Appointed 12 June 2017)
Executive Director
Independent Non-Executive Director
Previous Executive Deputy Chairman (Resigned 29 June 2017)
Previous Chief Operating Officer (Resigned 29 June 2017)
Directors’ Interests
The interests of current Directors in shares and options are disclosed in the Directors’ Remuneration Report set
out on pages 13 to 16.
- 7 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
REPORT OF THE DIRECTORS
Significant Shareholdings
In addition to the current Directors’ interests shown on page 15 and 16, 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 16 January 2018:
Legal & General
Jonathan Keeling
Arden Partners Employee Benefit Trust
Richard Day
Alasdair Locke
Miton Group
Robert Griffiths
Tony Bartlett
Charles Stanley
David Newlands
%
13.33
6.24
4.78
4.42
4.41
4.03
3.55
3.44
3.23
3.05
Share Capital
Information relating to the Company’s ordinary share capital (including share purchase) is shown in note 19 to
the Financial Statements.
Treasury Shares
The Board continued buying back the Company’s shares during the year, under the authority granted by the
Shareholders.
The Company purchased 743,070 ordinary shares in the year ended 31 October 2017, for a consideration of
£0.3m. 31,000 shares were sold during the year to satisfy share options.
At 31 October 2017 the Company held 1,912,312 shares in Treasury, at a cost of £0.9m (2016: 1,200,242
£0.5m).
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 2017 the Trust held
1,480,700 (4.71% of total voting rights) (2016: 1,480,700 (7.62% of total voting rights)) shares. The Trustees
have agreed to hold these shares to satisfy options granted under various share option schemes.
Events After Reporting Period
For details of significant post balance sheet events please see note 23.
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 2017 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.
- 8 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
REPORT OF THE DIRECTORS
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
James Reed-Daunter
Executive Director
16 January 2018
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ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
Donald Brown
James Reed-Daunter
Mark Ansell
Chairman (Non-Executive)
Chairman of Nominations Committee
Chief Executive Officer
Executive Director
Senior Independent Director (Non-Executive)
Chairman of Audit Committee
Chairman of Remuneration Committee
Biographical details of all the Directors are set out on page 6.
Board Meetings
The Board has regular scheduled full meetings and will meet at other times as necessary. The Board is
responsible for strategic and major operational issues affecting the Group. It reviews financial performance,
regulatory compliance, and monitors key performance indicators. All directors receive appropriate information
on a timely basis to enable them to discharge their duties accordingly. The Board will consider any ad hoc
matters of significance to the Group including corporate activity. Attendance at meetings by members of the
Board during the year ended 31 October 2017 was as follows:
Total number of meetings
Donald Brown1
James Reed-Daunter
Jonathan Keeling2
Steve Wassell2
Mark Ansell
Luke Johnson
Board
Audit
Committee
Remuneration
Committee
10
4
10
6
6
10
10
2
n/a
n/a
n/a
2
2
2
10
n/a
n/a
n/a
n/a
10
10
Notes:
1. Donald Brown attended all Board meetings required subsequent to his appointment on 12 June 2017.
2.
Jonathan Keeling and Steve Wassell attended all Board meetings required prior to their resignations on 29
June 2017.
Re-election of Directors
In accordance with the Company’s Articles certain of the Directors are required to be re-elected at Annual
General Meetings of the Company. In accordance with the Articles, Donald Brown is required to retire at the
forthcoming Annual General Meeting and, being eligible, offers himself for re-election. The Board supports
this re-appointment having assessed performance and value to the Board.
- 10 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 (further details of Directors’ remuneration are set out in the Report on Directors’
remuneration on pages 13 to 16) 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 Company Secretary, 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 36. 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.
During the year the Committee appointed Donald Brown as Chief Executive Officer.
Operations Committee
The Operations Committee is responsible for the implementation of strategy and for monitoring progress of
delivery of key objectives. It also reviews financial performance against budgets and key performance
indicators. The Operations Board is chaired by the Head of Equities.
Risk Committee
The Risk Committee is chaired by the Chief Operating Officer and has the Head of Equities, 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.
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ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 regular reviews 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.
- 12 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
has 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.
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.
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ARDEN PARTNERS PLC ANNUAL REPORT 2017
DIRECTORS’ REMUNERATION REPORT
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 2017 is set
out below:
Executive Directors
Donald Brown1
James Reed-Daunter
Jonathan Keeling2
Steve Wassell2
Non-Executive Directors
Luke Johnson
Mark Ansell
Total
Salary,
fees and
benefits
£’000
Pension
contributions
£’000
Incentive
payments
£’000
Total
2017
£’000
89
170
115
76
-
35
485
3
-
-
-
-
-
3
150
80
-
-
242
250
115
76
-
-
-
35
230
718
Notes:
1. Donald Brown was appointed a Director on 12 June 2017 and his salary is apportioned from this date.
2.
Jonathan Keeling and Steve Wassell resigned as Directors on 29 June 2017 and their salaries are
apportioned to this date.
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ARDEN PARTNERS PLC ANNUAL REPORT 2017
DIRECTORS’ REMUNERATION REPORT
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.
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
Donald Brown
James Reed-Daunter
Non-Executive Directors
Luke Johnson
Mark Ansell
31 October
2017
Number
Percentage
Interest
31 October
2016
Number
200,000
2,553,644
3,445,112
111,750
0.64%
8.12%
-
2,353,644
10.95%
0.36%
2,195,112
111,750
- 15 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
Donald Brown1
Donald Brown1
Donald Brown1
James Reed-Daunter2
James Reed-Daunter1
James Reed-Daunter1
James Reed-Daunter1
Total
Vesting
Date
31 October
2016
Number
Options
granted in
year
Number
Options
exercised in
year
Number
31 October
2017
Number
20/09/2018
20/09/2019
20/09/2020
31/12/2018
20/09/2018
20/09/2019
20/09/2020
-
-
-
500,000
-
-
-
444,666
444,666
444,668
-
166,666
166,666
166,668
500,000
1,834,000
-
-
-
-
-
-
-
-
444,666
444,666
444,668
500,000
166,666
166,666
166,668
2,334,000
Notes:
1. These options were granted on 20 September 2017 under the Arden Partners Share Plan 2013 and are
exercisable subject to the achievement of Company performance related conditions.
2. 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.
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
16 January 2018
- 16 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 laws 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 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.
- 17 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ARDEN PARTNERS PLC
For the year ended 31 October 2017
Opinion
We have audited the financial statements of Arden Partners plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 October 2017 which comprise the consolidated statement of comprehensive
income, consolidated and company statement of financial position, the consolidated and company statement of
cash flows and the consolidated and company statement of changes in equity and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements 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.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 October 2017 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union ;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
•
•
•
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the group in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions regarding going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months from the date when the financial
statements are authorised for issue.
•
- 18 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ARDEN PARTNERS PLC
For the year ended 31 October 2017
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How we addressed the Key Audit Matter in the Audit
Revenue recognition
Our procedures performed included:
As detailed in the accounting policies
and note 2, the group derives its
revenue from two business divisions
which have four sub categories.
from
Commission
equity
earned
trading on an agency basis and realised
and unrealised trading gains and losses
on shares traded on a principal basis
are
and
consist of a high volume of low value
transactions. The group uses a service
organisation
the clearing and
settlement of trades.
automatically
calculated
for
and
Corporate Finance income includes
retainer fees and corporate finance deal
fees
commissions.
placing
Judgement is required in respect of the
timing of the recognition of deal fees
and placing commissions where there
is uncertainty over the contractual
entitlement for the Group to receive
them.
Commission earned from equity trading on an agency basis and
realised and unrealised trading gains and losses on shares
traded on a principal basis:
• We obtained and considered the findings of relevant service
the clearing and
organisation control
settlement services provided by the service organisation
reports covering
• We obtained monthly trading and commission reports directly
from the service organisation and re-performed the monthly
reconciliations between the trading system, general ledger and
the service organisation’s reports
• We vouched monthly receipts of commission to bank
• We obtained direct confirmation of the year end market
positions held and performed a recalculation of the unrealised
and realised gains and losses on principal trading based on the
opening book position, closing book position and buy and sell
transactions in the year
• We verified a sample of buy and sell transactions through third
party confirmations and reconciled the total transactions to cash
movements.
Corporate finance deal fees and placing commissions
• For 99% of deal fees in the year, we recalculated the amount
due based on the terms set out in the relevant engagement
letters
• We considered the status of open projects at the year end to
determine whether it would be appropriate to recognise any
revenue during the year
• We analysed deal fees and placing commissions received
subsequent to the year end based on the terms set out in the
relevant engagement letters and the timing of the completion of
the deals to determine whether revenue should be recognised in
the year.
- 19 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ARDEN PARTNERS PLC
For the year ended 31 October 2017
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below this level will not necessarily be evaluated as immaterial
as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the Financial Statements.
Based on our professional judgement, we determined materiality for the financial statements as a whole to be
£75,000 (2016: £59,000). This represents 1% of the average revenue for the last 3 years.
Revenue has remained in excess of £5m over the last three years. We considered a three year average revenue to
be the most appropriate benchmark as profit before tax has been volatile in the past three years and the Group
made a loss in the previous two years. The increase in materiality this year is a reflection of growth in the
business.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
£1,500, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
There were no misstatements identified during the course of our audit that were individually, or in aggregate,
considered to be material in terms of their absolute monetary value or on qualitative grounds.
An overview of the scope of our audit
The group manages its operations from 2 locations in the UK, London and Birmingham, and consists of the
Group holding company, one active subsidiary and two dormant subsidiaries.
The Group engagement team carried out statutory audits for the Group holding company and the active
subsidiary.
Our audit approach was developed by obtaining an understanding of the group’s activities, the key functions
undertaken by the Board and the overall control environment. Based on this understanding we assessed those
aspects of the Group’s transactions and balances which were most likely to give rise to a material misstatement.
Our audit work on each component was executed at levels of materiality applicable to the individual entity
which was lower than Group materiality.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
- 20 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ARDEN PARTNERS PLC
For the year ended 31 October 2017
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
•
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 17, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative but to do so.
- 21 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ARDEN PARTNERS PLC
For the year ended 31 October 2017
Auditor’s responsibilities for the audit of the financial statements
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.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Peter Smith (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
16 January 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
- 22 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2017
Revenue
Administrative expenses
Profit/(loss) from operations
Finance income
Finance expense
Profit/(loss) before taxation
Income tax charge
Profit/(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
Transfer to profit or loss on disposal of available for sale
assets
Deferred tax taken to equity
Total comprehensive income for the year attributable to
equity shareholders
Profit/(loss) per share
Basic
Diluted
Note
2
7
8
9
15
10
10
2017
£’000
10,477
(9,741)
736
34
(23)
747
(15)
732
(8)
13
4
741
3.3
3.2
2016
£’000
5,857
(6,323)
(466)
40
(3)
(429)
(41)
(470)
(5)
-
-
(475)
(2.5p)
(2.5p)
The notes on pages 30 to 54 form part of these financial statements
- 23 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 October 2017
Note
2017
£’000
2017
£’000
2016
£’000
2016
£’000
2,806
503
2,714
48
9,037
(171)
(2,494)
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
Collateral deposits
Cash and cash equivalents
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
67
39
106
15,108
15,214
(2,665)
(2,665)
12,549
3,338
700
6,691
(849)
(6)
3,547
13,421
(872)
12,549
1,489
552
2,544
58
5,170
(48)
(2,719)
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
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 Financial Statements were approved by the Board of Directors and authorised for issue on 16 January 2018.
Donald Brown
Chief Executive Officer
Mark Ansell
Chairman of the Audit Committee
The notes on pages 30 to 54 form part of these financial statements
- 24 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
COMPANY STATEMENT OF FINANCIAL POSITION
At 31 October 2017
Note
2017
£’000
2017
£’000
2016
£’000
2016
£’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
Collateral deposits
Cash and cash equivalents
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
2,806
503
2,902
48
9,028
18
18
(171)
(2,673)
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
67
39
106
15,287
15,393
(2,844)
(2,844)
12,549
3,338
700
6,691
(849)
(6)
3,547
13,421
(872)
12,549
6,756
1,489
552
2,732
58
5,161
(48)
(2,898)
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
The Company has taken advantage of Section 408 of the Companies Act 2006, and the Statement of
Comprehensive Income of the parent Company is not presented. The parent Company’s profit after taxation for
the financial year amounted to £732,000 (2016: loss £470,000).
The Financial Statements were approved by the Board of Directors and authorised for issue on 16 January 2018.
Donald Brown
Chief Executive Officer
Mark Ansell
Chairman of the Audit Committee
The notes on pages 30 to 54 form part of these financial statements
- 25 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 October 2017
Note
2
11
7 & 8
19
15
15
11
7 & 8
Operating activities before taxation
Profit/(loss) before tax
Adjustments for:
Fair value adjustments
Gain on sale of available for sale investments
Depreciation of fixtures, fittings and computer equipment
Net interest receivable
Share based payments
Operating cash flow before changes in working capital
(Increase)/decrease in operating assets
Decrease/(increase) in operating liabilities
Purchase of available for sale investments
Proceeds from disposal of available for sale investments
Cash (used in)/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
Issue of shares
Net cash flows from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
2017
£’000
2016
£’000
747
(27)
(50)
21
(11)
4
684
(1,437)
(102)
(509)
600
(764)
-
(764)
(61)
11
(50)
(15)
-
(337)
5,033
4,681
3,867
5,170
9,037
(429)
(205)
-
23
(37)
22
(626)
88
682
(50)
-
94
10
104
(25)
37
12
(31)
133
(420)
-
(318)
(202)
5,372
5,170
The notes on pages 30 to 54 form part of these financial statements
- 26 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 October 2017
Note
2
11
7 & 8
19
15
15
11
7 & 8
Operating activities before taxation
Profit/(loss) before tax
Adjustments for:
Fair value adjustments
Gain on sale of available for sale investments
Depreciation of fixtures, fittings and computer equipment
Net interest receivable
Share based payments
Operating cash flow before changes in working capital
(Increase)/decrease in operating assets
Decrease/(increase) in operating liabilities
Purchase of available for sale investments
Proceeds from disposal of available for sale investments
Cash (used in)/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
Issue of shares
Net cash flows from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
17
2017
£’000
2016
£’000
747
(27)
(50)
21
(11)
4
684
(1,437)
(102)
(509)
600
(764)
-
(764)
(61)
11
(50)
(15)
-
(337)
5,033
4,681
3,867
5,161
9,028
(429)
(205)
-
23
(37)
22
(626)
88
682
(50)
-
94
10
104
(25)
37
12
(31)
133
(420)
-
(318)
(202)
5,363
5,161
The notes on pages 30 to 54 form part of these financial statements
- 27 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2017
Share
Capital
£’000
2,063
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
700
(295)
(849)
(6)
3,348
Total
£’000
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
-
-
-
-
-
-
1,275
3,758
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(337)
-
14
-
-
-
-
-
-
-
-
-
13
(8)
5
-
-
-
-
732
732
4
-
-
4
13
(8)
736
741
-
-
4
(29)
5,033
(337)
4
(15)
3,338
6,691
700
(872)
(849)
(6)
3,547
12,549
Balance at
1 November 2015
Loss 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
Profit for year
Deferred tax taken to
equity
Transferred to profit or loss
on disposal of available for
sale assets
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Issue of ordinary shares net
of expenses
Purchase of own shares
Share based payments
Share options exercised
Balance at
31 October 2017
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.
4. Share premium represents the excess over nominal value of the fair value consideration received for equity
shares net of expenses of the share issues amounting to £67,000.
The notes on pages 30 to 54 form part of these financial statements
- 28 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2017
Share
Capital
£’000
2,063
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
700
(295)
(849)
(6)
3,348
Total
£’000
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
-
-
-
-
-
-
1,275
3,758
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(337)
-
14
-
-
-
-
-
-
-
-
-
13
(8)
5
-
-
-
-
732
732
4
-
-
4
13
(8)
736
741
-
-
4
(29)
5,033
(337)
4
(15)
3,338
6,691
700
(872)
(849)
(6)
3,547
12,549
Balance at
1 November 2015
Loss 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
Profit for year
Deferred tax taken to
equity
Transferred to profit or loss
on disposal of available for
sale assets
Revaluation of available
for sale financial assets
Total comprehensive
income for the year
Contributions by and
distributions to owners
Issue of ordinary shares net
of expenses
Purchase of own shares
Share based payments
Share options exercised
Balance at
31 October 2017
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.
4. Share premium represents the excess over nominal value of the fair value consideration received for equity
shares net of expenses of the share issues amounting to £67,000.
The notes on pages 30 to 54 form part of these financial statements
- 29 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 55.
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 profit after
taxation for the financial year amounted to £732,000 (2016: loss £470,000).
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.
Where there are arrangements in place for an element of revenue to be paid away the cost is recognised
in administrative expenses.
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.
- 30 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. Purchases and sales of financial
assets are recognised on trade date.
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.
- 31 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
•
Available for sale assets: Non-derivative financial assets that do not qualify to be classified in
another category are classified as available for sale financial assets. They are carried at fair value
with changes in fair value recognised directly in a separate component of equity (available for
sale reserve). 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 Statement of
Comprehensive Income. When an available for sale financial asset is disposed of, the cumulative
gain or loss previously recognised in equity is reclassified from other comprehensive income to
the profit or loss account.
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.
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.
- 32 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
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 ion other comprehensive income.
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.
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.
- 33 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Estimates and judgements that may have an effect on the next financial year are discussed below:
Derivative Financial Assets
The fair value of options which are included within derivative financial are determined by using
valuation models.
Share Based Payments
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.
- 34 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2017 include:
IFRS 9 Financial Instruments
In July 2014, the IASB issued IFRS 9 Financial Instruments. The standard is effective for annual
periods beginning on or after 1 January 2018 with early adoption permitted. The standard was endorsed
in November 2016. The Group currently plans to apply IFRS 9 to its financial statements starting 1
November 2018.
IFRS 9 brings changes to the classification and measurement of financial assets, impairment of financial
assets and hedge accounting. IFRS 9 uses a single approach to determine whether a financial asset is
measured at amortised cost or fair value. The approach in IFRS 9 is based on how an entity manages its
financial instruments (its business model) and the contractual cash flow characteristics of the financial
assets.
IFRS 9 will also change impairment methodology with a shift from an incurred loss to an expected loss
impairment methodology. At initial recognition an allowance (or provision in the case of commitments
and guarantees) is required for expected credit losses resulting from default events that are possible
within the next 12 months. In the event of a significant increase in credit risk since initial recognition,
IFRS 9 requires the recognition of lifetime expected credit losses. Impairment measurement will
involve increased complexity and significant judgements on areas such as the estimation of probabilities
of default, loss given default, unbiased future economic scenarios, estimation of expected lives,
estimation of exposures at default and assessing whether a significant increase in credit risk has
occurred.
The current assessment of the classification and measurement is as follows:
•
financial assets and liabilities designated at fair value through profit and loss (FVTPL) under IAS
39 will be measured at FVTPL under IFRS 9;
• non-derivative financial assets classified as available for sale assets under IAS 39 will be measure
at FVTPL under IFRS9.
The group expects that the recognition and measurement basis of the majority of the group’s financial
assets will be largely unchanged under IFRS9.
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. The standard is
effective for annual periods beginning on or after 1 January 2018 with early adoption permitted. The
standard was endorsed in September 2016. The Group currently plans to apply IFRS 15 to its financial
statements starting 1 November 2018.
The Group’s current measurement and recognition principles are aligned to the standard and we do not
expect an impact to measurement principles currently applied.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases. The standard is effective for annual periods
beginning on or after 1 January 2019 with early adoption permitted. The standard was endorsed in June
2017. The Group currently plans to apply IFRS 15 to its financial statements starting 1 November
2019.
- 35 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IFRS 16 results in lessees accounting for most leases within the scope in a manner similar to the way in
which finance leases are currently accounted for under IAS 17 Lease. Lessees will recognise a ‘right of
use’ asset and a corresponding financial liability on the balance sheet. The asset will be amortised over
the period of the lease and the financial liability measured at amortised cost.
The Group is currently in the process of assessing the new standard but it is expected to have a material
impact on the balance sheet as all operating leases will need to be recognised on the balance sheet. The
rental expense in the income statement will be replaced with depreciation and interest expense.
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
Gain on sale of available for sale asset
Transfer to profit or loss on disposal of available for sale assets
Total revenue
2017
£’000
3,767
6,673
50
(13)
10,477
2016
£’000
2,430
3,427
-
-
5,857
Included within revenue of the Equities Division is a profit of £40,000 (2016: £205,000) 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 2017, one of the Group’s customers contributed more than 10% of the
Group’s revenue, the amount was £1,996,000. In 2016 none of the Group’s customers contributed 10%
or more of the Group’s revenue.
3)
Profit from operations
This is arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Operating lease costs
Auditor’s remuneration:
Audit services:
Company
Subsidiaries
Tax services
Audit related assurance services
Foreign currency losses/(gains)
Share based payments
Restructuring costs
Lease settlement (Note 10)
- 36 -
2017
£’000
21
321
38
1
6
16
8
4
517
-
2016
£’000
23
211
35
1
6
15
4
22
-
(150)
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4)
5)
Dividends
No dividends were recognised in the year.
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
2017
£’000
3,458
523
4
494
127
4,606
2016
£’000
3,088
25
22
385
173
3,693
Staff costs include an amount of £460,000 (2016: £Nil) in respect of restructuring payments. The
average number of employees (including Directors) of the Group and Company during the year was 39
(2016: 38) of which 28 (2016: 28) are front-office and the remainder are administration.
6)
Directors' remuneration
Directors' emoluments including incentive payments
Company contributions to money purchase pension schemes
2017
£’000
715
3
718
2016
£’000
493
27
520
There was 1 Director in a defined contribution pension scheme during the year (2016: 2).
The total amount payable to the highest paid Director in respect of emoluments was £250,000 (2016:
£170,000) of this total Company pension contributions of £Nil (2016: £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 13 to 16.
7)
Finance income
Bank and other interest receivable
8)
Finance expense
Bank overdrafts and loans
- 37 -
2017
£’000
34
2017
£’000
23
2016
£’000
40
2016
£’000
3
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9)
Income tax 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
2017
£’000
2016
£’000
-
-
-
15
-
-
-
15
15
-
7
7
26
8
-
-
34
41
The tax assessed for the year is lower (2016: higher) than the standard rate of corporation tax in the UK.
The differences are explained below:
Profit/(loss) before tax
Profit/(loss) on ordinary activities at the standard rate of
corporation tax in the UK of 19.41% (2016: 20%)
Effect of:
Deferred tax not previously recognised
Losses carried forward
Income not taxable
Expenses not deductible for tax purposes
Deferred tax on share options
Change in tax rate
Total income tax charge
2017
£’000
747
2016
£’000
(429)
145
(86)
(147)
-
(5)
20
(4)
2
11
-
94
-
25
8
-
41
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. Reductions to 19% from 1 April 2017 and 18% from 1 April
2020 were substantively enacted in November 2015. A further reduction to 17 % from 1 April 2020
was enacted in September 2016
The deferred tax balances at 31 October 2017 have been stated at 19% as this is the expected prevailing
rate when the temporary differences are expected to reverse.
- 38 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 profit/(loss) per share
Add: IFRS2 share-based payments
Add: Restructuring costs
Less: Lease settlement credit
Underlying basic profit/(loss)
Diluted profit/(loss) per share
Add: IFRS2 share-based payments
Add: Restructuring costs
Less: Lease settlement credit
Underlying diluted profit/(loss)
Year ended
31 October 2017
Year ended
31 October 2016
Pence per
Share
3.3
-
2.3
-
Numerator
£’000
732
4
517
-
Pence per
Share
(2.5)
0.1
-
(0.8)
Numerator
£’000
(470)
22
-
(150)
5.6
3.2
-
2.3
-
5.5
1,253
(3.2)
(598)
732
4
517
-
1,253
(2.5)
0.1
-
(0.8)
(3.2)
(470)
22
-
(150)
(598)
Year ended
31 October 2017
Number
Year ended
31 October 2016
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
22,188,366
406,895
22,595,261
18,734,234
541,383
19,275,617
The 1,480,700 (2016: 1,480,700) shares held by the Arden Partners Employee Benefit and the
1,912,312 (2016: 1,200,242) shares held in Treasury have been excluded from the denominator.
In the prior year 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.
- 39 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11) Property, plant and equipment
Group and Company as at 31 October 2017
Cost
At 1 November 2016
Additions
At 31 October 2017
Depreciation
At 1 November 2016
Charge for the year
At 31 October 2017
Net book value
At 31 October 2017
At 31 October 2016
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
Improvements
to leasehold
buildings
£’000
Fixtures,
fittings and
computer
equipment
£’000
301
-
301
301
-
301
-
-
1,255
61
1,316
1,228
21
1,249
67
27
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
Total
£’000
1,556
61
1,617
1,529
21
1,550
67
27
Total
£’000
1,531
25
1,556
1,506
23
1,529
27
25
- 40 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12)
Investments
Company
Cost
At 1 November 2015, 31 October 2016 and 31 October 2017
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 at 5 George Road, Edgbaston, Birmingham, B15 1NP, England. The Company's
sole activity is to act as payment agent for the Arden Partners Employee Benefit Trust. At 31 October
2017, the Arden Partners Employee Benefit Trust held 1,480,700 ordinary shares in Arden Partners plc
(2016: 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 at 5 George Road, Edgbaston, Birmingham, B15 1NP, 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 – 2017
At 1 November 2016
(Charged)/credited to Statement of Comprehensive
Income
At 31 October 2017
Group and Company – 2016
At 1 November 2015
(Charged)/credited to Statement of Comprehensive
Income
At 31 October 2016
Accelerated
capital
allowances Share options
£’000
20
£’000
30
Total deferred
tax asset
£’000
50
(15)
15
4
24
(11)
39
Accelerated
capital
allowances Share options
£’000
45
£’000
39
Total deferred
tax asset
£’000
84
(9)
30
(25)
20
(34)
50
The Company has unutilised tax losses of £1.7m (2016: £2.4m) on which a potential deferred tax asset
of £323k (2016: £456k) which due to the uncertainty of the timing of future taxable profits has not been
recognised.
- 41 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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 2017
2017
£’000
2016
£’000
2,561
1,284
245
205
2,806
1,489
At 31 October 2017 the historical cost of long market making equity positions was £2,848,000 (2016
£1,232,000).
At 31 October 2017 the historical cost of derivative financial assets was £Nil (2016: £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 gain on disposal
Fair value losses
At 31 October 2016
2016
£’000
552
509
(600)
50
(8)
503
2016
£’000
507
50
-
-
(5)
552
At 31 October 2017 the historical cost of available for sale financial assets was £508,000 (2016:
£563,000).
Included within available for sale financial assets is a holding in United Kingdom Treasury Gilts of
£503,000 (2016: £502,000), which is pledged as security to BNP Paribas Securities Services.
- 42 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
2017
£’000
740
393
446
1,135
2,714
2017
£’000
740
393
634
1,135
2,902
2016
£’000
1,409
598
198
339
2,544
2016
£’000
1,409
598
386
339
2,732
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
2017
£’000
9,037
2016
£’000
5,170
2017
£’000
9,028
2016
£’000
5,161
Included within cash and bank balances of the Group and the Company at 31 October 2017 is an
amount of $51,000 (£39,000) (2016: $17,000 (£13,000)) which is denominated in USD.
Included within cash and bank balances of the Group and the Company at 31 October 2017 is an
amount of €14,000 (£12,000) (2016: €3,000 (£2,000)) which is denominated in EUR.
- 43 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
2017
£’000
2016
£’000
171
547
353
182
766
646
2,494
2,665
48
1,477
303
178
239
522
2,719
2,767
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
£1,716,000 (2016: £1,918,000).
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
2017
£’000
2016
£’000
171
547
353
182
945
646
2,673
2,844
48
1,477
303
178
418
522
2,898
2,946
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
£1,895,000 (2016: £2,097,000).
- 44 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19) Share capital
Equity share capital
40,000,000 Ordinary shares of 10p each
33,378,935 (2016: 20,628,935) Ordinary shares
of 10p each
Authorised
2017
£’000
2016
£’000
Allotted, called up
and fully paid
2017
£’000
2016
£’000
4,000
4,000
-
-
-
-
3,338
2,063
On 30 June 2017 the Company issued 12,750,000 ordinary 10p shares at a price of 40p. Issue costs
amounting to £66,740 were incurred and have been deducted from the share premium account.
During the year the Company purchased 743,070 (2016: 1,293,266) ordinary shares to be held in
Treasury. The total cost of the shares was £0.3m (2016: £0.4m).
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)
2017
31.9
-
36.6
(2.2)
39.2
Number of
Options
2017
1,245,158
(60,000)
5,500,000
(183,370)
6,501,788
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
At 1 November 2016
Exercised during the year
Granted during the year
Expired during the year
At 31 October 2017
The weighted average market price of the Company’s shares at the date of exercise of options during
the year was 43.2p (2016: 27.2p).
- 45 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The share options outstanding at the year end have a weighted average exercise price and expected
remaining life as follows:
31 October 2017
31 October 2016
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
75,000
10.0
41
75,000
10.0
6,426,788
39.5
53
1,170,158
33.3
6,501,788
1,245,158
53
56
Arden
Partners
Share Plan
2007
Arden
Partners
Share Plan
2013
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 2017 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
20/09/2017
5.53p
39.53p
0p – 47.8p
37.73p
30%
0.25%
Nil
36-113
63
53
6,426,788
100%
426,788
24/03/2011
44.7p
10.0p
10.0p
54p
30%
4%
5%
120
120
41
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.
- 46 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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)
2017
£’000
4
2016
£’000
22
The charge for the year of £4,000 is made up of an expense of £73,000 and an expense reverse on
forfeiture of share options of £69,000.
20) Pensions
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 £127,000 (2016: £173,000).
Contributions amounting to £38,000 (2016: £32,000) remained outstanding to schemes and are included
in payables.
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
2016
£’000
242
469
-
2017
£’000
264
274
-
538
711
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 13 to 16. 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
2017
£’000
715
3
5
723
Year ended
31 October
2016
£’000
493
27
3
523
The Group has paid £Nil (2016: £16,000) 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. No amounts were outstanding at the year end.
The Group has received £Nil (2016: £67,000) from The Brighton Pier Group plc for Corporate Finance
services, Luke Johnson is a director of both The Brighton Pier Group plc and Arden Partners plc. No
amounts were outstanding at the year end.
- 47 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23) Events after the reporting period
On 3 November 2017 and 4 December 2017 the company purchased a total of 474,833 ordinary shares
to be held in treasury. The total cost of the shares was £0.2m.
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
24.1 Market risk
•
Liquidity risk
• Operational risk
•
Regulatory 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 £5,000 in the profit shown in the
Consolidated Statement of Comprehensive Income. In the year ended 31 October 2016 a 10%
movement in the all share AIM index would have increased or decreased the profit before
taxation by approximately £38,000.
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 2017, the profit before taxation would have
been increased by approximately £16,000 / decreased by £5,000. In the year ended 31 October
2016 a 0.5% movement in rates would have increased the profit before taxation by approximately
£36,000 / decreased by £11,000.
Fixed rate cash financial assets of £8,250,000 (2016: £4,800,000) comprise sterling cash deposits
at an average rate of 0.15% (2016: 0.15%). 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 2017 in respect of
US$51,000 (£39,000). There was a currency exposure for the Group and the Company at 31
October 2016 of US$16,000 (£13,000). The effect of a 10% movement in the US$/£ exchange
rate from the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £4,000 (2016: £1,000).
The Group and Company had an aggregate currency exposure at 31 October 2017 in respect of
EU€13,000 (£12,000). There was a currency exposure for the Group and the Company at 31
October 2016 of EU€Nil (£Nil). The effect of a 10% movement in the EU€/£ exchange rate from
the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £1,000 (2016: £Nil).
- 48 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23) Events after the reporting period
24.2 Credit risk
On 3 November 2017 and 4 December 2017 the company purchased a total of 474,833 ordinary shares
to be held in treasury. The total cost of the shares was £0.2m.
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:
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:
•
Liquidity risk
• Operational risk
•
Regulatory risk
• Market risk
• Credit 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 £5,000 in the profit shown in the
Consolidated Statement of Comprehensive Income. In the year ended 31 October 2016 a 10%
movement in the all share AIM index would have increased or decreased the profit before
taxation by approximately £38,000.
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 2017, the profit before taxation would have
been increased by approximately £16,000 / decreased by £5,000. In the year ended 31 October
2016 a 0.5% movement in rates would have increased the profit before taxation by approximately
£36,000 / decreased by £11,000.
Fixed rate cash financial assets of £8,250,000 (2016: £4,800,000) comprise sterling cash deposits
at an average rate of 0.15% (2016: 0.15%). 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 2017 in respect of
US$51,000 (£39,000). There was a currency exposure for the Group and the Company at 31
October 2016 of US$16,000 (£13,000). The effect of a 10% movement in the US$/£ exchange
rate from the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £4,000 (2016: £1,000).
The Group and Company had an aggregate currency exposure at 31 October 2017 in respect of
EU€13,000 (£12,000). There was a currency exposure for the Group and the Company at 31
October 2016 of EU€Nil (£Nil). The effect of a 10% movement in the EU€/£ exchange rate from
the rate ruling at the reporting date would be to impact profit/(loss) and net assets by
approximately £1,000 (2016: £Nil).
•
•
•
•
•
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:
Available for sale financial assets
Market receivables
Collateral deposits
Trade receivables
Other receivables
Prepayments and accrued income
Total loans and receivables
Cash and cash equivalents
Total assets
Group
2017
£’000
503
740
48
393
446
614
2,744
9,037
11,781
2016
£’000
503
1,409
58
598
198
-
2,766
5,170
7,936
Company
2017
£’000
552
740
48
393
634
614
2,981
9,028
12,009
2016
£’000
552
1,409
58
598
386
-
3,003
5,161
8,164
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.
- 48 -
- 49 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Movement in provision:
Opening balance
Amounts released
Amounts written off
Increase in provision
Closing balance
31 October
2017
£’000
297
27
-
27
62
(20)
393
31 October
2017
£’000
-
-
-
20
20
31 October
2016
£’000
507
47
-
-
44
-
598
31 October
2016
£’000
-
-
-
-
-
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 Group has a stock borrow facility with HSBC plc which allows the Group to borrow
securities up to the value of $750,000. Under such arrangements a security is purchased with a
commitment to return it at a future date at a future agreed price.
- 50 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The ageing of trade receivables at the reporting date was:
The following table sets out the contractual maturities (representing undiscounted contractual
cash-flows) of financial liabilities:
31 October
31 October
Group as at 31 October 2017
Financial liabilities at fair value
through profit and loss
Trade and other payables
Group as at 31 October 2016
Financial liabilities at fair value
through profit and loss
Trade and other payables
Company as at 31 October 2017
Financial liabilities at fair value
through profit and loss
Trade and other payables
trade and other payables are short term in nature and are due for payment within one year.
Company as at 31 October 2016
Financial liabilities at fair value
through profit and loss
Trade and other payables
Up to 3
months
£’000
171
1,500
1,671
Up to 3
months
£’000
48
1,826
1,874
Up to 3
months
£’000
171
1,500
1,671
Up to 3
months
£’000
48
1,826
1,874
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
45
45
-
-
-
-
-
-
-
-
-
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
-
45
45
-
-
-
-
-
-
-
179
179
Between
3 and 12
months
£’000
Between
1 - 2
Years
£’000
Between
2 - 5
Years
£’000
Over 5
years
£’000
-
44
44
-
-
-
-
-
-
-
179
179
Not past due
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due 121+ days
Provisions
Total
Movement in provision:
Opening balance
Amounts released
Amounts written off
Increase in provision
Closing balance
2017
£’000
297
27
-
27
62
(20)
393
2017
£’000
-
-
-
20
20
2016
£’000
507
47
-
-
-
44
598
2016
£’000
-
-
-
-
-
31 October
31 October
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.
•
•
•
•
•
•
•
The Group has a stock borrow facility with HSBC plc which allows the Group to borrow
securities up to the value of $750,000. Under such arrangements a security is purchased with a
commitment to return it at a future date at a future agreed price.
- 50 -
- 51 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2016 and 2017 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.
24.5 Regulatory Risk
Regulatory risk is the risk that the Group fails to comply with the complex regulatory
environment in which it operates. The Group has a separate risk committee and compliance
functions which are resourced by suitably qualified individuals. The directors continually
monitor changes and developments in the regulatory environment and ensure that sufficient
resources are made available to implement any required changes.
24.6 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.
- 52 -
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 2016 and 2017 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.
24.5 Regulatory Risk
Regulatory risk is the risk that the Group fails to comply with the complex regulatory
environment in which it operates. The Group has a separate risk committee and compliance
functions which are resourced by suitably qualified individuals. The directors continually
monitor changes and developments in the regulatory environment and ensure that sufficient
resources are made available to implement any required changes.
24.6 Fair value estimation
follows:
All financial instruments carried at fair value are categorised into three categories defined as
• 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.
ARDEN PARTNERS PLC ANNUAL REPORT 2017
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2017:
Group and Company as at 31 October 2017
Level 1
£’000
Level 2
£’000
Level 3
£’000
Assets
Long market making positions
Options
Available for sale financial assets
Liabilities
Short market making equity positions
Group and Company as at 31 October 2016
2,561
-
503
3,064
171
-
-
-
-
-
Level 1
£’000
Level 2
£’000
Level 3
£’000
-
171
Total
£’000
2,561
245
503
3,309
Total
£’000
1,284
205
552
2,041
-
245
-
245
-
205
-
205
-
48
• Level 1 – Quoted market price
Financial instruments with quoted prices for identical instruments in active markets.
Liabilities
Short market making equity positions
Assets
Long market making positions
Options
Available for sale financial assets
1,284
-
552
1,836
48
-
-
-
-
-
Reconciliation of recurring fair value measurements categorised within level 3 of the fair
value hierarchy
At 1 November 2016
Net unrealised profit recognised in Statement of Comprehensive
Income
Net unrealised loss recognised in Statement of Comprehensive
Income
At 31 October 2017
Options
£’000
Total
£’000
205
77
(37)
245
-
205
-
205
The derivative financial assets are classified as level 3 within the fair value hierarchy and
comprise equity options over liquid listed securities.
- 52 -
- 53 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
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
2017
£’000
Valuation
Technique
Unobservable
input
Range
Options
245
Black-Scholes
Model
Historical
Volatility
25-40%
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
£8,018 / decrease of £5,599 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
Profit before tax (£’000)
Corporation tax paid
Public subsidies received
31 October 2017
Arden Partners plc
Institutional Stockbroker
UK
10,477
39
747
-
-
- 54 -
ARDEN PARTNERS PLC ANNUAL REPORT 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ARDEN PARTNERS PLC ANNUAL REPORT 2017
ARDEN PARTNERS PLC ANNUAL REPORT 2017
CORPORATE INFORMATION
CORPORATE INFORMATION
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
2017
£’000
Valuation
Unobservable
Technique
input
Range
245
Black-Scholes
Model
Historical
Volatility
25-40%
Options
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
£8,018 / decrease of £5,599 respectively in the profit shown in the Consolidated Statement of
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
Comprehensive Income.
25)
Country by country reporting
provides the relevant detail:-
Entity Name
Nature of Activities
Geographic Location
Turnover (£’000)
Average number of employees
Profit before tax (£’000)
Corporation tax paid
Public subsidies received
31 October 2017
Arden Partners plc
Institutional Stockbroker
UK
10,477
39
747
-
-
- 54 -
Company Secretary
Company Secretary
Company Number
Company Number
Nominated Advisor
Nominated Advisor
Registrar
Registrar
Lawyers
Lawyers
Auditors
Auditors
Bankers
Bankers
Registered Office
Registered Office
Steve Wassell
5 George Road
Steve Wassell
Edgbaston
5 George Road
Birmingham
Edgbaston
B15 1NP
Birmingham
B15 1NP
4427253
4427253
GCA Altium Limited
1 Southampton Street
GCA Altium Limited
London
1 Southampton Street
WC2R 0LR
London
WC2R 0LR
Link Asset Services
The Registry
Link Asset Services
34 Beckenham Road
The Registry
Beckenham
34 Beckenham Road
Kent
Beckenham
BR3 4TU
Kent
BR3 4TU
HFW LLP
Friars Court
HFW LLP
65 Crutched Friars
Friars Court
London
65 Crutched Friars
EC3N 2AE
London
EC3N 2AE
BDO LLP
55 Baker Street
BDO LLP
London
55 Baker Street
W1U 7EU
London
W1U 7EU
HSBC Bank plc
1st Floor
HSBC Bank plc
60 Queen Victoria Street
1st Floor
London
60 Queen Victoria Street
EC4N 4TR
London
EC4N 4TR
5 George Road
Edgbaston
5 George Road
Birmingham
Edgbaston
B15 1NP
Birmingham
B15 1NP
- 55 -
- 55 -
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
London
125 Old Broad Street
London
EC2N 1AR
Birmingham
5 George Road
Edgbaston
Birmingham
B15 1NP
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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