ANNUAL
REPORT
2017
PAGE 2
K3 CAPITAL GROUP PLC
THE FINANCIAL YEAR ENDING MAY 2017 HAS SEEN THE SUCCESSFUL
IMPLEMENTATION OF OUR STRATEGY TO GROW OUR BRANDS
ORGANICALLY AND RAISE THE QUALITY AND VALUE OF CLIENTS ACROSS
THE GROUP
ANNUAL REPORT 2017 | CONTENTS
PAGE 3
TABLE OF
CONTENTS
STRATEGIC REPORT
OTHER REPORTS
FINANCIAL
04 KEY
HIGHLIGHTS
22 BOARD OF
DIRECTORS
32 FINANCIAL
STATEMENTS
06 CHAIRMAN’S
STATEMENT
24 DIRECTORS’
REPORT
79 NOTICE OF
MEETING
10 CHIEF EXECUTIVE
OFFICER’S REPORT
30 INDEPENDENT
AUDITOR’S REPORT
16 CHIEF FINANCIAL
OFFICER’S REPORT
PAGE 4
K3 CAPITAL GROUP PLC
BUSINESS
HIGHLIGHTS
NUMBER ONE ADVISOR
FOR UK DEAL VOLUME -
THOMSON REUTERS H1 2017
GROWTH ACROSS ALL
THREE BUSINESS STREAMS
NEW HEAD OFFICE DURING
FY17 ALLOWED FOR GROUP
EXPANSION
CONTINUED INVESTMENT IN
OUR PEOPLE
110
STAFF MAY 17
IMPROVED BOARD &
MANAGEMENT STRUCTURE
FOLLOWING FLOAT
WE REMAIN THE ONLY UK
ADVISOR TO OFFER FULLY
CONTINGENT LEGAL FEES
INCREASED VOLUME OF
CLIENTS ARE SECURED
FROM VALUATION PORTAL
CONTINUED SUCCESS IN
ATTRACTING BIGGER AND
BETTER CLIENTS
STRATEGIC REPORT | KEY HIGHLIGHTS
PAGE 5
FINANCIAL
HIGHLIGHTS
GROUP REVENUE
NORMALISED EBITDA†
NET CASH††
2016
2017
£8.6m
2016
£3.8m
2016 £0.9m
£10.8m
2017
£4.7m
2017
£3.4m
+26%
+25%
+285%
2017
41%
2016
38%
2017*
6.59P
2016**
6.17P
2017***
7.19P
2016**
2.08P
† Normalised EBITDA (as defined in Note 3 of the Financial Statements) is an adjusted measure that reflects the illustrative historical
cost savings of having Triskell LLP and KBS CF LLP personnel as employees of the Group, under the arrangements in force at the date
of Admission, compared to the consultancy fees paid to Triskell LLP and KBS CF LLP during each historical period. Also excludes all
exceptional costs associated with AIM listing.
†† Cash in bank less bank loans
* 2017 Earnings Per Share & Dividend Per Share are based on 42.2m issued Share Capital at 31 May 2017
** 2016 Earnings Per Share & Dividend Per Share are based on Normalised 40m issued Share Capital
*** 2017 Dividends Per Share includes proposed Final Dividend
EARNINGS PER SHAREEBITDA MARGINDIVIDEND PER SHARE PAGE 6
K3 CAPITAL GROUP PLC
IAN MATTIOLI MBE | CHAIRMAN
IANMATTIOLIMBE STRATEGIC REPORT | CHAIRMAN’S STATEMENT
PAGE 7
CHAIRMAN’S
STATEMENT
INTRODUCTION
It was a great pleasure to accept the Chairmanship of K3 Capital Group
plc (K3C / the Group) at the time of its AIM floatation on 11th April 2017,
a significant milestone in the history of K3C. I have seen first-hand the
professionalism and dedication of the Board and management and I
am delighted to be involved in contributing to the next chapter of the
Group’s growth as a public company.
K3C has a disruptive business model which sets it apart from other
professional services providers in the highly fragmented business and
company sales marketplace which has and should enable it to increase
market share and achieve sustainable organic growth.
The float represented the culmination of many years of successful year
on year growth driven by the refinement of its business model and its
people building expertise and knowledge. The skills and diligence of
the K3C team and its advisers enabled a most satisfactory IPO process.
The business is now at the beginning of a new chapter in its journey
and the K3C team not only understand the growth opportunity but also
understand the importance of controls, planning and governance which
are required as a listed entity which all points towards a very compelling
opportunity.
It is satisfying to report a year of robust growth that has seen revenues
increase by 26% to £10.8m (FY16 £8.6m) and normalised EBITDA (note
3) increase by 25%, to £4.7m (FY16 £3.8m). In addition to this, despite
costs relating to the IPO process, the Group are pleased to report a
profit after tax of £2.8m, an increase of 13% (FY16 £2.5m).
26% INCREASE
IN GROUP
REVENUE
25% INCREASE
IN NORMALISED
EBITDA
K3C has continued to invest in innovative and high impact marketing
throughout the financial year in order to enhance our high volume, direct
marketing approach to client acquisition. A strategy that yielded 15%
more client mandates in FY17. Non-contingent fee income across the
brands has increased by 16% to £5.1m in FY17 (FY16 £4.3m). This marketing
investment, combined with our floatation on AIM and continuing industry
recognition has raised our profile and brand awareness throughout the
UK.
16%
INCREASE IN NON-CONTINGENT
FEE INCOME (FY16 - FY17)
Not only have we enjoyed success with new client wins, our operations
department have also had a successful year with revenue from Group
transaction fees increasing by 37%. These departments have grown as
a direct result of investment into people, management and processes.
The Group remains focussed on delivering a ‘best in class’ service to all
clients in order to adhere to our strong client centric culture.
Once again, we find ourselves excelling in national league tables, with
Thomson Reuters naming us as the most active dealmaker in the Small
Cap Financial Advisory review for the first half of 2017. Such accolades are
testament to the dedication of the board and employees in developing a
successful service delivery model, that remains scalable for anticipated
future growth.
THE UK’S MOST ACTIVE DEALMAKER H1 2017
RANK
ADVISOR
DEALS
1=
1=
3
4
5
6
7
8
9
KBS Corporate
Rothschild & Co
RSM Corporate Finance
Grant Thornton
KPMG
PricewaterhouseCoopers
Deloitte
Clearwater International
Baker Tilly International
10=
IMAP
Source: Thomson Reuters Small Cap M&A Review - H1 2017
32
32
29
28
25
21
18
17
15
14
PAGE 8
K3 CAPITAL GROUP PLC
FINANCIALS
BOARD AND PEOPLE
Our fantastic results have only been made possible with the commitment
and dedication of my colleagues throughout the year. On behalf of the
Board, I would like to extend my sincerest thanks for their hard work in
growing the company to the position it is in today. A number have been
with the Company since the start of our journey and our recent listing is
a celebration of their success and determination to succeed.
Since the floatation I can announce
that we have strengthened our
board with the appointment of
Martin Robinson as a Non-Executive
Director. Martin brings a wealth of
both public and private company
experience with over
director
25 years in the financial services
industry.
As reported, revenues for the year stood at £10.8m, an increase of 26%
(FY16 £8.6m), and 2.3% above market expectations.
We are also pleased to report a normalised EBITDA† of £4.7m for the
financial year, an increase of 25% (FY16 £3.8m) and 4.7% above market
expectations with net cash at the year-end standing at £3.4m (+285%)
(FY16 £0.9m). The Group has also enjoyed an increase in Operating
Profit of 16% to £3.7m (FY16 £3.2m).
EBITDA MARGIN
EARNINGS PER SHARE
DIVIDEND PER SHARE
2017
41%
38%
2016
2017*
6.59P
6.17P
2016**
2017***
7.19P
2.08P
2016**
† Normalised EBITDA (as defined in Note 3 of the Financial Statements, along with a definition of
reported EBITDA) is an adjusted measure that reflects the illustrative historical cost savings of having
Triskell LLP and KBS CF LLP personnel as employees of the Group, under the arrangements in force at
the date of Admission, compared to the consultancy fees paid to Triskell LLP and KBS CF LLP during
each historical period. Also excludes all exceptional costs associated with AIM listing.
* 2017 Earnings Per Share & Dividend Per Share are based on 42.2m issued Share Capital at 31 May 2017
** 2016 Earnings Per Share & Dividend Per Share are based on Normalised 40m issued Share Capital
*** 2017 Dividends Per Share includes proposed Final Dividend
Group net assets at FY17 were £5.4m (FY16: £1.7m) with current net
assets standing at £1.5m (FY16: -£0.7m).
As a result, the Board is pleased to recommend the payment of a final
dividend of 4.4p per share, resulting in total dividends for FY17 of
£3.0m (FY16 £0.8m). The Board remains committed to a progressive
dividend policy, whilst maintaining an appropriate level of dividend
cover. If approved, the final dividend will be paid on 30 October 2017 to
shareholders on the register at the close of business on 22 September
2017.
RECOMMENDING A FINAL DIVIDEND
OF 4.4P PER SHARE
STRATEGIC REPORT | CHAIRMAN’S STATEMENT
PAGE 9
OUTLOOK
During FY18 we will continue to implement our strategy of organic
growth across each of our three trading brands.
This strategy will be assisted by our ongoing mantra of targeting and
winning ‘bigger and better’, higher value client mandates across the
Group.
We are developing our technologies and enhancing our data profiling in
order to improve operational efficiencies and both increase the volume
of, and more closely define our key market segments through increased
profiling of the data.
Most importantly, we will continue to invest in our people and their
training and development. We recognise that their experience and
dedication is the lifeblood of the business and ensuring that they have
all the tools necessary to service our clients will always be a fundamental
strategy of the Group.
Myself and the Board are confident that these strategies will assist us in
achieving our growth expectations over the coming months and years.
In summary, the Board is pleased with the FY17 performance and is
confident that the Group is well placed to continue the trend into FY18.
IAN MATTIOLI MBE
Chairman
8th September 2017
PAGE 10
K3 CAPITAL GROUP PLC
JOHN RIGBY | CHIEF EXECUTIVE OFFICER
JOHNRIGBY STRATEGIC REPORT | CHIEF EXECUTIVE OFFICER’S REPORT
PAGE 11
CHIEF EXECUTIVE
OFFICER’S REPORT
INTRODUCTION AND HIGHLIGHTS
I am very pleased to report on what has been a very busy and extremely
significant year in the development of K3 Capital Group plc.
Whilst the UK and wider economic and political landscapes have not
been without some challenges and unexpected happenings during the
period, the small cap M&A market has enjoyed a relatively stable and
progressive period with deal volumes above the ten-year average. This
was boosted by a significant upturn in inward investment as foreign
bidders looked to take advantage of favourable exchange rates and high
levels of private equity funding, which created strong activity from both
UK and overseas houses.
The financial year ending 31 May 2017 has seen the continuing and
successful implementation of our strategy to both grow our brands
organically and also raise the quality and value of clients across the
Group. I am pleased to report that our average transaction fee across
the group increased 40% to £44.3k in FY17 (FY16 £31.6k).
During the previous year we identified a new Head Office building of
12,000 sq ft which we could purpose fit to our own requirements. After
six months of building and fit out we relocated the businesses on 30
September 2016.
The building provides Grade A office accommodation, on-site parking,
high quality client meeting rooms and presentational facilities, the latest
technology and telecommunications infrastructure, catering facilities and
a staff gymnasium. Our new home gave us the opportunity to relocate
our corporate finance team from Manchester bringing all disciplines,
management and central functions under one roof.
Relocating the corporate finance team has enabled us to share knowledge
throughout the business including research, technical expertise, financial
modelling, negotiation skills and all aspects of deal execution which is
proving of great benefit across the Group.
The increased capacity created by the Head Office relocation has
allowed us to increase staff numbers to 110 in May 17 (from 73 in May 16),
attract and retain quality people and allows for additional capacity to
future proof the business.
I would like to thank my fellow directors and indeed all the staff across
the Group for their hard work and dedication over the last 12 months
in achieving double digit growth in both revenue up 26% to £10.8m
FY17 (FY16 £8.6m), and normalised EBITDA (note 3 of the Financial
Statements) up 25% to £4.7m FY17 (FY16 £3.8m). Despite the costs of
AIM floatation, the Group are still pleased to report an increase in Profit
Before Tax of 18% to £3.6m (FY16 £3.1m).
GROUP REVENUE
+26%
These achievements alongside the two very significant milestones of a
business relocation and an AIM floatation within the financial year speak
volumes for the strength, commitment and professionalism of the entire
team.
I am delighted to welcome Ian Mattioli, who joined the Board as Chairman
during our successful AIM admission in April and also Martin Robinson
who recently joined the Board as a Non-Executive Director. Both Ian and
Martin bring significant plc pedigree and we welcome their experience
and knowledge to the Board.
2016£8.6m2017£10.8m PAGE 12
K3 CAPITAL GROUP PLC
After 17 years with the Group, the last ten of which have been spent as
Chief Executive Officer, recent events make me exceptionally proud of
what we have achieved and our ability to reward several key members
who have helped to deliver this growth via our new share option scheme
is very pleasing (the performance period for which commenced on 1
June 2017). This scheme will no doubt help us to both retain and attract
key talent into the Group as we begin the next chapter of our exciting
story.
We are delighted to have retained our high standing within industry
league tables having been ranked by Thomson Reuters (small cap M&A
review by deal volume) as No 3 Advisor for the calendar year 2016 and
No 1 Advisor in the first six months of this calendar year (Jan to June
2017). Such accolades can only assist us as we continue to develop our
marketing efforts and raise brand awareness.
We remain innovative and forward thinking in our disruptive approach
to business and company sales. We are the only advisor in the UK to
offer fully contingent legal fees to all clients through our national legal
partnerships. We are driving new business generation through innovative
use of data, high impact marketing techniques and our creative digital
strategy. This is underpinned by our growing dataset of profiled seller
targets which increased by 20% in FY17 to over 1.7m, through enhanced
data profiling.
Our marketing spend has increased in line with our strategy to target
and mandate ‘bigger and better’, higher value clients. The costs of £0.9m
(8.5% of turnover) in FY17 compares with £0.6m (7.5% of turnover) in
FY16 and has driven new client wins across all three brands, many of
which will convert into transaction fee income as we move into FY18.
This has been complemented by increased investment into direct
marketing resulting in growth across all main KPIs (monthly appointments
increased to 189 in FY17 (FY16 177); monthly fee quotes increased from
to £204k in FY17 (FY16 £180k) and monthly new mandates increased to
57 in FY17 (FY16 51).
APPOINTMENTS
FEE QUOTES
NEW MANDATES
This has delivered a 22% increase in non-contingent fee income to £736k
in FY17 (FY16 £603k). We strongly believe that this investment in people
will underpin the expected growth in the sales efforts of the brand in
FY18.
OPERATIONS
Within the financial year we created a separate department to manage
commercial instructions under a new Knightsbridge Commercial brand.
This has improved the customer journey, driven additional completions,
which in turn has increased the income from this client base. In addition,
we have strengthened the retail delivery team and we are already starting
to see the benefit of this investment, delivering increased buyer activity,
viewings and offers for our clients’ businesses.
The growth across all main KPIs included monthly buyer enquires
increased to 2,965 in FY17 (FY16 2,658); monthly buyer meetings
increased to 200 in FY17 (FY16 160) and monthly offers increased to 35
in FY17 (FY16 24).
BUYER ENQUIRIES
BUYER MEETINGS
OFFERS
SALES
The Knightsbridge brand had traded positively across the year and
since our relocation has seen investment into growing our national sales
footprint. We have recruited a further two Regional Sales Managers,
increasing the team to six, with supporting investment into Head Office
sales staff.
This has delivered a 19% increase in transaction fee income to £532k
in FY17 (FY16 £446k) in and we are confident that the investment will
deliver further revenue growth in FY18.
201617720171892016£180k2017£204k20165120175720162,65820172,96520161602017200201624201735 STRATEGIC REPORT | CHIEF EXECUTIVE OFFICER’S REPORT
PAGE 13
OPERATIONS
As the sales function has delivered quality mandates and improved
client numbers we have continued to invest in improving the customer
journey. Additions to all the internal teams, that look after our clients’
needs, include document writers, researchers and deal executives.
This combined investment coupled with a stable market has delivered
some pleasing results across all major KPIs. These include, monthly Non
Disclosure Agreements (NDAs) received increase to 673 in FY17 (FY16
274); monthly buyer meetings increased to 86 in FY17 (FY16 45) and
monthly offers increased to 21 in FY17 (FY16 13).
NDAS
BUYER MEETINGS
OFFERS
Transaction Fee income has increased by 56% to £1.5m in FY17 (FY16
£1.0m) and we are confident that the investment will deliver further
revenue growth and profitability in FY18 as we continue to deliver our
‘bigger and better’ strategy.
I am also pleased to report that the final phase of our KBS Globe CRM
system is due to be in ‘test phase’ by Q4 2017 with a view to be operational
by Q1 2018. This is an exciting development which we believe will bring
operational efficiencies and an improved customer journey.
Further automation of the Buyer Matching Engine (BME) should see
a significant increase in the number of NDAs, meetings and offers
which we achieve for our client, ultimately resulting in further growth in
transaction fee income streams.
SALES
Since relocation to our new Head Office we have continued to invest in
both the national sales force and Head Office sales support functions.
We have recruited an additional regional corporate director in the South
East, taking the sales team to eight regional directors and recruited
additional support staff and management internally to drive further
productivity and growth as we move forward into FY18.
This has also been complemented by additional
investment into marketing and ongoing refinement
of the KBS Globe system resulting in growth
across all KPIs. In common with many similar
businesses we would typically expect a time lag
from any investment and it is pleasing to note
that we have seen some immediate returns in the
financial period, which gives a positive outlook for
the forthcoming financial year.
The investment has resulted in growth across all main KPIs (monthly
appointments increased to 239 in FY17 (FY16 238); monthly fee quotes
increased to £1.3m FY17 (FY16 £1.2m) and monthly new mandates
increased to 52 in FY17 (FY16 43).
APPOINTMENTS
FEE QUOTES
NEW MANDATES
As a result non-contingent fee income has increased by 15% to £4.3m in
FY17 (FY16 £3.7m)
201623820172392016£1.2m2017£1.3m20164320175220162742017673201645201786201613201721 PAGE 14
K3 CAPITAL GROUP PLC
OPERATIONS
Our ‘execution only’ model and corporate finance team have continued
to gain traction and deliver pleasing results across the financial year. Key
highlights across the brand are:-
ESTABLISHED GRADUATE ACADEMY
ACQUISITION OF TRISKELL LLP
TRADE AND ASSETS
INCREASE IN MANDATES OVER £2M
EBITDA
We now have a team of five highly experienced corporate finance
directors following pre-float reorganisation and the acquisition of the
trade and assets of Triskell LLP. The team have in-depth knowledge
across many sectors and over 100 years combined expertise in company
sales to PLCs, Private Equity, UK and Overseas buyers with transaction
values ranging from £10m - £200m.
During FY17 our strategy of targeting higher value clients has resulted in
us winning numerous mandates with profits typically ranging from £2m
to £10m, many of which will transact in FY18.
Our Graduate Academy was established during the year. This incubates
four undergraduates, during their work experience year, into our corporate
finance department. They work and train directly with our senior staff
and are involved in all aspects of a corporate finance transaction. This
includes research, buyer contact, document writing, client meetings,
data rooms and the completion process. At the end of their placement,
which is in effect a one-year interview process, we will look to offer at
least two of the interns a position with K3C, post degree to train as
corporate financiers and qualify as Chartered Accountants.
Our Academy Programme has been enhanced by
our new status as an ICAEW Authorised Training
Employer and this is also assisting with the recruitment
of both part qualified accountants and candidates
who wish to take accountancy qualifications whilst
training on the job.
The key focus of the business has been to attract and win larger and
more profitable mandates. Our ever-improving reputation, successful
case studies combined with our sector leading marketing strategy and
national sales footprint, has allowed us to significantly increase the
quality and fee value of the clients which we have both completed and
brought to market in FY17. This has resulted in a 33% increase in fee
income to £3.7m in FY17 (£2.8m in FY16).
33%
INCREASE IN TRANSACTION FEE
INCOME (FY16 - FY17)
Several of our key team members have been rewarded with their inclusion
in the Share Option scheme and we continue to look for talented
corporate finance staff as we build this income stream and drive further
value from our client base.
STRATEGIC REPORT | CHIEF EXECUTIVE OFFICER’S REPORT
PAGE 15
LOOKING AHEAD
Since 31 May 2017, we can report a strong start to the new financial year,
with trading comfortably in line with management expectations. We
have already completed two significant transactions, which have each
generated transaction fees in excess of £1m. We expect this performance,
together with the momentum gained throughout H2 FY17, to result in
sustainable profit growth in FY18.
Our strategy for FY18 continues on a very similar theme, targeting
organic growth across all three trading brands, together with our mantra
of winning higher quality, ‘bigger and better’, more profitable mandates.
Our people remain at the core of our business. We continually strive
to recruit high quality, experienced sales people and we invest a huge
amount of time in training them in our ways and to our own exacting
standards. Operationally we continue to focus on the recruitment and
training of high quality graduates who complement the senior and
experienced executive team.
We expect the KBS Globe business system to drive operational
efficiencies from our delivery teams and remain excited by the prospects
that this offers the Group. This will be complemented by the further
enhancement of our proprietary BME and the part automation of our
buyer targeting process. Both of these technological developments will
deliver strategic advantage and add value to both our clients and the
Group, as they drive increased buyer interest and help to realise our
clients’ expectations, ultimately delivering significant transaction fee
income to the Group.
We have developed a suite of high impact marketing collateral which is
proving to be very compelling in attracting entrepreneurial business and
company owners to our proposition. We aim to continue to develop new
and exciting marketing initiatives throughout FY18 to set K3C apart from
others within the professional services market.
During FY18 we are planning to refresh our various websites to assist
our ability to drive income through our digital platforms and we will
continue to improve our valuation portal which is delivering a growing
income stream as part of our wider direct marketing ‘engine’.
We are excited by the prospects of the coming financial year and
look forward to delivering sustainable organic growth and increasing
profitability across the Group.
JOHN S RIGBY
Chief Executive Officer
8 September 2017
PAGE 16
K3 CAPITAL GROUP PLC
ANDREW MELBOURNE | CHIEF FINANCIAL OFFICER
ANDREW MELBOURNE STRATEGIC REPORT | CHIEF FINANCIAL OFFICER’S REPORT
PAGE 17
CHIEF FINANCIAL
OFFICER’S REPORT
INCOME STATEMENT
I am pleased to report that Group turnover for FY17 amounted to £10.8m,
an increase of £2.2m (26%) compared to the prior year (FY16: £8.6m).
The bulk of turnover growth has come following continued investment
in our transactional departments, resulting in ever improving success at
completing deals, with transaction fee income derived from completions
increasing by 37% to £5.8m in FY17 (FY16 £4.2m).
As a whole, the business significantly benefited from the Head Office
relocation in September 16. With floor space being quadrupled,
management across the Group undertook a calculated recruitment drive,
seeing staff numbers rise to 110 on the payroll in May 17, a 51% increase in
the year (May 16 payroll: 73). This resulted in a strong H2 which delivered
many encouraging KPI results as discussed throughout this report.
FY16
FY17
51%
INCREASE
IN STAFF
NUMBERS
NON-CONTINGENT FEE INCOME
Reported Non-Contingent Fee Income grew by 16% to £5.1m, representing
a £0.8m increase on the previous year (FY16 £4.3m). These recognised
figures take into account the contractual nature of new client mandates,
and spread income throughout the life of a contract. It is also worth noting
the level of ‘banked’ Non-Contingent Fees, which equated to £5.3m in
FY17, an increase of £0.8m (FY16 £4.5m), demonstrating the underlying
performance of the business in terms of successfully generating new
mandates.
This increase has predominantly come from the further targeting and
winning of ‘bigger and better’ mandates across the Group. These
typically attract a higher level of Non-Contingent Fee due to the nature
of the services provided. We have also achieved an increased conversion
rate, with 25% of appointments converting to new client mandates in
FY17 (FY16 23%).
As part of the investment in staff, the Group
have added to the regional sales force in order
to increase our national footprint. There are
currently 14 regional sales directors (FY16 11),
increasing diary capacity by 27%. This increased
capacity allows for more client appointments
to generate
increasing
the portfolio of clients within operational
departments.
further mandates,
TRANSACTION FEE INCOME
27%
INCREASE
IN DIARY
CAPACITY
Group Transaction Fee Income increased by 37% in FY17, delivering £5.8m
(FY16 £4.2m), continuing the trend of Transaction Fee growth exceeding
Non-Contingent fee growth. This demonstrates that the driving factor in
our success is derived from our core activity of completing transactions.
In aiming to deliver a ‘best in class’ service to our clients, we have seen
the Group receive numerous industry awards and top league tables for
transaction volumes, which in turn gives new clients confidence that K3C
are one of the foremost business and company sales specialist in the UK.
Knightsbridge Transaction Fee income has seen the most modest growth
in the year with £0.5m turnover delivered in FY17, a 19% increase (FY16
£0.4m). Since the Head Office relocation, a new commercial delivery
team has been created to deliver a more focussed service into the larger
commercial clients. This continues the ‘bigger and better’ mantra seen
throughout the Group, and has delivered a number of completions
towards the end of FY17 and would expect to see continuing success of
this department throughout FY18.
Transaction Fees in KBS Corporate Finance have increased by 33%
to £3.7m in FY17 (FY16 £2.8m). This growth comes as a result of the
investments made into the ‘bigger and better’ mandate strategy,
strengthening the deal delivery team and ultimately delivering successful
outcomes for our clients.
During FY17, the Group made an acquisition of the trade and assets
of Triskell LLP (as disclosed in note 15 of the Financial Statements).
This resulted in senior resource being brought into the Group payroll,
bringing commission structures in line with the rest of the team at 10%
compared to previous rates up to 50%. KBS Corporate Finance ended
FY17 with five experienced directors, a head of buyer intelligence, a
senior researcher and five support staff, demonstrating the investment
in this brand during the year.
PAGE 18
K3 CAPITAL GROUP PLC
The largest percentage increase in Transaction Fee income came from
KBS Corporate achieving £1.5m in FY17, an increase of 56% (FY16 £1.0m).
This growth has been a direct result of both our ‘bigger and better’
mantra and the continued investment into service delivery. The Group
has invested in the number of deal executives, document writers and
researchers within the department. This additional resource has seen the
quality of client documentation significantly enhanced, a more focused
buyer targeting strategy and improved customer service standards
across the brand.
KEY PERFORMANCE INDICATORS (KPIs)
As reported in more detail within this report, the following KPIs are used
by management to monitor the groups income statement. FY17 has seen
a 26% increase in revenue compared to FY16, alongside a 39% increase
in the reported EBITDA, and 10% growth in the reported EBITDA margin.
26%
39%
10%
REVENUE
GROWTH
EBITDA
GROWTH
EBITDA MARGIN
GROWTH
In addition to the above, management utilise non-financial KPIs to monitor
underlying performance. In the year, the Group has seen increased non-
financial KPIs, resulting in 24% more NDAs received, 40% more buyer
meetings arranged and 51% more offers received.
24%
40%
51%
NDAs
MEETINGS
OFFERS
Expanded marketing activities in the year have seen costs growing
in proportion to 8.5% of turnover (FY16 7.5%). Total marketing spend
rose by 43% in FY17 to £0.9m (FY16 £0.6m), in line with our strategy
of targeting ‘bigger and better’, higher value mandates into K3C. We
continue to innovate across all marketing channels in order to drive
organic growth across all brands in FY18.
OVERHEAD COSTS
Overheads, excluding exceptional costs (note 11) have increased in FY17
by £0.7m to a total of £5.4m (FY16 £4.7m). The increases have been a
direct result of the Head Office move, which has seen a stepped increase
in fixed overheads, followed by the recruitment drive and subsequent
increased wage bill. Changes to commission structures have mitigated
some of this rise, with variable overheads (commission payments) being
reduced marginally to £0.9m (FY16 £1.0m), though when compared to
sales, the saving is more apparent with variable costs representing 17.6%
of turnover (FY16 23.0%).
£1.0m£0.9m
10% REDUCTION
IN VARIABLE
OVERHEADS
(FY16 - FY17)
EBITDA
As a result, reported EBITDA (note 3) has increased by £1.3m (39%)
to £4.5m in FY17 (FY16 £3.2m). This has seen the EBITDA margin also
increase to 41% (FY16 38%).
An area reported on during the floatation process was a normalised
EBITDA (note 3), which sought to adjust costs for historic commission
payments pre Triskell LLP trade and asset acquisition and reflect what
payments would have been made under the new employment terms.
This shows that when these non-recurring costs are removed, the Group
delivered a Normalised EBITDA of £4.7m in FY17 (FY16 £3.8m).
MARKETING COSTS
The Group has continued to deliver high quality and relevant marketing
campaigns through innovative and creative channels. The Group classify
all marketing costs to include sales and operational marketing spend.
25%
INCREASE IN NORMALISED
EBITDA (FY16 - FY17)
STRATEGIC REPORT | CHIEF FINANCIAL OFFICER’S REPORT
PAGE 19
EXCEPTIONAL COSTS
STATEMENT OF FINANCIAL POSITION
During FY17, the Group incurred significant costs related to the
successful AIM float, with a total of £0.8m of costs identified as being
directly attributable to the listing. This has seen £0.1m allocated to share
premium (note 11), with the balance of £0.7m being an exceptional cost
for the year (note 11).
TAXATION
The pre-exceptional effective tax rate is 19.1% which is marginally lower
than the prior year (FY16 19.5%) reflecting the reduction in the standard
rate of Corporation Tax. The exceptional costs are not subject to tax
relief.
PROFIT BEFORE TAX
Group Profit Before Tax has increased by 18% to £3.6m in FY17 (FY16
£3.1m). This is after exceptional costs of £0.7m bring incurred during
FY17 (FY16 £nil).
18%
INCREASE IN PROFIT BEFORE
TAX (FY16 - FY17)
EARNINGS PER SHARE
Based on the closing 42.2m shares in circulation, the basic earnings per
share was 6.6p for the year. This represents an increase of 7% on FY16
when using a normalised 40m shares in circulation that delivered a basic
earnings per share of 6.2p. The Earnings Per Share, based on a weighted
average measure, is disclosed in note 14.
7% INCREASE
IN EARNINGS
PER SHARE
CASH
The Group cash balances closed the year with £3.8m (FY16 £1.5m).
The Group is highly cash generative as Non-Contingent Fee income
is typically paid in advance of services, although is recognised in the
accounts over a period of time. In addition to this, the Group still enjoys
high levels of costs related directly to performance with 30.0% of all
costs being variable in FY17 (FY16 36.8%). This year has seen exceptional
cash movements in the year, notably £2m funds raised from the AIM
float, £1.1m paid for the acquisition of the trade and assets of Triskell
LLP, £0.2m of exceptional costs associated with AIM float, and £0.8m of
capital expenditure related to the Head Office move.
By exception, other points of note with regard to the statement of
financial position are:
• Goodwill increased by £1.1m in respect of the trade and asset
acquisition of Triskell LLP
• Goodwill relating to the 2007 acquisition adjusted to £2.8m under
IFRS transition (note 36).
•
Increase in office equipment due to relocation, anticipated to be an
exceptional spend (note 16).
• Trade receivables/payables are subject to the timing of transactions
and recognised income around the reporting date.
• Accruals have increased by £0.1m largely relating to a rent accrual due
to the rent free period being recognised over the lease, in addition to
increased audit fees, post floatation.
• Other debtors reduced significantly with repayment of Director loans
in the year (note 19).
• Other financial liabilities are now nil following settlement of preference
shares (note 23).
• Deferred income continues to grow in line with Non-Contingent Fee
income to underpin future turnover (note 25).
• Borrowings continue to reduce with two historic term loans, one due
to be repaid in April 18, and the remaining due to be repaid by May
19 (note 22).
PAGE 20
K3 CAPITAL GROUP PLC
RISKS AND UNCERTAINTIES
Management consider the following issues to be the principal risks
potentially affecting the business:
Risk:
Management consider there could be a risk to the Group growth strategy
should it fail to retain or attract effective personnel.
Mitigation:
Subsequent to the AIM floatation, key members of staff were granted
share options as part of a Share Option Scheme as an incentive to retain
talent within the Group. The performance period under this scheme
commenced 1 June 2017. In addition, K3 Capital Group pride ourselves on
employee wellbeing and, during the course of the year following Head
Office relocation, have invested in providing gym facilities, a discounted
onsite café and have coordinated a number of staff events to both retain
and attract the high-quality employees required.
Risk:
The AIM float process uncovered some weaknesses in contractual terms
with clients and suppliers alike.
Mitigation:
Management has worked closely with legal advisors and following
listing have introduced revised terms of business to all brands, and are
committed to ensuring all terms are refreshed in line with industry/
regulatory changes. The Group now also have agreed formal terms with
all key suppliers to ensure adequate protection with future trading.
Risk:
K3 Capital Group operates within a partially unregulated market place
and relies on a specific exemption from FCA in order to trade without
formal regulatory approval.
Mitigation:
Following listing, all new terms of engagement with clients make clear
that K3 are not regulated by the FCA and are only able to act on behalf of
share sales of 50% or above. Regional sales teams have been trained with
the FCA exemption and are aware K3C are not able to act on minority
share sales, in addition there are regular team meetings to review offers
to ensure that no existing transactions fall foul of the exemption. In
addition to this, both the FY17 audit and due diligence process have
tested hundreds of transactions and have found no evidence of any
transactions historically breaching this exemption.
Risk:
There is a large impending change in May 2018 in respect of data
protection. The General Data Protection Regulation (GDPR) (Regulation
(EU) 2016/679) is a regulation by which the European Parliament, the
Council of the European Union and the European Commission intend
to strengthen and unify data protection for all individuals within the
European Union and covers all firms that hold client data. These changes
may threaten the marketing capabilities of businesses who are not
prepared.
Mitigation:
Management has commissioned an independent data protection audit
for completion in September 2017 to ensure that the Group is fully
prepared for all changes and is equally compliant with current legislation.
SHAREHOLDERS’ DIVIDEND
The Board is recommending a final dividend of 4.4 pence per ordinary
share payable to shareholders on the register at 22 September 2017. The
final dividend, together with the combined pre listing interim dividends
based on the 42.2m closing shares of 2.8 pence, gives an indicative total
dividend of 7.2 pence per share for the year.
On admission, the Board outlined an intention to pay approximately 80%
of the Group’s post tax profits for the year weighted 1/3 on interim results
and 2/3 on final results. The 4.4p final dividend represents approximately
2/3 of 80% of the Group’s post tax profits for the year adjusted for the
costs associated with admission to AIM.
FINAL DIVIDEND OF 4.4P PER SHARE
Going forward, the Board expects to maintain a consistent dividend
policy in line with our intentions outlined on admission to AIM.
STRATEGIC REPORT | CHIEF FINANCIAL OFFICER’S REPORT
PAGE 21
SHARE PRICE
STRATEGIC REPORT
The K3 Capital Group plc share price closed the financial year at 120.5
pence, an increase of 27% since our successful AIM float on 11 April 2017,
at a placing price of 95.0 pence.
The Strategic Report on pages 4 to 21 was approved by the Board of
Directors on 1 March 2017 and signed on its behalf by:
125.0p
120.5p
ANDREW MELBOURNE FCMA
Chief Financial Officer
8 September 2017
95.0p
11/04
31/05
GOING CONCERN
After making enquiries, the directors have formed a judgement, at the
time of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, the
directors continue to adopt the going concern basis in preparing the
financial statements.
PAGE 22
K3 CAPITAL GROUP PLC
BOARD OF
DIRECTORS
IAN MATTIOLI MBE
CHAIRMAN
JOHN RIGBY
CHIEF EXECUTIVE OFFICER
ANDREW MELBOURNE FCMA
CHIEF FINANCIAL OFFICER
Ian has over 30 years’ experience in the financial
John joined K3C in 2000 following a career
Andrew joined the Group in 2012 following
services sector and co-founded the Mattioli
in commercial and corporate banking. John
ten years in various financial accounting roles
Woods Group in 1991 where he is the Chief
has over 17 years of operational, sales and
across various industries including media,
Executive Officer and remains responsible
commercial management experience within
leisure and property management. Andrew
for the vision and operational management
the sector and developed the national sales
possesses strong financial, strategy and
of the group. Ian has been awarded an MBE
infrastructure of the Group. John became
commercial management skills including HR,
and also won the London Stock Exchange AIM
Chief Executive Officer of the Group in 2010
IT and special projects. Andrew is a fellow
Entrepreneur of the Year award in 2007.
and has been responsible for driving growth
of the Chartered Institute of Management
and integral in the development of the low
Accountants and has an MSC in Strategic
Ian was appointed on the 11 April 2017 upon
cost, process driven delivery platform.
Financial Management. Andrew was voted
AIM floatation and is a member of the Audit,
Remuneration and Nominations Committees.
North West Young Finance Director of the Year
at the North West Finance Awards in 2016.
OTHER REPORTS | BOARD OF DIRECTORS
PAGE 23
TONY FORD (FCA)
EXECUTIVE VICE CHAIRMAN
STUART LEES (FCA)
EXECUTIVE DIRECTOR
MARTIN ROBINSON (FCA)
NON-EXECUTIVE DIRECTOR
Tony is a qualified chartered accountant and
Stuart
joined K3C as a Non-Executive
Martin is a highly experienced private and
experienced corporate financier. He founded
Director in September 2015 to assist with the
public company director with over 25 years’
K3C and led its investment in the Group in
development of the strategic direction of the
experience in financial services. He currently
2007. He was subsequently responsible for the
Group. Stuart is a highly respected corporate
serves on the board of a number of the
overall strategic direction of the Group and,
financier and was previously Managing
subsidiary companies of AIM-quoted Brooks
previously as Chairman, he oversaw a period
Director of Altium and head of corporate
Macdonald Group Plc, the integrated wealth
of strong growth and internal development.
finance at Arthur Andersen in the UK. Stuart
management group. Martin is a Fellow of the
Tony possesses
significant directorship
has a wealth of business experience and held
Institute of Chartered Accountants in England
experience across a broad range of industries
the position of Group CEO of Latium Holdings
and Wales and was previously on the AIM
including corporate finance, financial services,
Limited
from 2004
to 2009 acquiring
Advisory Committee as a founder member,
technology and business services.
Ultraframe plc, Spectus Systems, Kestrel
overseeing the development and regulation of
Building Products and the successful disposal
the market in 1995. Martin was appointed to
of Everest Home Improvements. Stuart moved
the K3 Capital Group board on 17 July 2017
to an executive role in July 2017 where he has
and is a member of the Audit, Remuneration
an active involvement in deal execution of
and Nominations Committees.
larger corporate finance assignments.
PAGE 24
K3 CAPITAL GROUP PLC
DIRECTORS’
REPORT
The directors’ present their report and the audited financial statements
for the year ended 31 May 2017.
EMPLOYEES
The directors who served the company during the year and to the date
of this report were as follows:
Non-Executive Directors
I J Mattioli (appointed 11 April 2017)
W M Robinson (appointed 17 July 2017)
Both of the above are members of the Audit, Remuneration and
Nominations Committees of the Board.
Executive Directors
A J Ford
J Rigby
A R Melbourne
S Lees
M C Clancy (resigned 11 April 2017)
S Daniels (resigned 11 April 2017)
FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
Business risks and uncertainties are included within the Chief Financial
Officer’s Report on pages 16 to 21 and financial risks are set out in notes
4 and 28 to the financial statements.
At K3 Capital Group, we recognise that we need to attract, motivate
and develop good quality people. As a company, we aim to become one
of the employers of choice within the local area and to be recognised
as an organisation where you can work in a challenging and rewarding
environment whilst having fun, developing a career and growing with
the business.
As a company, we value the following:
• Honesty and integrity
• Energy and enthusiasm
• A strong desire to satisfy our customers
• New and innovative ideas
• Commitment and loyalty
• Common sense and intelligence
• Ambitious people who strive to succeed in whatever they do
We aim to provide a professional, friendly and safe work environment
where our colleagues can develop as individuals and as part of the
winning team, sharing the rewards of our success. The Group’s policy
is to recruit and promote on the basis of aptitude and ability without
discrimination of any kind. Applications for employment by disabled
people are always fully considered bearing in mind the qualification and
abilities of the applicants. In the event of employees becoming disabled,
every effort is made to ensure their continued employment.
DIRECTORS’ REMUNERATION
POLITICAL DONATIONS
Directors’ remuneration payable in year ended 31 May 2017:
There were no political donations in either FY17 or FY16.
£000
Salary
& Fees
Benefits
in Kind
Bonus payable
in respect of
FY17
Pension
Contributions
Total
FY17
Total
FY16
SHARE CAPITAL
Ian Mattioli
Tony Ford
John Rigby
Andrew Melbourne
Stuart Lees
10
66
124
61
60
-
-
2
8
-
-
60
121
35
-
Total
321
10
216
-
-
-
-
-
-
10
126
247
104
60
-
60
184
81
41
547
366
During the course of the year, K3 Capital Group plc undertook several
share capital restructures in order to equalise ordinary shareholdings
and enable the transformation from a Limited company to a PLC. All of
these changes are detailed within note 27 of the financial statements. In
addition to this, a total of £1.5m of redeemable preference shares were
purchased in the year from company cash balances.
OTHER REPORTS | DIRECTORS’ REPORT
PAGE 25
SHARE OPTIONS
CORPORATE GOVERNANCE
The directors consider that an important part of the Group’s remuneration
policy should include equity incentives through the grant of share options
to directors and employees. Accordingly, the Company has adopted an
Option Plan. On admission, a total of 6 employees were awarded options
at the admission price subject to performance criteria commencing 1
June 2017, totalling 2.5% of the enlarged share capital.
Prior to the Admission to AIM, it was the intention of directors to open
a Save As You Earn share scheme, however, a subsequent investigation
of employee appetite and administration costs delivered the conclusion
it was not appropriate at this time to open the scheme. This will be
reviewed periodically.
It is the intention of the directors to grant further options to current
and future employees of the Group. Following Admission, the maximum
number of Ordinary Shares which will be subject to options granted to
directors and employees under the Option Plan, ShareSave Plan and any
other employee share plan adopted by the Company will not exceed 10
per cent. of the Company’s issued share capital from time to time in any
rolling 10 year period.
HEALTH, SAFETY AND THE ENVIRONMENT
The directors consider the health, safety and environmental protection
aspects of the Company to be of great importance, in addition to the
prevention of any personal injury, avoidance of damage to health and the
protection of the environment, which are important business and social
responsibilities. Management practices within the Group are designed to
ensure so far as is reasonably practicable, the health, safety and welfare
at work of employees, contractors and visitors and the implementation
of environmentally aware and friendly policies.
AUDITORS
During the period, BDO LLP were appointed as statutory auditor. In
accordance with Section 489 of the Companies Act 2006, a resolution
will be proposed at the Annual General Meeting that BDO LLP will be
reappointed auditors.
The Board is committed to achieving high standards of corporate
governance, integrity and business ethics. Under the AIM Rules the
Company is not required to comply and has not complied with the
provisions of the new edition of UK Corporate Governance Code issued
by the Financial Reporting Council in 2014 (the Code) but recognises
the importance of effective corporate governance procedures relevant
to its size and nature of operations, as described below.
THE BOARD
The Board comprises a Chairman, four Executive Directors and one
Non-Executive Director. Their names and biographical details are set out
on pages 22 and 23. The Board considers the Non-Executive Director,
WM Robinson, to be independent. The posts of Chairman and Chief
Executive are held by different individuals. The Chairman is responsible
for the Board and the Chief Executive for the operating performance of
the Group.
The Board is scheduled to meet four times each year, with additional
meetings called if required. The Board’s main responsibilities are to
agree Group strategy, approve annual budgets, review management
performance, financial results, board appointments and dividend
policy. A comprehensive board pack is distributed to all directors prior
to each scheduled board meeting. Directors are able, if necessary,
to take independent professional advice, at the Group’s expense,
in the furtherance of their duties. The Board has delegated specific
responsibilities to Audit, Remuneration, and Nomination Committees.
REMUNERATION COMMITTEE
The Remuneration Committee is chaired by I T Mattioli, its other member
is W M Robinson. The Remuneration Committee reviews the performance
of the Executive Directors and makes recommendations to the Board
on matters relating to their remuneration and terms of employment.
The Remuneration Committee also makes recommendations to the
Board on proposals for the granting of share options and other equity
incentives pursuant to any share option scheme or equity incentive
scheme in operation from time to time. The remuneration and terms
and conditions of appointment of the Non-executive Directors of the
Company are set by the Board. Details of directors’ remuneration are set
out in the directors’ report on page 24.
PAGE 26
K3 CAPITAL GROUP PLC
AT K3 CAPITAL GROUP, WE RECOGNISE THAT WE NEED
TO ATTRACT, MOTIVATE AND DEVELOP GOOD QUALITY
PEOPLE
OTHER REPORTS | DIRECTORS’ REPORT
PAGE 27
AUDIT COMMITTEE
The Audit Committee is chaired by W M Robinson, its other member is
I T Mattioli.
The Audit Committee has primary responsibility for monitoring the
quality of internal controls and ensuring that the financial performance
of the Company is properly measured and reported on. It receives and
reviews reports from the Company’s management and auditors relating
to the interim and annual accounts and the accounting and internal
control systems in use throughout the Company. The Audit Committee
meets at least twice times a year and has unrestricted access to the
Company’s auditors.
NOMINATIONS COMMITTEE
The Nominations Committee is chaired by I T Mattioli, its other member
is W M Robinson. The Nominations Committee assists the Board in
discharging its responsibilities relating to the composition of the Board,
performance of Board members, induction of new directors, appointment
of committee members and succession planning for senior management.
The Nominations committee is responsible for evaluating the balance
of skills, knowledge, diversity and experience on the Board, the size,
structure and composition of the Board, retirements and appointments
of additional and replacement directors and makes appropriate
recommendations to the Board on such matters. The Nominations
Committee prepares a description of the role and capabilities required for
a particular appointment. The Nominations Committee meets formally
at least twice a year and otherwise as required.
SUMMARY OF DIRECTORS INTERESTS IN
THE COMPANY
Director
Class of Share
Shareholding at
end of Year
Class of Share
Shareholding at
start of Year
Ian Mattioli
Tony Ford
Ordinary
Ordinary
596,316 -
-
8,442,105 Preferred A Ordinary
1,000,000
B Preference
Ordinary A
Ordinary B
Ordinary F
Ordinary V
John Rigby
Ordinary
Andrew Melbourne
Ordinary
Stuart Lees
Ordinary
8,442,105 Ordinary C
675,854 Ordinary G
800,000 Ordinary H
500,000
200,000
200,000
26,786
1
357,143
17,857
1
SCHEME INTERESTS AND OUTSTANDING
SHARE AWARDS
Director
Description
Options Granted
during the Year
Outstanding interest at
31 May 2017
Andrew Melbourne
LTIP Option
217,020
217,020
The above Share Option scheme has a performance period which
commenced on 1 June 2017.
PAGE 28
K3 CAPITAL GROUP PLC
AUDITORS
During the period BDO LLP were appointed as statutory auditor.
In accordance with Section 489 of the Companies Act 2006 a resolution
will be proposed at the Annual General Meeting that BDO LLP be
reappointed auditors.
Each of the persons who is a director at the date of approval of this
report confirms that:
• so far as they are aware, there is no relevant audit information of
•
which the group and the company’s auditor is unaware; and
they have taken all steps that they ought to have taken as a director
to make themselves aware of any relevant audit information and to
establish that the group and the company’s auditor is aware of that
information.
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the strategic report and
the directors’ 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.
in accordance with
Under that law the directors have elected to prepare the financial
International Financial Reporting
statements
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 and
profit or loss of the Company and Group for that period.
The directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies
trading securities on the Alternative Investment Market. In preparing
these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with IFRSs as
adopted by the European Union;
• 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 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.
By order of the Board
ANDREW MELBOURNE FCMA
Company Secretary
8 September 2017
OTHER REPORTS | DIRECTORS’ REPORT
PAGE 29
OUR ADVISORS
Registered Office:
KBS House
5 Springfield Court
Summerfield Road
Bolton
BL3 2NT
Registered Number:
06102618
Website Address:
www.k3capitalgroupplc.com
OUR ADVISERS
Auditors:
BDO LLP
3 Hardman Street,
Spinningfields
Manchester
M3 3AT
Accountants:
Beever & Struthers
St. George’s House
215 - 219 Chester Road
Manchester
M15 4JE
Solicitors:
TLT LLP
3 Hardman Square
Manchester
M3 3EB
Nominated Advisor and Broker:
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ
Registrars:
Computershare Investor Services PLC
The Pavillions
Bridgwater Road
Bristol
BS99 6ZZ
PAGE 30
K3 CAPITAL GROUP PLC
INDEPENDENT
AUDITOR’S REPORT
We have audited the financial statements of K3 Capital Group Plc for
the year ended 31 May 2017 which comprise the consolidated statement
of comprehensive income, the consolidated and company statement of
financial position, the consolidated and company statement of changes
in equity, the consolidated and company statement of cash flows and the
related notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in
accordance with chapter 3 of part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our audit work, for
this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF
DIRECTORS AND AUDITOR
As explained more fully in the directors’ responsibilities statement, the
directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Financial
Reporting Councils (FRC’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL
STATEMENTS
A description of the scope of an audit of financial statements is provided
on the FRC’s website at www.frc.org.uk/auditscopeukprivate
OPINION ON FINANCIAL STATEMENTS
In our opinion:
•
the financial statements give a true and fair view of the state of the
group’s and of the parent company’s affairs as at 31 May 2017 and of
the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
•
the parent company financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union and
as applied in accordance with the provisions of the Companies Act
2006; and
•
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
OPINION ON OTHER MATTER 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 directors’ report have been prepared in
accordance with applicable legal requirements.
OTHER REPORTS | INDEPENDENT AUDITOR’S REPORT
PAGE 31
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 where the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
the parent company financial statements are not in agreement with
the accounting records and returns; or
• certain disclosures of directors remuneration specified by law are not
made; or
• we have not received all the information and explanations we require
for our audit.
Julien Rye (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
8 September 2017
BDO LLP is a limited Liability Partnership registered in England and
Wales (with registered Number: OC305127)
PAGE 32
K3 CAPITAL GROUP PLC
FINANCIAL
STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2017
Year Ended 31 May 2017
Revenue
Distribution Costs
Administration expenses
EBITDA
Depreciation of tangible assets
Amortisation of intangible assets
AIM listing fees
Operating Profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit and total comprehensive income for the financial year
Attributable to the owners of the company
Earnings per share:
Restated for IFRS
(see note 36)
2016
£’000
8,551
(645)
(4,713)
3,215
(9)
(13)
-
3,193
2
(127)
3,068
(599)
2,469
2,469
2017
£’000
10,816
(913)
(6,200)
4,463
(47)
(9)
(704)
3,703
2
(100)
3,605
(823)
2,782
2,782
Note
5
11
7
12
13
14
Basic and diluted EPS - based on the weighted average measure
£0.27
£1.31
All the activities of the group are from continuing operations
FINANCIAL | FINANCIAL STATEMENTS
PAGE 33
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 MAY 2017
31 May 2017
Restated for IFRS (see Note 36)
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Other financial assets
Other assets
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Current tax liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to owners of the Company:
Issued capital and share premium
Capital redemption reserve
Retained Earnings
TOTAL EQUITY
Note
15
16
26
18
19
20
21
22
23
24
25
22
26
27
2017
£000
3,978
146
-
4,124
105
-
286
3,801
4,192
8,316
1,053
220
-
313
1,137
2,723
211
32
243
2,966
5,350
2,413
-
2,937
5,350
2016
£000
2,853
31
-
2,884
48
1,094
440
1,531
3,113
5,997
785
224
1,500
495
825
3,829
431
4
435
4,264
1,732
10
1,500
222
1,732
As at 1 June 2015
£000
2,847
13
120
2,980
41
17
99
971
1,128
4,108
671
221
-
253
724
1,869
655
-
655
2,524
1,584
1,500
1,500
(1,416)
1,584
These financial statements were
approved by the board of directors
and authorised for issue on 8
September 2017, and are signed on
behalf of the board by:
ANDREW MELBOURNE FCMA
Company Secretary
8 September 2017
PAGE 34
K3 CAPITAL GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 MAY 2017
31 May 2017
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Trade and other receivables
Other financial assets
Other assets
Cash at bank and in hand
Total current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to owners of the Company:
Issued capital and share premium
Capital redemption reserve
Retained Earnings
TOTAL EQUITY
2017
2016
As at 1 June
2015
Note
£000
£000
£000
15
16
17
18
19
20
21
22
23
22
27
1,100
-
5,597
6,697
18
-
19
25
62
6,759
482
220
-
702
211
211
913
5,846
2,413
-
3,433
5,846
-
12
5,597
5,609
-
1,675
-
11
1,686
7,295
2,256
224
1,500
3,980
431
431
4,411
2,884
10
1,500
1,374
2,884
-
-
5,597
5,597
-
-
-
8
8
5,605
709
221
-
930
655
655
1,585
4,020
1,500
1,500
1,020
4,020
An income statement is not provided for the parent company as permitted by s408 of the Companies Act 2006.
The profit for the financial year of the parent company was £2,126,000 (2016: £1,185,000)
These financial statements were
approved by the board of directors
and authorised for issue on 8
September 2017, and are signed on
behalf of the board by:
ANDREW MELBOURNE FCMA
Company Secretary
8 September 2017
FINANCIAL | FINANCIAL STATEMENTS
PAGE 35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2017
Year Ended 31 May 2017
Share capital
Balance at 1 June 2015 (restated for IFRS)
Profit and total comprehensive income for the year
Transactions with owners
Issue of ordinary share captial
Cancellation of subscribed capital
- 2,499,750,000 Ordinary A
- 2,499,750,000 Ordinary B
Reclassification of preference shares from equity to liabilities
Dividends
Balance at 31 May 2016 (restated for IFRS)
Profit and total comprehensive income for the year
Transactions with owners
Issue of ordinary share capital
Bonus issue of ordinary share capital
Redemption of preference shares
Cancellation of subscribed capital
AIM listing fees
Dividends
As at 31 May 2017
£000
1,500
-
-
(250)
(250)
(1,000)
-
-
-
22
400
-
-
-
-
422
Share
premium
£000
-
-
10
-
-
-
-
10
-
2,078
-
-
(10)
(87)
-
1,991
Capital
redemption
reserve
£000
1,500
-
-
-
-
-
-
1,500
-
-
-
1,500
(3,000)
-
-
-
Retained
earnings
£000
(1,416)
2, 469
-
-
-
-
(831)
222
2,782
-
(400)
(1,500)
3,010
-
(1,177)
2,937
Total
£000
1,584
2,469
10
(250)
(250)
(1,000)
(831)
1,732
2,782
2,100
-
-
-
(87)
(1,177)
5,350
PAGE 36
K3 CAPITAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2017
Year Ended 31 May 2017
Share capital
Balance at 1 June 2015
Profit and total comprehensive income for the year
Transactions with owners:
Issue of ordinary share captial
Cancellation of subscribed capital
- 2,499,750,000 Ordinary A
- 2,499,750,000 Ordinary B
Reclassification of preference shares from equity to liabilities
Dividends
At 31 May 2016
Profit and total comprehensive income for the year
Transactions with owners:
Issue of ordinary share capital
Bonus issue of ordinary share capital
Redemption of preference shares
Cancellation of subscribed capital
AIM listing fees
Dividends
At 31 May 2017
£000
1,500
-
-
(250)
(250)
(1000)
-
-
-
22
400
-
-
-
-
422
Share
premium
£000
-
-
10
-
-
-
-
10
-
2,078
-
-
(10)
(87)
-
1,991
Capital
redemption
reserve
Retained
earnings
£000
1,500
-
-
-
-
-
-
1,500
-
-
-
1,500
(3,000)
-
-
-
£000
1,020
1,185
-
-
-
-
(831)
(1,374)
2,126
-
(400)
(1,500)
3,010
-
(1,177)
3,433
Total
£000
4,020
1,185
10
(250)
(250)
(1,000)
(831)
2,884
2,126
2,100
-
-
-
(87)
(1,177)
5,846
FINANCIAL | FINANCIAL STATEMENTS
PAGE 37
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2017
Year Ended 31 May 2017
Restated for IFRS
Cash flows from operating activities
Profit for the financial year
Adjustments for:
Depreciation and amortisation
Finance income
Finance costs
Income tax expense
Movement in working capital:
(Increase) / decrease in trade and other receivables
Decrease / (increase) in other assets
Increase in trade and other payables
Increase in deferred revenue
Cash generated from operations
FInance costs paid
Finance income received
Income taxes paid
Net cash from operating activities
Investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of intangible assets arising from business combinations
Amounts advanced to related parties
Repayments by related parties
Net Cash used in investing activities
Financing activities
Proceeds from issue of shares
Payments of share issue costs
Redemption of preference shares
Repayment fo bank borrowings
Dividends paid to owners of the Company
Dividends paid on preference shares classed as liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and equivalents at end of year
Note
7
12
13
18
21
25
16
15
15
19
19
27
23
22
30
30
2017
£000
2,782
56
(2)
100
823
3,759
(57)
154
266
312
4,434
(25)
2
(977)
3,434
(164)
3
34
(1,100)
(600)
1,694
(201)
2,100
(87)
(1,500)
(224)
(1,177)
(75)
(963)
2,270
1,531
3,801
2016
£000
2,469
22
(2)
127
599
3,215
62
(341)
33
101
3,070
(27)
2
(233)
2,812
(27)
-
(19)
-
(1,077)
-
(1,123)
10
-
-
(21)
(831)
(100)
(1,142)
560
971
1,531
PAGE 38
K3 CAPITAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2017
Year Ended 31 May 2017
Cash flows from operating activities
Profit for the financial year
Adjustments for:
Income from shares in group undertakings
Finance costs
Movement in working capital:
Increase in trade and other receivables
Increase in other assets
Increase in trade and other payables
Cash generated from operations
FInance costs paid
Net cash generated from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of intangible assets arising from business combinations
Amounts advanced to related parties
Settlement of amounts due from related parties
Net Cash used in investing activities
Financing activities
Proceeds from issue of shares
Payments of share issue costs
Redemption of preference shares
Repayment of bank borrowings
Dividends paid to owners of the Company
Dividends paid on preference shares classed as liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and equivalents at end of year
Note
18
20
21
15
19
19/21
27
23
22
30
30
2017
£000
2,126
(3,050)
94
(18)
(19)
2,063
(19)
1,177
-
(1,100)
(600)
1,500
(200)
2,100
(87)
(1,500)
(224)
(1,177)
(75)
(963)
14
11
25
2016
£000
1,185
(1,300)
126
-
-
2,847
(26)
2,832
(12)
-
(1,675)
-
(1,687)
10
-
-
(221)
(831)
(100)
(1,142)
3
8
11
FINANCIAL | FINANCIAL STATEMENTS
PAGE 39
NOTES TO THE FINANCIAL
STATEMENTS
PAGE 40
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017
1.
General Information
K3 Capital Group PLC (formerly K3 Capital Group Limited) is incorporated in England and Wales under the Companies Act, listed in the
Alternative Investment Market, with the registered number 06102618. The address of the registered office is KBS House, 5 Springfield Court,
Summerfield Road, Bolton, BL3 2NT.
The principal activity K3 Capital Group PLC to act as Business Sales Specialists.
2.
Presentation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively ‘’IFRSs’’) issued by the International Accounting Standards Board (‘’IASB’’) as adopted by the
European Union (‘’adopted IFRSs’’).
The financial statements have been presented in Pounds Sterling (£, GBP) as this is the currency of the primary economic environment that
the Company operates in.
3.
Accounting Policies
The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently
applied to all periods presented, and in preparing an opening IFRS consolidated statement of financial position and company statement of
financial position at 1 June 2015 for the purposes of transition to adopted IFRSs.
Basis of Accounting
The financial statements have been prepared on the historical cost basis except as stated. Historical cost is generally based on the fair value of
consideration given in exchange for goods and services.
Basis of consolidation
The group financial statements consolidate, those of the company and its subsidiaries (together referred to as the “group”).
Subsidiary undertakings acquired are included using the acquisition method of accounting. Under this method the consolidated statement of
comprehensive income, consolidated statement of financial position and consolidated statement of cash flows included the results and cash
flows of subsidiaries from the date of acquisition and to the date of sale outside the group in the case of disposals of subsidiaries.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 41
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control.
Transition to adopted IFRSs
The Group transitioned from UK GAAP to adopted IFRSs as at 1 June 2015 and consequently has applied IFRS 1, adjusted amounts reported
previously in financial statements prepared in accordance with generally accepted accounting practice in the UK (UK GAAP). These financial
statements for the year ended 31 May 2017 are the first the Group has prepared in accordance with adopted IFRSs. For first time adoption of
International Financial Reporting Standards, an explanation of how the transition to adopted IFRSs has affected the reported financial position,
financial performance and cash flows of the group is provided in note 36.
New standards, amendments to and interpretations to published standards not yet effective
There were no new standards, interpretations or amendments effective for the first time for periods beginning on or after 1 January 2016 that
had a significant effect on the Group’s financial statements.
As at 31 May 2017, the following Standards and Interpretations which have not been applied in this financial information were in issue but not
yet effective (and in some cases had not yet been adopted by the EU):
IFRS 9, Financial instruments
IFRS 15, Revenue from contracts with customers
IFRS 16, Leases
Disclosure Initiative: Amendments to IAS 7
Clarifications to IFRS 15 revenue from Contracts with Customers
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
Annual Improvements to IFRSs (2014-2016 Cycle)
The directors are currently considering the potential impact of adoption of these standards and interpretations in future periods on the
consolidated financial statements of the Group.
In respect of the above, the directors are specifically reviewing the requirements of IFRS 15, which will become effective for the 31 May 2019
year end. In particular an assessment is ongoing around specific elements within the standard’s guidance relating to recognition of revenue
at a point in time versus over time, client payments received in advance of services being performed, and contingent pricing. Similarly, the
directors are currently reviewing the impact of IFRS 16 and IFRS 9 which will become effective for the 31 May 2020 year end. At this point
it is not practicable for the directors to provide a reasonable estimate of the effect of IFRS 9 as their detailed review of this standard is
ongoing. Were IFRS 16 effective for the current year end, a lease asset and liability of £0.5m would be recognised on the balance sheet in
respect of operating leases committed to. Annual lease costs would no longer be incurred, replaced by interest costs on the lease liability and
depreciation costs on the lease asset.
PAGE 42
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Going Concern
The financial statements have been prepared on the basis that the Group will continue as a going concern.
After making enquiries, the Directors consider that the Group has adequate resources and committed borrowing facilities to continue
in operational existence for the foreseeable future. Consequently, they have adopted the going concern basis in preparing the financial
statements.
Revenue Recognition
Revenue comprises revenue recognised by the Group in respect of services supplied during the year, exclusive of Value Added Tax.
Revenue from the rendering of services is measured by reference to the stage of completion of the service transaction at the end of the
reporting period provided that the outcome can be reliably estimated. When the outcome cannot be reliably estimated, revenue is recognised
only to the extent that expenses recognised are recoverable. Further detail on revenue recognition policies is provided in the critical
accounting estimates section in Note 4.
Employee Benefits
i.
ii.
Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the associated
services are rendered by employees of the Group.
Defined Contribution plans
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those
of the Group. The annual contributions are charged to the Statement of Comprehensive Income. The Group also contributes to the
personal pension plans of the Directors at the Group’s discretion.
Operating Profit
Operating profit is stated after all expenses, including those considered to be exceptions, but before finance income or expenses. Distribution
costs relate to marketing expenses. All other operational costs are classified as administrative expenses.
EBITDA
EBITBA is utilised as a key performance indication for the group and is calculated utilising profit before tax, adjusted for finance income and
costs, amortisation and depreciation on non-current assets. It is also adjusted for AIM listing fees incurred in the year ended 31 May 2017.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 43
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2017
Normalised EDITDA reflects the illustrative historical cost savings of having Triskell and KBS CF personnel as employees of the group, under
the arrangements in force during the period covered by the financial statements compared by the consultancy fees paid to Triskell and KBS
CF during each period. Further details of the arrangements with Triskell and KBS CF are set out in note 29.
Year Ended 31 May 2017
EBITDA
Transaction fees paid to Triskell LLP
Remuneration due under employment terms
Normalised EBITDA
Operating Lease Agreements
2017
£000
4,463
416
(172)
4,707
2016
£000
3,216
920
(383)
3,753
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against
profits on a straight line basis over the full period of the lease. Any lease incentives are spread on a straight line basis over the full period of the
lease.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition
related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance
with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
Goodwill is measured as the excess of the aggregate of the consideration transferred and the amount recognised for the non-controlling
interest over the fair value of the identifiable net assets acquired and liabilities assumed.
After initial recognition, goodwill is not amortised and is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to a cash generating unit that is
expected to benefit from the combination. For each period covered in these financial statements the Group has one cash generating unit,
related to Business Sales.
Other Intangible Assets
The group classifies website costs as an intangible asset. Such intangible assets are initially recorded at cost, and are subsequently stated at
cost less any accumulated amortisation and impairment losses.
PAGE 44
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as
follows:
Website costs
-
33% straight line
If there is an indication that there has been a significant change in amortisation rate, useful life or residual value of an intangible asset, the
amortisation is revised prospectively to reflect the new estimates.
Property, Plant and Equipment
Property, plant and equipment is initially recorded at cost, and subsequently stated at cost less any accumulated depreciation and impairment
losses.
Depreciation is calculated so as to write off the cost or valuation of an asset, less its residual value, over the useful economic life of that asset
as follows:
Long leasehold property
Fixtures and fittings
Equipment
-
-
-
Over the lease term
33% straight line
33% straight line
Investments
Fixed asset investments are initially recorded at cost, and subsequently stated at cost less any accumulated impairment losses.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another
entity.
Financial assets
Initial recognition and measurement
The Group’s financial assets include cash and cash equivalents, trade and other receivables that arise from the business operations, as well as
non-derivative other financial assets.
Cash and cash equivalents comprise deposits with banks and bank and cash balances, subject to insignificant risk of changes in value. All
other financial assets are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less provision
for impairment. Interest is recognised by applying the effective interest method, except for short term receivables when the recognition of
interest would be immaterial.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 45
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity
instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities and equity components
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual
arrangement and in conjunction with the application of IFRS. Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
a)
b)
they include no contractual obligations upon the Company (or Group as the case may be) 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
(or Group); and
where the instruments 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’s
exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified
takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share
premium account exclude amounts in relation to these shares.
Preference shares that carry a mandatory dividend that represents a market rate of interest at the issue date are presented in other financial
liabilities. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis
using the effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
PAGE 46
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if there is a currently
enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the
liabilities simultaneously.
Impairment of assets
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset
is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash
flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and
present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss is recognised in profit or
loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For assets that
have indefinite lives, the recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and risk specific to the asset. For the purpose of impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets
or groups of assets. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating
units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount.
Impairment losses are recognised in the profit or loss. Impairment losses recognised in respect of cash generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (or
group of units) on a pro rata basis.
Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of
FINANCIAL | FINANCIAL STATEMENTS
PAGE 47
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are not taxable or tax deductible.
The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the financial period.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax.
Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date
Share Capital
Ordinary shares are recorded at nominal value and proceeds received in excess of nominal value of shares issued, if any, are accounted for as
share premium. Both ordinary shares and share premium are classified as equity. Costs incurred directly to the issue of shares are accounted
for as a deduction from share premium, otherwise they are charged to the Statement of Comprehensive Income.
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.
Events After the Balance Sheet Date
Post period-end events that provide additional information about the Group’s position at the reporting period end are reflected in the financial
statements. Post period-end events that are not adjusting events are disclosed in the notes when material.
Related Parties
Parties are considered to be related if one party has the ability (directly or indirectly) to control the other party or exercise significant influence
over the other party in making financial and operating decisions. Parties are also considered related if they are subject to common control or
common significant influence. Related parties may be individuals or corporate entities.
PAGE 48
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Contingent Liabilities and Contingent Assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation
arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of
obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so
that the outflow is probable, it will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-
occurrence of one or more uncertain events not wholly within the control of the Company. Contingent assets are not recognised but are
disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
Exceptional Items
Exceptional items are disclosed separately in the financial statements in order to provide further understanding of the financial performance of
the entity. They are material items of income or expense that have been shown separately because of their nature or amount.
4.
Critical Accounting Estimates and Sources of Estimation Uncertainty
In applying the accounting policies, the directors may at times require to make critical accounting judgements, estimates and assumptions
about the carrying amount of assets and liabilities. These estimates and assumptions, when made, are based on historical experience and
other factors that the directors considers are relevant.
The key estimates and assumptions concerning the future and other key sources of estimation uncertainty at the end of the financial year,
that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
reviewed are as stated below
Revenue recognition
Revenue is recognised by the Group in respect of services supplied to clients of the Group in presenting the clients’ sales opportunity to
market, sourcing potential acquirers and project managing transactions to completion. In relation to the services provided, a non-contingent
fee (“retainer fee”) is typically paid by clients upon commencement of a contract with the Group, which is deferred and recognised as
revenue over the period in which the initially specified services are provided. The directors are required to estimate the period over which
these services are to be provided and accordingly recognise revenue based on that estimate. This leads to the deferral of revenue at period
ends, which the directors assess for reasonableness based on the stage of completion of services at that point in time. A contingent fee
(“transaction fee”) is payable upon the completion of a transaction. This fee is typically a percentage of the transaction value and therefore
FINANCIAL | FINANCIAL STATEMENTS
PAGE 49
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
varies by client. Revenue on the transaction fee element of the contract is only recognised when the outcome of the transaction can be
reliably estimated by management, which is on completion of the transaction.
Linked to the non-contingent fee at the commencement of a contract is a commission fee payable to employees for sourcing the contract. The
commission costs are similarly deferred and recognised over the same period as the revenue. Commission costs deferred are accounted for
within prepayments.
Assessing Goodwill for Potential Impairment
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the assets have
been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-
generating unit and a suitable discount rate in order to calculate present value (see note 15).
Classification of Leases
The directors are required to make a judgement on the appropriate classification of lease agreements entered into. These judgements depend
on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis.
5.
Revenue
The Group’s revenue arises from the provision of services in fulfilling the principal activities. An analysis of revenue by subsidiary company is
shown below:
Revenue
Year Ended 31 May 2017
KBS Corporate Sales Limited
KBS Corporate FInance Limited
Knightsbridge Business Sales Limited
2017
£000
5,816
3,732
1,268
10,816
A further breakdown of revenue by type is shown below:
Revenue
Year Ended 31 May 2017
Non-contingent fees
Transaction fees
2017
£000
5,056
5,760
10,816
2016
£000
4,714
2,788
1,049
8,551
2016
£000
4,345
4,206
8,551
PAGE 50
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
6.
Segment Information
The Group has 3 operating segments based on the subsidiaries identified above, but one reporting segment due to the nature of services
provided across the whole Group being the same, being business sales derived solely from the UK. The Group’s revenues, costs, assets,
liabilities and cash flows are therefore totally attributable to this reporting segment.
Internal management reports are reviewed by the directors on a monthly basis, including revenue information by subsidiary. Such revenue
information alone does not constitute sufficient information upon which to base resource allocation decisions.
Performance of the segment is assessed based on a number of financial and non-financial KPI’s as well as on EBITDA.
The Group is not reliant on a major customer or group of customers.
As the Group only has one reportable segment, all segmented information is provided by the consolidated income statement, the consolidated
statement of financial position, the consolidated statement of changes in equity and the consolidated statement of cash flows.
7.
Operating Profit
Operating profit or loss is stated after charging:
Year Ended 31 May 2017
Operating profit or loss is stated after charging:
Amortisation of intangibles - website costs
Depreciation of owned assets
Auditor remuneration
Impairment loss on trade receivables
Operating lease charge
2017
£000
9
47
143
-
124
2016
£000
13
9
14
10
108
FINANCIAL | FINANCIAL STATEMENTS
PAGE 51
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
8.
Auditors Remuneration
The analysis of the Auditor’s remuneration is as follows:
Employee Benefit Expense
Year Ended 31 May 2017
Beever & Struthers
2017
£000
2016
£000
Fees payable to the Company’s Auditor and their associates
for the audit of the Company’s annual accounts
BDO LLP
Fees payable to the Company’s Auditor and their associates
for the audit of the Company’s annual accounts
Fees payable to the Company’s Auditor and their associates
for other services to the Group
– the audit of the Company’s accounts to 30 November 2016
for the purposes of the AIM listing
– non-audit services: IPO reporting accountant
services
Total Auditors Remuneration
-
30
15
98
143
14
-
-
-
14
No non-audit services were provided on a contingent fee basis.
In 2017, fees payable to the Auditor for other services are in respect of work required for the Group to complete its IPO. BDO were selected to
undertake this work after consideration of the impact this may have on their independence, which it was concluded would not be impinged
by undertaking the work. Fees of this type are ad hoc in nature and occur in respect of major events. Any such further occurrence will require
Audit Committee approval.
PAGE 52
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
9.
Employee Benefit Expense
The average number of persons employed by the Group during the year, including the directors, amounted to:
Year Ended 31 May 2017
2017
2016
Management
Sales
Marketing / Administration
No.
8
41
46
95
No.
6
33
36
75
The aggregate payroll costs incurred during the year by the Group, relating to the above, were:
Year Ended 31 May 2017
Wages and salaries
Social security costs
Other pension costs
2017
£000
3,321
291
14
3,626
2016
£000
2,600
256
9
2,865
The aggregate payroll costs incurred during the year by the Company, relating to the above, were:
Year Ended 31 May 2017
Wages and salaries
Bonuses
Social security costs
2017
£000
80
165
33
278
2016
£000
-
-
-
-
The average number of persons emplyed by the Company during the year, including Directors amounted to:
Year Ended 31 May 2017
Management
2017
No.
1
2016
No.
-
FINANCIAL | FINANCIAL STATEMENTS
PAGE 53
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
10.
Directors’ and Key Management Remuneration
Group
The directors aggregate remuneration in respect of qualifying services was:
Year Ended 31 May 2017
Group
Fees
Wages and salaries
Bonuses
Social securtity costs
Pension contributions
2017
£000
73
247
216
60
1
597
Remuneration of highest paid director in respect of qualifying services:
Year Ended 31 May 2017
Group
Wages and salaries
Bonuses
Social securtity costs
2017
£000
124
121
33
278
2016
£000
-
323
205
66
1
595
2016
£000
100
82
22
204
Company
The directors aggregate remuneration in respect of qualifying services was:
2016
Year Ended 31 May 2017
2017
£000
£000
Wages and salaries
Bonuses
Social securtity costs
80
165
33
278
Remuneration of highest paid director in respect of qualifying services:
Year Ended 31 May 2017
Wages and salaries
Bonuses
Social securtity costs
2017
£000
31
80
15
126
The directors are considered to be key management personnel.
-
-
-
-
2016
£000
-
-
-
-
PAGE 54
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
11.
Exceptional Items
Year Ended 31 May 2017
Group
Company
AIM listing fees
2017
£000
704
2016
£000
-
2017
£000
704
2016
£000
-
Exceptional items incurred in the year are in relation to costs of converting the Company from a Limited Company to a PLC and the
subsequent admission of the company to trading on AIM during the year. Total costs incurred were £791,000, with £87,000 charged to
share premium as being directly related to newly issued shares.
12.
Finance costs
Year Ended 31 May 2017
Interest on bank loans
Dividends paid on shares classed as debt
2017
£000
25
75
100
2016
£000
27
100
127
The dividend above represents the 10 per cent coupon on the Preferred A Ordinary shares. B
Preference share dividends were waived by the shareholder.
13.
Tax on Profit
Major components of tax expense
Year Ended 31 May 2017
Current tax:
UK current tax expense
Adjustments in respect of prior periods
Total current tax
Deferred tax:
Origination and reversal of timing differences
Impact of change in tax rate
Adjustments in respect of prior periods
Tax on profit
2017
£000
795
-
795
28
-
-
823
2016
£000
499
(24)
475
4
5
115
599
FINANCIAL | FINANCIAL STATEMENTS
PAGE 55
FINANCIAL
STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Reconciliation of tax expense
The tax assessed on the profit on ordinary activities for the year is higher than (2016: lower than) the standard rate of corporation tax in the
UK of 19.83% (2016: 20%).
Reconciliation of tax expense
Year Ended 31 May 2017
Profit on ordinary activities before taxation
Profit on ordinary activities by rate of tax
Adjustment to tax charge in respect of prior periods
Effect of expenses not deductable for tax purposes
Effect of capital allowances and depreciation
Effect of different UK tax rates on some earnings
Utilisation of tax losses
Effect of research and development relief
Tax on profit
Changes Affecting Future Tax Rates
2017
£000
3,605
715
-
123
1
-
2
(18)
823
2016
£000
3,068
614
(24)
28
-
5
(4)
(20)
599
In the Budget on 8 July 2015, the Chancellor announced additional planned reductions to 19 per cent, with effect from 1 April 2017, and to 18
per cent, with effect from 1 April 2020. This rate was subsequently revised downwards to 17 per cent, with effect from 1 April 2020 in the 2016
Budget. These changes were substantially enacted on 26 October 2015 and 6 September 2016 respectively.
14.
Earnings per Share
Basic earnings per share amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Year Ended 31 May 2017
Net profit attributable to equity holders of the Company
Initial weighted average of ordinary shares
Basic earnings per share
2017
£000
2,782
10,305,651
26.99p
2016
£000
2,469
1,879,978
131.33p
There are no share options in effect during the current prior years. As such there is no dilution of
earnings per share.
PAGE 56
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
15.
Intangible Assets
Group
Year Ended 31 May 2017
Cost
At 1 June 2015
Additions
At 31 May 2016
Additions
Acquisitions through business combinations
Disposals
At 31 May 2017
Amortisation
At 1 June 2015
Charge for the year
At 31 May 2016
Charge for the year
Amortisation on disposals
At 31 May 2017
Carrying amount
At 31 May 2017
At 31 May 2016
At 31 May 2015
Company
Year Ended 31 May 2017
Cost
At 1 June 2015, 31 May 2016
Acquisitions through business combinations
At 31 May 2017
Amortisation
At 1 June 2015, 31 May 2016 and 31 May 2017
Carrying amount
At 31 May 2017
At 31 May 2016
At 31 May 2015
Total
£000
4,769
19
4,788
34
1,100
(20)
5,902
1,922
13
1,935
9
(20)
1,924
3,978
2,853
2,847
Goodwill
Website Costs
£000
57
19
76
34
-
(20)
90
37
13
50
9
(20)
39
51
26
20
£000
4,712
-
4,712
-
1,100
-
5,812
1,885
-
1,885
-
-
1,885
3,927
2,827
2,827
Goodwill
£000
1,100
1,100
-
1,100
-
-
FINANCIAL | FINANCIAL STATEMENTS
PAGE 57
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
15.
Intangible Assets (continued)
£2,827,000 of goodwill relates to the cash generating unit that arose from the business combination that took place when the Group acquired
KBS Corporate Sales Limited in the year ended 31 May 2008 and £1,100,000 relates to the business combination when the company acquired
the trade and assets of Triskell LLP in the year ended 31 May 2017 (see note 32).
As explained in the accounting policies, the Group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired. The recoverable amounts of the goodwill are determined by value-in-use calculations. The key assumptions for
the value-in-use calculation are those regarding discount rates and growth rates as well as expected changes to costs and the forecast level of
demand from clients wishing to engage in the group’s services. For the purposes of the impairment review, the goodwill acquired in the year
has been subsumed by the cash generating unit that is already reviewed by the directors in assessing future cash flows and monitoring the
existing goodwill carrying value.
The key assumptions for the value-in-use calculation are shown below:
Year Ended 31 May 2017
2017
2016
Period on which management approved forecasts are based
5 years
5 years
Growth rate applied beyond approved forecast period
Pre-tax discount rate
2%
15%
2%
15%
Management has estimated the discount rate taking account of the way the market would assess specific risks inherent within the Group’s
estimated future cash-flows.
The growth rates used in the value in use calculation reflect the long term economic growth rates in the UK.
No impairment was identified and furthermore, a reasonably possible change in the assumptions applied would not result in any impairment.
PAGE 58
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
16.
Tangible Assets
Group
Year Ended 31 May 2017
Cost
At 1 June 2015
Additions
At 31 May 2016
Additions
Disposals
At 31 May 2017
Depreciation
At 1 June 2015
Charge for the year
At 31 May 2016
Charge for the year
Disposals
At 31 May 2017
Carrying amount
At 31 May 2017
At 31 May 2016
At 31 May 2015
Company
Cost
At 1 June 2016
Transferred to KBS Corporate Sales Limited
At May 2017
Depreciation
At 1 June 2015, 31 May 2016 and 31 May 2017
Carrying amount
At 31 May 2017
At 31 May 2016
At 31 May 2015
Long Lease-
hold property
Fixtures and
fittings
Equipment
£000
£000
£000
-
12
12
-
-
12
-
-
-
3
-
3
9
12
-
75
1
76
98
(76)
98
74
1
75
21
(76)
20
78
1
1
206
14
220
66
(188)
98
194
8
202
23
(186)
39
59
18
12
Total
£000
281
27
308
164
(264)
208
268
9
277
47
(262)
62
146
31
13
Long leasehold
property
£000
12
(12)
-
-
-
12
-
FINANCIAL | FINANCIAL STATEMENTS
PAGE 59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
17.
Investments
The group has no investments.
Company
Year Ended 31 May 2017
Cost
At 1 Jun 2015, 31 May 2016 and 31 May 2017
Impairment
At 1 Jun 2015, 31 May 2016 and 31 May 2017
Carrying amount
At 1 Jun 2015, 31 May 2016 and 31 May 2017
Shares in group
undertakings
£000
5,597
-
5,597
Subsidiaries, associates and other investments
Details of the investments in which the parent company has an interest in are as follows:
Year Ended 31 May 2017
Class of Share
Percentage of shares
held
Subsidiary undertakings
KBS Corporate Sales Limited
KBS Corporate Finance Limited
Knightsbridge Business Sales Limited
Ordinary shares
Ordinary shares
Ordinary shares
100
100
100
The Registered Office address of the subsidiaries is:
KBS House
5 Springfield Court
Summerfield Road
Bolton
England
BL3 2NT
PAGE 60
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
18.
Trade and Other receivables
Year Ended 31 May 2017
Group
Company
Trade receivables
Allowance for doubtful debts
Other receivables
2017
£000
105
-
105
-
105
As at 1 June
2015
£000
24
-
24
17
41
2016
£000
48
(10)
38
10
48
2017
£000
-
-
-
18
18
As at 1 June
2015
£000
2016
£000
-
-
-
-
-
-
-
-
-
-
The carrying amount of trade and other receivables approximates to their fair value.
19.
Other Financial Assets
Year Ended 31 May 2017
Group
Company
Amounts owed by group undertakings
Amounts owed by related parties
Directors loan amounts
2017
£000
-
-
-
-
As at 1 June
2015
£000
-
17
-
17
2016
£000
-
194
900
1,094
2017
£000
-
-
-
-
As at 1 June
2015
£000
-
-
-
-
2016
£000
775
-
900
1,675
The amounts owed by related parties are stated at the undiscounted amount as the amounts are repayable on demand. No interest is charged
on the loans.
The directors’ loan account consists of amounts due from certain directors which are stated at the undiscounted amount. This was repaid by
23 February 2017. No interest was charged on the loan.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
20.
Other assets
Year Ended 31 May 2017
Prepayments and accrued income
Group
Company
As at 1 June
As at 1 June
2017
£000
286
2016
£000
440
2015
£000
99
2017
£000
19
2016
£000
-
2015
£000
-
There are no other assets which are past due but not impaired in any period.
21.
Trade and Other Payables
Year Ended 31 May 2017
Group
Company
Trade payables
Payments received on account
Amounts due to to group undertakings
Amounts due to related parties
Accruals
Other taxation and social security
Other payables
As at 1 June
As at 1 June
2017
£000
173
-
-
-
267
608
5
1,053
2016
£000
151
11
-
13
168
419
23
785
2015
£000
92
46
-
-
107
384
42
671
2017
£000
21
-
314
-
25
122
-
482
2016
£000
-
-
2,256
-
-
-
-
2015
£000
--
-
707
-
2
-
-
2,256
709
The carrying amount of trade and other payables approximates to their fair value due to their short term nature.
The amounts due group undertakings/related parties are stated at the undiscounted amount as they are repayable on demand. No interest is
paid/payable and the loans are not secured.
PAGE 62
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
22.
Borrowings
Year Ended 31 May 2017
Bank loans
Current
Non-current
Group
Company
As at 1 June
As at 1 June
2017
£000
431
220
211
431
2016
£000
655
224
431
655
2015
£000
876
221
655
876
2017
£000
431
220
211
431
2016
£000
655
224
431
655
2015
£000
876
221
655
876
The bank loans repayable in monthly instalments and are secured by fixed and floating charge over the assets of the companies within the
group. Interest is charged at a combination of 3% above LIBOR and 3% above Base Rate.
23.
Other Financial Liabilities
Year Ended 31 May 2017
Group
Company
Preferred A Ordinary shares
B Preference shares
2017
£000
-
-
-
As at 1 June
2015
£000
-
-
-
2016
£000
1,000
500
1,500
2017
£000
-
-
-
As at 1 June
2015
£000
-
-
-
2016
£000
1,000
500
1,500
FINANCIAL | FINANCIAL STATEMENTS
PAGE 63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
24.
Current Tax Liabilitites
Year Ended 31 May 2017
Corporation tax payable
25.
Deferred Revenue
Year Ended 31 May 2017
Arising from client contracts
Group
Company
As at 1 June
As at 1 June
2016
£000
495
2015
£000
253
2017
£000
-
2016
£000
-
2015
£000
-
Group
Company
As at 1 June
As at 1 June
2016
£000
825
2015
£000
724
2017
£000
-
2016
£000
-
2015
£000
-
2017
£000
313
2017
£000
1,137
The deferred revenue arises from the non-contingent contracts provided to certain customers in respect of providing business marketing and
research to these clients. Revenue is recognised and deferred in accordance with services provided within contract terms.
26.
Deferred Tax (Liability) / Asset
Year Ended 31 May 2017
Asset at 1 June 2015
Charge for the year
Liability at 31 May 2016
Charge for the year
Liability at 31 May 2017
Group
£000
120
(124)
(4)
(28)
(32)
Company
£000
-
-
-
-
-
PAGE 64
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Deferred Tax
The deferred tax asset at 1 June 2015 was solely related to the revenue recognition policy adjustment arising on the Group’s transition to FRS
102, a policy consistent under adopted IFRS. Deferred tax liabilities thereafter arose on the timing difference between the carrying values of
the certain the Group’s assets for financial reporting purposes and for income tax purposes. These will be released to the income statement as
the fair value of the related assets are depreciated or amortised.
Unrecognised Deferred Tax
Year Ended 31 May 2017
Tax losses
27.
Share Capital
Alloted, called up and fully paid
Year Ended 31 May 2017
Group
Amounts presented in equity
Ordinary A shares
Ordinary B shares
Preference A Ordinary shares
Ordinary C shares
Ordinary D shares
Ordinary E shares
Ordinary F shares
Ordinary G shares
Ordinary H shares
Ordinary V shares
Ordinary shares
Group
Company
As at 1 June
As at 1 June
2017
£000
-
2016
£000
9
2015
£000
5
2017
£000
-
2016
£000
-
2015
£000
-
2017
2016
2015
No.
£000
No.
£000
No.
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42,210,526
42,210,526
422
422
250,000
250,000
-
357,143
89,286
44,643
26,786
17,857
1
1
-
1,035,717
-
-
-
-
-
-
-
-
-
-
-
-
250,000
250,000
1,000,000
535,715
-
-
-
-
-
-
-
250
250
1,000
-
-
-
-
-
-
-
-
2,035,715
1,500
FINANCIAL | FINANCIAL STATEMENTS
PAGE 65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
27.
Share Capital (continued)
Year Ended 31 May 2017
Group
Amounts presented in liabilities:
Preference A Ordinary shares
B Preference shares
2017
2016
2015
No.
£000
No.
£000
No.
£000
-
-
-
-
-
-
1,000,000
500,000
1,500,000
1,000
500
1,500
-
-
-
-
-
-
On 5 April 2016 a share reorganisation was undertaken as follows:
(1) The Ordinary A and Ordinary B shares of £1 each in issue were subdivided into 2,500,000,000 shares in each category of £0.0001 each.
(2) A new class of share, Ordinary V of £1 each, was created. One share was issued at a premium of £9,999.
(3) 2,499,750,000 Ordinary A and Ordinary B shares of £0.0001 each were cancelled.
(4) A new class of share, B Preference of £1 each, was created. 500,000 shares were issued at par.
(5) 178,572 Ordinary C shares of £0.0001 each, owned by certain shareholders, were re-designated as 89,286 Ordinary D shares of £0.0001
each, 44,643 Ordinary E shares of £0.0001 each, 26,786 Ordinary F shares of £0.0001 each and 17,857 Ordinary G shares of £0.0001 each.
(6) 44,643 Ordinary E shares of £0.0001 each were issued at par.
(7) 53,572 Ordinary F shares of £0.0001 each were issued at par.
(8) 71,428 Ordinary G shares of £0.0001 each were issued at par.
(9) The Ordinary E shares of £0.0001 each were consolidated and subdivided and reclassified into 44,643 Ordinary E shares of £0.0002 each.
(10) The Ordinary F shares of £0.0001 each were consolidated and subdivided and reclassified into 26,786 Ordinary F shares of £0.0003 each.
(11) The Ordinary G shares of £0.0001 each were consolidated and subdivided and reclassified into 17,857 Ordinary G shares of £0.0005 each.
(12) A further new class of share, Ordinary H of £9.00 each, was created. One share was issued at par.
The H Ordinary share carried the right to attend, speak and vote at any general meeting of the Company and on a poll to cast 5 per cent. of
the votes attached to the equity shares.
The V Ordinary share carried the right to attend, speak and vote at any general meeting of the Company and on a poll to cast such number of
votes as would when aggregated with the voting rights attributable to all the other equity shares held by that shareholder and his privileged
relations entitle that shareholder and his privileged relations to together to cast 50.1 per cent. of the votes attached to the shares in the
Company from time to time at all general meetings.
The holders of the Ordinary A, B, C, D, E, F and G shares carried the right to attend, speak and vote at any general meeting of the Company
and on a poll to cast between them the remaining balance of the voting rights attached to the shares in the Company pro rata to their
shareholdings.
PAGE 66
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
The Preferred A Ordinary shares and B Preference shares did not carry any right to vote at any general meeting, unless any amount of
dividend on the respective shares is outstanding. The Preferred A Ordinary shares were entitled to a cumulative dividend of 10 per cent. per
annum of the amount paid up on the shares. The B Preference shares were entitled to a cumulative dividend of 5 per cent. per annum of the
amount paid up on the shares. Prior to the share reorganisation on 5 April 2016 such dividend rights were not in place on the Preferred A
Ordinary shares – following the share reorganisation the Preferred A Ordinary shares were treated as liabilities rather than equity in line with
IAS32.
In relation to the cancellation of the 2,499,750,000 Ordinary A and Ordinary B shares of £0.0001 each, no transfer was made from
distributable profits to capital redemption reserve because the repurchase of shares was financed partly by a new issues of shares and hence
the transfer required was reduced by the proceeds of the new issue and further reduced by the extent that the company could make a
permissible capital payment. After reducing the amount to be transferred by these two amounts, the amount required to be transferred was
immaterial.
Year ended 31 May 2017
On 23 February 2017, Anthony Ford repaid his directors loan of £1.5 million and the Group redeemed all the Preferred A Ordinary shares and
the B Preference shares at par. In relation to the redemption of these shares, a transfer to capital redemption reserve from retained earnings
occurred as required by Companies Act 2006.
On 8 March 2017 a bonus issue was carried out: 57 C shares of £0.0001 each, 14 D shares of £0.0001 each, 7 E shares of £0.0002 each, 4 F
shares of £0.0003 each and 3 G shares of £0.0005 each were allotted.
On 8 March 2017 all ordinary shares were consolidated and subdivided such that the nominal values were all equalised at £0.01.
On 8 March 2017 a further bonus issue was carried out: 9,459,539 A shares of £0.01 each, 9,459,539 B shares of £0.01 each, 13,513,631C shares
of £0.01 each, 3,378,417 D shares of £0.01 each, 1,688,762 E shares of £0.01 each, 1,012,989 F shares of £0.01 each, 674,961 G shares of £0.01
each and 799,100 H shares of £0.01 each were allotted.
On 8 March 2017 the Company purchased a fractional entitlement to a single F share of £0.01 each from Anthony Ford (which resulted from
the bonus issue and consolidation described above) and it was cancelled.
By a resolution dated 8 March 2017 (taking effect on 9 March 2017) the Company reduced its capital using the statutory solvency statement
procedure by cancelling the capital redemption reserve of £3,000,025 and the share premium account of £9,999 and crediting an amount
equal to the sum so cancelled to a distributable reserve.
Immediately prior to Admission, by a resolution dated 5 April 2017 (conditional upon Admission occurring but deemed to take effect
immediately before Admission) all of the issued shares in the capital of the Company were redesignated as ordinary shares ranking pari passu.
Following the company’s admission to trading on AIM on 11 April 2017 a further 2,210,526 shares were issued at a price of 95p per share.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
28.
Financial Instruments
The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other payables.
The Group’s accounting policies and method adopted, including the criteria for recognition, the basis on which income and expenses are
recognised in respect of each class of financial asset, financial liability and equity instrument are set out in note 3 to the financial statements.
The Group does not use financial instruments for speculative purposes.
The fair values and the carrying values of financial assets and liabilities are the same. The principal financial instruments used by the Group,
from which financial instrument risk arises, are as follows:
Year Ended 31 May 2017
Group
Financial assets measured at amortised cost
Trade receivables
Other financial assets
Cash and cash equivalents
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Borrowings
Other financial liabilities
Total financial liabilities
Total financial instruments
2017
£000
105
-
3,801
3,906
173
431
-
604
3,302
2016
£000
38
1,094
1,531
2,663
164
655
1,500
2,319
344
2015
24
17
971
1,012
92
876
-
968
44
There are no fair value adjustments to assets or liabilities through profit and loss.
Capital management
The Group manages its capital to ensure that it will be able to continue as a going concern while attempting to maximise the return to
stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of issued capital and
retained earnings.
Credit risk
Credit risk is the risk that a counter-party will cause a financial loss to the Group by failing to discharge its obligations to the Group. The Group
manages its exposure to this risk by applying limits to the amount of credit exposure to any one counterparty and employs strict minimum
credit worthiness criteria as to the choice of counterparty. The maximum exposure to credit risk for receivables and other financial assets is
represented by their carrying amount. The Group considers credit risk to be low due as trade receivables are insignificant and amounts are
settled from business sales proceeds brokered by the Group via the legal process of completion agreements.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables
as appropriate. The allowance comprises a provision against individually significant exposures.
PAGE 68
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Ageing analysis
The ageing analysis of the Group’s trade receivables is as follows:
Year Ended 31 May 2017
Group
Current
Up to 30 days
Up to 60 days
90 days and older
Bad debt provision
2017
£000
104
-
-
1
105
-
105
2016
£000
38
-
-
10
48
(10)
38
2015
24
-
-
-
24
-
24
These receivables are not secured by any collateral or credit enhancement. Normal credit terms are 30 days.
The maximum exposure to credit risk at each balance sheet date was:
Year Ended 31 May 2017
Group
Net trade receivables
Accrued income
Cash and cash equivalents
2017
£000
105
-
3,801
3,906
2016
£000
38
300
1,531
1,869
2015
24
-
971
995
For banks and financial institutions, only independently rated parties with minimum rating “A” are accepted.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Fair values
The directors have assessed that the fair values of cash and short-term deposits, trade receivables, trade payables and other current liabilities
approximate to their carrying amounts largely due to the short-term maturities of these instruments.
The principal interest rate risks of the Group arise in respect of borrowings. As the interest expense on variable rate financial instruments is
immaterial, the Group does not actively manage the exposure to this risk.
Interest rate risk
The Group’s policy is to fund its operations through the use of retained earnings and equity. The Group’s exposure to changes in interest rates
relates primarily to cash at bank. Cash is held either on current or short-term deposits at a floating rate of interest determined by the relevant
bank’s prevailing base rate.
Interest rate sensitivity
There would be no material impact resulting from a reasonably possible change in interest rates.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market
risk comprises three types of risk:
• commodity price risk
interest rate risk; and
•
foreign currency risk.
•
Financial instruments affected by market risk include deposits, trade receivables, trade payables and accrued liabilities.
Foreign currency exchange risks
The Group has no foreign currency risk currently as its operations and transactions are all denominated in Sterling.
PAGE 70
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Liquidity risks
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its
financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The maturity profile of the Group’s trade and other payables, and other financial liabilities are, at each period end, due within one year. The
maturity profile of borrowings at the reporting dates, based on contractual undiscounted payments, are summarised below:
Year Ended 31 May 2017
Group
2017
£000
220
211
-
2016
£000
237
220
211
2015
221
224
431
Due within 1 year
Due in 1-2 years
Due in 2-5 years
29.
Related Party Transactions
Group
Key management personnel compensation has been disclosed in note 9. In addition to the related party information disclosed elsewhere in the
financial information, the following were significant related party transactions during the current and prior year and at terms and rates agreed
between the parties: During the years dividends were paid to individuals who were directors at the time and their close family members as
follows:
Year Ended 31 May 2017
Dividends paid to directors and their close family members
Year Ended 31 May 2017
Dividends paid on preference shares classified as liabilities
2017
£000
1,177
2017
£000
75
2016
£000
831
2016
£000
100
The dividend above represents the 10 per cent coupon on the Preferred A Ordinary shares. B Preference share dividends were waived by the
shareholder.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
During the year the Group was charged the following costs from Triskell LLP (of which Anthony Ford is a designated member).
Year Ended 31 May 2017
Consultancy fees
2017
£000
425
The amount owed by Triskell LLP as at the period ends were:
Year Ended 31 May 2017
Owed by Triskell LLP to the Group
2017
£000
-
2016
£000
943
Group
2016
£000
166
At 1 June
2015
-
As disclosed in note 32, on 8 March 2017 the company acquired the trade and assets of Triskell LLP.
During the year the Group was charged the following costs from Signia Corporate Finance (a business owned by Stuart Lees)
Year Ended 31 May 2017
Consultancy fees
Group
2017
£000
48
2016
£000
41
The amount owed to Signia Corporate Finance as at the period ends were:
Year Ended 31 May 2017
Owed to Signia Corporate Finance by the Group
2017
£000
-
Group
2016
£000
27
At 1 June
2015
-
During the year the Group was recharged costs from K3 Estates LLP and provided a loan to K3 Estates LLP (of which the Directors, except for
Stuart Lees, W Robinson and Ian Mattioli, are designated members).
Year Ended 31 May 2017
Recharges
Rent
Group
2017
£000
-
24
2016
£000
12
-
PAGE 72
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
The amount owed by K3 Estates LLP as at the period ends were:
Year Ended 31 May 2017
Owed by K3 Estates LLP to the Group
2017
£000
-
Group
2016
£000
175
At 1 June
2015
-
The loan was provided on an interest free basis and is repayable on demand. The loan was repaid on 14 February 2017.
During the year ended 31 May 2017 the Group commenced the lease of a property from K3 Estates LLP, initially with a rent-free period. Rent
payments commenced on 30 March 2017 at £8,250 per month. No amounts are outstanding at year end.
During the year the Group recharged and was charged the following costs from KBS CF LLP (of which the Directors, except Stuart Lees,
William Robinson and Ian Mattioli, are designated members).
Year Ended 31 May 2017
Consultancy fees paid to KBS CF LLP by the Group
2017
£000
432
2016
£000
133
The amounts owed to / from KBS CF LLP as at the period ends were:
Year Ended 31 May 2017
Loan to KBS CF LLP from the Group
Amounts due to KBS CF LLP to the Group
2017
£000
-
-
-
Group
2016
£000
19
(13)
6
At 1 June
2015
17
-
17
KBS CF LLP has now ceased to trade and no further consultancy fees will be paid.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
During the year the Group provided loans to various individuals who were also directors at the time. The amounts owed by such directors as
at the period ends were:
Year Ended 31 May 2017
Owed by Anthony Ford to the Group
2017
£000
-
Group
2016
£000
900
At 1 June
2015
-
The loan to Anthony Ford was repaid on 24 February 2017. All loans to directors were provided interest free and were deemed to be repayable
on demand.
Company
K3 Capital Group Plc is the parent entity of the group. The group has taken advantage of the exemption available under IAS 24 not to disclose
transactions with wholly owned subsidiary undertakings.
PAGE 74
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
30.
Dividends
Year Ended 31 May 2017
Dividends paid on equity shares
Ordinary A shares
Ordinary B shares
Ordinary C shares
Ordinary D shares
Ordinary E shares
Ordinary F shares
Ordinary G shares
Ordinary H shares
Ordinary V shares
Ordinary shares
Total
Dividend per share (unadjusted)
Ordinary A shares
Ordinary B shares
Ordinary C shares
Ordinary D shares
Ordinary E shares
Ordinary F shares
Ordinary G shares
Ordinary H shares
Ordinary V shares
Ordinary shares
Dividend per share (adjusted)
Ordinary A shares
Ordinary B shares
Ordinary C shares
Ordinary D shares
Ordinary E shares
Ordinary F shares
Ordinary G shares
Ordinary H shares
Ordinary V shares
Ordinary shares
2017
£000
284
284
406
102
51
30
20
–
–
–
1,177
2017
113.72p
113.72p
113.72p
113.72p
113.72p
113.72p
113.72p
–
–
–
2017
3.00p
3.00p
3.00p
3.00p
3.00p
3.00p
3.00p
–
–
–
2016
£000
201
201
429
–
–
–
–
–
–
–
831
2016
80.20p
80.20p
80.20p
–
–
–
–
–
–
–
2016
2.12p
2.12p
2.12p
–
–
–
–
–
–
–
The adjusted dividends per share are adjusted for the impact of the bonus issues and share consolidations and subdivisions described in note
27.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
Dividends paid on shares classed as liabilities
Year Ended 31 May 2017
Preferred A Ordinary shares
B Preference shares
Total
2017
£000
75
-
75
2016
£000
100
-
100
The holder of the B preference shares waived the dividend payable during both financial years.
Dividend per share
Year Ended 31 May 2017
Preferred A Ordinary shares
B Preference shares
2017
£000
10p
-
2016
£000
10p
-
On 23 February 2017 the Preferred A Ordinary shares and the B Preference shares were redeemed at par.
31.
Commitments
The total future minimum lease payments under non-cancellable operating leases are as follows:
Year Ended 31 May 2017
Group
Company
Not later than 1 year
Later than 1 year and not later than 5 years
2017
£000
100
79
179
As at 1 June
2015
£000
14
183
197
2016
£000
122
109
231
2017
£000
-
-
-
2016
£000
-
-
-
2015
£000
-
-
-
PAGE 76
K3 CAPITAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
32.
Business Combinations and Goodwill
Acquisition of Triskell LLP
On 8 March 2017 the company acquired the trade and assets of Triskell LLP. The fair value of consideration was initially set up as a loan at
£1.1m, settled subsequently via cash in full prior to the year end.
The fair value of amounts recognised at the acquisition date in relation to Triskell LLP are as follows:
Year Ended 31 May 2017
Book Value
Adjustments
Fair Value
Tangible assets acquired
Trade receivables acquired
£000
£000
£000
23
41
64
(23)
(41)
(64)
-
-
-
The fair value of total assets acquired was £nil, resulting in goodwill being recognised equivalent to the fair value of consideration. The
goodwill recognised includes certain intangible assets that cannot be separately identified and measured due to their nature. This includes
control over the acquired business, the skills and experience of the acquired workforce and the future growth opportunities that it provides the
Group’s operations. The goodwill recognised is not deductible for tax purposes.
33.
Contingencies
The group companies, including K3 Capital Group Plc, entered into a debenture dated 22 May 2014 for securing all monies due by K3 Capital
Group Plc in respect of the bank loan facilities. This represents a fixed and floating charge over the group’s assets. The balance outstanding at
31 May 2017 was £431,376 (2016: £655,382).
34.
Audit exemption statement
Under section 479A of the Companies Act 2006 the Group’s subsidiaries, listed below, are claiming exemption from audit. The parent
undertaking, K3 Capital Group plc, registered number 06102618, guarantees all outstanding liabilities to which each subsidiary company is
subject at the end of the financial year (being the year ended 31 May 2017 for each company listed below). The guarantee is enforceable
against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.
04141555
KBS Corporate Sales Limited
08924449
KBS Corporate Finance Limited
Knightsbridge Business Services Limited 08924297
35.
Controlling Party
In the opinion of the directors, the group has no overall controlling party.
FINANCIAL | FINANCIAL STATEMENTS
PAGE 77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2017 (CONTINUED)
36.
Transition to adopted IFRS
These are the first financial statements that comply with adopted IFRS. The group and the company transitioned to adopted IFRS on 1 June
2015.
Reconciliation of equity
No transitional adjustments were required for the company.
Year Ended 31 May 2017
As previously
stated
£000
2,980
1,128
(1,869)
(655)
1,584
1,584
1 June 2015
Effect of
transition
£000
-
-
-
-
-
-
IFRS (as
restated)
As previously
stated
Effect of
transition
IFRS (as
restated)
31 May 2016
£000
2,980
1,128
(1,869)
(655)
1,584
1,584
£000
2,648
3,112
(3,829)
(435)
1,496
1,496
£000
236
-
-
-
236
236
£000
2,884
3,112
(3,829)
(435)
1,732
1,732
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net Assets
Equity
Reconciliation of profit or loss for the year
Revenue
Distribution costs
Administrative expenses
Operating profit
Other interest receivable and similar income
Interest payable and similar expenses
Tax on profit
Profit for the financial year
Year Ended 31 May 2016
As previously
stated
Effect of
Transition
IFRS (as
restated)
£000
8,551
(645)
(4,949)
2,957
2
(127)
(599)
2,233
£000
£000
-
-
236
236
-
-
-
236
8,551
(645)
(4,713)
3,193
2
(127)
(599)
2,469
As a consequence of the transition to adopted IFRS on 1 June 2015 the group has reversed goodwill amortisation, previously charged in
accordance with UK GAAP.
PAGE 78
K3 CAPITAL GROUP PLC
NOTICE IS HEREBY GIVEN THAT THE FIRST ANNUAL
GENERAL MEETING OF K3 CAPITAL GROUP PLC
WILL BE HELD AT TLT SOLICITORS LLP
FINANCIAL | NOTICE OF MEETING
PAGE 79
NOTICE OF ANNUAL
GENERAL MEETING
Notice is hereby given that the first Annual General Meeting of K3
Capital Group plc will be held at TLT Solicitors LLP, 3 Hardman Square, 3
Hardman St, Manchester, M3 3EB on Friday, 27 October 2017 at
11:00 a.m. for the following purposes:
You will be asked to consider and vote on the Resolutions below.
Resolutions 1 to 11 will be proposed as Ordinary Resolutions and
Resolutions 12 and 13 will be proposed as Special Resolutions.
ORDINARY BUSINESS
Resolution 1
To receive the Company’s annual accounts for the year ended 31 May
2017 together with the directors’ report and auditor’s report on those
accounts.
Resolution 2
To declare a final dividend in the sum of 4.4 pence per Ordinary Share
for the year ended 31 May 2017.
Resolution 3
To appoint Martin Robinson as director of the Company.
Resolution 4
To re-appoint Ian Mattioli as a director of the Company.
Resolution 5
To re-appoint John Rigby as a director of the Company.
Resolution 6
To re-appoint Anthony Ford as a director of the Company.
Resolution 7
To re-appoint Andrew Melbourne as a director of the Company.
Resolution 8
To re-appoint Stuart Lees as a director of the Company.
Resolution 9
To re-appoint BDO LLP as the Company’s auditor to hold office from
the conclusion of this meeting until the conclusion of the next annual
general meeting at which accounts are laid before the Company.
Resolution 10
To authorise the directors to determine the auditor’s remuneration.
Resolution 11
That:
1. in accordance with section 551 of the Companies Act 2006 (Act) the
directors be generally and unconditionally authorised to allot shares
in the Company, and to grant rights to subscribe for or to convert any
security into shares in the Company:
(a). up to an aggregate nominal amount of £140,701.75 (such
amount to be reduced by the nominal amount allotted or granted
under paragraph (b) below in excess of such sum); and
(b). comprising equity securities (as defined in Section 560 of the
Act) up to an aggregate nominal amount of £281,403.50 (including
within such limit any shares allotted or rights granted under
paragraph (i) above) in connection with an offer by way of a rights
issue as follows:
(i). to holders of ordinary shares of 1 pence each in the capital of
the Company in proportion (as nearly as may be practicable) to
their existing holdings; and
(ii). to holders of other equity securities as required by the
rights of those securities or as the directors otherwise consider
it necessary;
and so that the directors may make such exclusions or other
arrangements as they consider expedient in relation to treasury
shares, fractional entitlements, record dates, shares represented
by depositary receipts, legal or practical problems under the laws
in any territory or the requirements of any relevant regulatory
body or stock exchange or any other matter;
2. this authority shall expire on the earlier of the date 15 months from
the passing of this Resolution or the conclusion of the next Annual
General Meeting of the Company after the passing of this Resolution
(whichever is the earlier) save that the Company may make offers
and enter into agreements during the relevant period which would,
or might, require shares or rights to subscribe for or to convert any
security into shares in the Company to be allotted after the authority
ends and the Board may allot shares or rights to subscribe for or to
convert any security into shares in the Company under any such offer
or agreement as if the authority had not expired; and
3. all previous authorities granted under Section 551 of the Act be
revoked.
PAGE 80
K3 CAPITAL GROUP PLC
NOTICE OF ANNUAL
GENERAL MEETING
SPECIAL BUSINESS
Resolution 12
12.1. That subject to the passing of Resolution 11 above, the Board be
authorised to allot equity securities (as defined in section 560(1) of
the Companies Act 2006) for cash under the authority given by that
Resolution and/or to sell ordinary shares held by the Company as
treasury shares for cash as if section 561 of the Act did not apply
to any such allotment or sale, provided that such authority shall be
limited to:
(a). the allotment of equity securities and sale of treasury shares
for cash in connection with an offer of, or invitation to apply for,
equity securities (but, in the case of the authority granted under
Resolution 11.1(b)(ii), by way of a rights issue only):
(i). to the holders of ordinary shares in proportion (as nearly as
may be practicable) to their respective holdings; and
(ii). to holders of other equity securities as required by the
rights of those securities or as the directors otherwise consider
necessary, but subject to such exclusions or other arrangements
as the directors may deem necessary or expedient in relation
to treasury shares, fractional entitlements, record dates, legal or
practical problems in or under the laws of any territory or the
requirements of any regulatory body or stock exchange; and
(b). the allotment of equity securities or sale of treasury shares
(otherwise than pursuant to Clause 12.1(a) of this Resolution) to
any person up to an aggregate nominal amount of £21,105.26.
The authority granted by this Resolution shall expire on the earlier
of the date 15 months from the passing of this Resolution or the
conclusion of the next Annual General Meeting of the Company
after the passing of this Resolution (whichever is the earlier) save
that such authority shall extend to the making before such expiry
of an offer or arrangement that would, or might, require equity
securities to be allotted after such expiry and the directors may
allot equity securities in pursuance of that offer or arrangement as
if the authority conferred hereby had not expired.
12.2. That subject to the passing of Resolution 11, the directors be
authorised in addition to any authority granted under Clause 12.1 of
this Resolution to allot equity securities (as defined in section 560(1)
of the Companies Act 2006) for cash under the authority conferred
by Resolution 11 and/or to sell ordinary shares held by the Company
as treasury shares as if section 561 of the CA 2006 did not apply to
any such allotment or sale, provided that such authority shall be:
(a). limited to the allotment of equity securities or sale of treasury
shares up to an aggregate nominal amount of £21,105.26; and
(b). used only for the purpose of financing (or refinancing, if the
authority is to be used within 6 months after the original transaction)
a transaction which the directors determine to be an acquisition or
other capital investment of a kind contemplated by the Statement of
Principles on Disapplying Pre Emption Rights most recently published
by the Pre-Emption Group prior to the date of this notice.
The authority granted by this Resolution shall expire on the earlier
of the date 15 months from the passing of this Resolution or the
conclusion of the next Annual General Meeting of the Company after
the passing of this Resolution (whichever is the earlier) save that such
authority shall extend to the making before such expiry of an offer
or arrangement that would, or might, require equity securities to be
allotted after such expiry and the directors may allot equity securities
in pursuance of that offer or arrangement as if the authority conferred
hereby had not expired.
12.3. The Resolutions in Clause 12.1 and Clause 12.2 revoke and replace
all unexercised powers previously granted to the directors to allot
equity securities or sell treasury shares as if section 561 of the CA
2006 did not apply but without prejudice to any allotment of equity
securities or sale of treasury shares already made or agreed to be
made pursuant to such authorities.
Resolution 13
That the Company be and is hereby generally and unconditionally
authorised pursuant to Section 701 of the Act to make market purchases
(within the meaning of Section 693(4) of the Act) of ordinary shares of
1 pence each in the capital of the Company, provided that:
1. the maximum number of ordinary shares hereby authorised to be
purchased is 4,221,052 (representing 10% of the Company’s issued
ordinary share capital at 8 September 2017);
2. the minimum price, exclusive of any expenses, which may be paid
for an ordinary share is 1 pence (equivalent to the nominal value of the
Company’s ordinary shares);
3. the maximum price, exclusive of any expenses, which may be paid
for any ordinary share is the higher of:
(a). 105 per cent of the average market value of an ordinary share
in the Company for the five business days immediately preceding
the day on which such share is contracted to be purchased; and
(b). the value of an ordinary share calculated on the basis of the
higher of the price quoted for:
(i). the last independent trade of; and
(ii). the highest current independent bid for,
any number of the Company’s ordinary shares on the trading venue
where the purchase is carried out.
4. unless previously renewed, varied or revoked, the authority hereby
FINANCIAL | NOTICE OF MEETING
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NOTICE OF ANNUAL
GENERAL MEETING
conferred shall expire on the earlier of the date 15 months from the
passing of this Resolution or the conclusion of the next Annual General
Meeting of the Company after the passing of this Resolution; and
5. the Company may make a contract for the purchase of ordinary
shares under this authority before the expiry of this authority which
would or might be executed wholly or partly after the expiry of such
authority, and may make purchases of ordinary shares in pursuance
of such a contract as if such authority had not expired.
By Order of the Board
ANDREW MELBOURNE FCMA
Company Secretary
8 September 2017
D I V I D E N D
3 0
O C T O B E R
AGM
27
OCTOBER
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Nash.
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