Y O U R A M B I T I O N D E L I V E R E D
www.finncap.com
Annual Report
2020
F O R T H E Y E A R E N D I N G 31S T M A R C H
STRATEGIC REPORT
Chairman’s Statement ................................................................................................................... 1
Business Model and Strategy ......................................................................................................... 5
Key Performance Indicators ........................................................................................................... 7
Financial Performance and Position .............................................................................................. 9
Principal Risks ............................................................................................................................... 11
The Board’s Statement on s.172(1) of CA2006 ........................................................................... 14
GOVERNANCE
Board of Directors ........................................................................................................................ 18
Corporate Governance Report ..................................................................................................... 21
Nominations Committee Report .................................................................................................. 25
Audit Committee Report .............................................................................................................. 26
Risk Committee Report ................................................................................................................ 28
Remuneration Committee Report ............................................................................................... 29
FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities...................................................................................... 33
Directors’ Report .......................................................................................................................... 34
Auditors’ Report ........................................................................................................................... 37
Consolidated Statement of Comprehensive Income ................................................................... 42
Consolidated Statement of Financial Position ............................................................................. 43
Company Statement of Financial Position ................................................................................... 44
Consolidated Statement of Cashflows ......................................................................................... 45
Company Statement of Cashflows ............................................................................................... 46
Consolidated Statement of Changes in Equity ............................................................................. 47
Company Statement of Changes in Equity .................................................................................. 48
Note to Financial Statements ...................................................................................................... 49
OTHER INFORMATION ....................................................................................................... 80
finnCap Group plc | Annual Report and Accounts 2019-20
Strategic Report
STRATEGIC REPORT
Chairman’s Statement
This report covers the first full financial year of
finnCap Group plc (“finnCap”, ”the Group”, “the
Company” or “the Firm”) created by finnCap’s
acquisition of Cavendish Corporate Finance and
its admission to AIM in December 2018.
During the financial year ended 31 March 2020,
we made significant progress with business
integration, consolidating our existing client
offerings,
infrastructure and
investing in new service offerings, which are
central to delivering our strategy for growth and
strengthening the business.
improving our
However, the operating environment for UK
financial services was challenging and volatile.
Business confidence was significantly impacted
by the protracted discussion on Brexit timing in
the first part of the financial year and then the
resulting change
in the Conservative Party
leadership and the general election. Completing
transactions in both the Equity Capital Markets
(“ECM”) and Mergers and Acquisitions (“M&A”)
sectors was
than
significantly
experienced
This was
in the prior year.
particularly evident in the quantum of funds
raised on AIM in the calendar year 2019 which
amounted to only £3.8bn, a reduction of 30% on
the prior year and the lowest funds raised since
2012.
harder
In this context, whilst the result for the year was
disappointing, it reflects the importance of
remaining profitable and continuance of the
development of the business.
Key Financial Highlights
The key financial highlights for the 12 months to
31 March 2020 are set out below. The 2019
comparatives are for the 11 months to 31 March
2019, being the new year end date chosen to
align Cavendish Corporate Finance and finnCap
following the acquisition in December 2018. The
comparatives therefore include the results of
finnCap for 11 months and Cavendish for
approximately four months. Inevitably, this
mixture of periods makes interpretation of the
results difficult.
Group revenues £26.0m (2019: £24.5m)
ECM revenues £18.7m (2019: £21.3m)
M&A revenues £7.3m (2019: £3.2m)
Pre-tax profit £1.2m (2019: £3.2m)
Earnings per share 0.49p (2019: 1.85p)
Adjusted earnings per share* 0.80p (2019:
2.86p)
Cash balance £4.7m (31 March 2019: £4.7m)
Key Operating Highlights (at 31 March 2020)
Retained ECM clients 126 (2019: 126)
Average monthly retainer £539k (2019: £538k)
ECM transactions 27 (2019: 29)
New client PLC advisory mandates 6 (2019: 6)
M&A mandates completed 13 (2019: 10)
* See page 80 for details of alternative performance measures.
Integrating Cavendish
The commercial logic to finnCap’s acquisition of
Cavendish was that both organisations had
clients with a range of advisory requirements
that neither business, standalone, had the
expertise and track record to undertake.
Now, we offer our core services to our combined
client base, whilst also building up new service
lines enabling us to offer a much wider menu of
services to our larger client base.
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We continue to integrate both businesses and
have visibility of the benefits to both the revenue
and cost base. Sector teams from both sides of
the firm work together on potential client
identification and mandates are being won off
the back of joint pitches.
Our costs also continue to benefit from the
efficiencies that flow from the consolidation of
our operations.
increasingly
Our collaborative approach has
exposed the impracticality of operating from
separate buildings. We are therefore delighted
to have secured new offices at 1 Bartholomew
Close which will, from September 2020, enable
us to operate across both finnCap and Cavendish
from a single base.
Although we will continue to operate and
leverage our two brands, this physical move will
undoubtedly improve our ability to share best
practice, cross sell and win new clients and
business.
We have also continued to expand and develop
our teams, both in our established sectors, and
in those that we are looking to develop.
The firm’s business model has high operational
leverage, so as revenues benefit from stronger
markets, profit and cashflow should also
improve.
COVID-19 response and Dividend
The COVID-19 pandemic required an urgent
response and given the likelihood of severe
economic impact, it was deemed sensible to
preserve the Group’s cash resources as a buffer
against future developments.
and
To reduce costs, we implemented a 3-month
voluntary and company-wide reduction
in
salaries and directors’ remuneration, deferred
discretionary
recruitment
expenditure. In addition, we have made limited
redundancies and
furloughed staff where
appropriate. Alongside this, we also took the
difficult decision to not pay any further dividends
relating to the year ended 31 March 2020.
reduced
policy
reflecting
At the time of its admission, the firm set a
dividend
historic
performance of each business, the expectation
of future cash flow generation and long-term
earnings potential of the Group. During FY19 the
Group made dividend payments of £1.2m.
the
The Board recognises the importance of income
to its shareholders, and is keen to reinstate the
dividend, but will only do so when the operating
environment is more certain. We will review the
position in November at the time of our interim
results.
We recognise our employees’ and directors’
contribution to the firm’s financial resilience in
these testing times.
Commercial and regulatory environment
As discussed above, the economic and political
environment
financial year was
particularly uncertain and business activity in our
key sectors was much reduced.
the
in
The challenges continue with the COVID-19
pandemic resulting in the largest government
intervention in daily life since World War 2.
Having adjusted our cost base and dividend to
preserve liquidity, it was pleasing to see our
corporate activity remained strong in the areas
that the firm has chosen to operate and invest in
over the past ten years. However, the ongoing
uncertainty may impact the demand for our
services for some time.
From a regulatory point of view, finnCap
continues to invest in the resources to enable it
to comply with the requirements of its various
regulators, exchanges and non-statutory bodies.
We believe that we have retained good
relationships and standing with these bodies
during the financial year.
During the year we successfully transitioned to
the new Senior Managers and Certification
Regime (SMCR).
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Board
Current Trading and Outlook
After the year end, Vin Murria stepped down
from the Board to allow her to focus more on her
other interests. The Board thanks Vin for her
considerable input into the Group’s strategy and
operations, particularly during the period of its
acquisition of Cavendish and admission to
trading on AIM.
In May, Richard Snow joined the Board as Chief
Financial Officer. Tom Hayward, the previous
CFO, remains on the Board in the new role of
Chief Operating Officer with a particular focus on
the performance and development of Cavendish
as its Managing Partner.
The current Board of Directors is significantly
invested in the success of finnCap and as at 30th
June 2020 holds in total over 35% of the issued
share capital of the Group.
People
The finnCap Group now numbers nearly 140
people – an almost fourfold increase from its
formation in early 2010.
We are very proud of our staff, who have
invested not just a considerable amount of time
and effort, but also a material proportion of their
personal financial resources in the business. In
aggregate, employee and directors own over
70% of the issued share capital providing the
benefit of aligned interests in the Firm’s success
and an appropriate long-term view of what is
best for the business.
We continue to believe that the Firm’s culture is
a material strength, and atypical amongst our
peers. Being collegiate is one of the Firm’s three
core values and we focus on the success of the
team rather than the individual. We believe this
generates a more stable employee base,
focussed on helping the firm as a whole to
succeed, in the knowledge that they personally
will then benefit.
In the 3 months to 30 June 2020, the Group
recorded turnover (unaudited) of £9.8m (Q1 19:
£6.5m), up by 51%.
Our ECM division has benefitted from a number
of equity fundraisings by clients to invest in
COVID-19 related activities, support balance
sheets
investment
programmes. Alongside this the Group has
completed several public M&A transactions,
experienced
market-making
conditions and continued to win clients.
favourable
accelerate
and
to
the M&A division,
transactions have
In
continued to complete and the team has won
further mandates, although several transactions
expected to close in the first quarter have been
delayed as the result of COVID-19.
The trading performance, combined with the
actions taken to protect the business during the
initial stage of the COVID-19 pandemic, has led
to an increase in cash to £8.5m at 30 June
(excluding a £1.8m 5 year loan to fund the fit out
of our new offices, and HMRC deferrals). This
level of liquidity is substantially in excess of our
capital requirements and provides a strong base
as we look to an uncertain future.
In September 2020, the Group will move into its
new premises at 1 Bartholomew Close which will
enable us to operate and leverage our two
brands across both finnCap and Cavendish from
a single base and to share best practice, cross-
sell and win new clients.
Whilst we have experienced a good start to the
year and have a reasonable pipeline of deals to
support revenue for the next few months, the
outlook remains uncertain and we therefore
continue to be cautious about the prospects for
the year and particularly the trading period post
September 2020.
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We will continue to drive our strategy however
and, as the result of our actions in March and a
strong Q1 performance, we have a more resilient
balance sheet to take advantage of any
opportunities that arise in the post COVID-19
period as we service the needs of ambitious
growing companies.
Your management team and staff have handled
three months
the events of
last
the
outstandingly well, and their efforts and
contribution to the Firm’s financial resilience are
greatly appreciated.
Jon Moulton
Chairman
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Business Model and Strategy
The Group is a full-service financial services firm
for ambitious growth companies. It currently
provides these companies with access to the
private and public equity and debt markets and
advice on acquisitions, disposals and public
market bids. The Group’s long-term strategy is
to further develop these services to offer a full
suite of best-in-class advisory services to its
target market.
The Group’s revenues are primarily generated in
the UK, although a number of its corporate
clients and institutional investors are based
overseas.
The Group had 138 employees at the year end.
Revenue generation
The revenue model for the Group is based on
(i)
(ii)
retainer fees;
trading commissions, research payments
and market making; and
(iii) deal fees for fundraisings and advisory
mandates which are either a percentage
of funds raised or deal value, or a fixed
fee, or a combination of both.
The Directors believe that the retainer fees and
trading revenues provide a stable base which
underpins the Group’s turnover. The Group’s
principal costs are its people, premises and IT
infrastructure – the
largest element by a
significant margin is the cost of its people.
Equity capital markets and corporate finance
This team focuses on the UK equity markets and
provides advice mainly to quoted companies
across a wide range of transactions. Projects
undertaken include taking companies public on
UK equity markets, raising equity finance in the
public markets, and advising on public company
takeovers, mergers and acquisitions, disposals
and restructurings. In addition to transactional
work, the team provides day-to-day advice to
quoted companies on market sentiment and
likely reactions to market communications and
strategy updates using knowledge gained from
investor
its extensive base of
contacts.
institutional
The team is also responsible for the active
promotion of
to
finnCap’s
institutional fund managers.
client base
The team operates across most industry sectors,
including technology, life sciences, industrials,
support services, consumer, mining, energy and
financials.
finnCap Ltd is authorised by the London Stock
Exchange to act as a nominated adviser allowing
it to advise issuers seeking admission to, and
trading on, AIM. Currently, the Corporate
Finance team acts as nominated adviser to 82
AIM companies. finnCap Ltd is also authorised
by the FCA to act as sponsor to issuers seeking a
listing on, or conducting transactions on, the
Official List, and is an AQSE (formerly NEX)
corporate adviser and a member firm of the
London Stock Exchange.
Equity sales and trading
long-term
The Equity Sales and Trading team serves
institutional clients including long-only funds,
specialist investors, wealth managers, and hedge
funds both in the UK and Europe. The team
seeks to target the full breadth of the investor
universe to create the right balance between
stable,
investors and those who
provide trading liquidity on behalf of finnCap’s
retained corporate clients. The team additionally
offers
for
ideas and
institutional clients and makes a market in
approximately 180 securities.
The team
supports other services provided to the Group’s
clients by providing real time information on
trading in retained corporate clients’ securities.
strategies
trading
Research
The Research team publishes daily research
reports to generate and maintain institutional
interest in the securities of the Group’s retained
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is particularly
corporate clients and other equity securities.
focused on the
The team
technology, support services,
life sciences,
industrials, mining, consumer and
energy,
financial sectors and special situations. The
focus is predominantly on companies quoted on
a UK equity capital market with a market
capitalisation below £500 million. The team
delivers active coverage of over 140 securities
which
includes results coverage, corporate
actions, morning notes, sector quarterlies and
thematic pieces.
Investment companies
The Group provides a full-service offering of
trading, sales, research and corporate finance
advice to quoted funds, with a strong focus on
the emerging market and alternative funds
sectors. The team currently has 10 retained
investment company clients.
financial services, industrials and healthcare.
The team has typically advised on the sale of
businesses with an enterprise value between
£10 million and £250 million. Cavendish usually
charges a retainer at the commencement of a
mandate and a success fee based on the value
achieved on sale with incremental fees paid as
value increases to further align its interest with
the client.
PLC strategic advisory
As part of its existing corporate finance business,
finnCap seeks
to win strategic advisory
mandates from its retained clients. Activity has
included both acquisitions and disposals and
nearly all of these mandates have involved
advice on the Takeover Code. Over the past 4
years the team has also won many mandates
from non-retained clients and the Firm seeks to
expand this activity.
Private growth capital
Debt advisory
finnCap has a team focused on raising funds
between £2 million and £50 million for private
companies and funds, assisting the scale up of
existing businesses that have clear commercial
traction.
M&A advisory
the
The Cavendish M&A advisory team specialises in
pre-sale exit planning, exit reviews and the
delivery of sell-side and buy-side advisory
mandates. This activity extends to the full
management of
sales process and
identification of the most appropriate purchaser
for private businesses. Through its membership
of Oaklins, the international association of 70
offices in over 45 countries, the team has access
to both buyers and sellers of businesses world-
wide and has particular expertise in technology,
services, consumer/retail,
media, business
The Group’s debt advisory
team advises
finnCap’s corporate clients and other clients on
their debt raisings, and on buy-side M&A
financing. The Group considers the opportunity
here to be significant, particularly in the current
economic climate.
Strategic objectives
The Group’s objective is to become the leading
to ambitious publicly
full-service provider
quoted and private companies. The Group has
set itself three core objectives to drive growth:
(i)
to capitalise on the existing successful
Equity Capital Markets platform;
(ii) to expand the service offering to clients and
into new markets; and
(iii) to
increase
development.
its reach through brand
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Key Performance Indicators
The Group monitors and manages its performance through the use of various Key Performance
Indicators (KPIs), at different levels within the business. The main KPIs used to assess the Group’s
performance as a whole over a financial period are set out below.
In each case, unless otherwise stated, the statistic for the prior period is based on the performance of
the Group as consolidated in its IFRS accounts (i.e. comprising the performance of finnCap Ltd for 11
months and Cavendish for the four-month period from the date of its acquisition).
Annualised average revenue per head
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
Annualised average revenue per head
186
230
The annualised average revenue per head incorporates both the Group’s income and its main cost.
The ability to pay staff appropriate remuneration is fundamental to the success of the Group. The
movement in the annualised average revenue per head in the year was mainly due to the decrease in
revenues (and specifically deal fees) as a result of the impact of the general economic climate on the
rate of our clients’ corporate transactions.
Average monthly retainer fees
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
Average monthly retainer fees
539
538
The Group continues to focus on growing its retainer income, a resilient revenue stream that helps to
reduce the risk in the Group’s business model. Although the average did not change in the period, we
continue to work to improve our client base through the recruitment of companies that are likely to
transact as well as to provide our investors with strong returns.
Completed M&A transactions
Year ended
31 March 2020
Number
Year ended
31 March 2019
Number
Completed M&A transactions (by Cavendish in
the full relevant period)
13
28
The number of transactions closed in a given period is relatively small and is therefore potential
subject to material proportional movement. The statistic in the previous period was particularly high
relative to Cavendish’s recent history, whereas the current year was adversely affected by the impact
of political uncertainty on buyer and seller confidence which reduced our client base’s propensity to
transact.
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Strategic Report
Total deal fees
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£m
Total Deal fees
15,968
15,179
As stated above and elsewhere in this Annual Report, the revenues in the period, when compared on
a like for like basis, show the significant impact of the political and economic uncertainly throughout
the year. In the light of this, we regard the performance in the current year as being robust.
Adjusted earnings per share*
Year ended
31 March 2020
Period ended
31 March 2019
Adjusted earnings per share
0.80p
2.86p
Whilst basic earnings per share is a standard measure, the Board focuses on adjusted earnings per
share. Adjusted Earnings excludes non-recurring items, amortisation of intangible assets from
acquisitions, share based payments and adds a normalised tax charge. The weighted number of shares
excludes the shares held by the Group Employee Benefit Trust. The adjusted earnings per share
reflects the reduced financial performance of the group in the current year.
* See page 80 for details of alternative performance measures.
Dividend per share
Year ended
31 March 2020
Period ended
31 March 2019
Dividend per share
0.78p
1.38p
The dividends paid in the current year were not characteristic of the dividend ambitions of the
Group. As stated in the Chairman’s Report, we have decided to hold back from declaring further
dividends in the current economic climate.
Employee cost as a percentage of revenue
Year ended
Period ended
31 March 2020
31 March 2019
Employee costs as a percentage
of revenue
62%
59%
Employee costs as a percentage of revenue have remained broadly stable as the variable pay structures used
by the Group have enabled it to flex pay in line with revenue.
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Financial Performance and Position
Equity capital markets
The equity capital markets division of the Group
delivered £18.7m of turnover in the year (FY19:
£21.3m). The principal reason for the reduction
in turnover was a significant reduction in deal
fees as a result of lower equity issuance by our
corporate clients consistent with equity market
activity as a whole. The individual contributors
to this performance are considered below.
Retainer revenues
Total fees from retainers in the year were £6.5m,
or a monthly average rate of £539k. Retainers
have remained stable on a pro rata basis which
does not reflect the significant change in the
client base in the year. Our focus on client
service saw 22 new client wins which was offset
by client losses principally due to delistings and
takeovers.
Transactions
Total fees received from transactions in the year
were £8.7m (11 month period to 31 March 2019:
£12.0m).
SCISYS Group plc – £78.9m recommended
offer by CGI Inc. – Rule 3 adviser, NOMAD
and broker
Kingswood Holdings plc
Convertible Preference Shares issue
£80.0m
–
Private Company
Our private capital team closed 4 fundraisings
including:
Parsley Box Ltd – £3.0m Private Equity
Fundraise
Bella & Duke Ltd – £3.5m Private Equity
Fundraise
Debt Advisory
Our debt advisory team – which works across
Cavendish and finnCap - closed three deals and
signed up a further 9 mandates for FY21.
Trading and research
Trading revenues improved to £3.6m (FY19:
£3.4m) despite market conditions and reflect
our core focus on providing liquidity to our
corporate client list.
Public Market Transactions
M&A advisory
Notable public market fundraisings and advisory
mandates included:
Xeros Technology Group plc – £5.7m equity
fundraising
Trackwise Designs plc – £5.9m equity
fundraising
Synairgen plc – £14.0m equity fundraising
The Barkby Group plc – admission to AIM,
£5.0m equity fundraising; £30.6m reverse
takeover
FFI Holdings plc – £39.5m recommended
offer by Lumiere Acquisitions – Rule 3
adviser
Nasstar plc – £79.4m recommended offer
by GCI – Rule 3 adviser, NOMAD and broker
13
closing
Cavendish generated revenues of £7.3m in the
year (FY19: £3.2m in the c.4 months after its
acquisition),
private M&A
transactions. Revenue was well down on the
previous full financial year (year to 31 March
2019: £14.9m) reflecting the impact of political
uncertainty in the second half of the year on
buyer and seller confidence and the cancellation
of a small number of high value deals that would
have made a material difference to the year’s
outturn.
Activity improved in the final quarter and the
team signed up a significant number of new
retainers which, we believe, demonstrates the
its
strength of the Cavendish brand and
engagement with clients in the private sell-side
market. This should benefit revenue when buyer
finnCap Group plc | Annual Report and Accounts 2019-20
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Strategic Report
confidence returns to the market although
COVID-19
is clearly delaying many deal
timetables.
Key transactions included:
Java Republic – sale to Spanish coffee group
Cafento
Centaur Media – sale of three subsidiaries
as part of its strategic refocus
The Farm Post Production – advised the
founders and WPP plc on the sale to Picture
Head Group
Avicenna Holdings – sale to Juno Health
Lay & Wheeler – advised Naked Wines Plc
on its sale Coterie Limited
Star Professional – sale to IRIS Software
Group
Falcon Green – sale of a minority stake to
two private business investors
AltoDigital Holdings – sale to Xerox.
Administrative expenses
Costs increased as a result of the longer period
duration, the cost base assumed from the
acquisition of Cavendish, and the additional
costs of being a public company.
The average operating cost per employee
reduced to £175k (FY19: £191k) primarily as a
result of lower bonus payments. Average staff
costs per employee reduced by 15% to £115k
(FY19: £136k). Staff costs to revenue were
broadly stable at 62% (FY19: 59%). Non staff
operating cost per employee increased by 10%
to £60k partly as the result of the transition to
being a listed company. However, cost action
decisions taken during Q4 reduced our quarterly
cost run rate and we currently expect that
operating costs excluding variable compensation
and non-recurring costs (primarily redundancy
and the property move) in FY21 to be roughly
10% below FY20.
Group Financial position
The Group’s cash and cash equivalents, net of
borrowings, did not change over the period at
£4.7m. Net assets decreased from £20.9m to
£20.3m through the payment of dividends in
excess of profits.
The Board’s intention in the coming years
continues to be the growth of the Firm’s net
assets through the retention of profits after
funding dividends, and to be able to fund future
investment in appropriate opportunities.
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Principal Risks
finnCap Group plc actively guards against risk by regularly reviewing the business and by actively
promoting a culture of compliance throughout the Group. The Company has a Risk and Compliance
Committee, which includes its Chairman and an Independent Non-Executive Director and is attended
by the COO, CFO, Head and Deputy Head of Compliance and General Counsel. Additionally, the
Company has taken out insurance against those risks that the Directors consider to be appropriate.
The Company's main risks are set out below, separated into operational, regulatory and financial risks.
Operational risks
Risk from COVID-19 – like most businesses, the Group has been and continues to be impacted by
COVID-19. There is a direct impact on the Group, in terms of the health and availability of key staff,
the ability to interact effectively with clients and suppliers and restrictions on the day-to-day operation
of the business from the implementation of social distancing. Additionally, the government’s
response to the virus has an impact on the general economy, and hence critical suppliers, clients and
trading counterparties, where business models are being stretched beyond their intended boundaries.
Many of the below risks are exaggerated by the virus, and the duration and extent of the eventual
impact is simply unknowable.
Risk of pursuing an inappropriate strategy – the Group manages this risk through the Board’s
oversight of strategy, adherence to the QCA’s corporate governance code, risk analysis and the
provision of timely management information in order to enable decisions to be made appropriately.
Risk of market downturn - as with other firms in our sector, the Group is generally dependent on the
financial market's health and appetite for investment. However, the Board recognises that the
business and its markets are cyclical and has developed a business model that is robust in these
circumstances. The Group as a whole is less reliant on any particular subsector of the financial markets
than either of its previously independent subsidiaries.
Risk of loss of key staff – the Group is a people-oriented business and hence the loss of team members
is a potential risk. The Group maintains appropriate remuneration and employment policies to seek
to retain and improve the quality of its team and regularly reviews these to ensure they are still
appropriate for this purpose.
Reputational risk - reputational risk accompanies all transactions. The Group has internal approvals
processes that mitigate risk both before it takes on new business and as transactions proceed. In the
event of risk crystallisation, management would proactively to address market impact and maintain
confidence in the Group's offering and services.
Risk of IT failure - the level of risk arising from an IT failure is dependent largely on the extent of the
failure. In particular, there is a risk of data loss, potentially through cyber-attack. As finnCap relies on
core data services, management actively seeks providers who have suitable disaster recovery
procedures of their own in place, in addition to building networks that are a robust and externally
tested combination of in-house and packaged products. COVID-19 related IT risks – arising, for
example, from the move from office based to home based IT systems – have been a particular focus
in recent months.
Capital risk - the Group’s primary objective in managing capital is to ensure that it has capital which is
permanent, and which is able to absorb any reasonable losses arising from an extreme event. The
Group’s two operating companies are also subject to the capital requirements of the FCA Handbook
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Strategic Report
which sets capital requirements based on the risks (including credit risk and market risk) assumed by
each company. The operating companies manage their capital by performing a daily computation of
the capital requirements and ensuring that their capital exceeds these requirements.
Risk of poor trading performance - the Group relies on the supervised decision-making of its market
makers and proprietary traders. It contains its potential exposure through the implementation of a
tight regime of trading limits and constant monitoring of performance and exposure. Any protracted
loss-making period would result in a reappraisal of the commercial rationale of these business lines.
Market risk – the Group is exposed to movements in the value of its holdings in quoted and unquoted
securities. This risk is mitigated through frequent review of its holdings for appropriateness, risk and
liquidity. In any case the Group rarely holds significant positions outside trading.
Risk from dependence on third party service providers – the Group relies on third party service
providers for certain aspects of its businesses (for example, on Pershing for settlement of its trades).
There is a risk that these service providers are unable to meet their contractual obligations to the
Group. The Group manages this risk through the identification of key providers, monitoring of their
performance, investigation of issues as and when they arise and dialogue about these providers’
business continuity plans.
Competition risk – the Group operates in a competitive market. The Group’s main defence against
competition is the actions that management and staff take to be a leader in the Group’s markets in
terms of client service and the development of new products and services.
Risk of employee misconduct or error – the Group is reliant on its staff to operate their roles
appropriately. There is the potential for employees to exceed the boundaries of their roles, either
intentionally or through error. The Group manages this risk through clear job descriptions, the use of
segregation of duties and technology to restrict the potential for breach and monitoring to highlight
breaches when they occur so enabling timely remedy. The Group has also carried out extensive
conduct training and ensured that appropriate channels of oversight are in place as part of the
implementation of SMCR.
Risk of Force Majeure - the Group’s operations now or in the future may be adversely affected by
risks outside the control or anticipation of the Group. The Group mitigates some of these risks through
its Risk Committee, which has responsibility for the identification and mitigation of the risks that the
Group faces.
Litigation risk – legal proceedings may arise from time to time in the course of the Group’s businesses.
The Group mitigates the risk of litigation through the use of clear engagement letters that specify
exactly what services are provided and which limit the Group’s liability appropriately.
Risk from integration with Cavendish – the Group is in the process of integrating the two sides of the
business in order to benefit from the synergies available. This diminishing risk could take longer, or
be costlier than expected.
Regulatory risk
The Group operates in a regulated environment. The Group has an independent and well-resourced
compliance department that reports to the main Board through the Risk & Compliance Committee.
The Directors monitor changes and developments in the regulatory environment and ensure that
sufficient resources are made available to implement any required changes. However, there is the
potential that future changes to the regulatory, legislative or tax environment may have further
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Strategic Report
impacts on the profitability of the Group. Particularly relevant here is the lack of visibility of the
eventual resolution of Brexit, and its impact on the Group, its clients and markets.
Financial and credit risk
Details of the Group’s financial and credit risks can be found in Note 4 of the Financial Statements.
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Strategic Report
The Board’s Statement on s172(1) of CA2006
The Board of Directors, in line with their duties under s172 of the Companies Act 2006, act in a way
they consider, in good faith, would be most likely to promote the success of the Company for the
benefit of its members as a whole, and in doing so have regard to a range of matters when making
decisions for the long term. Key decisions and matters that are of strategic importance to the
Company are appropriately informed by s172 factors and our directors have regard, amongst other
matters to:
Likely consequence of any decision in the long-term;
Interests of employees;
Fostering business relationships with suppliers, customer and others;
Maintaining a reputation for high standards of business conduct; and
Acting fairly as between members of the company.
Impact of operations on the community and the environment;
All Directors were briefed in writing on their responsibilities under s172 on admission and this will be
refreshed at regular intervals, as well as forming part of the induction for new directors. The Group’s
General Counsel & Company Secretary provides support to the Board to help ensure that sufficient
consideration is given to issues relating to the matters set out in s172 when making key strategic
decisions.
Through an open and transparent dialogue with our key stakeholders, we believe that we have
developed a clear understanding of their needs, assessed their perspectives and monitored their
impact on our strategic ambition and culture.
As part of the Board’s decision-making process, the Board and its Committees consider the potential
impact of decisions on relevant stakeholders whilst also having regard to a number of broader factors,
including the impact of the Company’s operations on the community and environment, responsible
business practices and the likely consequences of decisions in the long term.
Impact on key Board decisions during FY20
The Board has primarily focussed on the integration of Cavendish and revenue generation throughout
the year. That being the case, the key strategic decision made by the Board during FY20 was in relation
to the Group’s premises. Since admission, the Group has been based in two locations, reflecting the
historically separate operations of finnCap Ltd and Cavendish prior to the merger. The imminent
expiry of finnCap Ltd’s lease at 60 New Broad Street, and the potential to exercise a break clause in
Cavendish’s lease of 40 Portland Place, required the Board to consider the best location for the Group
going forwards. In reaching the decision to sign a lease on new premises in 1 Bartholomew Close, as
announced on 17 January 2020, the Board considered the factors in s172 as follows:
The Board considered that the consolidation of the Group’s operations into one premises
would benefit the Group’s stakeholders in the long-term, giving it opportunity to capitalise on
the additional revenue opportunities that are available to the Group as a result of delivering
multiple services. The Board also had regard to the financial impact of the lease across its 10
year term, comparing this to the impact of maintaining its leases at its current properties.
The Board took into account the views of employees on combining the office and location,
which were sought via an all employee survey and were in favour of combining the Group’s
operations under one roof. The Board considered transport links for employees in approving
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Strategic Report
the new location of the Group’s offices at Barbican to ensure that its employee base was able
to commute efficiently.
The needs of the Group’s clients on both sides of the business were considered in deciding on
an appropriate location for the new offices. It was noted that finnCap Ltd’s clients needed
ready access to visit investors and other brokers in the City of London, whereas Cavendish’s
clients and contacts were also located in the West End. The Board therefore considered a
Barbican location to facilitate access to both areas of London.
In choosing office space, the Board noted that bike racks and showers were available at the
new property, meeting both the needs of employees who wish to cycle to work and allowing
the Group to facilitate environmentally friendly ways of travelling to work.
Finally, when determining how much office space the Group required, the Board considered
not only the Group’s plans for growth, but also the space required to ensure that teams could
be separated and information flows restricted as required by its obligations under MAR and
to the FCA and in order to meet its high standards of business conduct.
Towards the end of FY20, the Board were required to consider the ongoing and potential future impact
of COVID-19 and the appropriate response for the Group. All employees were moved to remote
working, in order to protect employees’ health and safety. In addition, as announced on 1 April, the
Board made the decision to reduce the Group’s operating expenses, including by salary and fee
sacrifices, furloughing staff and the cancellation or deferral of discretionary expenditures. The Board
further decided not to pay a second dividend for FY20. These actions were taken to minimise the
financial impact of the uncertainty of COVID-19 and to protect our strong balance sheet for the benefit
of all stakeholders in the longer-term.
Engagement with stakeholders
We set out, below, who we view to be our key stakeholders, how we engage with them and our
assessment of how effective this engagement has been. As is normal for most listed or larger
companies, the Board delegates authority for the day-to-day management of the Company to its
executive Directors and management team, providing oversight by monitoring their progress against
the Group’s KPIs and strategy and as indicated in this Report.
Clients
Our ambition to be a full-service financial services firm for ambitious growth companies requires us to
provide and maintain a high quality service for our clients at all times. We recognise that the success
of our clients is critical to our own success and that this applies equally to our advisory clients, quoted
clients and institutional clients. We have dedicated teams across sectors and advisory lines offering
bespoke advice to our quoted, advisory and institutional clients based on a proper understanding of
that client’s needs and often based on a relationship built over a number of years. We undertake
independent, internal peer reviews of transactions to ensure that each one meets our internal
standards and to identify where we can improve service. We also hold weekly client service meetings
to identify client issues and resolution, a key aspect for retaining our listed client base. We believe
that the effect of these processes is reflected in the number of listed clients who have remained with
us for more than 5 years.
In the unusual event we fail to meet our clients’ high standards, our complaints procedure escalates
matters immediately to the Head of Compliance. Information about complaints is circulated to the
Board’s Risk & Compliance Committee for appropriate oversight and to enable non-executive
Directors to monitor the Group’s client relationships.
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Strategic Report
Employees
Our employees are central to our success in delivering high quality service and advice to our clients.
In a complex year of integration and a challenging operating environment, and after the year end with
COVID-19, our employees have worked hard to support the business and to sustain our culture which
is central to our employee engagement.
The Group’s cultural values – Smart Thinking, Collegiate, Dynamic - were established and defined by
our employees and define both how we succeed and behave and form a central part of each
employee’s half yearly assessment. In 2019, our Group HR Director undertook a wide staff survey,
covering more than 90% of our workforce, to identify the key issues concerning employees and ensure
that they were reflected in the Management Committee and Board’s analysis of our business.
Employees, regardless of whether they are shareholders or not, are also given an opportunity to
provide input on the Group’s business and strategy at regular strategy sessions led by the Group’s
management team.
Andy Hogarth, Senior Independent Non-Executive Director, is available to employees to discuss
concerns in relation to the Group’s business or operations, and his contact details have been circulated
to all employees.
Shareholders – Institutional and Employee
Alongside the provision of capital, our shareholders play an essential role by monitoring our financial
performance, progress on our key KPIs, strategy development and our approach to governance and
Board leadership. We actively engage with our institutional investors through regular results based
or event driven investor meetings and also benefit from regular ad hoc feedback through our
institutional equity sales team. During the year we conduct regular institutional investor meetings.
We also engage with our large base of employee shareholders through regular briefing on results and
events across the Group. All our resolutions were supported by shareholders at the 2019 AGM and
proxies received averaged over 99% in favour.
Regulators and Industry Bodies
Our two operating companies are regulated by, inter alia, the Financial Conduct Authority and, in
finnCap Ltd’s case, the London Stock Exchange. We have an open and transparent dialogue with the
regulatory and industry bodies that we work with and we employ leading compliance professionals to
monitor and police our adherence with best practice. We also require our employees to undertake
specific training on regulation and best practice as required by their roles. During 2019 we held three
formal review meetings with the FCA. We were subject to no censures or disciplinary action in the
period.
Community and Environment
We are committed to making a positive contribution to the wider community in which we operate
including through the payment of taxes, managing our environmental impact and through creating
the opportunity of employment and work experience. Our employees are actively involved in two
important community charity initiatives: Stepping into Business – where we offer Enterprise
programmes to school children to help them learn essential life skills for future careers in business -
and Modern Muse where we provide mentors and role models to young women aged 13-18 to help
them witness women succeeding in the modern workplace and encourage them to become business
leaders. Through AmbitionNation we have developed Female Leaders Series events to promote and
enhance equality in the workplace.
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Strategic Report
The Group acknowledges the importance of environmental matters and where possible uses
environmentally friendly policies in its offices, such as recycling, offsetting our carbon emissions from
air travel, and implementing energy-efficient practices.
The Group’s energy consumption during the year was below 40,000 kWh.
Anti-Corruption and Bribery
The Group is committed to the highest level of ethical standards in the conduct of its business affairs,
and this is encapsulated in its Financial Crime Policy. This covers all of the major forms of financial
crime, including bribery and corruption. Staff are required to conform to this policy, and the Firm’s
Gifts and Hospitality Policy, and receive appropriate training.
Approval
This report was approved by the Board of Directors on 6 July 2020 and signed on its behalf by:
Samantha Smith
Chief Executive Officer
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Governance
Board of Directors
GOVERNANCE
Our Board is responsible for overseeing the management of the business as a whole and for ensuring
high standards of corporate governance are maintained throughout the business. Certain aspects of
this are delegated to Committees of the Board, as further described in the reports of the various
Committees below.
The biographical details, skills and experience of each of the Directors who served in the year ended
31 March 2020 and our current serving Directors is below, including the expected time commitment
of each Director.
Jon Moulton, Non-Executive Chairman
Jon was appointed Chairman of finnCap in January 2010. He is currently Chairman of The International
Stock Exchange and Anti-Microbial Research Limited. He is a Chartered Accountant and a Fellow of
the Institute for Turnaround Professionals. He chairs the Better Capital funds and Greensphere, an
alternative energy infrastructure fund. He is an active private investor and has been working in private
equity since 1979. Jon is a member of both the Board of the Corporate Finance Faculty and the
Technical Strategy Board of the Institute of Chartered Accountants and regularly writes, broadcasts
and speaks on corporate finance and financial matters. He is a Director of the think tank, The Centre
for Policy Studies. Jon is also an Honorary Fellow of University College London and a Trustee of the
UK Stem Cell Foundation and his own medical research charity. A former Managing Partner of
Alchemy, Jon’s career also included running Permira, CVC UK and the buy-out group of Apax, as well
as being a director of numerous public and private companies, including Ashmore PLC. He was also a
board member of the £3.8 billion UK Government Regional Growth Fund.
Time commitment: Approximately 2-3 days a month
Lord Leigh of Hurley, Executive Deputy Chairman
Howard is the senior partner and co-founder of Cavendish and has built the business into a leading UK
M&A advisory practice. He graduated in Economics and, after a short period in UK merchant banking,
joined Deloitte Haskins & Sells where he qualified as a Chartered Accountant and further qualified
with the Chartered Institute of Taxation. In 1986 Howard established Deloitte’s Mergers and
Acquisitions business and developed an expertise in selling corporates. In 1988 he left to set up
Cavendish. He served as the Chairman of the Faculty of Corporate Finance of the ICAEW between
2000 and 2004. During this time, he also served on the Takeover Panel as well as sitting on the Council
of the ICAEW. In 2008 he was awarded the Faculty’s Outstanding Achievement in Corporate Finance
award. Howard was a Vice President of M&A International Inc., the global advisory M&A firm, and
predecessor to Oaklins International Inc. He was elevated to the Peerage as Baron Leigh of Hurley in
2013 and speaks regularly in the House of Lords on business, finance and tax matters. Howard was
appointed as a Treasurer of the Conservative Party in 2000, and subsequently as Senior Treasurer.
Time commitment: Full-time
Samantha (Sam) Smith, Chief Executive Officer
Sam established finnCap in 2007, having orchestrated the management buy-out of a small broking
subsidiary of JM Finn & Co Limited, a private client stockbroking firm. Sam is the first female chief
executive of a City stockbroking firm and is a supporter of social enterprises designed to inspire and
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Governance
engage the next generation of female business leaders and entrepreneurs. Sam qualified as a
Chartered Accountant at KPMG and is an alumnus of the University of Bristol.
Time commitment: Full-time
Tom Hayward, Chief Operating Officer, and Managing Partner of Cavendish
Tom was appointed to the role of Finance Director to finnCap in 2010. Tom served as Chief Financial
Officer of the Company during its admission to AIM in 2018 and until Richard Snow joined the Board
in May 2020, and therefore was Chief Financial Officer during the financial year ended 31 March 2020.
Since May 2020, Tom has continued to serve on the Board as Group Chief Operating Officer and
Managing Partner of Cavendish, roles he assumed following the departure of the Group’s Chief
Commercial Officer in 2019. Tom previously spent nearly 10 years as a Venture Capital investor at
Herald Investment Management Limited where he invested in early-stage information technology and
media companies. Between 1998 and 2000, Tom worked in the telecoms and technology M&A team
at J. Henry Schroder & Co. Tom qualified as a chartered accountant in KPMG’s project finance team
and has an MA (Hons) in Natural Sciences from Trinity College, Cambridge, and an MSc in Computing
from Imperial College, London.
Time commitment: Full-time
Richard Snow, Chief Financial Officer (appointed after the year-end on 20 May 2020)
Richard joined the Company as Chief Financial Officer in May 2020. Prior to joining the Company,
Richard was the Finance Director and Compliance Officer for Finance and Administration of the UK
law firm Greenberg Traurig, LLP. He qualified as a Chartered Accountant with Arthur Andersen in 1991
and moved to the investment banking industry gaining 15 years' experience in corporate advisory at
Charterhouse, Merrill Lynch, Goldman Sachs and Nomura. From 2006 to 2011 Richard was director of
M&A and then Investor Relations at Vodafone Group plc. From early 2014, he was Director of Investor
Relations of Ladbrokes plc and then, from December 2015, he served on its Executive Committee as
acting Chief Financial Officer leading the finance team through the merger with Coral. Richard has an
MA (Hons) in Natural Sciences from Trinity College, Cambridge.
Time commitment: Full-time
Stuart Andrews, Managing Director of finnCap
Stuart joined finnCap in March 2012 as Head of Corporate Finance and joined the board of finnCap in
2013. He qualified as a chartered accountant at PwC and subsequently worked in the corporate
finance department of Beeson Gregory and Evolution Securities. Stuart has extensive knowledge of
advisory roles for ambitious growth companies both on the public markets and privately which
includes IPOs, all aspects of fundraising and M&A. Stuart is currently a member of the London Stock
Exchange AIM Advisory Group, an external committee of senior executives who provide input and
advice on all matters affecting the operation and regulation of AIM. He has previously chaired the
Quoted Companies Alliance Markets and Regulations Committee and is now a member of the Primary
Markets Expert Group.
Time commitment: Full-time
Andrew (Andy) Hogarth, Senior Independent Non-Executive Director
Andy was appointed to the board of Staffline Group plc as Finance Director in 2002, becoming
Managing Director in 2003 and was appointed Chief Executive when the company was admitted to
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Governance
trading on AIM in 2004. During the fifteen years of his leadership, the business grew from a turnover
of £40 million in 2004 to nearly £1 billion in 2017, with underlying operating profits growing from £2
million to over £39 million during the same period. He has held senior roles in a wide range of
businesses, including retail, support services, healthcare, hospitality and construction. As Finance
Director, he led the management buy-out and subsequent trade sale (to Morgan Sindall in 2002) of
Pipeline Constructors Group, a utility services business. Andy currently sits on the board of an elderly
care charity, is a Governor of two RSA academy schools and is the Non-Executive Chairman of Ten10
Ltd, a PE backed computer software testing consultancy. He is also a Director of Hogarths Hotels,
which has two boutique hotels in Solihull and Kidderminster. He is a Fellow of the Association of
Chartered Certified Accountants.
Time commitment: Approximately 2-3 days a month
Vin Murria OBE, Non-Executive Director (resigned after the year-end on 19 May 2020)
Vin has more than 25 years of venture capital, private equity, M&A, Chief Executive Officer and
operational experience in the software sector. Vin has held Chief Executive Officer positions at
Advanced Computer Software which she founded in 2008 and sold seven years later to Vista Private
Equity, and at Computer Software Group. During her five-year tenure at Computer Software Group
she took the company private, backed by HG Capital, then subsequently sold it to PE Hellman
Friedman in July 2007. Vin is on the board of Bunzl Plc, a FTSE 100 company, Softcat Plc, a FTSE 250
company, and DWF Plc. Prior to this she sat on the board of two other FTSE 250 companies (Zoopla
Plc and Sophos Plc), and Chime plc before they were taken private. Vin has a BSc (Hons) in Computer
Science and an MBA from the University of London and a Doctorate Business Administration
(Honorary) from Edinburgh Napier University. Vin stepped off the board on 19 May 2020, after the
end of the year under consideration in this report and accounts, to pursue her many other interests.
Time commitment: Approximately 2-3 days a month
Barbara Firth, Independent Non-Executive Director
Barbara has decades of financial and management experience covering both private and quoted
companies. Previous roles have included Chief Financial Officer and subsequently Chief Operating
Officer of Advanced Computer Software Group plc (ACS) from its early stages to the sale in 2015 to
Vista for £725 million. Prior to her role at ACS, Barbara was Chief Financial Officer of Computer
Software Group plc (CSG) from the time of its float to the sale in 2007 to HG Capita. Prior to CSG,
Barbara was the UK financial controller for Roberts Pharmaceutical Inc. and a member of the
Roberts/Shire merger task force. Barbara has considerable M&A experience including processing
and integrating many smaller bolt-on acquisitions and several larger scale transactions. Barbara’s
past responsibilities have included Finance, M&A, Human Resources, Legal and Commercial
Contracts, Investor Relations and Company Secretarial functions.
Time commitment: Approximately 2-3 days a month
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Governance
Corporate Governance Report
Introduction
The Board has adopted the Quoted Companies Alliance’s Corporate Governance Code (“QCA Code”)
since admission. The Board continues to support the QCA Code principles and believes that
implementing these have created a strong governance framework for the Group.
The following sections of this Report sets out how the Company has measured itself against these
principles in terms of the rules and spirit of good Corporate Governance.
The Board do not consider that there are any practices which differ from the expectations set by the
QCA Code and have no adverse governance related matters to report in the year.
QCA Code Principles
The QCA Code is constructed around ten principles:
Deliver Growth
1. Establish a strategy and business model which promotes long-term value for shareholders (see
pages 1 to 10 of this Annual Report)
2. Seek to understand and meet shareholder needs and expectations (see pages 14 to 17 of this
Annual Report)
3. Take into account wider stakeholder and social responsibilities and their implications for long-
term success (see pages 14 to 17 of this Annual Report)
4. Embed effective risk management, considering both opportunities and threats, throughout the
organisation (see pages 11 to 13 and pages 21 to 32 of this Annual Report)
Maintain a dynamic management framework
5. Maintaining the Board as a well-functioning, balanced team led by the Chairman (see pages 18
to 32 of this Annual Report)
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities (see pages 18 to 20 of this Annual Report)
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement (see pages 21 to 24 of this Annual Report)
8. Promote a culture which is based on ethical values and behaviours (see pages 21 to 24 of this
Annual Report)
9. Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board (see pages 21 to 24 of this Annual Report)
Build trust
10. Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders (see pages 14 to 17 of this Annual Report)
Overview of the Group governance framework
Board oversight
The Board provides oversight of the Group’s governance and it is the Board’s job to ensure that the
Group is managed for the long-term benefit of our clients, staff, shareholders and other key
stakeholders, with effective and efficient decision-making,
including maximising revenue
opportunities across the Group’s trading subsidiaries. It delegates authority to various Committees:
The Nominations Committee is responsible for receiving and recommending changes to the
composition of the Board and its Committees.
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Governance
The Remuneration Committee is responsible for overseeing the overall remuneration policy
for the Group and the remuneration of the Executive Directors.
The Audit Committee is responsible for overseeing financial performance, financial risk,
internal controls and external audit.
The Risk & Compliance Committee is responsible for overseeing the risk management policies
of the Group.
Further information on each of the Board Committees is set out in their respective reports in this
Annual Report.
Management
The Executive Directors are responsible for the management of the business and, in the case of the
CEO, the strategic development of the Group. They have general authority to manage the business of
the Group, subject to a list of matters reserved for consideration by the Board.
The Executive Directors, other than Howard Leigh, sit on the boards of the trading subsidiaries of the
Group, and are the regulated entities’ “Senior Managers” for the purposes of the Senior Managers &
Certification Regime (“SMCR”). They meet regularly (usually monthly) in this capacity, reviewing
matters relating to the risk management, legal & compliance issues, staff conduct, technology risks,
financial procedures and other issues as required.
Group-wide committees
The Group has a Management Committee, which comprises of the CEO, COO, CFO, Managing Director
of finnCap, various heads of departments at finnCap and two Cavendish partners. The Management
Committee reviews the implementation of the Group’s strategy and performance, as well as
departmental matters and discusses and proposes new strategic ideas for consideration by the CEO
and Board, as appropriate.
The Group also has an Operations Committee, which is chaired by the CFO and operates on a Group-
wide basis. It consists of members of the Trade Support, Compliance, Finance, Legal, IT, HR and wider
operations team and considers inter-departmental projects and other operational issues.
Subsidiary committees
finnCap Ltd and Cavendish Corporate Finance LLP, being the Group’s operating subsidiaries, each have
an Executive Committee (“ExCom”) comprised of key revenue generators and department heads. The
Cavendish ExCom is chaired by its Managing Partner and discusses and decides on matters specific to
Cavendish’s business, performance and staff. The finnCap ExCom is chaired by its Managing Director
and discusses and decides on matters specific to finnCap’s business, performance and staff.
finnCap and Cavendish each have new business committees which consider the take-on of new clients
or transactions. finnCap also has certain other committees, including a Nomad committee, Sponsor
committee and Opinions committee, which assist in meeting its regulatory obligations in providing
services to its clients.
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Governance
Board and Committee Meetings
The Board has regular scheduled meetings at least six times per year and meets at other times as
necessary. At its scheduled meetings, the Board reviews financial performance, strategy, key risks and
monitors key performance indicators. Board packs are circulated several days in advance of formal
scheduled meetings and all Directors receive appropriate information on a timely basis to enable them
to discharge their duties accordingly.
Attendance at Board and Committee meetings by members of the Board, and Committee
membership, during the year ended 31 March 2020 was as follows.
Board
Committee membership
Position
As at 31
March 2020
Chairman
(non-
executive)
CEO
Deputy
Chairman
(executive)
CFO
Jon Moulton
Sam Smith
Howard Leigh
Tom Hayward
Andy Hogarth
Stuart Andrews Managing
Director,
finnCap
Senior
Independent
Director
Non-Executive
Director
Non-Executive
Director
Barbara Firth
Vin Murria
Maximum
possible
attendance
10
10
10
10
10
10
10
10
* Chair
Jon Moulton
Tom Hayward
Andy Hogarth
Barbara Firth
Nominations Committee
Meetings
attended
Maximum
possible
attendance
1
n/a
1
1
1
n/a
1
1
Meetings
attended
Nominations
Committee
Audit
Committee
Risk
Committee
Remuneration
Committee
Considered
independent
10
10
10
10
10
10
9
10
*
*
*
Audit Committee
Maximum
possible
attendance
n/a
n/a
4
4
Meetings
attended
n/a
n/a
4
4
Meetings
attended
Remuneration Committee
Maximum
possible
attendance
n/a
n/a
3
3
n/a
n/a
3
3
*
Risk Committee
Maximum
possible
attendance
9
9
n/a
9
Meetings
attended
9
9
n/a
9
Development and Support
All Directors receive regular updates on legal, regulatory and governance issues, as appropriate. The
Board and its various Committees have access to independent advice at the Company’s expense, as
well as access to the Company’s Nomad and Company Secretary.
No new Directors joined the Company in the period from the Company’s IPO to 31 March 2020.
Richard Snow joined as CFO in May 2020, subsequent to year-end. A personalised induction
programme was run for Richard and will, in future, be provided to all new Directors in order to help
familiarise them with their duties and the Company’s operations. Richard’s induction programme
included, and it is expected that future induction programmes for directors will include, meetings with
members of the Board, one-to-one meetings with senior managers, access to Board and Committee
papers and minutes and meetings with external advisers, including the Company’s Nomad.
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Governance
Board Effectiveness Review
In December 2019, the Board conducted its first formal annual evaluation of its effectiveness,
including its Committees, which was facilitated by the Company Secretary. Questionnaires covering
topics such as composition, meeting effectiveness and balance of skills & knowledge were circulated,
and the results compiled by the Company Secretary for consideration by the Board. The findings of
the evaluation confirmed that the Board and its Committees were operating effectively, and no
changes were required at that time.
Whistleblowing
The Group has in place well-established policies on whistleblowing and financial crime. Employees
may report in confidence, and anonymously if preferred, any concerns they may have about suspected
impropriety or wrongdoing in any matters affecting the business. No matters were reported in the
year.
This report was approved by the Board on 6 July 2020 and signed on its behalf by:
Jon Moulton
Chairman
finnCap Group plc | Annual Report and Accounts 2019-20
24
Governance
Nominations Committee Report
Role of the Nomination Committee
The Board has delegated authority to the Nomination Committee for ensuring that the Board has the
right balance of skills and experience, including succession planning for directors and other senior
executives and filling vacancies in the Board as they arise.
The Committee’s terms of reference are available on the finnCap Group website and set out in further
detail the objectives and responsibilities of the Committee.
Members and Meetings
The Nominations Committee comprises Andy Hogarth, Jon Moulton and Barbara Firth. The
Committee is chaired by Andy Hogarth. The experience and expertise of the Committee members is
set out in the directors’ biographies on pages 18 to 20.
The Committee meet as appropriate, and at least once a year. In the last financial year, the Committee
met once. Information about meetings and attendance is set out on page 23.
The Chief Executive Officer and/or Chief Operating Officer are invited to attend these meetings as
appropriate. The Company Secretary acts as the secretary of the Committee.
Activity during the year
The chief business of the Nominations Committee during the financial year was to consider the
recommendation of Richard Snow’s appointment as CFO. In considering the appointment, the
Committee considered the balance of skills and experience on the Board, as well as Richard’s own
skills and experience, and was satisfied that Richard would bring additional capacity and capability to
the executive team and the Board.
Diversity
The Nominations Committee recognises the importance of diversity, in its broadest sense, having
regard to gender, ethnicity, background, skillset and breadth of experience, at Board level and
throughout the Group. The Committee is currently satisfied with the diversity of the Board but will
keep this under review and will give it careful consideration on any changes in the composition of the
Board in the future.
Andy Hogarth
Chairman – Nominations Committee
finnCap Group plc | Annual Report and Accounts 2019-20
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Governance
Audit Committee Report
Role of the Audit Committee
The Board has delegated authority to the Audit Committee to provide oversight and governance to
the Group’s financial reports, its internal controls and processes in place, its financial risk management
systems and the appointment of and relationship with the external auditor.
The Committee’s terms of reference are available on the finnCap Group website and set out in further
detail the objectives and responsibilities of the Committee.
Members and Meetings
The Audit Committee comprises Barbara Firth and Andy Hogarth, and Jon Moulton (as Chairman) is
invited to attend. The Committee is chaired by Barbara Firth. The experience and expertise of the
Committee members is set out in the directors’ biographies on pages 18 to 20.
The Committee meet as appropriate, and at least three times a year. In the last financial year, the
Committee met four times. Information about meetings and attendance is set out on page 23.
Activity during the year
The main items of business considered by the Audit Committee during the year included:
Reviewing and monitoring the integrity of the Group’s interim financial statements published in
November 2019;
Considering the Group’s revenue recognition policy and clarifications for FY20 and ongoing;
Reviewing the FY20 audit plan and audit engagement letter;
Reviewing the suitability of the Group’s external auditors for FY20;
Considering the key audit matters and how they were addressed in the financial statements for
the 11 month period ended 31 March 2019;
Reviewing the financial statements and Annual Report for the 11 month period ended 31 March
2019; and
Considering the external audit report and management representation letter for the 11 month
period ended 31 March 2019.
Role of the External Auditor
The Audit Committee monitors the relationship with the Group’s external auditor BDO LLP, to ensure
that its independence and objectivity is maintained. Noting the tenure of BDO LLP, the Committee
will keep under review the need for an external tender.
As part of its review, the Committee monitors the review of non-audit fees and this is set out in Note
6. The Audit Committee also assesses the auditor’s performance. The Committee has confirmed it is
satisfied with the performance of BDO LLP and has recommended to the Board that the auditors be
reappointed, and there will be a resolution to that effect at the forthcoming AGM.
The Audit Process
The Group’s auditors prepare an audit plan for the review of the full period financial statements. The
audit plan sets out the scope of the audit, areas to be targeted and the audit timetable. This plan is
reviewed and agreed in advance by the Audit Committee. Following the audit, the auditor presents
its findings to the Audit Committee for discussion.
finnCap Group plc | Annual Report and Accounts 2019-20
26
Governance
Internal Audit
Currently the Group does not have an internal audit function and the Audit Committee believes that
management is able to derive assurance as to the adequacy and effectiveness of the internal controls
from its risk management procedures. This position is reviewed annually.
Barbara Firth
Chair – Audit Committee
finnCap Group plc | Annual Report and Accounts 2019-20
27
Governance
Risk Committee Report
Role of the Risk & Compliance Committee
The Board has delegated authority to the Risk & Compliance Committee to assess the quality, integrity,
implementation and reliability of the Company’s risk management processes.
The Committee’s full terms of reference are available on the finnCap Group website.
Members and Meetings
The Risk & Compliance Committee comprises Jon Moulton and Barbara Firth as non-executive
directors, and the COO, CFO, the Head & Deputy Head of Compliance and the General Counsel attend
meetings of the Committee. The Committee is chaired by Jon Moulton. The experience and expertise
of the Committee members is set out in the directors’ biographies on pages 18 to 20.
The Committee meets as appropriate, and at least six times a year. In the last financial year, the
Committee met nine times. Information about meetings and attendance is set out on page 23.
Activity during the year
During this year, the Risk & Compliance Committee has overseen a thorough review of the Group’s
risks, including the assessment of the estimated impact of the risk occurring, likelihood of the risk
occurring and the timing of the risk occurring. A detailed risk management and oversight plan was
prepared based on this review and assessment and progress against that plan is monitored by the
Senior Managers and the Committee.
The Committee received regular updates from the Compliance team on market abuse monitoring,
financial crime training and procedures, gifts & hospitality, conflicts checking and other matters. The
Committee also received regular updates on the Group’s technology and IT related risk management
and procedures, and updates from the Group’s General Counsel.
Another major area of focus for the Committee during the year was overseeing the implementation
of the Senior Managers & Certification Regime (“SMCR”) for the Group’s trading subsidiaries. The
Group has taken thorough and detailed steps to ensure that its Senior Managers, management team
and staff are aware of their responsibilities under the SMCR, including running training which was
compulsory for all staff to attend and making a Q&A on expected conduct and other materials
available on the Group’s Intranet pages. The Group has amended its procedures to incorporate the
certification process required for staff holding relevant positions.
Towards the end of the year and thereafter, the Committee has overseen the Group’s response to
COVID-19 from a regulatory risk management perspective, receiving regular updates on how the
Group continued to comply with its regulatory requirements (including in relation to trade reporting,
call recording and inside information) and considering the technology and fraud risks arising from
working from home. The Committee also oversaw planning actions if key members of staff were to
become unwell or unavailable.
Jon Moulton
Chair – Risk Committee
finnCap Group plc | Annual Report and Accounts 2019-20
28
Governance
Remuneration Committee Report
Role of the Remuneration Committee
The Board has delegated authority to the Remuneration Committee to set the framework and policy
for the remuneration of the executive directors and other senior managers, as well as to determine
the overall remuneration policy for the Group.
The Committee’s terms of reference are available on the finnCap Group website and set out in further
detail the objectives and responsibilities of the Committee.
Members and Meetings
The Remuneration Committee comprises the independent non-executive directors – Andy Hogarth
and Barbara Firth. The Committee is chaired by Andy Hogarth. The experience and expertise of the
Committee members is set out in the directors’ biographies on pages 18 to 20.
The Committee meet as appropriate, and at least twice a year. In the last financial year, the
Committee met three times. Information about meetings and attendance is set out on page 23.
The Chief Executive Officer and/or Chief Financial Officer are invited to attend these meetings as
appropriate but are not present when their own remuneration is discussed. The Company Secretary
acts as the secretary of the Committee. The Committee is authorised to consult external advisers on
remuneration and regulatory issues, when appropriate.
Remuneration Policy
The Group’s remuneration policy is designed to ensure that the remuneration packages attract,
motivate and retain all employees of high calibre and to reward them for enhancing value to
shareholders. The Group’s policy is that a substantial proportion of the total potential remuneration
of the Executive Directors should be performance-related and aligned to performance measures that
benefit all shareholders and promote the long-term success of the group. The performance
measurement of the Executive Directors and the determination of their annual remuneration package,
including performance targets, are undertaken by the Remuneration Committee.
There are five main elements of the remuneration package offered by the Group to its employees
(including the Executive Directors):
Fixed*
Variable
Base salary
Benefits
Pension contribution
Discretionary cash bonus*
Share option awards (long-term incentivisation)
*Before its acquisition by finnCap, Cavendish’s partners were remunerated with sub-market salaries and a revenue share. Some of these
partners are still remunerated on this basis (none of whom are Executive Directors) but they are therefore excluded from the Group bonus
pot.
Policy for determining fixed remuneration
The Committee reviews the Executive Directors’ base salaries and the other elements of fixed
compensation on an annual basis. In the event that an increase in any element of fixed compensation
is considered, the Committee takes into account the performance of the individual, comparisons with
finnCap Group plc | Annual Report and Accounts 2019-20
29
Governance
peer group companies within the industry, the experience of the individual and their responsibility.
On a pro-rated basis, there have been no increases in the Executive Directors’ fixed compensation
since the Company’s admission to AIM in December 2018.
The Executive Directors and senior management carry out a similar process in determining the fixed
remuneration of other members of staff.
Policy for determining variable remuneration
In relation to determining the variable elements of compensation, the Committee will consider paying
discretionary bonuses from the Group bonus pool or granting share option awards in recognition of
both corporate performance and individual achievement of objectives set each year via the Group’s
performance review framework.
The quantum of the discretionary bonus pool is determined by the Committee with specific reference
to the Group’s profit before bonus and tax, typically by capping the aggregate pool to an agreed
percentage of this profit measure. The Committee is able to establish clear targets when setting the
aggregate pool available for variable compensation at Group level, acknowledging that a degree of
flexibility is required at different stages of the business cycle. The Committee also considers the
Executive Directors’ recommendation for the distribution of the pool to staff in different business
areas, based on the performance and targets for those business areas.
Individual performance is assessed through clearly defined objectives and a structured process of
review and feedback. In particular, a discretionary bonus payable to a member of staff (including the
Executive Directors) is determined with regard to the performance of the individual, performance of
the area, sector or function of the business in which the individual works or for which the individual is
responsible, the profitability of the Group and levels of reward for comparable roles in the external
market. In the case of bonuses or option awards proposed for the Executive Directors, these are
determined by the Committee.
In the financial year ending 31 March 2020, no discretionary bonus pool was available for distribution.
Director remuneration for the year (audited)
The single total remuneration of each of the Directors who held office during the year ended 31 March
2020 was as follows. No share option awards were made to Directors during this period:
Base salary/fees
Discretionary bonus
Benefits (including
pension)
Total
2020
2019
2020
2019
2020
2019
2020
2019
Executive directors
Sam Smith
Howard Leigh
Tom Hayward
Stuart Andrews
Non-Executive Directors
Jon Moulton
Andy Hogarth
Vin Murria
Barbara Firth
TOTAL
275,000
200,000
177,469
200,000
55,000
50,000
50,000
50,000
1,057,469
234,450
66,667
162,680
166,448
50,417
16,667
45,833
16,667
759,829
-
-
-
-
-
-
-
-
-
258,000
-
116,636
194,636
-
-
-
-
569,272
2,079
6,230
926
11,187
-
-
-
-
20,422
1,253
1,763
1,876
1,899
-
-
-
-
6,791
277,079
206,230
178,395
211,187
493,703
68,429
281,192
362,983
55,000
50,000
50,000
50,000
1,077,891
50,417
16,667
45,833
16,667
1,335,890
finnCap Group plc | Annual Report and Accounts 2019-20
30
Governance
Directors’ interests under Employee Share Plans
Date of issue
Sam Smith
Tom Hayward
Stuart
Andrews
November 2018
November 2018
November 2018
November 2018
November 2018
November 2018
Salaries and pension
Outstanding
31 March
2019
1,685,714
173,076
1,000,000
173,736
1,100,000
1,100,000
Granted
Exercised
-
-
-
-
-
-
-
-
400,000
-
-
-
Outstanding
31 March
2020
1,685,714
173,076
600,000
173,736
1,100,000
1,100,000
Vested
Exercise
price
(p)
Yes
5.0
Yes
10.4
Yes
5.0
Yes
10.4
14.0
Yes
14.0 May 2020
Expiry date
March 2023
September 2020
March 2023
September 2020
May 2021
May 2023
The Committee considered the basic salary paid to Executive Directors and the levels of remuneration
for other key senior executive positions as well as the lack of pay rises proposed for other Group
employees. The Committee concluded that there should be no change for the financial year ending
31 March 2021 in respect of the Executive Directors. No Executive Director currently receives any
pension contributions.
Discretionary bonuses
The Group did not have a discretionary bonus pool for allocation for the financial year ended 31 March
2020. The Executive Directors therefore did not receive any discretionary bonus.
Share options
The Remuneration Committee did not grant any additional options to the Executive Directors in the
financial year ended 31 March 2020.
Non-Executive Directors’ remuneration
Remuneration of Non-Executive Directors is set by the Board on the recommendation of the CEO (in
consultation with the Chairman, in relation to the other non-executive directors, and the
Remuneration Committee in relation to the Chairman), considering comparisons with peer group
companies, experience and responsibility of the individual and the level of work carried out during the
year. Remuneration comprises an annual fee only with reimbursement of all reasonable expenses.
Non-Executive Directors do not participate in any form of variable compensation, be that discretionary
cash bonuses or awards under the Group’s share schemes and are not eligible for pension benefits.
No changes have been proposed to the fees of the Non-Executive Directors for the current financial
year, although it is noted that all non-executive directors have waived their fees for the period from 1
April 2020 to 30 June 2020 and will therefore be paid a lower overall amount than in the previous
financial year.
Events following the end of the financial year
As described elsewhere in this Annual Report and announced by the Company on 1 April, COVID-19
and the social and economic measures implemented by the government in response have impacted,
and are expected to continue to impact, on the Group. Since the end of the financial year, unapproved
options over approximately 5.3 million shares were granted as recompense to members of staff who
agreed to sacrifice portions of their salary on 1 April 2020 for a period of three months, as announced
in the Company’s trading update. No director received any options pursuant to the salary sacrifice
scheme.
finnCap Group plc | Annual Report and Accounts 2019-20
31
Governance
On 2 April 2020, the Group became ineligible to grant EMI options because of the commencement of
its lease of offices at 1 Bartholomew Close. Therefore, on 1 April 2020, holders of options pursuant to
the finnCap Unapproved Plan surrendered options over 3,150,000 shares and were granted options
over an equivalent number of shares pursuant to the finnCap EMI Plan. Stuart Andrews, an executive
director of the Company, surrendered unapproved options over 300,000 shares and was granted EMI
options over the same number on equivalent terms.
Finally, Richard Snow joined the Company on 20 May 2020 as its Chief Financial Officer. The
Remuneration Committee carefully considered the remuneration package to be offered to him, taking
into account its Remuneration Policy above. Richard’s base salary is £190,000 per annum and he is
eligible for a discretionary bonus on the same basis as the above. On joining the Group, it was agreed
that he would be granted unapproved options over 250,000 shares pursuant to the Group’s
established share option scheme, which are subject to performance conditions related to Group
performance and will vest over a period of five years. His benefits and pension entitlement are in line
with those offered to other Group employees.
Director service contracts
Executive directors
The general principle is that all Executive Directors will have a rolling contract of employment with
mutual notice periods of at least six months. The table below provides details of the service
contracts of the Executive Directors as at 31 March 2020.
Sam Smith
Howard Leigh
Tom Hayward
Stuart Andrews
Date of appointment
28 August 2018
28 November 2018
28 August 2018
28 November 2018
Nature of contract
Rolling
Rolling
Rolling
Rolling
Notice period
12 months
6 months
6 months
6 months
Next re-election
2020
2020
2020
2020
Non-executive directors
Non-executive Directors are engaged under letters of appointment, which are available for
shareholders to view at the Company’s registered office and will be available at the Annual General
Meeting.
The table below provides details of the date of appointment of the Non-executive Directors together
with the next election or re-election date as at 31 March 2020. Vin Murria resigned following year-
end, and therefore will not be proposed for re-election.
Jon Moulton
Andy Hogarth
Vin Murria
Barbara Firth
Date of appointment
28 November 2018
28 November 2018
28 November 2018
28 November 2018
Nature of contract
3 years
3 years
3 years
3 years
Notice period
3 months
3 months
3 months
3 months
Next re-election
2020
2020
n/a
2020
Andy Hogarth
Chairman – Remuneration Committee
finnCap Group plc | Annual Report and Accounts 2019-20
32
Financial Statements
FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under
that law the Directors have elected to prepare the Group and Company financial statements in
accordance with International Financial Reporting Standards (IFRSs) 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 AIM.
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.
The Directors are also 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.
finnCap Group plc | Annual Report and Accounts 2019-20
33
Financial Statements
Directors’ Report
The Directors serving during the financial year ended 31 March 2020 and up to the date of the signing
of the Financial Statements present their report on the affairs of the Company (finnCap Group plc)
and its subsidiaries (collectively the Group), together with the Company Financial Statements and the
audited Financial Statements of the Group and the associated Independent Auditors’ Report, for the
year ended 31 March 2020.
Parent Company
The Company acts as the holding company for the Group and details of its subsidiary undertakings can
be found in Note 14.
Dividend
Interim dividends of £1,218,000, 0.78p per share, were paid during the year (2019 - £1,635,000). No
final dividend is proposed.
Going concern
The Group's business activities, together with the factors likely to affect its future development,
performance and position are set out in the Chairman's Statement. The Strategic Report and Directors’
Report describe the financial position of the Group; the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives; and its exposure to credit risk and
liquidity risk.
As normal, the Company has assessed the appropriateness of accounting on a going concern basis.
This has become more relevant given the current economic environment caused by COVID-19. This
process involved the review of a forecast for the coming 15 months, along with stress testing a second
downside scenario. Both cases showed that the Group has the required resources to operate within
its resources during the period. The Board also noted the ability of the Firm to obtain to obtain
additional liquidity though existing financial arranges, the potential to realise assets and if necessary,
the ability to raise further equity.
The Directors believe that the Company has adequate resources to continue trading for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
Risks arising from financial instruments
Risks arising from financial instruments include, but are not limited to, credit risk, liquidity risk and
market risk. Details of these risks and how they are managed can be found in Note 4.
Post balance sheet events
Details of post-balance sheet events are set out in Note 27.
Relations with shareholders
The Chief Executive Officer and Chief Financial Officer communicate the Group’s strategy and results
to shareholders and analysts principally through meetings held following the announcement of the
Group’s full annual and interim results.
Shareholders may also attend the Annual General Meeting at which members of the Board are
available to answer questions.
finnCap Group plc | Annual Report and Accounts 2019-20
34
Financial Statements
Independent auditors
BDO LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint
BDO LLP as auditor of the Group will be proposed at the forthcoming Annual General Meeting.
Employment policy
The Group’s employment policies are based on a commitment to equal opportunities for all from the
selection and recruitment processes, through to training, development, appraisal and promotion. The
Group recognises that its people are pivotal to its success and encourages the involvement of
employees by its performance-driven employee share plans.
Change of control
Directors’ and employees’ employment contracts do not provide for compensation for loss of office
or employment due to a change of control. The provisions of the Company’s share plans may,
however, cause options and awards granted to employees under such plans to vest on a change of
control.
Political donations
The Group did not make any political donations or incur any political expenditure during the year.
Directors’ indemnities
Directors and Officers’ Liability Insurance is maintained by the Group for all Directors and Officers of
the Company and the Group as permitted by the Companies Act 2006. To the extent permitted by
law and in accordance with its Articles of Association, the Company indemnifies its Directors in respect
of any loss, liability or expense they incur in relation to the Company or any associated company of
the Company. Indemnity provisions were in force during the year and these remain in force at the
date of this report.
Share capital and share premium
As at 31 March 2020, the issued share capital of the Company was £1,697,300. This comprised of
169,730,089 ordinary 1p shares, which are admitted to trading on AIM. All shares have equal voting
rights and no person has any special rights over the Company’s share capital.
Details of shares issued during the year are shown in Note 20.
Directors and their interests
The Directors who served during the year and their interests in the share capital of the Company as at
31 March 2020 are shown below.
Number of ordinary shares
% of ordinary shares in issue
Executive directors
Sam Smith (appointed 28/8/2018)
Howard Leigh (appointed 28/11/2018)
Tom Hayward (appointed 28/8/2018)
Stuart Andrews (appointed 28/11/2018)
Non-Executive Directors
Jon Moulton (appointed 28/11/2018)
Andy Hogarth (appointed 28/11/2018)
Vin Murria (appointed 28/11/2018 and resigned 19/05/2020)
Barbara Firth (appointed 28/11/2018)
16,014,286
16,327,892
3,593,352
3,878,334
20,022,854
357,142
18,592,698
357,142
finnCap Group plc | Annual Report and Accounts 2019-20
9.44
9.62
2.11
2.29
11.80
0.21
10.95
0.21
35
Financial Statements
The Directors’ interests in options over ordinary shares in the Company as at 31 March 2020 are set
out in the Remuneration Report on page 29.
Substantial shareholders
In addition to the Directors’ interests noted above, the Directors have been notified of substantial
shareholders, set out below, who have an interest in 3% or more of the Company as at 31 March 2020.
Holder
finnCap Group plc Employee Benefit Trust
Geoff Nash
Mark Tubby
Purchase of own shares
Number of ordinary shares
12,291,006
7,080,000
5,196,687
% of ordinary shares in issue
7.24
4.17
3.06
The Group’s Employee Benefit Trust has not purchased or sold shares during the year.
This report was approved by the Board of Directors on 6 July 2020 and signed on its behalf by:
Tom Hayward
Director
finnCap Group plc | Annual Report and Accounts 2019-20
36
Financial Statements
Auditors’ Report
Independent auditor’s report to the members of finnCap Group plc
Opinion
We have audited the financial statements of finnCap Group plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 March 2020 which comprise the consolidated
statement of comprehensive income, consolidated and company statements of financial position,
consolidated and company statements of cash flows, consolidated and company statements 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 March 2020 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 and the Parent Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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.
finnCap Group plc | Annual Report and Accounts 2019-20
37
Financial Statements
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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. This matter was 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 this matter.
Key Audit Matter
Revenue Recognition of Corporate Finance
Fees and Commissions (Note 2 and Note 5)
As described in note 2 to the financial
statements, the Group generates revenue
from several different distinct revenue
streams including, income from trading
activities, corporate finance fee and
retainer income and trading profits from
short-term investments.
Revenue from corporate finance fees and
commission are generated upon successfully
raising debt or equity finance on behalf of
clients and therefore only earned when the
deal is concluded.
There is a risk in the recognition of
corporate finance fees and commission that
revenue is not recognised in accordance
with contractual entitlement or satisfaction
of performance obligations. Furthermore, if
there are any deals which are significantly
progressed around the year-end judgement
is required in determining whether
performance obligations have been satisfied
and whether revenue may be recognised.
How we addressed the Key Audit Matter in
the Audit
Our procedures performed included:
For a sample of commissions recognised
during the year, we:
recalculated the commission that
should be recognised by obtaining a
placing agreement for each
engagement and reviewing the
engagement letter to confirm the
percentage commission due to the
Group and the supporting
statements or contracts confirming
the amount of debt or equity
finance raised.
compared our calculation above to
the revenue recognised by the
Group;
agreed the timing of revenue
recognition to regulator
announcements in order to confirm
the timing and occurrence of the
deal.
agreed the income recognised by
the Group to the sales invoice and
to bank statements.
For a sample of corporate finance fees
recognised during the year, we:
reviewed the terms of the
engagement letter in order to assess
the performance obligations and
determined whether these had been
met through inspection of
applicable supporting
documentation.
agreed the fee recognised to the fee
per the engagement letter.
agreed the income recognised by
the Group to the sales invoice and
to bank statements.
finnCap Group plc | Annual Report and Accounts 2019-20
38
Financial Statements
Performed cut off testing by selecting a
sample of recorded commission and
corporate finance fee income recorded for
a defined period before and after year end
and agreed the performance obligations
back to contract and regulatory
announcements to check that the income
was recognised in the correct accounting
period.
Key observations
Based on procedures performed we did not
find any material errors in relation to the
recognition of corporate finance fees and
commission revenue.
Our application of materiality
We apply the concept of materiality both in planning and in 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 will also take account of the nature of the
identified misstatements and the particular circumstance of their occurrence, when evaluating
their effect on the financial statements.
Based on our professional judgement, we determined materiality for the Group financial
statements as a whole to be £177,000 (2019: £272,000), which represents 8.1% of the Group’s
average profit before tax for 2019 and 2020 (2019: 8.5% of 2019 profit before tax). Materiality for
the parent company was £116,000 (2019: £272,000) based on 66% (2019: 100%) of Group materiality
Our audit work on each component of the Group was executed at levels of materiality applicable to
the individual entity or restricted to the Group materiality. Component materiality ranged from
£13,000 to £140,000 (2019: £12,000 to £272,000).
Performance materiality is the application of materiality at the individual account or balance level
set at an amount to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceed materiality. On the basis of our risk assessment
together with our assessment of the overall control environment, performance materiality for the
Group and parent company was set at 75% of materiality (70% of materiality), equating to £133,000
and £87,000 (2019: £190,000 and £190,000) respectively.
We agreed with the Audit Committee that we would report to them all audit differences in excess
of £7,000 (2019: £11,000), as well as differences below that threshold, that in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
We tailored our audit to ensure we have performance sufficient work to be able to give an opinion
on the financial statements as a whole taking into account the structure of the Group and its
accounting processes and controls. The Group is based in the United Kingdom and it operates
through subsidiaries of the parent company. The main trading entities are finnCap Limited and
Cavendish Corporate Finance LLP who provide stockbroking and corporate finance services to their
clients.
finnCap Group plc | Annual Report and Accounts 2019-20
39
Financial Statements
The Group audit engagement team carried out full scope audits for the Parent Company and the
group companies’ finnCap Ltd, Cavendish Corporate Finance LLP and Cavendish Corporate Finance
(UK) Limited which are all significant components.
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the annual report and financial statements 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.
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 statement of Directors’ responsibilities, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view, 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.
finnCap Group plc | Annual Report and Accounts 2019-20
40
Financial Statements
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.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we
might state to the Parent Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions, we have
formed.
Timothy West (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
6 July 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
finnCap Group plc | Annual Report and Accounts 2019-20
41
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
Notes
Revenue
Other operating income
Total income
Administrative expenses
Operating profit before non-recurring items
Non-recurring items
Operating profit
Finance income
Finance charge
Profit before taxation
Taxation
Profit attributable to equity shareholders
Total comprehensive income for the year
Earnings per share (pence)
Basic
Diluted
5
5
6
8
9
10
10
26,006
(115)
25,891
(24,522)
1,369
(188)
1,181
26
(24)
1,183
(411)
772
772
0.49
0.46
There are no items of other comprehensive income.
All results derive from continuing operations.
The notes on pages 49 to 79 form part of these financial statements.
24,516
14
24,530
(20,264)
4,266
(1,095)
3,171
28
-
3,199
(875)
2,324
2,324
1.85
1.65
finnCap Group plc | Annual Report and Accounts 2019-20
42
Financial Statements
Consolidated Statement of Financial Position
Non-current assets
Property, plant and equipment
Intangible assets
Financial assets held at fair value
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Current assets held at fair value
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Provisions
Current liabilities
Trade and other payables
Corporation taxation
Total current liabilities
Equity
Share capital
Share premium
Own shares held
Merger relief reserve
Share based payments reserve
Retained earnings
Total equity
Total equity and liabilities
31 March
2020
£’000
31 March
2019
£’000
Note
11
12
13
15
16
17
18
20
21
22
21
635
13,533
393
171
14,732
9,037
431
4,695
14,163
28,895
40
8,469
64
8,533
1,697
616
(1,636)
10,482
388
8,775
20,322
28,895
487
13,644
691
428
15,250
8,541
1,111
4,659
14,311
29,561
63
8,065
498
8,563
1,688
575
(1,636)
10,482
292
9,534
20,935
29,561
The Financial Statements of finnCap Group plc, company number 11540126, were approved and
authorised for issue by the Board of Directors on 6 July 2020 and were signed on its behalf by:
Tom Hayward
Director
The notes on pages 49 to 79 form part of these Financial Statements
finnCap Group plc | Annual Report and Accounts 2019-20
43
Financial Statements
Company Statement of Financial Position
Non-current assets
Investments in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Non-Current liabilities
Provisions
Current liabilities
Trade and other payables
Corporation taxation
Amounts due to subsidiaries
Total current liabilities
Equity
Share capital
Share premium
Merger relief reserve
Share based payments reserve
Retained earnings
Total equity
Total equity and liabilities
Note
14
16
17
18
20
21
22
22
31 March
2020
£’000
31 March
2019
£’000
23,404
23,404
481
8
489
23,893
29
30
21
2,894
2,945
1,697
616
16,612
18
1,976
20,919
23,893
23,404
23,404
156
105
261
23,665
34
69
13
2,894
2,976
1,688
575
16,612
18
1,762
20,655
23,665
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not
to present the Company Statement of Comprehensive Income. The profit after taxation attributable
to the Company in the period ended 31 March 2020 was £1,423,000 (2019: £1,041,528).
The Financial Statements of finnCap Group plc, company number 11540126, were approved and
authorised for issue by the Board of Directors on 6 July 2020 and were signed on its behalf by:
Tom Hayward
Director
The notes on pages 49 to 79 form part of these Financial Statements.
finnCap Group plc | Annual Report and Accounts 2019-20
44
Financial Statements
Consolidated Statement of Cashflows
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation (see note 25)
Amortisation of intangible assets
Finance income
Share based payments charge
Net fair value gains recognised in profit or loss
Payments received of non-cash assets
Changes in working capital:
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Cash generated from operations
Net cash receipts /(payments) for current asset investments
held at fair value through profit or loss
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds on sale of investments
Interest received
Net cash outflow from investing activities
Cash flows from financing activities
Purchase of own shares by EBT
Sale of own share by EBT
Equity dividends paid
Proceeds from the issue of new shares net of costs
Proceeds from exercise of options
Lease liability payments
Proceeds from borrowings
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
1,183
948
79
(26)
110
115
(275)
2,134
(495)
173
(23)
1,789
680
(845)
1,624
-
(262)
(9)
508
26
263
-
-
(1,218)
-
50
(683)
-
(1,851)
36
4,659
4,695
3,199
242
56
(28)
100
(155)
(218)
3,196
778
109
(10)
4,073
(465)
(796)
2,812
(3,592)
(249)
(30)
70
28
(3,773)
(1,260)
693
(1,635)
3,665
375
-
(739)
1,099
138
4,521
4,659
The notes on pages 49 to 79 form part of these Financial Statements.
finnCap Group plc | Annual Report and Accounts 2019-20
45
Financial Statements
Company Statement of Cashflows
Cash flows from operating activities
Profit before taxation
Adjustments for:
Share based payments charge
Changes in working capital:
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Acquisition of subsidiaries
Net cash outflow from investing activities
Cash flows from financing activities
Equity dividends paid
Proceeds from the issue of new shares net of costs
Proceeds from exercise of options
Proceeds from intercompany loans
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’002
1,431
9
1,440
(325)
(39)
(5)
1,071
-
-
(1,218)
-
50
-
(1,168)
(97)
105
8
(1,042)
-
(1,042)
(156)
70
33
(1,095)
(5,252)
(5,252)
(231)
3,665
124
2,894
6,452
105
-
105
finnCap Group plc | Annual Report and Accounts 2019-20
46
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Notes to the Financial Statements
1. General information
finnCap Group plc (the “Company”) is a public limited company, limited by shares, incorporated and
domiciled in England and Wales. The Company was incorporated on 28 August 2018. The registered
office of the Company is at 1 Bartholomew Close, London, EC1A 7BL, United Kingdom. The registered
company number is 11540126. The Company is listed on AIM, a market of the London Stock
Exchange.
2. Accounting policies
a. Basis of preparation
These consolidated Financial Statements contain information about the Group and have been
prepared on a historical cost basis except for certain Financial Instruments which are carried at fair
value. Amounts are rounded to the nearest thousand, unless otherwise stated and are presented in
pounds sterling, which is the currency of the primary economic environment in which the Group
operates.
These consolidated Financial Statements have been prepared in accordance with International
Financial Reporting Standards and International Accounting Standards as adopted by the European
Union and the IFRS Interpretation Committee interpretations (collectively IFRSs), and in accordance
with applicable law.
The preparation of Financial Statements in compliance with adopted IFRS requires the use of certain
critical accounting estimates. It also requires Group management to exercise judgement in applying
the Group's accounting policies. The areas where significant judgements and estimates have been
made in preparing the financial statements and their effect are disclosed in note 3.
b. Basis of consolidation
The Group’s consolidated Financial Statements include the Financial Statements of the Company and
all its subsidiaries. Subsidiaries are entities over which the Group has control 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. Subsidiaries
are fully consolidated from the date on which control is established and de-consolidated on the date
that control ceases.
The acquisition method of accounting is used for the acquisition of subsidiaries. Transactions and
balances between members of the Group are eliminated on consolidation and consistent accounting
policies are used throughout the Group for the purposes of consolidation.
c. Going concern
The Group's business activities, together with the factors likely to affect its future development,
performance and position are set out in the Chairman's Statement. The Strategic Report and
Directors’ Report describe the financial position of the Group; the Group’s objectives, policies and
processes for managing its capital; its financial risk management objectives; and its exposure to
credit risk and liquidity risk.
As normal, the Company has assessed the appropriateness of accounting on a going concern basis.
This has become more relevant given the current economic environment caused by COVID-19. This
finnCap Group plc | Annual Report and Accounts 2019-20
49
process involved the review of a forecast for the coming 15 months, along with stress testing a
second downside scenario. Both cases showed that the Group has the required resources to
operate within its resources during the period. The Board also noted the ability of the firm to obtain
additional liquidity though existing financial arrangements, the potential to realise assets and if
necessary, the ability to raise further equity.
The Directors believe that the Company has adequate resources to continue trading for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
d. New standards, amendments and interpretations
The Company has adopted the IFRS 16 – Leases (effective 1 January 2019).
The adoption of the above standard removes the distinction between finance and operating leases.
As a result, the Group’s property leases are recognised as right of use assets and lease liabilities in
the Statement of Financial Position, whilst the Statement of Comprehensive Income includes
depreciation and interest charges as opposed to operating lease payments.
Further detail on the adoption of this standard can be found in Note 24.
There are other standards in issue, effective in future periods, which are not expected to have an
impact on the Group and therefore have not been included in the list above.
e. Principal accounting policies
Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for services provided in the normal course of business, net of trade discounts,
VAT and other sales related taxes. Where consideration includes financial instruments or other non-
cash items, revenue is measured at fair value using an appropriate valuation method. Revenue
comprises:
(i)
(ii)
(iii)
Income from trading activities;
Corporate finance fees and retainers; and
Other income, including trading profits from short term investments taken as
consideration for core services
To determine whether to recognise revenue, the Company follows a 5-step process as follows:
i)
ii)
iii)
i)
ii)
Identifying the contract with a customer;
Identifying the performance obligations;
Determining the transaction price;
Allocating the transaction price to the performance obligations; and
Recognising revenue when/as performance obligation(s) are satisfied
The Company also considers whether it is acting as a principal or an agent for each type of revenue.
Revenue is recognised either at a point in time, or over time as the Company satisfies performance
obligations by transferring the promised services to its customers as described below.
finnCap Group plc | Annual Report and Accounts 2019-20
50
(a) Income from trading activities
Income from trading activities includes commissions from agency dealing which are recognised on
trade date. Trading activities also include gains and losses on market making, with trades recognised
on trade date, with corresponding financial assets and financial liabilities until trade settlement.
Market making positions are revalued to the closing market bid price (long positions) and offer price
(short positions) on the London Stock Exchange as appropriate at the period end. Market making
revenues consist of the realised and unrealised profits and losses on financial assets and financial
liabilities, arrived at after taking into account attributable dividends. Dividend income from
investments is recognised when the shareholders’ right to receive payment has been established.
(b) Corporate finance fees and retainers
Corporate finance transaction fees and commission are recognised at a point in time when, under
the terms of the contract, the conditions have been unconditionally met such that the Company is
entitled to the fees specified. Corporate finance retainer fees, including nominated adviser retainer
fees, are recognised over time as the services are delivered.
(c) Other income
Revenue also includes the fair value of options and warrants over securities received as
consideration for corporate finance services rendered.
Contract costs including commissions and referral fees paid to introducers of business are shown in
administrative expenses.
Foreign currency
Transactions in foreign currencies are translated into the functional currency at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in profit or loss.
Classification of instruments issued by the Company
Instruments issued by the Company are treated as equity (i.e. forming part of shareholders’ funds)
only to the extent that they meet the following two conditions:
(i)
(ii)
they include no contractual obligations upon the Company to deliver cash or other
financial assets or to exchange financial assets or financial liabilities with another party
under conditions that are potentially unfavourable to the Company; and
where the instrument will or may be settled in the Company’s own equity instruments, it
is either a non-derivative that includes no obligation to deliver a variable number of the
Company’s own equity instruments or is a derivative that will be settled by the Company
exchanging a fixed amount of cash or other financial assets for a fixed number of its own
equity instruments.
Financial payments associated with financial instruments that are classified in equity are dividends
and are recorded directly in equity.
finnCap Group plc | Annual Report and Accounts 2019-20
51
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes the
original purchase price of the asset and the costs attributable to bringing the asset to its working
condition for its intended use.
Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment. Depreciation is provided on the following
basis:
Fixtures, fittings and equipment
3-4 years straight line
Leasehold improvements
Over period of lease
It is assumed that all assets will be used until the end of their economic life.
Investments
Fixed asset investments are investments in subsidiaries and are stated at cost less any accumulated
impairment losses. Cost is measure of the fair value of consideration paid for the investment.
Intangible assets
Trademarks, trade names and computer software and are stated at cost net of accumulated
amortisation and provision for any impairment in value. Amortisation is provided on the following
basis:
Computer software
Trade names
Trademarks
2-4 years straight line
10 years straight line
held at cost less any provisions for impairment
Goodwill is recognised on consolidation as the difference between the fair value of identifiable
assets and liabilities acquired and the purchase consideration. Goodwill has an indefinite life and is
assessed for impairment at each reporting date.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount, being the higher of value in use and fair value
less costs to sell, of the asset is estimated in order to determine the extent of the impairment loss (if
any).
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment
test is carried out on the smallest group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units ('CGUs'). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from a business combination that gives rise
to the goodwill.
finnCap Group plc | Annual Report and Accounts 2019-20
52
If the recoverable amount of an asset is estimated to be less than the carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an
expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount. The reversal of the impairment
loss shall not increase the carrying amount of the asset above the carrying amount that would have
been determined (net of amortisation or depreciation) had no impairment loss been recognised for
the asset in prior years. An impairment loss recognised for goodwill is not reversed.
Retirement benefits
The Company operates a defined contribution scheme for UK-based employees. The amount
charged to the profit and loss account in respect of pension costs and other post-retirement benefits
is the contributions payable in respect of service in the year. Differences between contributions
payable during the year and contributions actually paid are shown as either accruals or prepayments
in the balance sheet.
Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the liability.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in profit
or loss except to the extent that it relates to items recognised in other comprehensive income or
directly in equity, in which case it is recognised in other comprehensive income or in equity,
respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes, except to the
extent that it arises on:
(i)
(ii)
(iii)
the initial recognition of goodwill;
the initial recognition of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination; and
differences relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future.
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 balance sheet 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.
finnCap Group plc | Annual Report and Accounts 2019-20
53
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Financial instruments
Financial assets
The Company’s financial assets comprise trading investments, derivative financial instruments, trade
and other receivables, and cash and cash equivalents. The classification of financial assets at initial
recognition depends upon the purpose for which they are acquired and their characteristic. Financial
assets are measured initially at their fair value.
Financial assets held at fair value through profit or loss are held for trading and are acquired
principally for selling or repurchasing. These include market making positions valued at the closing
market bid price (long positions) or offer price (short positions) at the balance sheet date and
presented within current asset investments. The change in the value of investments held for trading
is recognised in the profit and loss account. Purchases and sales of investments are recognised on
trade date with the associated financial assets and liabilities presented as market making
counterparty debtors and creditors up to settlement date.
Non-current financial assets held at fair value through profit or loss are derivative assets comprising
equity shares, options and warrants that are initially accounted for and measured at fair value on the
date the Group becomes a party to the contractual provisions of the derivative contract and
subsequently measured at fair value. The gain or loss on re-measurement is taken to the income
statement within revenue, as part of net trading gains or losses. Fair values are obtained from
quoted prices prevailing in active markets, including recent market transactions and valuation
techniques including discounted cash flow models and option pricing models as appropriate. The fair
values of the warrants are determined using the Black Scholes model. These valuation techniques
maximise the use of observable market data, such as the quoted share price. The variables used in
the valuation include exercise price, expected life, share price at the date of grant, price volatility,
dividend yield and risk-free interest rate. Derivatives are included in assets when their fair value is
positive and liabilities when their fair value is negative.
Gains and losses from the financial assets held at fair value through profit and loss are presented
within revenue as income from trading activities, or other operating income for trading profit on
short-term investments.
Financial assets also include trade and other receivables and cash and cash equivalents. Trade and
other receivables are amounts due from customers for services performed in the ordinary course of
business. If collection is expected in one year or less (or in the normal operating cycle of the business
if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are initially recorded at fair value and thereafter are measured at
amortised cost using the effective interest rate.
Impairment provisions for trade receivables are recognised based on the simplified approach within
IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-
payment of trade receivables is assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime expected credit loss for the trade
receivables. For trade receivables, which are reported net, such provisions are recorded in a
separate provision account with the loss being recognised within administrative expenses in the
finnCap Group plc | Annual Report and Accounts 2019-20
54
consolidated statement of comprehensive income. On confirmation that the trade receivable will
not be collectable, the gross carrying value of the asset is written off against the associated
provision.
Financial liabilities
The Group’s financial liabilities comprise trade and other payables including market making
counterparty creditors and provisions. The classification of financial liabilities at initial recognition
depends upon the purpose for which they are acquired and their characteristic.
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable
transaction costs. After initial recognition, these liabilities are measured at amortised cost using the
effective interest method. The entities’ borrowings, trade and most other payables fall into this
category of financial instruments. The Group derecognises a financial liability when its contractual
obligations are discharged, cancelled, or expire.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
After initial recognition, interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in profit or loss over the period of the
borrowings on an effective interest basis.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers and are initially recorded at fair value and thereafter at amortised
cost using the effective interest rate method.
Segmental reporting
The Group is managed as an integrated corporate advisory, M&A advisory and stockbroking business
and although there are different revenue streams, the Group’s activities are considered to be
subject to similar economic characteristics. Consequently, the Group is managed as one business
unit which is reported in a manner consistent with the internal reporting to the Board of Directors,
which has been identified as the chief operating decision maker.
Share capital
Share capital represents the nominal value of shares that have been issued.
Share premium
Share premium includes any premiums received on issue of share capital. Any transaction costs
associated with the issuing of shares are deducted from share premium.
Own shares held by the finnCap Limited Employee Benefit Trust
Transactions of the Group-sponsored Employee Benefit Trust are treated as being those of the
Group and are therefore reflected in these consolidated financial statements. In particular, the
Trust’s purchases and sales of shares in the Company are debited and credited to equity.
Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the
Group’s plans are cash-settled. All goods and services received in exchange for the grant of any
share-based payment are measured at their fair values using the Black Scholes model.
finnCap Group plc | Annual Report and Accounts 2019-20
55
Where employees are rewarded using share-based payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the equity instruments granted. This fair value
is appraised at the grant date and excludes the impact of non-market vesting conditions (for
example profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a
corresponding credit to equity. Where vesting periods or other vesting conditions apply, the expense
is allocated over the vesting period, based on the best available estimate of the number of share
options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous estimates. Any adjustment to
cumulative share-based compensation resulting from a revision is recognised in the current year.
The number of vested options ultimately exercised by holders does not impact the expense recorded
in any year.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction
costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any
excess being recorded as share premium.
Retained earnings
Retained earnings includes all current and prior year retained profits and losses.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to
equity shareholders, this is when declared by the Directors. In the case of final dividends, this is
when approved by the shareholders at the AGM.
Leases
All leases are accounted for by recognising a right of use asset and a lease liability except for:
Leases of low value assets; and
Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 April 2019 without restatement of comparative figures. For an explanation of
the transitional requirements that were applied as at 1 April 2019, see Note 24.
Lease liabilities are measured at the present value of the contractual payments due to the lessor
over the lease term, with the discount rate determined by reference to the group’s incremental
borrowing rate.
On initial recognition, the carrying value of the right to use asset also includes:
the amount of the lease liability, reduced for any lease incentives received;
initial direct costs incurred; and
the amount of any provision recognised where the group is contractually required to
dismantle, remove or restore the leased asset.
finnCap Group plc | Annual Report and Accounts 2019-20
56
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a
constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use
assets are depreciated on a straight-line basis over the remaining term of the lease.
3. Critical accounting estimates and judgements
In preparing these financial statements, the Directors have made the following judgements:
Impairment of non-current assets
The Directors apply judgement in the assessment as to whether the Company’s tangible and
intangible assets are impaired at each reporting date, considering several factors including the
economic viability and expected future financial performance of the asset.
During the assessment of Going Concern, see Note 2.c, the Directors additionally considered the
impact of COVID-19 on the carrying value of intangible assets. This process concluded that there are
no indications that the assets are impaired.
In preparing these financial statements, the Directors have made the following estimations:
Estimated fair values of financial derivative assets where there is no quoted price
The Group holds options and warrants in unlisted entities which are not in an active market and
cannot be valued by reference to unadjusted quoted prices for identical instruments. The Directors
use judgement to select valuation techniques and make assumptions that are based on observable
market data, as far as possible, in respect of equivalent instruments at the balance sheet date.
4. Risk Management
The main risks arising from the holding of financial instruments are credit risk, liquidity and market
risk. Market risk comprises currency risk, interest rate risk and other price risk. The Directors review
and agree policies for managing each of these risks are as summarised below.
Credit risk
Credit risk is the risk that clients or other counterparties to a financial instrument or contracted
engagement will cause a financial loss by failing to meet their obligation.
Credit risk exposure therefore arises as a result of trading, investing, and financing activities. The
primary source of credit risk faced by the Company is that arising from the settlement of equity
trades carried out in the normal course of business.
The credit risk on a particular equity trade receivable is measured by reference to the original
amount owed to the Company less any partial payments less any collateral to which the Company is
entitled.
Credit risk exposures are managed by the use of individual counterparty limits applied initially on the
categorisation of the counterparty and assessed further according to the results of relevant financial
indicators and/or news flow.
Trade receivables relating to fees due on the Company’s corporate finance and advisory activities
are monitored on a weekly basis. Formal credit procedures include checking client creditworthiness
before starting to trade, approval of material trades and chasing of overdue accounts.
finnCap Group plc | Annual Report and Accounts 2019-20
57
Other debtors consist of deposits held at our agency settlement agent (Pershing, a wholly owned
subsidiary of Bank of New York Mellon Corporation), employee loans secured by finnCap Group plc
shares and s455 tax. These balances are considered low risk and are reviewed on a monthly basis.
The Group’s cash and cash equivalents are held with HSBC Bank plc, National Westminster Bank plc
and Pershing.
Risk exposure
Non-current asset investments
Market making counterparty debtors
Trade debtors
Other debtors
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Total
Rating
AA
AA
Unrated
Unrated
AA-
AA
A+
Group
31
March
2020
£’000
393
4,128
1,910
2,006
2,615
825
1,255
11,877
31
March
2019
£’000
691
2,806
2,864
1,944
2,629
1,138
892
12,964
31
March
2019
£’000
-
-
-
-
105
Company
31
March
2020
£’000
-
-
-
-
8
-
-
8
-
105
The maximum exposure to credit risk on trade debtors at the end of the reporting period is equal to
the balance sheet figure. In addition, the Company has credit risk exposure to the gross value of
unsettled trades (on a delivery versus payment basis) at its agency settlement agent, which were
£5.0 million (2019: £9.6m) at the balance sheet date. The vast majority are settled within two days.
Liquidity risk
Liquidity risk is the risk that obligations associated with financial liabilities will not be met. The
Company monitors its risk to a shortage of funds by considering the maturity of both its financial
assets and projected cash flows from operations. The Company’s objective is to maintain adequate
cash resources with a material contingency to meet its obligations as they fall due.
The table below analyses the entities’ non-derivative and derivative financial liabilities into relevant
maturity groupings based on the remaining period at the balance sheet date to the contractual
maturity date. Derivative financial liabilities are included in the analysis if their contractual
maturities are essential for an understanding of the timing of cash flows. The amounts disclosed in
the table are the contractual undiscounted cash flows.
As at 31 March 2020
Trade and other payables
As at 30 April 2019
Trade and other payables
Currency risk
Less than
three months
£’000
6,464
3,473
finnCap Group plc | Annual Report and Accounts 2019-20
58
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. There are no significant currency risks at the balance
sheet date.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. There are no significant interest rate risks at
the balance sheet date.
Other price risk
Other price risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in the market prices (other than those arising from interest rate risk or
currency risk) whether those changes are caused by factors specific to the individual financial
instrument or its issuer or factors affecting all similar financial instruments traded in the market. The
Group manages market price risk by monitoring the value of its financial instruments daily. The risk
of future losses is limited to the fair value of investments as at the balance sheet date.
If equity prices had been 10% higher/lower, net profit for the period ended 31 March 2020 would
have been £83k higher/lower (2019: £180k higher/lower) due to the change in value of investments
held at fair value through the profit and loss. The Group’s exposure to equity price risk is closely
monitored by senior management on a daily basis.
finnCap Group plc | Annual Report and Accounts 2019-20
59
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities recognised at the balance sheet date of the
reporting periods under review may also be categorised as follows:
Financial assets
Financial assets measured at fair value through profit or loss
Non-current financial assets – investments
Current asset investments
Total non-current
Financial assets measured at amortised cost
Market making counterparty debtors
Trade debtors
Other debtors
Cash and cash equivalents
Total current
Total financial assets
Financial liabilities
Financial liabilities measured at amortised cost
Amounts due to subsidiaries
Market-making counterparty creditors
Trade and other payables
Total current
Net financial assets and liabilities
Group
2020
£’000
2019
£’000
Company
2020
£’000
2019
£’001
393
431
824
691
1,111
1,802
4,128
1,910
2,006
4,695
2,806
2,864
1,944
4,659
12,739 12,273
13,563 14,075
-
-
-
-
-
-
8
8
8
-
-
-
-
-
-
105
105
105
-
-
2,496
3,624
977
2,425
6,049
3,473
7,514 10,602
2,894
-
-
2,894
(2,886)
2,894
-
12
2,906
(2,801)
Financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy are categorised as follows:
Level 1 – Quoted equity investments - fair value is based on quoted market prices at the balance
sheet date.
Level 2 – None.
Level 3 – Warrants and private company investments – fair value is determined using either the
value of a recent investment reviewed for changes in fair value or the Black Scholes model as
deemed most appropriate. The investments valued using Black Scholes at the reporting dates are
immaterial as are the sensitivities on these assumptions.
The amounts are based on the values recognised in the statement of financial position.
Current asset investments are all level 1.
finnCap Group plc | Annual Report and Accounts 2019-20
60
Movements in non-current financial assets during the period were as shown below:
Level 1
£’000
390
Level 3
£’000
301
31 March
2020
£’000
691
Level 1
£’000
1
Level 3
£’000
387
8
192
(509)
81
(123)
134
-
312
(115)
326
(509)
393
171
218
-
390
(16)
-
(70)
301
31
March
2019
£’000
388
155
218
(70)
691
At start of year
Net (losses)/gains recognised
in other operating income
Additions
Disposals
At end of year
Level 3 financial instruments comprise investments or warrants in unquoted companies. The
determination of fair value requires judgement, particularly in determining whether changes in fair
value have occurred since the last observable transaction in the company’s shares. In making this
judgement the Company evaluates amongst other factors the materiality of each individual holding,
the stage of the company’s development, financial information of each company and relevant
discussions with the company’s management.
Capital management policies and procedures
The Group’s capital management objectives are:
To ensure the Group’s ability to continue operating as a going concern; and
To provide an adequate return to shareholders by pricing products and services
commensurately with the level of risk.
This is achieved through close management of working capital and regular reviews of pricing.
Decisions on whether to raise funding using debt or equity are made by the Board based on the
requirements of the business.
Capital for the reporting period under review is shown as total equity in the balance sheet. This was
£20,322,000 as at 31 March 2020 (31 March 2019: £20,935,000). Subsidiary entities within the group
are subject to FCA capital requirements. The Group closely monitors its capital resources to ensure
that sufficient headroom is maintained at all times.
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61
5. Segmental Analysis
The Group is managed as an integrated full-service financial services group and the different
revenue streams are considered to be subject to similar economic characteristics. Consequently, the
Group is managed as one business unit.
The trading operations of the Group comprise of Corporate Advisory and Broking, M&A Advisory and
Institutional Stockbroking. The Group’s revenues are derived from activities conducted in the UK,
although several of its corporate and institutional investors and clients are situated overseas. All
assets of the Group reside in the UK.
Revenues
Retainers
Transactions
Corporate advisory and broking
M&A advisory
Institutional stockbroking
Total revenue
Services transferred at a point in time
Services transferred over a period of time
Total revenue
Other operating income
Trading profit on long term investments
Rental income
Total other operating income
Major customers
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
6,471
8,642
15,113
7,326
3,567
26,006
18,777
7,229
26,006
(115)
-
(115)
5,922
11,950
17,872
3,229
3,415
24,516
16,891
7,625
24,516
11
3
14
There are no customers that individually accounted for more than ten percent of total revenues.
finnCap Group plc | Annual Report and Accounts 2019-20
62
6. Expenses by Nature
Employee benefit expense (see note 7)
Depreciation
Amortisation
Operating lease payments
Foreign exchange (gains)
Other expenses
Total administrative expenses
Audit Services
Other Services
IPO Reporting Accountants
Regulatory reporting
Total auditors' remuneration
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
16,095
948
79
-
(112)
7,512
24,522
90
-
15
105
14,451
242
56
467
(55)
5,103
20,264
115
211
7
333
The impact in the year of the adoption of IFRS 16 on depreciation and amortisation can be seen in
note 24 for further details.
7. Staff costs
Employee benefit expenses (including the Directors):
Wages and salaries
Social security costs
Pension costs
Share based payments
Total employee benefit expense
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
13,881
1,633
471
110
16,095
12,829
1,237
285
100
14,451
31 March 2020
Number
31 March 2019
Number
Average number of employees:
Corporate broking and corporate finance
Sales and trading
Research
Administration
Total number of employees
76
9
15
40
140
finnCap Group plc | Annual Report and Accounts 2019-20
54
9
14
29
106
63
Key Management Personnel
Key management personnel are considered to be the Executive Directors of finnCap Group plc.
Highest Paid Director
Total emoluments
Year ended
31 March 2020
£’000
277
Period ended
31 March 2019
£’000
494
Details of the remuneration for all Board members is disclosed in the Remuneration Report on page
29.
8. Non-recurring items
Group formation costs
Group structuring costs
Total non-recurring items
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
-
188
188
1,095
-
1,095
Non-recurring items in the current year relate to one off expenditure from cost reductions carried
out in the year.
Non-recurring items in the prior period relate to transaction costs from the acquisition of finnCap
Ltd, Cavendish Corporate Finance (UK) Limited and Cavendish Corporate Finance LLP and the costs
related to the listing on AIM.
finnCap Group plc | Annual Report and Accounts 2019-20
64
9. Taxation
Analysis of charge in the period
Current tax
Current taxation charge for the period
Adjustments made in respect of prior periods
Total current tax
Deferred taxation
Origination and reversal of timing differences
Total tax charge
Reconciliation of total tax charge
Profit before taxation
Profit before taxation multiplied by the standard rate
of UK taxation (19%)
Effects of:
Expenses not deductible for tax purposes
Deduction for the exercise of employee share options
Income not taxable for tax purposes
Capital allowances in excess of depreciation
Adjustments made in respect of prior periods
Total tax charge
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
316
95
411
-
411
950
(25)
925
(50)
875
1,183
3,199
225
85
(35)
20
21
95
411
608
342
(50)
(9)
9
(25)
875
finnCap Group plc | Annual Report and Accounts 2019-20
65
10. Earnings per share
Earnings (£’000)
Earnings for the purposes of basic and diluted earnings
per share being profit for the year attributable to
equity shareholders
Number of shares
Weighted average number of shares for the purposes
of basic earnings per share
Weighted average dilutive effect of conditional share
awards
Weighted average number of shares for the purposes
of diluted earnings per share
Profit per ordinary share (pence)
Basic profit per ordinary share
Diluted profit per ordinary share
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
772
2,324
157,093,604
125,845,121
9,553,641
14,927,048
166,647,245
140,772,169
0.49
0.46
1.85
1.65
The shares held by the Group’s Employee Benefit Trust, see Note 22, have been excluded from the
calculation of earnings per share.
finnCap Group plc | Annual Report and Accounts 2019-20
66
11. Property, plant and equipment
Right of
use asset
£’000
Leasehold
Fixtures
Office
improvements
£’000
and fittings
£’000
equipment
£’000
Cost
As at 1 May 2018
Additions
Acquired through business
combinations
As at 1 April 2019
Additions
Adoption of IFRS 16
As at 31 March 2020
Depreciation
As at 1 May 2018
Charge for the year
As at 1 April 2019
Charge for the period
As at 31 March 2020
Net book value
As at 30 April 2018
As at 31 March 2019
As at 31 March 2020
-
-
-
-
-
850
850
-
-
-
(600)
(600)
-
-
250
910
104
-
1,014
3
-
1,017
(670)
(120)
(790)
(160)
(950)
240
224
67
380
28
1
409
25
-
434
(295)
(46)
(341)
(57)
(398)
85
68
36
535
117
34
686
225
-
911
(415)
(76)
(491)
(138)
(629)
120
195
282
Total
£’000
1,825
249
35
2,109
253
850
3,212
(1,380)
(242)
(1,622)
(955)
(2,577)
445
487
635
The right of use asset was created during the year on the adoption of IFRS 16. See Note 24 for
further details.
finnCap Group plc | Annual Report and Accounts 2019-20
67
12. Intangibles
Cost
As at 1 May 2018
Additions
Acquired through business combinations
As at 1 April 2019
Additions
As at 31 March 2020
Amortisation
As at 1 May 2018
Charge for the year
As at 1 April 2019
Charge for the period
As at 31 March 2020
Net book value
As at 30 April 2018
As at 31 March 2019
As at 31 March 2020
Other
intangibles
£’000
Computer
software
£’000
Goodwill
£’000
Total
£’000
20
-
214
234
-
234
-
(20)
(20)
(79)
(99)
20
214
135
516
30
-
546
9
555
(415)
(36)
(451)
(41)
(492)
101
95
63
-
-
13,335
13,335
-
13,335
-
-
-
-
-
-
13,335
13,335
536
30
13,549
14,115
9
14,124
(415)
(56)
(471)
(120)
(591)
121
13,644
13,533
On 5 December 2018, the Company acquired all the share capital of Cavendish Corporate Finance
(UK) Limited and all of the partnership rights of Cavendish Corporate Finance LLP. The Company has
recognised goodwill, trade name and technology assets arising from the acquisition. Intangible
assets are recognised at cost less accumulated amortisation and impairment losses.
The goodwill arising from the acquisition has been assessed for impairment by calculating the net
present value of future cashflows from the Cavendish entities as cash generating units. The
assessment was carried out over four years assuming consistent performance as in the last group
forecast. The cashflows were discounted at the Group’s weighted average costs of capital. No
impairment has been recognised during the period.
During the assessment of Going Concern, see Note 2.c, the Directors additionally considered the
impact of COVID-19 on the carrying value of intangible assets. This process shown that the
discounted cashflow had sufficient headroom and concluded that they are no indications that the
assets are impaired.
finnCap Group plc | Annual Report and Accounts 2019-20
68
13. Investments
Financial assets held at fair value
through profit and loss
Opening
Acquisition of shares in listed companies
Change in market value recognised in the profit and loss
Disposals
Closing
31 March
2020
£’000
31 March
2019
£’000
691
326
(115)
(509)
393
388
218
155
(70)
691
The shares acquired during the period relates to the settlement of corporate finance fees and the
participation in placings. As a non-cash item, this does not appear in the consolidated statement of
cashflows.
Each investment is revalued at each reporting date. The change in value is recognised through the
statement of comprehensive income. All items were classified as held at fair value upon recognition
and there have been no reclassifications during the period.
Sensitivity analysis
These financial assets include warrants valued at 31 March 2020 at £2,867 (31 March 2019 at
£1,751). If the future volatility of the quoted equity price had been 5 percent to 20 percent basis
points higher or lower, the impact on fair value of the warrants would have been immaterial.
finnCap Group plc | Annual Report and Accounts 2019-20
69
14. Investments in subsidiaries
Opening
Share for share exchange
Acquisitions
Carrying amount
Name
finnCap Ltd
Cavendish Corporate Finance
(UK) Limited
Cavendish Corporate Finance LLP
15. Deferred taxation
31 March
2020
£’000
23,404
-
-
23,404
Country of
incorporation and
principal place of
business
Financial services
United Kingdom
Holding company
Financial services
United Kingdom
United Kingdom
31 March
2019
£’000
-
8,799
14,605
23,404
Proportion of
ownership
and voting
rights at 31
March 2020
100%
100%
100%
Deferred tax assets and liabilities are recognised where the carrying amount for financial reporting
purposes differs from the tax basis. Recognition of deferred tax assets is restricted to those instances
where it is probable that taxable profit will be available against which the difference can be utilised.
Opening balance
Origination and reversal of temporary difference expense
Recognised in equity
Closing balance
31 March
2020
£’000
428
-
(257)
171
30 April
2,019
£’000
-
50
378
428
Deferred taxation for the group relates to timing difference on the taxation relief on the exercise of
options. The amount of the asset is determined using tax rates that have been enacted or
substantively enacted when the deferred tax assets are expected to be recovered.
finnCap Group plc | Annual Report and Accounts 2019-20
70
16. Trade and other receivables
Group
Trade receivables
Market marketing counterparty debtors
Prepayments and accrued income
Other debtors
Total trade receivables
Company
Prepayments and accrued income
31 March
2020
£’000
31 March
2019
£’000
1,910
4,128
993
2,006
9,037
2,864
2,806
927
1,944
8,541
481
156
The Directors consider that the carrying amount of trade and other receivables approximates the fair
value due to short maturities.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a
lifetime expected credit loss provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and contract assets are grouped based
on similar credit risk and aging. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group’s historical credit losses experienced over the three-
year period prior to the period end. The historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the Group’s customers. The Group
has identified the gross domestic product (GDP), unemployment rate and inflation rate as the key
macroeconomic factors in the countries where the Group operates. Based on the historically low
level of irrecoverable debts, the Board have concluded that there is no requirement for additional
provisions.
Group
Movements in the impairment allowance for trade receivables:
At start of year
Receivables provided for during the year as uncollectible
Acquired through business combinations
At end of year
31 March
2020
£’000
31 March
2019
£’000
12
-
-
12
28
(28)
12
12
The carrying amounts of the entity’s trade and other receivables are all denominated in GBP.
finnCap Group plc | Annual Report and Accounts 2019-20
71
Contract assets
Contract assets arise when the Group performs services for a customer in advance of consideration
being received or due. Contract assets comprise of retainer fee income accrued for ongoing advice
given to retained clients.
17. Cash and cash equivalents
Group
Cash and cash equivalents
Cash at bank and in hand
31 March
2020
£’000
31 March
2019
£’000
4,695
4,659
Cash and cash equivalents were held in the following currencies:
UK Pound
United States Dollar
Euros
Total cash and cash equivalents
3,908
541
246
4,695
Company
Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents were held in the following currencies:
UK Pound
8
8
4,376
123
160
4,659
105
105
The Group’s Employee Benefit Trust had a cash balance of £125,000 under the control of the
Trustees and not accessible by the Directors.
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72
18. Trade and other payables
Group
Trade payables
Social security
Accruals
Deferred income
Market marketing counterparty creditors
Lease liability
Other creditors
Total trade and other payables
Company
Accruals
Other creditors
Total trade and other payables
31 March
2020
£’000
31 March
2019
£’000
1,881
438
1,389
178
3,624
415
544
8,469
30
-
30
655
481
3,968
143
2,496
-
322
8,065
57
12
69
The lease liability was created during the year due to the adoption of IFRS16, see note 24.
The Directors consider that the carrying amount of trade and other payables approximates the fair
value due to short maturities. All trade and other payables were held in GBP.
Contract liabilities
Contract liabilities arise where consideration is received for which the Group has an obligation to
perform a service for a customer. Contract liabilities comprise of retainer fee deferred income for
ongoing advice given to retained clients.
19. Amounts due to subsidiaries
Company
Amounts due to subsidiaries
31 March
2020
£’000
31 March
2019
£’001
2,894
2,894
Amounts due to subsidiaries incur no interest and are repayable on demand.
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73
20. Share Capital
Opening
Issue of new shares
Issue of shares on exercise of options
Issue of shares on admission to AIM
Issue of shares through business combinations
Closing
31 March
2020
Number
168,830,089
-
900,000
-
-
169,730,089
31 March
2019
Number
117,951,100
11
4,082,715
13,392,857
33,403,406
168,830,089
Issued, called up and fully paid
£’000
Number
Ordinary shares of £0.01 each
169,730,089
1,697
The Company has one class of ordinary shares in issue, which are non-redeemable, carry one vote
per share and have no right to dividends other than those recommended by the Directors, and an
unlimited right to share in the surplus remaining on a winding up.
21. Reserves
Merger relief reserve
The merger relief reserve represents:
the difference between net book value of finnCap Ltd and the nominal value of the shares
issued due to the share for share exchange on the acquisition of finnCap Ltd. Upon
consolidation, part of the merger reserve is eliminated to recognise the pre-acquisition share
premium and capital redemption reserve of finnCap Ltd; and
the difference between the fair value and nominal value of shares issued for the acquisition
of Cavendish Corporate Finance (UK) Limited and Cavendish Corporate Finance LLP
This reserve is not distributable.
Share Premium
Share premium represents the excess of over the nominal value of new shares issued less the costs
of issuing the shares.
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74
22. Own shares held
The value of own shares held is the cost of shares purchased by the Group’s Employee Benefit Trust.
The Trust was established with the authority to acquire shares in finnCap Group plc and is funded by
the Group.
Shares held
At the start of year
Movement
At the end of year
31 March
2020
Number
12,291,006
-
12,291,006
31 March
2019
Number
4,503,170
7,787,836
12,291,006
During the year, the Group's Employee Benefit Trust purchased nil ordinary shares (2019:
10,903,772 at a weighted average price of £0.116). Total consideration for these purchases was nil
(2019: £1,259,229) and these purchases represent nil percent of the ordinary called up share capital
(2019: 6.46%).
In addition, the Group's Employee Benefit Trust sold nil ordinary shares (2019: 3,115,936 ordinary
shares at a weighted average price of £0.223). Total consideration for these sales was nil (2019:
£693,354) and these sales represent nil percent of the ordinary called up share capital (2019: 1.85%).
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75
23. Share Based Payments
The Company has a share option scheme for employees of the Group. If options remain unexercised
after a period of 4 or 7 years from the date of grant, then the options expire without value. Options
are forfeited if the employee leaves the Group before the options vest. Details of the share options
outstanding are as follows:
Weighted
average
exercise
price
£
0.132
0.260
0.056
0.142
0.148
Number of
share
options
27,285,515
3,000,000
(900,000)
(4,803,297)
24,582,218
15,638,386
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Forfeit during the period
Outstanding at the end of the period
Exercisable at the period end
The options outstanding at the period end were:
Grant date
26 November 2018
26 November 2018
26 November 2018
26 November 2018
26 November 2018
26 November 2018
05 December 2018
03 January 2019
24 January 2019
09 July 2019
Total options granted
Number of
shares
Exercise
price
under option per share
Vesting
period
Exercise
period
0.05 Up to 4 years Up to 7 years
0.06 Up to 4 years Up to 7 years
0.10 Up to 3 years Up to 4 years
0.13 Up to 4 years Up to 7 years
0.15 Up to 4 years Up to 7 years
0.14 Up to 4 years Up to 7 years
0.28 Up to 4 years Up to 7 years
0.23 Up to 3 years Up to 4 years
0.15 Up to 4 years Up to 7 years
0.26 Up to 4 years Up to 7 years
2,285,714
750,000
3,357,672
3,795,000
3,391,667
5,450,000
1,000,000
802,165
750,000
3,000,000
24,582,218
finnCap Group plc | Annual Report and Accounts 2019-20
76
The options outstanding at 31 March 2020 had a weighted average exercise price of £0.148, and a
weighted average remaining contractual life of 3.7 years. The aggregate of the estimated fair values
of the options granted on those dates is £669,248. The inputs into the Black-Scholes model are as
follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
2020
23.3
14.8
33.8%
Up to 7 years
1.7%
5.0%
Expected volatility was determined by calculating the historical volatility of a basket of listed
competitor companies’ share prices over the previous year.
The Group recognised total expenses of £110,037 (2019: £99,977) related to equity-settled share-
based payment transactions in the period.
Certain current and former employees of the Group, including key management personnel, have
provided the Employee Benefit Trust with 6,100,901 call options for shares in finnCap Group plc.
Separate, but related, options have been provided by the Employee Benefit Trust to other
employees of the Group. As these options will effectively be settled between these current and
former employees of the Group, they have not been included in the share options disclosed above.
24. IFRS 16 Leases
With the adoption of IFRS 16 – Leases, the distinction between operating and finance leases has
been removed resulting in the recognition of right of use assets and lease liabilities in the Statement
of Financial Position. Rental payments previously recognised as an operating lease expenses have
been replaced by depreciation of the right of use asset and interest charged on the lease liability.
The Group has applied the modified retrospective approach to the two existing property leases. As
such, assets and liabilities were created on 1 April 2019 and the comparative figures have not been
restated. The right of use asset and lease liability have been calculated as the net present value of
the remaining lease payments discounted at the incremental borrowing rate of 3.0%. As a result of
this change the Group has also derecognised a rent-free period accrual and adjusted retained
earnings brought forward upon creation of the IFRS 16 assets and liabilities.
The impact of this change on the financial statements is summarised below.
On the 1 April 2019, the Group recognised the right to use assets for the two properties whilst
creating corresponding lease liabilities. The right of use asset for 60 New Board Street was calculated
using the lease payments over the life of the lease. The asset for the 40 Portland Place property was
calculated based on the lease payments from the date of acquisition of Cavendish by the Group.
There adjustments have given rise to an adjustment to bought forward reserves.
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77
Non-current assets
Property, plant and equipment
Current liabilities
Accruals
Lease liability
Equity
Retained earnings
1 April
2019
£’000
IFRS 16
Adoption
£’000
31 March
2019
£’000
1,337
850
487
3,814
1,074
(154)
1,074
3,968
-
9,464
(70)
9,534
The rental payments previously recognised as an expense have been removed from the statement of
comprehensive income and replaced by depreciation and finance costs, as shown below.
Decrease in operating lease payments
Increase in depreciation
Operating profit
Finance Costs
Impact on profit before taxation
Year ended
31 March 2020
£’000
760
(600)
160
(24)
136
At the reporting date, the remaining undiscounted cashflows on the property leases are shown
below.
Undiscounted cashflows
Due within one year
Opening balance
Adoption of IFRS16
Finance Costs
Lease payments due
Closing balance
31 March
2020
£’000
415
31 March
2019
£’000
-
1,074
24
(683)
415
On 2 April, the Group took possession of its new lease of 5th Floor, 1 Bartholomew Close. The right
to use asset created by this lease will be recognised in the reporting period beginning on 2 April
2020 and is therefore not shown in these financial statements.
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78
25. Dividends
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
Dividends proposed and paid during the year
Dividends per share
1,218
0.78p
1,635
1.38p
Dividends are declared at the discretion of the Board.
26. Related party transactions
Transactions and balances between the Company and its subsidiaries, which are related parties,
have been eliminated on consolidation and, in accordance with IAS 24, are not discussed in this note.
The remuneration of key management personnel and their interests in the shares and options of the
Company are disclosed in the Remuneration Report on pages 29 to 32.
There are no outstanding balances with key management personnel at the balance sheet date.
27. Post balance sheet events
On 2 April, the Group took possession of its new lease of 5th Floor, 1 Bartholomew Close. On 10
June, the Group entered into a loan agreement for £1.8m to finance the fitout of these premises
with National Westminster Bank.
On 6th May, the company announced that the Takeover Panel had agreed that the finnCap Concert
Party, as previously described in the admission document dated 29 November 2018, comprised of
Sam Smith, Jon Moulton and Tom Hayward and their respective families and connected persons.
Consequently, the finnCap Concert Party holds, in aggregate, 39,630,492 Shares representing
23.31% of the issued share capital of the Company. Sam Smith and Tom Hayward also hold, in
aggregate, options over 2,631,866 Shares pursuant to the finnCap Group's various employee share
option plans. Should all of these options vest pursuant to their terms and be exercised in full
together, the holding of the finnCap Concert Party would increase to 42,262,358 Shares representing
24.48% of the Company's issued share capital as enlarged by that exercise and assuming no other
shares had been issued by finnCap. Since the finnCap Concert Party is now interested in shares
carrying less than 30% of the voting rights of the Company, members of the finnCap Concert Party
are able to make purchases of shares to increase their interest up to 29.99% without triggering the
requirement to make a mandatory offer to all shares pursuant to Rule 9 of the Takeover Code.
On 20 May, Richard Snow joined the firm as Chief Financial Officer, and was appointed to the Board.
At the same time, Vin Murria stepped off the board to pursue her many other interests.
finnCap Group plc | Annual Report and Accounts 2019-20
79
Other Information
Alternative performance measures
The below non-GAAP alternative performance measures have been used.
Adjusted earnings per share
Measure: Adjusted earnings per share is calculated excluding share-based payments, non-recurring
items, amortisation of intangible assets from the acquisition of Cavendish and includes a nominal tax
charge adjustment. As with earnings per share, the weighted average number of shares in issue
during the period excludes shares held by the Group's Employee Benefit Trust.
Use: Provides a consistent measure of the earnings performance of the core business activities.
Profit attributable to equity shareholders
Non-recurring items
Share based payments
Amortisation
Notional tax adjustment
Adjusted earnings
Basic shares
Earnings per share (basic)
Adjusted earnings per share (basic)
Year ended
31 March 2020
£’000
Period ended
31 March 2019
£’000
772
188
110
79
115
1,264
157,093,604
0.49
0.80
2,324
1,095
100
56
30
3,605
125,845,121
1.85
2.86
These measures are additional to GAAP measures to aid understand of these financial statements
and may not be the same as those used by other companies.
finnCap Group plc | Annual Report and Accounts 2019-20
80
Other information
Registered office for all entities
Nominated Adviser
1 Bartholomew Close
London
EC1A 7BL
Websites
www.finncap.com
www.cavendish.com
Registration numbers and company of
incorporation
finnCap Group plc – 11540126
finnCap Ltd – 06198898
Cavendish Corporate Finance LLP – OC333044
Cavendish Corporate Finance (UK) Ltd – 02234889
All companies are incorporated in England
Directors
Jon Moulton, Non-Executive Chairman
Baron Leigh of Hurley, Executive Deputy Chairman
Samantha Smith, Chief Executive Officer
Richard Snow, Chief Financial Officer
Tom Hayward, Chief Operating Officer, and
Managing Partner of Cavendish
Stuart Andrews, Managing Director, finnCap
Andy Hogarth, Senior Independent Non-Executive
Director
Barbara Firth, Independent Non-Executive Director
Company Secretary
Amy Ruprai
Grant Thornton UK LLP
30 Finsbury Square
London
EC2A 1AG
Broker
finnCap Ltd
1 Bartholomew Close
London
EC1A 7BL
Auditors
BDO LLP
150 Aldersgate Street
London
EC1A 4AB
Solicitors
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Registrar
Share Registrars Limited
17 West Street
Farnham
GU9 7DR
finnCap Group plc | Annual Report and Accounts 2019-20
81
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Y O U R A M B I T I O N D E L I V E R E D
www.finncap.com
Annual Report
2020
F O R T H E Y E A R E N D I N G 31S T M A R C H