BUILDING RESILIENCE
Kingswood Holdings Limited
Annual Report for the year ended 31 December 2020
Company Registration No. 42316 (Guernsey)
CONTENTS
Summary Information
STRATEGY
Kingswood at a Glance
2020 Key Highlights
Chairman and Group Chief
Executive Officer Statement
UK Chief Executive Officer Review
US Chief Executive Officer Review
Group Chief Financial Officer Review
Principal Risks and Uncertainties
Corporate Responsibility Statement
GOVERNANCE
Corporate Governance Statement
Board of Directors
Directors’ Report
Directors’ Remuneration Report
Directors’ Responsibilities Statement
FINANCE
Independent auditor’s report
Consolidated Statement
of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
1
2
3
4
6
9
11
15
18
20
28
30
34
35
36
44
45
46
47
48
Advisers and Company Information Inside back cover
CORE VALUES
Kingswood’s ethos and mission is to create opportunities for
people worldwide to experience financial freedom. Critical to
success is the continuous investment in people, innovation
and technology to support our advisers and clients.
The Group is built around the core principles of:
INTEGRITY
Trust is of utmost importance when
it comes to advice. Kingswood’s
people are committed to acting with
integrity, being fair and acting in the
best interest of clients.
TEAMWORK
It is important to always apply
understanding to the situation.
Kingswood believes that by uniting
the expertise of our people we build
deeper relationships and better serve
our clients.
IMPACT
We strive to make a difference
and a positive impact with everything
we do.
SUMMARY INFORMATION
Kingswood Holdings Limited (the “Company”) and its subsidiaries (the “Group” or “Kingswood”)
is an international, fully integrated wealth and investment management business listed on the
AIM market of the London Stock Exchange under ticker symbol (AIM: KWG).
Kingswood offers a suite of wealth planning and investment management solutions to its clients,
which range from private individuals to some of the UK's largest universities and institutions.
Kingswood is focussed on becoming a leading participant in its sector through targeted
acquisitions in the UK and US, complemented by strong organic growth to create a global
wealth management business.
The Group’s core proposition centres on primary offerings in wealth planning and investment
management to deliver best in class financial solutions for clients.
The Kingswood Board have identified six key components to the Group’s strategy:
HIGH GROWTH
VERTICAL
DISTRIBUTION
MARKETS
Grow by acquisition
INTEGRATION
Holistic wealth
NETWORK
Focus on creating
SCALABLE
PLATFORM
Centralised
MANAGEMENT
TEAM
Experiened and
GLOBAL
AMBITION
Growth equity
in globally
fragmented
markets
and investment
regional 'Hubs' for
proposition to
incentivised at
enables execution
management
personal advice
support economies
every level
of international
drives revenue
growth
of scale and sales
efficiency
growth plan
The Group is split into two core businesses: Investment Management
and Wealth Planning
Investment Management
Our Private Client Investment Management team
offers a comprehensive discretionary investment
management service to private individuals and families.
Our Investment Managers work closely with our wealth
planners to ensure that appropriate investment are
selected to meet client goals.
Our Institutional Investment Management team provide
Fixed Income and similar investment solutions to meet
the needs of Universities, Charities and Foundations.
Wealth Planning
Our Wealth Planning business provides holistic financial
advice to Personal and Corporate clients to identify
and help meet their goals. Our Financial Advisers work
closely with their clients to ensure they have a current
plan that meets their needs.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
1
KINGSWOOD AT A GLANCE
GROWING UK NETWORK
1 Abingdon
2 Beverley
3 Darlington
4 Derby
5 Egham
6 Grimsby
7 Hull
8 Lincoln
9 London
10 Maidstone
11 Newcastle upon Tyne
12 Sheffield (2)
13 Worcester
14 York
CREATING A GLOBAL FOOTPRINT
11
3
14
2
8
7
6
12
4
1
13
5
9
10
UK
South Africa
US
Our growing network of offices across the UK
along with an office in Johannesburg, South Africa
and also in Atlanta, New York and San Diego in
the US ensures we have a physical presence in
the local communities where our clients live and
work. Enabling our clients to contact us whenever
and wherever they want is helping us grow our
client base and the proportion of their wealth we
manage for them.
AuM
£6.1BN
Advisers 1
65
Employees
206
£6.1BN
65
206
£2.5BN
£1.7BN
40
23
120
90
Clients 1
C.8K
8.0K
7.5K
7.0K
12/18
12/19 Now*
12/18
12/19
Now*
12/18
12/19 Now*
12/18
12/19 Now*
* As at June 2021 1 Adviser and client figures disclosed are for UK-business only
2
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 2020 KEY HIGHLIGHTS
£6.1BN
Assets under advice
& management
8K
Active clients
£44.8M
Growth capital
Several key acquisitions were completed in 2020, significantly expanding
Kingswood’s UK and US footprints
IN THE UK
• Sterling Trust was acquired in June 2020, a transformative transaction which added
22 financial planners advising/managing £1.2 billion of client assets from five locations
across Yorkshire and the North East of England
• In November, the Group acquired Regency Investment Services, a high-quality IFA
business which operates from Egham, Surrey and provides independent financial advice
to individuals and corporates with six IFAs advising/managing £320 million on behalf of
circa 1,000 clients
IN THE US
• Completed the acquisition of Chalice based in San Diego, CA, USA which provides
full-service securities brokerage, advisory and investment banking services to a broad
client base
• Formalised a strategic partnership with Mike Nessim and his Manhattan Harbor Capital
platform, enabling the consolidation of Kingswood’s US interests – including Chalice -
into a 50.1% share in a nationwide broker dealer, advisory and investment banking
platform re-branded as Kingswood US
• This investment is a major statement of intent regarding our US expansion supported
by a commitment to contribute up to $8.0 million (£5.7 million) additional growth
equity before December 2022 to further build US distribution channels
Kingswood continued to bolster its management team throughout the year and in December
2020 appointed David Lawrence as UK CEO to lead the business on the next stage of its
growth journey
£44.8 million growth capital contributed by Pollen Street Capital to support Kingswood’s
acquisition and growth initiatives
Launch of the Kingswood Academy, a 24-month programme to nurture talented people
and provide them with the skills needed to provide effective financial advice and develop
a successful career in wealth management. The first 4 participants joined the academy in
January 2021
Total revenue
Recurring revenue
Operating profit
Total equity
£25.5M
61%
£0.9M
£25.5M
83%
83%
£0.9M
£50.2M
£50.2M
61%
£0.2M
£(1.6)M
£27.2M
£28.2M
£10.1M
£7.5M
12/18
12/19 12/20
12/18
12/19 12/20
12/18
12/19 12/20
12/18
12/19 12/20
3
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE CHAIRMAN AND
GROUP CHIEF
EXECUTIVE OFFICER
STATEMENT
Your continued support over the past
challenging year is much appreciated.
Thankfully, there is now light at the
end of the tunnel with the vaccination
programme progressing well, both here
in the UK and across the US. We can
now begin to put the uncertainty and
dislocation behind us and look forward
to a brighter 2021 and beyond.
We are truly in awe of the sacrifices made by so
many. By our healthcare workers to protect those
impacted by COVID-19; by families unable to be
with their loved ones in their hour of need; by
workers who risked their health to keep essential
services operating. We can never truly appreciate
their immense sacrifice and the strength in
adversity of the human spirit.
It was a difficult year for business, especially one
like ours which is built on personal relationships
– those one on one, face to face connections
between our team and their clients. We all
quickly adapted to Zoom or other means of
communication, but it is still quite impersonal
and makes it especially difficult to build new
relationships.
It was also difficult for the Kingswood family,
and we learned a lot over the past year about
the power of resilience – tackling challenges by
staying strong, maintaining belief in our vision
and strategy, and focusing on the outcome. It
drove the Kingswood family forward every day
and we are eternally grateful to every member of
the team for their endeavour and commitment in
dealing with our clients’ affairs in these difficult
times. We are a better company for it.
Despite these challenges, there are many
positives to take from 2020 - most notably
the many talented new colleagues who joined
across the UK and US including through the
Sterling, Regency, Chalice and Manhattan Harbor
transactions. We are delighted that David
Lawrence joined us as UK Chief Executive Officer
to lead the UK business on the next stage of its
growth journey. Patrick Goulding has been an
integral leader of our business over the last two
years as we built a foundation for growth, and
the Board is pleased he agreed to assume the
Group Chief Financial Officer role on a full-time
basis with the Kingswood business now of a size
and scale that requires his full-time efforts in this
critical function.
The UK wealth management sector continues to
exhibit strong, long-term growth characteristics
supported by demographic trends, a complex
regulatory environment, and the ongoing
consolidation within a very fragmented industry
and Kingswood is actively seeking to take
advantage of this through its acquisition strategy.
We can offer a seamless transition process,
centralised support services (like HR, compliance,
and finance), and a central investment proposition
that frees advisers of the acquired firm to focus
on their clients. We are pleased to have developed
and grown our UK platform in recent years with
the acquisition of five financial planning businesses
across the UK since 2018, including the acquisition
of Sterling Trust and Regency Investment Services
in 2020.
In the UK, Kingswood now has 64 financial
advisers and investment managers operating
across the country supporting our retail and
institutional client base and are projected to
deliver strong, sustainable EBITDA on an annual
basis once acquisitions are fully integrated.
As the largest global wealth management
market, the Board also sees the US as a major
growth opportunity and a market where we
can differentiate ourselves from our peers. The
market is still significantly growing year on year,
with 9% compound historical annual growth.
We have therefore been keen to expand in that
market for some time. In Mike Nessim, we have
identified a quality partner with shared values to
help implement and drive our US growth strategy.
We have no doubt the capital we deploy will drive
exceptional organic growth across the Kingswood
US platform and reflects the desire of both parties
to develop a highly accretive global platform
providing clients access to investment products
and services in major US and UK markets.
Kenneth ‘Buzz’ West
Non-Executive
Chairman
Gary Wilder
Group Chief
Executive Officer
4
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 We are focused on creating
solutions that combine
personal contact with the
convenience of technology
We hope you enjoy reading our annual report and
hearing from our business leaders. Thank you for
your continued support and trust.
Kenneth ‘Buzz’ West
Non-Executive
Chairman
Gary Wilder
Group Chief
Executive Officer
June 2021
This enhanced US investment will further
cement a key, strategic foothold in the largest
global wealth and investment management
market, differentiate us from our peers and
support our aspirations of asset linking and
cross-selling services. Mike and his team
will oversee acquired entities and focus on
delivering Kingswood US's full-service brokerage,
investment advisory and investment banking
proposition to clients.
Our partnership with Pollen Street Capital
grows in strength on many levels, and to date
has provided growth equity of £44.8 million to
support our strategy. We now have 206 people
across the globe advising/managing £6.1 billion
of client assets - all achieved during a global
pandemic. We have come together by staying
apart and are now ready to embark with renewed
vigour on our forward journey.
5
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE
UK CHIEF EXECUTIVE
OFFICER REVIEW
It has now been six months since
I joined the Kingswood Group to lead
the UK business and I am relishing
every moment. I’d like to firstly thank
Patrick Goulding for his leadership of
the business over the last two years and
for his and the Kingswood team’s efforts
in creating such a solid foundation for
future business growth. I look forward
to building on this foundation and
driving the next phase of Kingswood’s
growth both organically and through
further acquisitions
COVID-19 has meant that 2020 tested our
resilience on so many levels, though I am
delighted to see how colleagues at Kingswood
responded to this including how they adapted
their ways of working to ensure that our clients
continue to receive a high-quality service. This
client focus is an inherent strength of Kingswood
and something that I am keen to build on.
It was pleasing to complete the acquisitions of
Sterling Trust and Regency Investments in 2020.
The UK retail business now operates from four
regional hubs and 11 branch offices and has
61 financial planners and investment managers
serving circa 8,000 active clients with £3.4 billion
of retail Assets under Advice and Management.
This regional network and client base are the
building blocks of our future success.
We continued to build scale in our retail
discretionary investment propositions where we
are creating a strong track record. Additionally,
we also launched our first investment product
- Kingswood Defensive Alpha - a fund of
funds investing in liquid, diversified, alternative
investments that provides private clients access
to hedge fund strategies typically only available to
institutional investors.
We also continue to work with some of the
UK’s largest universities and institutions through
our Fixed Income business where 3 investment
managers deliver growth using our focussed
offering that has gained strong traction in this
highly competitive institutional sector. This year
we are very pleased to have launched the ESG
Bond Fund, one of the few short-dated, Sterling
only, investment grade ESG funds that is actively
managed in the market.
MARKET OVERVIEW
Despite the general economic uncertainty, the
UK wealth management sector continues to
exhibit strong, long-term growth characteristics
as supported by demographic trends, increasing
complexity in laws and regulations and the
consolidation of what is a fragmented sector.
The so called “advice gap” represents a significant
opportunity for firms to provide accessible advice
to clients that are either under-served or in many
cases unserved. The need for financial advice has
never been greater and in this sense firms such as
Kingswood can help fulfil a societal need.
Our clients want us to provide sound advice
on some of the things that matter most in life.
They trust us to do this well and, in many cases,
also want us to manage their investments. This
convergence of financial advice and investment
management is the cornerstone of Kingswood’s
strategy and business model.
I believe that successful firms will not only truly
put the client at the heart of the relationship,
but will also be highly accessible, have clear
propositions and most importantly provide great
value for money. This also requires firms to have
higher levels of transparency than may have
previously been the case.
Creating a frictionless client experience is also
key when accessing advice or investments. At
Kingswood we are looking to re-imagine the client
experience, removing blockers and inefficiencies
and progressively deploying technology to
support this. These principles will become a
cornerstone of our client proposition strategy.
Consolidation within the sector continues to
gather pace and this provides a great opportunity
for Kingswood to acquire firms that create a good
strategic fit. A significant number of financial
advisers are at or close to retirement age and
looking to exit. In addition, the speed and scale of
David Lawrence
UK Chief Executive
Officer
6
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 regulatory change is proving highly disruptive and
professional indemnity insurance is increasingly
problematic. This has led to a major aggregating
opportunity, and after a lull in the latter part of
2020 due to COVID-19, deal activity across the
UK wealth sector has increased considerably in
recent months with a continued influx of private
equity capital amid the accelerating pace of
consolidation.
Kingswood has completed five strategic
acquisitions over the last two years and continues
to seek opportunities to create fully operational
regional ‘hubs’ in geographies where we are
not currently present and smaller acquisitions
to complement an existing presence. There are
over 2,750 firms across UK with 2-50 advisers
representing potential targets.
We have a flexible acquisition model that can be
tailored to the opportunity, though cultural fit is
a critical consideration, closely followed by the
target business sharing our hunger and passion
for the client, having a synergistic proposition and
importantly sharing our ambition for growth.
OUR CORE PROPOSITIONS
Our goal for retail clients is to provide an
integrated wealth management service that
combines deep expertise across financial advice
and planning with equally deep knowledge and
experience in investment management.
We take time to understand our clients, their
goals and what is important to them. From this,
we are then able to provide a comprehensive
range of solutions to meet their needs. By building
enduring relationships with clients, we can help
realise the best of financial outcomes for them.
Our taglines of Advice Every Step of the Way
and Protect and Grow are perfect manifestations
of this.
Our advice proposition is best described as
Restricted Whole of Market. This means that we
maintain a core central investment proposition
that we believe will be suitable for most clients
but also provide other investment choices where it
isn’t. For non-investment and more specialist client
needs, we maintain a whole of market approach.
Our clients want us to
provide sound advice on
some of the things that
matter most in life
7
7
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE UK CHIEF EXECUTIVE OFFICER REVIEW CONTINUED
DELIVERING GROWTH
Inorganic opportunities create additive scale,
though it is through integration and then
accelerated growth that we will fully deliver on
our ambitions.
We have implemented processes to complete an
integration of a typical target firm within three to
six months following completion. However, these
timescales are agreed on a case-by-case basis
with the seller to ensure minimal disruption and
client impact.
Organic growth in Revenue, AuM and EBITDA is
then a function of firstly creating adviser capacity
and then delivering an increase in adviser
productivity from increased client demand. One
way we will do this is by leveraging our local
presence and relationships through our hub and
satellite offices.
In the medium term, most of our Investment AuM
and Revenue will be derived from wealth planning
activity, though over time we aim to broaden our
distribution channels.
The team at Kingswood care deeply about their
clients and have great expertise. Continuing to
apply a focussed approach to acquisitions will
create immediate scale. When coupled with
our organic growth strategy, an optimal client
experience and the strengthening track record of
our investment proposition, I am confident that
we will deliver sustainable growth in 2021.
I am excited for the future and look forward to
working with the UK team to further develop and
deliver on our vision and strategy.
David Lawrence
UK Chief Executive Officer
June 2021
Our retail investment proposition is discretionary
and comprises a set of risk rated core model
portfolios. Complementary models are also
available such as ESG and/or income variants.
These solutions are available on most of the
recognised third-party platforms. For the
more sophisticated investor we offer a more
personalised approach, also including an
investment manager where appropriate. Our
portfolios are delivering increasingly strong
investment performance versus ARC and risk
benchmarks.
KEY PERFORMANCE INDICATORS
£’000 (UNLESS
OTHERWISE STATED)
2020
2019
2018
Total Revenue
17,155 10,053
7,506
Recurring Revenue
Operating Profit
84%
319
83%
83%
211 (1,597)
Total Equity
AUA/AUM
(£ millions)
# of Advisers
47,897 28,201 27,243
4,378
2,471
1,649
64
40
23
The Group CFO review discusses financial
performance in further detail but total revenue
for the year was £17.2 million, a 71% increase
on the prior year reflecting the impact of recent
acquisitions. 84% of UK revenue is recurring
in nature providing a strong, annuity style fee
stream which is critical to delivering sustainable,
long term returns to shareholders.
The UK business has developed and grown in
recent years with the acquisition of five financial
planning businesses since 2018, including
the acquisition of Sterling Trust and Regency
Investment Services in 2020 and now comprises
185 employees with teams operating from four
regional and 11 branch offices across the UK.
On a pro-forma basis, the UK business is
projected to deliver strong, sustainable EBITDA
on an annual basis once acquisitions are fully
integrated with our discretionary investment
management offering.
8
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 US CHIEF EXECUTIVE
OFFICER REVIEW
2020 was a transformative year for
me and the Manhattan Harbor Capital
(MHC) business. I am delighted to
have created a long-term partnership
with the Kingswood Group, and to
now have the strategic and financial
backing to deliver the next phase of our
ambitious business plan. MHC has been
re-named Kingswood US and we now
have the capital, team, infrastructure,
and technology in place to execute our
ambitious US organic growth strategy.
I am excited to drive this next stage
of our growth journey and I have
no doubt the capital we deploy will
drive exceptional growth across the
Kingswood US platform
Kingswood US operates in the Independent
Broker Dealer (IBD) and Registered Investment
Adviser (RIA) market space and comprises
businesses across the US with key hubs in
Atlanta, New York, and San Diego. In addition, it
incorporates Kingwood Capital Markets (KCM),
a national Investment Banking platform now
supported by significant regulatory capital to
leverage our expanding distribution channels and
drive growth across equity and debt advisory,
capital raising and M&A.
I am the Managing Partner of the enlarged
Kingswood US business and we have an
exceptionally talented and experienced team
to deliver a successful US strategy. This team
now comprises 206 Authorised Representatives
managing $2.2 billion of client monies across
the US.
MARKET OVERVIEW
Currently, IBDs control ~$3 trillion in client assets
with ~123,000 advisers across the US operating
on a mostly self-employed basis. The IBD sector
includes firms as large as LPL with close to
17,000 independent financial advisers and ~$950
billion AUA to small, local IBD firms with less than
20 advisers. Small and medium sized IBDs face
many challenges today including an inability to
achieve scale, rising regulatory and technology
costs and a difficult recruiting environment
making it difficult to attract good advisers as
large competitors issue upfront cash incentives
to attract talent. The independent channel has
consequently seen significant consolidation, and
we are a significant player in this market.
There are currently over 12,500 RIA firms with
between $10 million and +$1 billion in AuM. The
RIA marketplace is ripe for acquisition with aging
ownership and no clear succession plans, rising
operational costs and a slow pace of growth.
The market is therefore active with pricing in a
range of 6 - 8x EBITDA multiples for target firms
especially those with strong value drivers such as
a high-quality client base or a unique proprietary
technology solution.
OUR CORE PROPOSITIONS
Our FINRA authorised IBD platforms buy and sell
securities on behalf of clients on a commission
basis, executing trades and custody of assets.
We offer a fast, smooth service with access to
many investment products and sectors including
equities, fixed income, alternatives, and mutual
funds. We also offer insurance products and
related services.
Through our SEC supervised RIAs, we provide
ongoing wealth, estate, philanthropic, tax and
succession planning services. We generate
predictable and recurring revenue streams from
advice and management of our client assets
through these programmes.
KCM continues to experience strong demand for
its Investment Banking services with markets very
active. We currently have 25 bankers and support
staff based in NY, with a goal to increase to over
100 bankers in key locations across the US over
the next two years. KCM generates high quality
income via securities underwriting and placement,
debt arrangement, advisory and M&A leveraging
our growing advisor distribution network.
KEY PERFORMANCE INDICATORS
The Kingswood Group progressively increased
its investment in MHC (now re-branded
Kingswood US) to a 50.1% interest by November
2020, including the contribution of the Chalice
businesses which were acquired in May 2020.
Mike Nessim
Kingswood US Chief
Executive Officer
9
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE US CHIEF EXECUTIVE OFFICER REVIEW CONTINUED
On a full year, 100% consolidated basis,
Kingswood US delivered a strong 2020 financial
result bolstered by strong revenue growth across
all activities including broker-dealing, investment
advisory and investment banking.
’000 (UNLESS OTHERWISE STATED)
$
£
Total Revenue
Gross Profit
Operating Profit
AUA/AUM (£ millions)
# of Authorised
Representatives
35,318
27,513
5,358
1,739
1,534
6,878
2,232
2,071
206
DELIVERING GROWTH
Our core objective is to build a successful,
scaled IBD and RIA platform across the US that
delivers excellent client service from a best-in-
class technology base. We are focused on the
movement of clients and their assets towards
the fee-based model, providing measurable,
annuity-style fee streams. We also believe we can
leverage our business through economies of scale
as we avail of the consolidation opportunities
available across the IBD and RIA landscape.
Growth will be driven by a number of factors
including the recruitment of independent
financial advisers dis-located and frustrated with
the challenges they face either in the large wire
houses, or the rising costs of managing a small,
sub-scale firm. We aim to acquire such small to
medium size IBD and RIA firms and support them
in driving sales growth by offering a superior
wealth management platform and supporting
practice. We will take away the management and
regulatory burden and free the advisers to focus
on growing their client base.
We have a very active pipeline of organic and
inorganic growth opportunities across the
US. Our efforts are bolstered by Kingswood
Group’s committed contribution of up to $8.0
million (£5.7 million) of additional growth equity
before 31 December 2022 to further build US
distribution channels through active adviser
recruitment and acquisitions.
I look forward to working with my Kingswood
colleagues to deliver our US strategy.
Mike Nessim
Kingswood US Chief Executive Officer
June 2021
Staying in touch with our
clients and providing ongoing
reassurance throughout the
year was a priority
10
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
Patrick Goulding
Group Chief
Financial Officer
GROUP CHIEF FINANCIAL
OFFICER REVIEW
Kingswood has experienced rapid growth
has undergone significant change over
the past few years to become the global,
integrated wealth management business
it is today. Within the last two years
we have completed five acquisitions
of UK financial advisory businesses, in
addition to the creation of a significant
US presence through acquisition and
organic growth. On a global basis,
Kingswood now has client assets under
advice/management of £6.1 billion and
continues to focus on taking advantage
of consolidation opportunities in the UK
and US wealth management sectors to
build a larger, scaled business.
The overall performance of the business in 2020
was impacted by the challenging conditions
COVID-19 presented. Continued restrictions
prevented us fully engaging with existing and
potential clients, but with conditions improving as
the vaccination programme escalates we remain
confident of the opportunity for growth this year
and beyond.
POSITIONED FOR GROWTH
A solid foundation is now in place and
considerable work has been completed over the
last couple of years to ensure we have the right
infrastructure and cost framework to support
growth. We are finalising the implementation
of our change management programme to
improve the Group’s cost/income ratio and
enhance margins.
Our ambition is supported by growth equity
provided by Pollen Street Capital (Pollen Street).
We are also keenly focused on driving organic
growth from acquired firms, in addition to the
enhancement of our investment management
capability which should drive future incremental
revenue. Our US presence is already taking
advantage of the consolidation opportunities
there, which should deliver an attractive return
on capital.
In 2021 we are very focused on revenue
enhancement and synergies as we integrate
acquired firms and drive costs by centralising
support services. Our greater scale enables
previously independent firms deliver enhanced
client service, which will support organic growth
and the opportunity to drive additional revenue
from clients through enhanced financial advice
or from our expanded range of investment
management solutions. Notwithstanding the
lingering impact of COVID-19, this should put us
in a strong position to deliver enhanced financial
performance from an up-scaled business.
BALANCE SHEET STRENGTH
Funds managed by Pollen Street can subscribe
for up to £80.0m of capital through a convertible
preference share structure and we draw on this
facility as required to complete acquisitions, putting
us in a strong position when negotiating potential
transactions. The preference shares are convertible
into ordinary shares at 16.5p in December 2023, or
earlier under certain conditions. The value sharing
between Pollen Street and Kingswood strongly
aligns interests. In addition, the Pollen Street board
members bring significant experience and expertise
to the execution of our strategy.
£44.8 million of this facility has been drawn to
date and on 31 December 2020 the Group had no
debt. Deferred liabilities of £4.1 million represent
deferred consideration obligations on acquisitions,
payable subject to underlying businesses meeting
certain performance conditions.
Kingswood is well capitalised today but remains
focused on maintaining capital flexibility and
balance within our funding structure. We have a
pipeline of circa £200 million in UK and numerous
possible targets in the US and feel there is a
significant opportunity to deploy additional capital
in the future.
We target minimum returns on investment of 20%
post integration into the Group. The combination
of revenue synergies, centralising key support
functions and ensuring cost efficiency within
the acquired businesses, enables us to drive an
enhanced return on invested capital. This takes
time to be reflected in overall Group results but
highlights the potential for the Kingswood Group
going forward.
11
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE GROUP CHIEF FINANCIAL OFFICER REVIEW CONTINUED
APPLICATION OF ACCOUNTING STANDARDS
Kingswood continues to balance the requirement
to meet all relevant technical accounting
standards with the need to provide shareholders
with a clear, commercial view of underlying
business performance. This is a particular
challenge for a company which is actively
growing its business through acquisitions where
accounting for acquisitions and related costs
under IFRS 3 requires Kingswood to treat certain
items differently to the underlying commercial
aspects of the business or transaction.
Kingswood commercially requires the principals
of acquired businesses to remain with the
business during the agreed earn out period to
ensure there is an alignment of interest between
both parties. To the extent principals leave prior
to the end of the earn out period, this would
result in them forgoing any deferred payments
due, notwithstanding whether agreed financial
metrics for the earn out have been met.
IFRS 3 currently dictates any deferred payments
subject to contingent employment are treated as
remuneration and expensed as paid as opposed
to being capitalised as consideration paid for the
acquired business.
In 2020 Kingswood therefore changed its
existing accounting treatment regarding
deferred consideration on acquisitions, and now
treats such contingent deferred payments as
‘remuneration’ when paid, rather than capitalise
into the value of the acquisition at completion.
This results in the statutory financial statements
delivering a result that is different to the
underlying commercial reality of the acquisition.
For these reasons, Kingswood adopts Operating
Profit as a key financial performance metric
and believes it provides a fairer reflection of
the Group’s profitability and underlying asset
value. Operating Profit measures underlying
business performance and removes the impact
of amortisation and depreciation, business
re-positioning costs and acquisition related
accounting treatments.
FINANCIAL PERFORMANCE
The business is in a financially strong position
and our large, existing client base proved highly
resilient delivering robust cash flows.
Year on year performance comparison is difficult
given the impact of acquisitions during the year.
In the UK, two acquisitions were completed in
2020, and in the US we acquired the Chalice
businesses and further invested in the Manhattan
Harbor Capital platform culminating in the
Kingswood Group holding a 50.1% interest
in the expanded and rebranded Kingswood
US in November 2020. Given we now hold a
controlling interest in the US business, from
mid-November 2020 we have consolidated the
financial performance of Kingswood US into our
Group results.
£’000 (UNLESS
OTHERWISE STATED)
UK
US
GROUP
Total Revenue
17,155
8,322
25,477
Recurring Revenue
Operating Profit
84%
319
12%
543
61%
862
Total Equity
AUA/AUM
(£ millions)
# of Advisers/
Authorised
Representatives
47,897
2,255
50,152
4,378
1,534
5,912
64
206
270
In the UK, total revenue for the year was
£17.2 million, a 71% increase on the prior year
reflecting the impact of recent acquisitions. 84%
of UK revenue is recurring in nature providing a
strong, annuity style fee stream which is critical
to delivering sustainable, long term returns to
shareholders.
The US business delivered strong performance,
largely driven by its active investment banking
business which continues to provide advisory
and underwriting support to its expanding client
basis. A total of 28 transactions were completed
in 2020, with 18 closed in the final quarter of
the year.
We have progressively expanded our US interests
as we become more familiar with the market and
put in a place a best in class infrastructure and
management team. Our initial move into the US
was in May 2019, with the acquisition of an initial
7% interest in Manhattan Harbor Capital (MHC),
a holding company that acquires, consolidates
and manages IBDs and RIAs across the US.
A further step was made in May 2020 with
12
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 the acquisition of Chalice Capital Partners
and Chalice Wealth Advisors which provide
full-service securities brokerage, advisory and
investment banking services to a range of
individuals and corporate clients.
The next stage was completed in November
2020 and saw Kingswood consolidate its US
investments into a 50.1% interest in MHC which
has been rebranded Kingswood US, with the
intention to contribute up to US$8m of additional
growth equity to build out the US distribution
channels through adviser recruitment and
acquisitions. This would take the total investment
to circa US$15m.
Kingswood also continues to expand its
investment banking operation, Kingswood Capital
Markets (KCM). KCM is a full- service investment
bank that provides companies with access to
capital necessary to build thriving and profitable
enterprises and has well-established relationships
that provide a steady stream of deal flow which
they then match with their global investor base.
This access to transcontinental capital is a strong
differentiator that sets KCM apart from its peers.
Group Operating Profit for the year was
£0.9 million, an improvement of £0.7 million
over 2019, while also noting 2020 performance
does not reflect a full year profitability impact
from Sterling Trust, Regency Investment Services
and the acquisition in the US of the Chalice
businesses which were completed during
the year.
M&A ACTIVITY
We are pleased with the progress made in
expanding the Kingswood network in the UK
and US, with five regional businesses acquired
in the UK over the last 2 years, in addition to
the progressive increase since May 2019 of our
US interests which are now combined within
Kingswood US.
We have strong private equity experience across
the senior management and have developed a
strong internal capability to complete transactions
quickly and efficiently, with a standardised
documentation and process to simplify due
diligence, execution, and subsequent integration.
Our selection process is rigorous, and we look
at many factors including cultural fit, client
focus and dedication, key personnel retention
to preserve and grow those client relationships.
Our model is to free up adviser time to focus on
their clients, and provide a centralised, efficient
support infrastructure. We are committed to
driving organic growth within every acquired
business and bring a ‘whole of wallet’ approach
where Kingswood can bring considerable
additional products and services to the table
for clients, generating revenue growth from the
existing client base.
Financially, we assess businesses on strict
performance parameters, with a focus not just on
revenue and profit measures but also on Assets
under Advice and Management (AuA/M) and
Return on Capital Employed (ROCE). We seek to
identify opportunities to enhance the revenue
yield on AuA/M by providing enhanced services
to clients. Post-acquisition, we benchmark
quarterly performance against these metrics and
adjust strategy and implementation accordingly.
The table below summarises UK acquisitions
completed to date. The average multiple paid is
6.8x EBITDA, or 1.9% of AuM/AuA.
DATE
ACQUISITION
PRICE
AUM/A
P/AUM ADVISERS
Oct-18 Marchant McKechnie
£4.0m
£200m 2.0%
Feb-19
Thomas & Co
£3.3m
£150m 2.2%
Sep-19 WFI Financial
£14.0m
£550m 2.5%
Jun-20
Sterling Trust
£17.8m £1,200m 1.5%
Sep-20
Regency
£3.5m
£320m 1.1%
Total
£42.6m £2,420m 1.8%
4
4
16
22
6
52
CURRENT
ANNUAL
OPERATING
PROFIT
TARGET POST-
SYNERGY
OPERATING
PROFIT
£0.9m
£1.1m
£0.5m
£0.7m
£2.0m
£2.2m
£2.5m
£2.8m
£0.5m
£0.7m
£6.4m
£7.5m
TARGET
ROI
28%
21%
19%
18%
20%
19%
Source: Internal investment memorandums / external due diligence reports
13
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE
GROUP CHIEF FINANCIAL OFFICER REVIEW CONTINUED
The US market is financially attractive from an
investment perspective given the relatively high
returns generated from a low capital commitment.
Our intention is to move as many of the broker-
dealer assets to the RIA model, which over
time will enhance quality of earnings given the
recurring fee-based nature of the RIA structure.
maintain a robust and disciplined balance sheet,
underpinned by Pollen Street’s growth equity
commitment and ensuring no deferred liabilities
remain uncovered from a funding perspective,
and a disciplined approach to expense
management.
PEEL HUNT
In April 2020 we were pleased to appoint Peel
Hunt as our Nominated Adviser (Nomad) and
broker as we continue our growth journey. Peel
Hunt are market leading in the UK mid and small
cap sector, providing Kingswood with expanded
access to investors as we seek to strengthen and
deepen our institutional investor base.
LOOKING FORWARD
We have an active transaction pipeline in UK and
US, and a strategy that provides a hedge against
UK centric businesses and enhances quality of
earnings. Kingswood’s financial strategy is to
The implementation of our change management
programme to improve the cost/income ratio and
enhance margins is beginning to bear fruit. Our
focus is to maximise shareholder returns through
EBITDA growth combined with minimising our
weighted average cost of capital and closing the
current market valuation gap to reflect our true
underlying valuation.
Patrick Goulding
Group Chief Financial Officer
June 2021
14
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 PRINCIPAL RISKS AND UNCERTAINTIES
The Board is ultimately responsible for the management of risk and regularly considers the most
significant and potential risks likely to impact delivery of the Group’s strategy. The Board also has
responsibility for implementing and maintaining a Group-wide system of internal controls and a robust
risk management framework, and to regularly review the efficiency and effectiveness of those systems
and frameworks.
Daily, our risk assessment process considers both the likelihood and impact of risk events which could
prevent the implementation of Group strategy and have a material impact on the performance of the
Group. These risks can arise from internal or external events. The principal risks identified as having a
potential material impact on the Kingswood Group are summarised below together with our mitigation
strategies. This list is by no means exhaustive and can and will change over time.
RISK
DESCRIPTION
MITIGATION
OUTLOOK
INDUSTRY RISKS
Regulatory Risk There remains a significant
• Professionally staffed compliance
Market Risk
amount of regulatory change
to be implemented and/or
managed. Failure to correctly
identify, interpret or implement
regulatory change may result
in an adverse impact for
Kingswood.
The COVID-19 global
pandemic is impacting
economic and financial
markets and volatility may
adversely affect advice and
other services provided in
addition to trading volumes
and the value of client assets
under management from
which we derive fee
revenue.
department monitoring, interpreting
and with business leaders
implementing the latest FCA
development.
• A Risk & Compliance Committee is in
place and chaired by an independent
Non- Executive Director and includes
participation by UK CEO, Group CRO,
Group CFO and other senior staff
• A suite of mandatory compliance
training modules is in place for all staff
• Broad range of client solutions offered
to clients enabling them to protect
assets through diversification, and
continuing to generate revenues
• Our Investment Committee closely
monitors and manages market
movements
• Many clients are invested in tax
advantaged investment products with
a long-term focus and are unlikely
to withdraw funds in short term and
jeopardise tax status
15
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK
DESCRIPTION
MITIGATION
OUTLOOK
OPERATIONAL RISKS
Operational
Resilience
Risk of a negative impact
on clients, firm profitability,
staff, and other stakeholders
because of operational
disruption (e.g. due to internal
or external factors).
• Throughout the COVID-19 pandemic,
Kingswood has benefited from robust
cloud based operating systems
allowing staff to seamlessly transition
to remote working
• Core systems are cloud based allowing
Suitability of
Advice
There is a risk of providing
unsuitable advice or a
failure to confirm ongoing
suitability.
Reliance on
Third Party
Service
Providers
Kingswood partners with
best-in-class experts for
certain key services- a financial
or operational failure of our
strategic partners could result
in an adverse impact on our
ability to service clients.
Business
Conduct
The risk of poor business
conduct resulting in client
outcomes that do not
meet their needs and
circumstances.
for ease of remote access
• The Company continues to invest in
improved IT connectivity and leading-
edge systems to improve resilience
and ensure continued service to
clients
• We maintain a skilled wealth planning
workforce, trained to the highest
industry standards
• A professional compliance team
provides training, oversight, and
ongoing monitoring to ensure that
high standards are maintained
• Senior management provide direct
oversight to ensure ongoing suitability
of advice to clients
• A third-party management framework
is in place and overseen by the
Group COO and Group CRO. This
framework ensures extensive financial
and operational due diligence is
undertaken at the outset of 3rd
party relationships and is continually
monitored on an ongoing basis
• Contracts are in place with clear
Service Level Agreements (SLAs) for all
key suppliers
• Training & Competence programme in
place for all client facing staff
• Kingswood culture is focused on client
outcomes
• Professionally staffed compliance
department providing additional
oversight
16
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 RISK
DESCRIPTION
MITIGATION
OUTLOOK
OPERATIONAL RISKS CONTINUED
Data Protection
& Cyber
Security
People Risk
External attacks on
information technology
systems could lead to loss
of client data and breaches
of data protection laws likely,
resulting in regulatory fines,
reputational damage, and
financial remediation claims
from clients.
Increasing workloads, key
person risk or inability to
adequately staff key roles
could result in adverse
business impact.
Financial Crime Risk of Fraud, Money
Laundering, Bribery &
Corruption, Sanctions,
Terrorism Financing, Tax
Evasion, Market Abuse,
Insider Dealing.
• Continual focus on data security,
including penetration testing and
‘phishing’ exercises.
• IT security & awareness training
regularly conducted for all staff
• Senior management oversight of IT
capability and resilience
• Competitive pay and benefits
• HR policies and procedures overseen
by HR director.
• Several HR initiatives aimed at
improving employing wellbeing.
• Training and development programme
in place to help staff advance their
careers
• The Money Laundering Reporting
Officer (MLRO) oversees the
implementation of financial crime
prevention policies and procedures
• An MLRO report is reviewed annually
by the Risk & Compliance Committee.
The number of high-risk clients is low
• An electronic ID verification system is
in place for all new clients
• Awareness of Financial Crime policies
& procedures across the Group is
maintained through regular training
Investment
Restrictions
There is a risk of breaching
regulatory, product or client
driven investment restrictions.
This could result in the need
to compensate clients and/or
lead to regulatory censure.
• Mandate restrictions are well
understood by experienced
investment management team
• Pre & Post trade alerts in place
• Investment Oversight Committee
monitors ongoing adherence to
portfolio strategies
17
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE CORPORATE
RESPONSIBILITY
STATEMENT
At Kingswood, we have a strong
Environmental, Social and Governance
(ESG) focus and prioritise being a
responsible corporate citizen.
We are committed to doing right by our
stakeholders – our clients, shareholders, staff,
suppliers and chosen charity partners.
Through 2020, we continued as a team, where
possible, to participate in volunteer work. We
launched a new career development programme
- the Kingswood Academy - to nurture talented
people and provide them with the skills needed
to provide effective financial advice and develop
a successful career in wealth management. We
also strived to continue to reduce our carbon
footprint, whether at the office or working
from home.
ESG / CSR has been added as a Board agenda
item and for the second year we have initiated a
group wide audit on how Kingswood is addressing
and responding to ESG issues – this includes not
only how we operate as a company but how our
actions impact our service offering to clients.
All steps and actions we take as a growing
company are moving us in the right direction
to be a responsible corporate citizen in the
communities in which we operate.
THE ENVIRONMENT
The main environmental impacts centre around
employee travel to and from the office and the
consumption of resources within our offices.
To reduce this impact, we offer all staff the
opportunity to participate in a cycle to work
scheme and a flexible working policy whereby
staff can choose to work a portion of their time
from home. We have also introduced recycling
and compost bins in most offices and encourage
minimal printing and consumption of paper. We
plan to roll this out to all offices in 2021.
We continue to enhance client communications
through the effective use of technology, including
the use of DocuSign (an electronic signature
system eliminating the need for wet signatures on
hard paper copies) and a new online client portal
to enable clients to directly access information,
eliminating the need to mail paper reports. All
these steps are to support our goal of a paperless
environment.
We partner with Trees for Life and plant a tree
for every client who registers on the portal and
goes paperless. Our goal is to have 95% of clients
accessing the online portal by June 2022 and
simultaneously re-wilding the Scottish Highlands.
In the last 6 months we estimate to have saved
at least 2,375 kg of wood, 58,364 litres of water,
5,575 kg of carbon and 386 kg of waste.
ETHICAL INVESTMENTS
Within our client proposition we offer clients
a suite of ESG portfolios which consider
environmental and ethical matters.
Our objective is to not only generate financial
returns, but to also generate a positive impact on
the environment and society. We believe strong
corporate governance is imperative to sustainably
meet this objective.
To help target the world’s salient environmental
and societal issues, we integrate the United
Nations Sustainable Development Goals
(UN SDGs) into our process, using them as
a framework to guide our idea generation.
Whilst we may invest in a fund to target one
environmental or societal theme/goal, what is
common across each fund in our portfolios is an
additional strict focus on governance.
In addition, in 2020 we launched the Kingswood
ESG Bond Fund, which provides institutional
clients access to “ESG responsible” investment
solutions.
OUR SUPPLIERS
As a financial services company, we do not
manufacture goods nor do we have a complex
supply chain. We believe in only engaging
suppliers who align with our values including for
anti-Modern Slavery and Human Trafficking.
2,375 kg
of wood
58,364 L
of water
5,575 kg
of carbon
386 kg
of waste
18
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 CHARITIES AND COMMUNITIES
In recent years we have partnered with
Benefacto.org and grant all staff 2 days per year
to volunteer in the community. Unfortunately,
during COVID-19, community work couldn’t
happen but some of our teams volunteered
virtually by donating food and old mobile phones
to those in need. We have also pledged to donate
£25,000 to charity on behalf of staff in lieu of a
day’s annual leave.
WORKPLACE
We are committed to creating a workplace
and culture that is welcoming and inclusive for
everyone.
We currently have 206 employees in total across
the Group:
Gender
Earlier this year we launched Kingswood
Community Week, which will take place in
September 2021, when as a firm employees
will take a day away from the office apply their
experience and skills to make a meaningful and
positive contribution to their local communities.
Employees will work alongside colleagues,
community partners, family members and
suppliers to make a difference. Kingswood
Community Week is driven by team members
with projects sourced and initiated by staff
around the country, giving them the ability to
choose where they want to lend a hand and can
be most helpful.
Kingswood Community Week will be an annual
event and is designed to create shared value
by driving community engagement, employee
wellbeing and development for the Kingswood
team, their families, and the communities we
interact with on a day-to-day basis.
Male
112
54.4%
Males
112
54.4%
Female
94
45.6%
Age
>50
61 people
29.6%
<30
39 people
18.9%
30 to 50
106 people
51.5%
Diversity and inclusion are a cornerstone of our
philosophy and culture and during the year an
employee-led Diversity and Inclusion Forum
was launched to encourage creative ideas and
action to further embed diversity and inclusion
as a central tenet of our business corporate
culture. We are proud to be an equal opportunity
employer committed to recruiting and maintaining
a diverse workforce irrespective of race,
religion, age, disability, gender or sexual
orientation or bias.
19
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020STRATEGYGOVERNANCEFINANCE
CORPORATE
GOVERNANCE
STATEMENT
The Directors of Kingswood Holdings
Limited recognise the importance of
sound corporate governance and have
chosen to apply the Quoted Companies
Alliance Corporate Governance Code (the
QCA Code). The QCA Code takes key
elements of good governance and applies
them in a manner that is workable for the
different needs of growing companies
and was developed by the Quoted
Companies Alliance as an alternative
corporate governance code applicable
to AIM companies.
Jonathan Freeman, in his capacity as an
independent Non-Executive Director, has
assumed responsibility for ensuring that the
Group has appropriate corporate governance
standards in place and that these requirements
are followed and applied within the Group as a
whole. The QCA Code corporate governance
arrangements that the Board has adopted are
designed to ensure that the Group delivers
long term value to its shareholders and that
shareholders have the opportunity to express
their views and expectations for the Group in a
manner that encourages open dialogue with the
Kingswood Holdings Limited Board.
The Directors have structured the relationship
between the Board of the Group holding
company, Kingswood Holdings Limited and the
individual ‘Subsidiary Boards’ which represent
KW Investment Management Limited and
KW Wealth Planning Limited, the operational
companies regulated by the FCA, and KW Wealth
Group Limited which is the holding company for
the Group’s US investments.
Kingswood Holdings Limited’s Board has the
responsibility to set strategy for the Group and
to monitor the performance of its operating
subsidiaries. The Subsidiary Boards have the
responsibility to oversee, govern and direct the
operations of the subsidiary entities in line with
relevant rules and regulations and overall Group
strategy.
The respective Boards have established various
committees, each of which has written terms
of reference. The principal committees are the
Audit, Nomination and Remuneration, and Risk &
Compliance Committees.
The principal methods of communicating the
application of the QCA Code are this Annual
Report and the Group’s website which sets out
the 10 QCA Code principles and how Kingswood
Holdings Limited complies with those principles
and the related disclosures: www.kingswood-
group.com/corporate-governance. The Group
applies all the QCA principles in full
CORPORATE GOVERNANCE STRUCTURE
The role of Non-Executive Chairman is held by
Kenneth ‘Buzz’ West. The Board considers that
the Non-Executive Directors provide a strong
and consistent independence to the Executive
members. None of the Non-Executive Directors
is involved in the day-to-day management of the
Group and are free from any business or other
relationship which could materially interfere
with their judgement. Biographies of the
Non-Executive Directors are contained on pages
28 to 29.
During the year ended 31 December 2020, the
Non-Executive Chairman was responsible for
leadership of the Board, creating conditions for
the effectiveness of the Board and individual
Directors and developing the Group’s strategy.
The Group Chief Executive Officer was
responsible for running the Group’s business
day to day and, subject to Board agreement, the
implementation of strategy.
The minutes of scheduled meetings of the Board
are taken by the Company Secretary. In addition
to constituting records of decisions taken, the
minutes reflect questions raised by Board members
in relation to the Group’s business and, in
particular, issues arising from the reports included
in the Board or Committee papers circulated prior
to the relevant meeting. Unresolved issues (if any)
are recorded in the minutes.
20
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
Corporate governance and the management
of the Group’s resources is achieved by regular
review and discussion, through meetings and
conference calls, monthly management accounts,
presentations and external consultant reports
and briefings.
INDEPENDENCE OF BOARD DIRECTORS
The Board considers that all Non-Executive
Directors bring an independent judgement.
The QCA code recommends that at least
two independent Non-Executive Directors
sit on the Board. The Board currently has
eight members, with two Executive and six
Non-Executive Directors. Kenneth ‘Buzz’
West, Jonathan Freeman and Robert Suss are
considered ‘independent’. Jonathan Massing,
Howard Garland and Lindsey McMurray are
not considered independent due to the size
of shareholding they are directly or indirectly
associated with.
BOARD COMPOSITION
During the year under review, the Board comprised:
Graydon Butler
Jonathan Freeman
Howard Garland
Patrick Goulding
David Hudd
Jonathan Massing
Lindsey McMurray
Robert Suss
(Executive Director, resigned 31 December 2020)
(Non-Executive Director)
(Non-Executive Director)
(Executive Director, resigned 31 December 2020)
(Executive Director, Legal Consultant)
(Deputy Non-Executive Chairman)
(Non-Executive Director)
(Non-Executive Director)
Kenneth ‘Buzz’ West
(Non-Executive Chairman)
Gary Wilder
(Group Chief Executive Officer)
The Board has scheduled meetings on a bi-monthly basis. The Board formally met six times throughout
the year.
Meetings of the Board are held at the Group’s offices in London or via conference call. In person
meetings of the Subsidiary Boards take place at least quarterly.
The number of main Board meetings and committees held in 2020 and individual attendance was
as follows:
DIRECTOR
Graydon Butler
Jonathan Freeman
Howard Garland
Patrick Goulding
David Hudd
Jonathan Massing
Lindsey McMurray
Robert Suss
Kenneth 'Buzz' West
Gary Wilder
AUDIT
COMMITTEE
NOMINATION &
REMUNERATION
COMMITTEE
RISK &
COMPLIANCE
COMMITTEE
4/4
4/4
2/2
1/1
9/9
9/9
2/2
1/1
BOARD
5/6
6/6
6/6
6/6
5/6
5/6
4/6
5/6
6/6
6/6
21
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
CORPORATE GOVERNANCE STATEMENT CONTINUED
The Board has approved a formal schedule of
matters reserved for consideration and decision.
These are divided into several key areas,
including but not limited to:
• Constitution of the Board, including its
various Committees, and succession planning
(as recommended by the Nomination and
Remuneration Committee)
• Group strategy and transactions
• Financial reporting (including approval of
interim and final financial statements)
• Group finance, banking, and capital structure
arrangements
• Regulatory matters (including the issue of
shares, communication, and announcements
to the market)
• Group compliance risk management
and control processes and decisions (as
recommended by the Audit and Risk and
Compliance Committees)
• Approval of remuneration policies (as
recommended by the Nomination and
Remuneration Committee)
• Approval of Group policies in respect of,
inter alia, Health and Safety, Corporate
Responsibility, and the Environment; and
• Human Resource issues or concerns
Matters requiring Board and Committee approval
are generally the subject of a written proposal
by the Executive Directors to the Board (or
Committee) and circulated prior to the relevant
meeting. All Directors receive appropriate
information on the Group comprising a financial
report and other relevant paperwork from each
of the responsible executives and other members
of senior management before each scheduled
Board meeting. The Executive Directors and
other invited members of senior management
present reports to each meeting on key issues
including strategy, risk & compliance, finance,
operations, people, and legal matters.
The Board recognises the importance of on-
going professional development and education,
particularly in relation to new laws and
regulations potentially impacting the business
of the Group. Such training may be obtained
by Directors individually or through the
Group. Directors also maintain knowledge and
skills through their day-to-day roles and may
additionally obtain independent professional
advice at the Group’s expense. Third party
Directors’ and Officers’ liability insurance at a
level considered appropriate for the size and
nature of the Group’s business is maintained.
The terms and conditions of each Director’s
appointment are available for inspection at
the Group’s head office in London during
normal business hours. The letters of
appointment of each Non-Executive Director
specifies the anticipated level of time and
commitment including, where relevant,
additional responsibilities in respect of the
Audit, Nomination and Remuneration and
Risk and Compliance Committees. Details
of other material commitments of the Non-
Executive Directors are disclosed to the Board
and maintained in a register by the Company
Secretary.
SUBSIDIARY BOARDS
Each of the Group’s UK operating subsidiary
companies has a separate Board which meets at
least quarterly to discuss key matters pertaining
to the subsidiaries’ activities. The UK Chief
Executive Officer, Group Chief Financial Officer,
Jonathan Freeman (Non-Executive Director) and
Howard Garland (Non-Executive Director) sit
on each of the operating subsidiary boards, with
Jonathan Freeman chairing them.
The Group’s US interests are ultimately held
through its subsidiary company KW Wealth
Group Limited and to date US investments have
been reviewed by the Group Board. However,
now that the US business is being consolidated
into the Group accounts, there will be a separate
subsidiary Board which will meet at least
quarterly to review and discuss key matters
relating to Kingswood’s US activities, and include
updates from key US executives as necessary.
22
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
BOARD COMMITTEES
The Board has established committees including
Audit, Nomination and Remuneration and Risk
& Compliance, each with separate terms of
reference. These are available for viewing at
Kingswood’s London office and on the Group’s
website: www.kingswood-group.com.
AUDIT COMMITTEE
The Audit Committee is chaired by Jonathan
Freeman with Buzz West joining in January 2020
and Jonathan Massing in January 2021. The
Audit Committee is responsible for providing
formal, transparent arrangements to the
application of suitable financial reporting and
internal control principles having regard to good
corporate governance. The committee is also
responsible for monitoring the external audit
function including the independence, objectivity
and cost-effectiveness of the Group’s external
auditor.
The independence and effectiveness of the
external auditor is reviewed annually. The
possibility of undertaking an audit tender
process is considered on a regular basis. The
Audit Committee meets at least twice a year
with the auditors to discuss their appointment,
independence and objectivity, the issuance of
the Interim and Annual Reports and any audit
issues arising, internal control processes and
any other appropriate matters. Fees in respect
of audit services are set out in note 5 of the
Notes to the Financial Statements. Fees for
non-audit services paid to the auditors are
not deemed to be of such significance as to
impair independence and therefore the Audit
Committee considers the objectivity and
independence of the auditors safeguarded.
and reports to the Board when appropriate with
recommendations. The annual review of internal
control and financial reporting procedures
did not highlight any issues warranting the
introduction of an internal audit function. It
was concluded, given the current size and
transparency of the operations of the Group,
that an internal audit function was not required
at this time. The main features of the internal
control system are outlined below:
• A control environment exists through
close management of the business by the
Executive Directors. The Group has a defined
organisational structure with delineated
approval limits. Controls are implemented and
monitored by the Executive Directors.
• The Board has a schedule of reserved
matters expressly for its consideration and
this includes approval of acquisitions and
disposals, major capital projects, treasury and
risk management and approval of business
plans and budgets.
• The Group utilises a detailed budgeting and
forecasting system. Detailed budgets are
prepared annually by the Executive Directors
and senior management and submitted to the
Board for approval. Forecasts are regularly
updated to reflect changes in the business
including cash flow projections and are
monitored by the Board. Actual results are
monitored against budgets and variances
reviewed by the Board.
• Financial risks are identified and evaluated
for consideration by the Board and senior
management; and
INTERNAL CONTROL
The Board is responsible for establishing and
maintaining the Group’s system of internal
control and for reviewing its effectiveness. The
system of internal control is designed to manage,
rather than eliminate, the risk of failure to
achieve business objectives and can only provide
reasonable, but not absolute, assurance against
material misstatement or loss.
The Audit Committee monitors and reviews the
effectiveness of the system of internal control
• Standard financial control procedures are
operated throughout the Group to ensure
assets are safeguarded and proper accounting
records maintained.
NOMINATION AND REMUNERATION
COMMITTEE
In March 2019, the Board approved combining
the then separate Nomination and Remuneration
Committees into one Committee. This
Committee was chaired by David Hudd until he
became an Executive Director in July 2020 at
23
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 CORPORATE GOVERNANCE STATEMENT CONTINUED
which time Buzz West joined the Nomination
and Remuneration Committee as Chairman.
Jonathan Freeman is also on the Committee.
The Nomination and Remuneration Committee
is responsible for the consideration of Board
appointments, the review of Board structure,
its size and composition and the identification
of future Board requirements by reference to
the balance of skills, knowledge and experience
present on the Board and the scale and direction
of the Group.
The Committee is also responsible for
establishing a formal and transparent procedure
for executive remuneration policy and to
determine the remuneration packages of
individual Directors. This includes agreeing with
the Board the framework for remuneration of the
Group Chief Executive Officer, other Executive
Directors, the Company Secretary, and such
other members of the executive management of
the Group as it is designated to consider.
It is also responsible for determining the total
individual remuneration packages of each
Director including, where appropriate, bonuses,
incentive payments and share options. No
Director is involved in a decision regarding their
personal remuneration. The Board considers
the current composition of the Nomination and
Remuneration Committee appropriate given the
size of the Group.
There were two Nomination and Remuneration
Committee meetings held during the financial
year ended 31 December 2020.
REMUNERATION POLICY
The Board retains responsibility for overall
remuneration policy. Executive remuneration
packages are designed to attract and retain
executives with the necessary skill and
experience to hold a senior management role
in the Group. The Committee recommends
to the Board the remuneration packages by
reference to individual performance and uses
the knowledge and experience of the Committee
members, published surveys relating to AIM
companies, the financial services industry and
market changes generally. The Committee has
responsibility for recommending any long-term
incentive schemes.
The Board determines if Executive Directors
are permitted to serve in roles with other
companies. Such permission would be granted
on a strictly limited basis, where there are no
conflicts of interest or competing activities
and providing there is not an adverse impact
on the commitments required to the Group.
Earnings from such roles would be required to be
disclosed to the Committee Chairman.
There are four main elements of the
remuneration package for Executive Directors
and executive staff:
1. Basic salaries and benefits in kind: Basic
salaries are recommended to the Board by the
Committee, based on the performance of the
individual and the compensation for similar
positions in comparable companies. Benefits
in kind including death in service cover are
available to all staff and Executive Directors.
Benefits in kind are non-pensionable.
2. Share options: The Company operates
approved share option schemes for key
personnel to incentivise performance through
equity participation. Exercise of share options
under the schemes is subject to defined
exercise periods and compliance with the
AIM Rules. The schemes are overseen by the
Nomination and Remuneration Committee
which recommends to the Board all grants
of share options based on the Committee’s
assessment of personal performance and
specifying the terms under which eligible
individuals may be invited to participate.
The AIM rules refer to the requirement for
performance related elements of remuneration
to form a significant proportion of the total
remuneration package of Executive Directors
and should be designed to align their interests
with those of shareholders. The Nomination
and Remuneration Committee currently
considers that the best alignment of these
interests is through the continued use of
performance incentives through the award of
share options in the Company’s existing LTIP
awards scheme.
3. Bonus scheme: The Group has a discretionary
bonus scheme for Executive Directors and
staff which is specific to each individual and
their role within the Group.
24
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
STRATEGY
GOVERNANCE
FINANCE
We are committed to
invest in, motivate and
incentivise talented people
to grow and develop their
Kingswood careers
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
25
CORPORATE GOVERNANCE STATEMENT CONTINUED
4. Pension contributions: The Group pays a
defined contribution to the pension schemes
of Executive Directors and staff. The individual
pension schemes are private, and assets are
held separately from those of the Group.
No Director has a service contract for longer
than 12 months.
POLICY ON NON-EXECUTIVE
REMUNERATION
All Non-Executive Directors, except Pollen Street
Capital’s representatives to the Board, receive
a fee for their services as a Director which is
approved by the Board, mindful of their time
commitment and responsibilities and current
market rates for comparable organisations
and roles. Non-Executive Directors are also
reimbursed for travelling and other incidental
expenses incurred on Group business.
The Board encourages the ownership of shares
in the Company by Executive and Non-Executive
Directors and in normal circumstances does not
allow Directors to undertake dealings of a short-
term nature.
Ownership of the Company’s shares by Non-
Executive Directors is considered a positive
alignment of interest with shareholders. The
Board periodically reviews the shareholdings of
Non-Executive Directors and seeks guidance
from its advisors if, at any time, it is concerned
that the shareholding of any Non-Executive
Director may, or could appear to, conflict
with their duties as an independent Non-
Executive Director of the Company. Directors’
remuneration, including Directors’ interests in
share options over the Company’s share capital,
are set out in the Directors’ Report (page 30) and
the Directors’ Remuneration Report (page 34).
RISK AND COMPLIANCE COMMITTEE
The Board has established a Risk and Compliance
Committee comprising an independent Non-
Executive Director, senior management and
the FCA Compliance Oversight function holder
(was CF10, now SMF16 and SMF17). The
Committee Chairman is Jonathan Freeman, a
Non-Executive Director of the Company. The
Committee generally convenes monthly and
the Board considers the composition of the
Committee appropriate given the size of the
Group’s business. During the year under review,
the Committee formally met 9 times.
The Risk and Compliance Committee is
authorised and empowered by the Board to, inter
alia, provide oversight and advice to the Board
in relation to current and potential risk exposure
and future compliance and risk strategy to review
the Group’s risk profile relative to current and
future risk appetite, to monitor risk and make
recommendations to the Board concerning all
elements of the Group’s compliance with the
FCA’s rules and those of the London Stock
Exchange, and to make recommendations to the
Board in respect of the Group’s risk appetite. The
Risk and Compliance Committee also oversees
the Group’s risk management framework
to ensure effective risk identification and
management throughout the Group.
Certain subsidiaries in the Group are regulated
by the FCA and are always therefore required to
maintain adequate regulatory capital. An Internal
Capital Adequacy Assessment Process (ICAAP) is
used to ensure there is sufficient capital in place
to immediately cover risks identified through
its risk management framework. The ICAAP is
regularly updated and reviewed and approved
by the Risk and Compliance Committee and the
Board on an annual basis.
In addition, the Group utilises various other
means to ensure compliance with the rules and
guidelines set by the FCA and that it operates
within the appropriate risk limits set by the
Board. These include a compliance manual
covering significant business and operational
activities, policies covering conflicts of interest,
insider dealing, market abuse, personal account
dealing and client acceptance procedures as well
as regular monitoring of market and credit risk.
These matters are the subject of regular review
by the Risk and Compliance Committee.
RE-ELECTION
Under the Company’s articles of association, all
Directors are subject to election by shareholders
at the AGM immediately following appointment.
All Directors formally retire by rotation at
intervals of no more than three years, requiring
re-election by shareholders.
26
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
PERFORMANCE EVALUATION
The composition of the Board is regularly
reviewed to ensure it maintains the necessary
depth and breadth of skills to sustain the delivery
of the Group’s long-term strategy. The Board is
committed to ensuring it maintains the necessary
combination of skill, experience, and gender
balance.
CORPORATE CULTURE AND SOCIAL
RESPONSIBILITY
The Board seeks to maintain the highest
standards of integrity in the conduct of
the Group’s operations. An open culture is
encouraged within the Group with regular
communications and meetings with staff where
open dialogue and feedback is sought.
The Group is committed to conducting its
business in a socially responsible manner and
to respect the needs of employees, investors,
customers, suppliers, regulators, and other
stakeholders. The Group is also committed to
being a responsible employer and to promoting
values, standards and policies designed to assist
our employees in their conduct, working and
business relationships.
The most significant impact on the environment
from the Group’s activities is the emission of
greenhouse gases as a result of running the
Group’s offices, associated travel, and the
recycling of waste. The Group is committed
to minimising the amount of travel employees
undertake and to recycling as much of the
Group’s waste as possible. The Group will
continue to look at ways to act in a socially
responsible manner.
The Group has recently launched a Diversity
and Inclusion Forum, run by employees, to
encourage creative ideas and action to further
embed diversity and inclusion as a central tenet
of its corporate culture. Kingswood is proud to
be an equal opportunity employer committed to
recruiting and maintaining a diverse workforce
irrespective of race, religion, age, disability,
gender or sexual orientation or bias.
Evaluations of the Board, the Committees
and individual Directors are undertaken on
an annual basis in the form of peer appraisal,
questionnaires, and discussions to determine
effectiveness and performance. This includes a
review of success in achieving annual objectives
set by the Board. The Board may utilise the
results of the annual evaluation process to
identify training and development needs and
succession planning.
RELATIONSHIP WITH SHAREHOLDERS
AND DIALOGUE WITH INSTITUTIONAL
SHAREHOLDERS
The Chairman, the Group Chief Executive Officer
and the Group Chief Financial Officer maintain
dialogue with key shareholders in relation to
strategy and corporate governance issues.
All shareholders receive the Annual Report
incorporating audited financial statements and
are welcome to attend the Company’s AGM. The
Directors attend the meeting and are available
to answer questions both formally during the
meeting and informally afterwards.
The collection and analysis of shareholder proxy
votes is handled independently by the Group’s
registrars. The Chairman announces the results
of the proxy votes lodged after shareholders
have voted on a show of hands. All Committee
chairmen are, where possible, available at the
AGM. The Non-Executive Directors are available
to shareholders and may be contacted through
the Group Chief Executive Officer’s office.
The Group’s website at www.kingswood-group.
com is an important source of information for
investors, including information required in
compliance with AIM Rule 26, and is updated
regularly.
27
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
BOARD OF DIRECTORS
KENNETH ‘BUZZ’ WEST Non-Executive Chairman
Buzz is Non-Executive Chairman of the Board, Chairman, and a member of the Audit Committee.
He is also Chairman of the Nomination and Remuneration Committee. He is highly experienced in
the financial services arena having held numerous Board positions in addition to being Founder and
Chairman of the AIM-listed wealth manager Ashcourt Rowan. Buzz sits on the Board of the Toronto
listed Auxico Resources Canada Inc. He is currently an advisor to several high-tech companies
including the Cyber training and qualification company, Qufaro. With a strong entrepreneurial
background, Buzz brings a track record of achieving success for shareholders and as Chairman he
led the loss adjustors, GAB Robins, from a management buyout (MBO) to successful trade sale. He
uses his experience in both wealth management and the AIM market to lead the Board and drive
Kingswood’s strategic direction.
JONATHAN MASSING Non-Executive Deputy Chairman
Jonathan is Non-Executive Deputy Chairman and, since 1 January 2021, is a member of the
Audit Committee. He brings wide ranging experience to the Board, in particular in corporate
finance and acquisitions. He has a strong background in commercial and corporate finance
advisory, buyouts, venture capital, shareholder dispute advisory, and private businesses valuation.
Jonathan is a Chartered Accountant and has extensive experience in the sale and acquisition of
private companies and provides advice on debt structures and working capital facilities. In 1998
he set up Kingswood Investment Partners Limited as a private equity investor. He is also a founder
of Kingswood Property Finance Limited Partnership and founded a City-based advisory firm
Kingswood in 1993.
Joined the Board in
January 2014
Joined the Board in
October 2017
GARY WILDER Group Chief Executive Officer
Gary is a Chartered Accountant and a graduate of the Cass Business School, University of London.
He has over 30 years’ experience in pan-European private equity and real estate, particularly in
investment, capital raising, structuring, debt financing and asset management. He is the co-founder
of Kingswood Property Finance Limited Partnership where he made a series of long-term strategic
investments in financial services. Gary’s key responsibilities include building strategic relationships
with new and existing investors, bankers, financial advisers and directing capital raising efforts to
the growth and expansion of the platform.
Joined the Board in
October 2017
DAVID HUDD Legal Consultant, Executive Director
David joined the executive team as Legal Consultant on 1 July 2020 having previously been a
non-executive director of the Company since June 2018. David is responsible for all legal affairs
of the Group. David trained as a solicitor with Linklaters and after a successful career as an
investment banker in structured finance joined Hogan Lovells, the international law firm, as a
partner in 1994. He was consistently ranked as a market-leading lawyer for over 25 years.
From 2005 David led the firm's global finance practice before assuming the role of Deputy CEO
in 2014. He retired from this position and as a partner in June 2020 but continues to serve as
Senior Counsel at Hogan Lovells. David earned his MA Jurisprudence (Oxon) in 1980 and qualified
as a solicitor in 1983.
Joined the Board in
June 2018
28
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 JONATHAN FREEMAN Non-Executive Director
Jonathan is a Non-Executive Director and chairs the Audit Committee and the Risk and
Compliance Committee. He is also a member of the Nomination and Remuneration Committee.
He is a seasoned corporate financier and company director with extensive experience of listed
companies, financial services and FCA regulated entities. This experience is important to the
Group as it is quoted on AIM and subsidiary entities are regulated by the Financial Conduct
Authority in the UK. Jonathan is also the senior independent non-executive director of
Futura Medical plc.
Joined the Board in
June 2018
HOWARD GARLAND Non-Executive Director
Howard holds a First-Class Honours degree in Mathematics from University College London.
Howard is a partner at Pollen Street Capital and a member of its private equity and credit
investment committees. Howard re-joined Pollen Street Capital in 2015 having been a Principal
at RBS until 2012. Prior to re-joining Pollen Street Capital as Partner in 2015, Howard assisted
the Swedish credit institution Hoist Finance in entering the UK debt collecting and NPL debt
purchasing sector, supporting the acquisition of a number of UK companies and debt portfolios in
both structuring and operational roles. Howard is also on the Board of BIK Brokers Group.
Joined the Board in
December 2019
LINDSEY MCMURRAY Non-Executive Director
Lindsey holds a First-Class Honours degree in Accounting and Finance and holds an MPhil
in Finance from Strathclyde University. Lindsey has been a private equity and credit investor
for more than 26 years with a focus on the financial and business services sector. Alongside
Kingswood, Lindsey sits on the Boards of Shawbrook Bank, CashFlows, 1st Stop Group and
BidX1. Lindsey co-founded Pollen Street Capital in 2005 and serves as Managing Partner.
Lindsey is the Chairman of the Pollen Street Capital’s private equity and credit investment
committees. Prior to Pollen Street Capital, Lindsey worked at RBS and spent six years at Cabot
Square Capital, where she was a Partner focused on investments in the financial services sector.
Joined the Board in
December 2019
ROBERT SUSS Non-Executive Director
Robert Suss is a Non-Executive Director and sits on the Board to advise on wealth management
strategy. Robert is the Co-Chief Executive Officer of UK Agricultural Finance, a specialist lender in
the UK serving the agricultural community as well as the founder of Global Tower Solutions, focused
on delivering renewable solutions globally. Robert Chairs the Advisory Board for EG Capital an
Emerging Market Debt Manager and he serves as a director for TPG Pace Holdings and
B. Riley Principal Merger Corp. Rob Suss retired from his position as a Managing Director of
Goldman Sachs where he spent 18 years building and turning around a number of businesses in
their Investment Management Division. His last role was as Head of Private Wealth Management in
London from 2012 to 2015.
Joined the Board in
June 2019
29
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 DIRECTORS’ REPORT
The Directors present their annual
report on the affairs of the Group,
together with the audited financial
statements, for the year to 31 December
2020. The Corporate Governance
Statement is set out from page 20
onwards. All financial information given
in this Directors’ Report is taken solely
from the statutory results prepared in
accordance with International Financial
Reporting Standards as adopted by
the EU (IFRS).
PRINCIPAL ACTIVITIES
The principal activities of the Group are the
operation of a financial planning and investment
management business.
FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
Information about the Group’s risk management
is included in the Strategy section under Risks &
Uncertainties.
RESULTS AND DIVIDENDS
The Group’s performance during the year is
discussed in the Strategy section on pages
2 to 19. The results for the year are set out
in the audited Consolidated Statement of
Comprehensive Income on page 44. The
Directors do not recommend the payment of a
dividend for the year ended 31 December 2020
(31 December 2019: £nil).
CAPITAL STRUCTURE
Details of KHL’s issued share capital, together
with details of the movements in the number of
shares during the year, are shown in notes 25
and 26.
CAPITAL MANAGEMENT
The primary objective of the Company’s
capital management strategy is to maintain
a strong capital structure in order to support
the development of its business, to maximise
shareholder value and to provide benefits for its
other stakeholders. Details of the management
of this risk can be found in the Strategy section
under Risks & Uncertainties.
KW Investment Management, KW Wealth
Planning, Marchant McKechnie Financial
Advisers (acquired 1 October 2018), Sterling
Trust Financial Consulting Limited (acquired on
25 June 2020) and Regency Investment Services
Limited (acquired on 17 November 2020), which
were regulated by the FCA at year end, must also
comply with the FCA capital adequacy rules.
Kingswood US has majority ownership interests
in four US regulated entities – two are subject
to regulatory oversight by FINRA and two come
under the SEC’s regulatory regime for Registered
Investment Advisers (RIAs) – and must comply
with certain capital adequacy requirements.
DIRECTORS
The names and a short biography of the
Directors of the Company are set out on pages
28 to 29. Graydon Butler and Patrick Goulding
resigned from the Board on 31 December 2020.
The appointment and replacement of Directors
is governed by the Company’s Articles of
Association, The Companies (Guernsey) Law,
2008 and related legislation. The Company’s
Articles of Association themselves may be
amended by special resolution of the Company’s
shareholders. The Group also applies the Quoted
Companies Alliance Corporate Governance Code.
The Company’s Articles of Association provide
that generally one third (rounded down to the
nearest whole number) of the Board of Directors
are required to retire by rotation, save for
Directors who are appointed during the year,
who must stand down and offer themselves
for re-election at the next occurring Annual
General Meeting (AGM) of the Group. The
Directors who offer themselves for re-election
will be announced in conjunction with the AGM
announcement, which is expected to be held in
the latter part of the year.
30
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 DIRECTORS’ INTERESTS
Directors who held office during 2020 had the following beneficial interests in the ordinary shares of
the Company as of 31 December 2020:
NAME OF DIRECTOR
Graydon Butler 1
Jonathan Freeman
Howard Garland
Patrick Goulding 1
David Hudd
Lindsey McMurray
Robert Suss
NUMBER OF
ORDINARY SHARES HELD
2020
NUMBER OF
ORDINARY SHARES HELD
2019
1,050,000
87,780
-
-
500,000
-
-
1,050,000
60,606
-
-
-
-
-
Kenneth 'Buzz' West
Gary Wilder and Jonathan Massing 2
4,536,076
4,536,076
143,220,906
142,944,905
1 Resigned 31 December 2020
2 Gary Wilder and Jonathan Massing’s shares relate to KPI (Nominees) Limited’s holding as both have a beneficial
interest in that entity.
EMPLOYEES
It is the Company’s policy to involve employees in the day-to-day operation of the Group’s business
and ensure that matters which could concern them, including the Group’s strategic objectives and
performance are communicated in an open and timely fashion. The Directors seek to achieve this
through executive committee meetings subsidiary Board meetings, e-mail communication and
informal staff communication.
The Group is committed to an equal opportunity policy for all prospective and existing employees
such that selection takes place based on ability, qualifications and suitability for the job, irrespective
of background, age, race, gender or sexual orientation. The Group’s executives, senior management
and employees are required to support and implement all such policies in their daily work ethic to
maximise the potential of its entire workforce. A Diversity and Inclusion Forum comprising employees
from across team has recently been formed to further encourage diversity and inclusion across the
Group and make it a central tenet of Kingswood’s culture.
Employees who become disabled during their employment with the Group will be retained and
re-trained where possible.
FUTURE DEVELOPMENTS AND EVENTS AFTER THE STATEMENT OF FINANCIAL
POSITION DATE
A review of the Group’s business and an indication of likely future developments are contained in the
Strategy section of this report.
31
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 DIRECTORS’ REPORT CONTINUED
SUBSTANTIAL SHAREHOLDINGS
The Group had been notified, in accordance with Chapter 5 of the Disclosure and Transparency Rules,
of the following voting rights of shareholders holding 3% or more of the issued share capital of the
Company as of 31 March 2021:
NAME OF SHAREHOLDER
KPI (Nominees) Limited
Monecor (ETX Capital)
All shareholdings stated above are beneficial.
PERCENTAGE OF VOTING
RIGHTS AND ISSUED
SHARE CAPITAL
NUMBER OF
ORDINARY
SHARES
66.26%
4.83%
143,720,906
10,476,969
KPI (Nominees) Limited is owned and controlled by Gary Wilder and Jonathan Massing.
The Company has issued 44,828,443 irredeemable, convertible preference shares at £1 per share to
HSQ INVESTMENT LIMITED, a wholly owned indirect subsidiary of funds managed and/or advised by
Pollen Street Capital on 31 December 2020. The preference shares are convertible into Kingswood
Holdings Limited ordinary shares at 16.5p per share on or before 31 December 2023.
DIRECTORS’ INDEMNITIES
During the year the Group made qualifying third-party indemnity provisions for the benefit of its
Directors and these remain in force at the date of this report.
GOING CONCERN
In accordance with Financial Reporting Council guidance all companies are required to provide fuller
disclosures regarding the Directors’ assessment of going concern. The Group's business activities,
together with the factors likely to affect its future development and liquidity and capital position, are
reviewed under the key risks affecting the business section as set out in the Strategy section on
pages 15 to 17.
The Directors have reviewed the cash flow forecast for the next 12 months and are satisfied that the
Group can continue to prepare its financial statements on the going concern basis. This includes an
assessment of the COVID-19 pandemic and any potential impact on the Group and its business.
Whilst the outbreak and the response of Governments in dealing with the pandemic is interfering
with general activity levels within the community, the economy and the operations of our business,
the Group is expected to generate positive cash flows on its own account for the foreseeable future.
The Group operates centralised treasury arrangements and shares banking arrangements between the
parent and its subsidiaries.
The Directors, having made appropriate enquiries, have no reason to believe that a material
uncertainty exists that may cast significant doubt regarding the ability of Kingswood Holdings Limited
and its subsidiaries to continue as a going concern or its ability to continue with the current banking
arrangements.
On the basis of their assessment of the Group’s financial position and of the enquiries made of the
Directors of Kingswood Holdings Limited, the Directors have a reasonable expectation that the Group
will be able to continue in operational existence for the foreseeable future. Thus, they continue to
adopt the going concern basis of accounting in preparing the annual financial statements.
32
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 AUDITOR
Each of the persons who are Directors of
Kingswood Holdings Limited at the date of
approval of this annual report confirms that:
• So far as the Director is aware, there is no
relevant audit information of which the
Group's auditor is unaware; and
• The Director has taken all the steps that he/
she ought to have taken as a Director in order
to make himself/herself aware of any relevant
audit information and to establish that the
Group's auditor is aware of that information.
This confirmation is given and should be
interpreted in accordance with the provisions
of Section 249 of The Companies (Guernsey)
Law, 2008.
Approved by the Board of Directors and signed
on behalf of the Board on 16 June 2021.
Kenneth ‘Buzz’ West
Chairman
A diversity and
Inclusion Forum
comprising employees
from the Group has
recently been formed
to further encourage
diversity and inclusion
as a central tenet
of our culture
33
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 DIRECTORS’
REMUNERATION
REPORT
BASE SALARY
INCL. NIC
£'000
PENSION &
BENEFITS
£'000
TERMINATION
£'000
OPTION VALUE
OF LTIP SHARES
£'000
-
-
-
-
-
-
-
-
-
-
-
-
28
-
12
-
4
-
12
5
7
68
EXECUTIVE
Graydon Butler 1
(appointed 28/2/19)
Patrick Goulding 1
(appointed 8/1/19)
Marianne Ismail
(resigned 16/1/19)
Gary Wilder
NON-EXECUTIVE
Jonathan Freeman
David Hudd
Darryl Kaplan
(resigned 8/5/19)
Jonathan Massing
Robert Suss
(appointed 10/6/19)
Kenneth ‘Buzz’ West
150
349
-
100
79
36
-
25
28
72
1
58
-
-
-
-
-
-
-
-
Aggregate emoluments
839
59
1 Resigned 31/12/2020.
Signed on behalf of the Board:
Kenneth ‘Buzz’ West
Non-Executive Chairman
16 June 2021
2020
TOTAL
£'000
151
435
-
112
79
40
-
37
33
79
2019
TOTAL
£'000
137
462
286
108
54
38
6
33
18
77
966
1,219
34
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 DIRECTORS’
RESPONSIBILITIES
STATEMENT
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
The Companies (Guernsey) Law, 2008 requires
the Directors to prepare financial statements
for each financial year. Under that law the
Directors have prepared the Group financial
statements in accordance with International
Financial Reporting Standards (IFRS) as adopted
by the European Union. The Directors must not
approve the annual financial statements unless
they are satisfied that they give a true and fair
view of the state of affairs of the Group and of
the Consolidated Statement of Comprehensive
Income for the year. In preparing these financial
statements, International Accounting Standard 1
requires that Directors:
• Properly select and apply accounting policies.
• Present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable, and understandable
information.
• Provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions on
the entity's financial position and financial
performance; and
• Make an assessment of the Group's ability to
continue as a going concern.
with The Companies (Guernsey) Law, 2008. They
are also responsible for safeguarding the assets
of the Group and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Group’s
website www.kingswood-group.com. Legislation
in the United Kingdom and Guernsey governing
the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
• The annual financial statements, prepared
in accordance with International Financial
Reporting Standards (IFRS) as adopted by
the European Union, give a true and fair view
of the assets, liabilities, financial position
and profit or loss of the Company and the
undertakings included in the consolidation
taken as a whole
• The Strategy includes a fair review of the
development and performance of the business
and the position of the Company and the
undertakings included in the consolidation
taken as a whole, together with a description
of the principal risks and uncertainties that
they face; and
• The Annual Report and financial statements,
taken as a whole, are fair, balanced, and
understandable and provide the information
necessary for shareholders to assess the
Group’s position and performance, business
model and strategy.
Signed on behalf of the Board:
The Directors are responsible for keeping
proper accounting records that are sufficient to
show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and enable them
to ensure that the financial statements comply
Kenneth ‘Buzz’ West
Non-Executive Chairman
16 June 2021
35
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 financial statements section of our report. We
believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion
Independence
We remain independent of the Group in
accordance with the ethical requirements that are
relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements.
CONCLUSIONS RELATING TO GOING
CONCERN
In auditing the financial statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the
Group’s ability to continue to adopt the going
concern basis of accounting included reviewing
the inputs and assumptions within the forecast
that forms the basis of management’s assessment
of the going concern assumption, to supporting
documentation and our own understanding
of the Company. We performed a sensitivity
analysis of management’s cash flow forecasts,
as well as conducting a review of the Group’s
liquidity position.
Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that, individually
or collectively, may cast significant doubt on the
Group's ability to continue as a going concern for
a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of
the Directors with respect to going concern are
described in the relevant sections of this report.
INDEPENDENT
AUDITOR’S REPORT
To the members of
Kingswood Holdings Limited
for the year ended
31 December 2020
OPINION ON THE FINANCIAL STATEMENTS
In our opinion the Group financial statements:
• give a true and fair view of the state of the
Group’s affairs as at 31 December 2020 and
of its loss for the year then ended;
• have been properly prepared in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the European
Union; and
• have been properly prepared in accordance
with the requirements of the Companies
(Guernsey) Law, 2008.
We have audited the financial statements
of Kingswood Holdings Limited (the ‘Parent
Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2020 which
comprise the Consolidated statement of
comprehensive income, Consolidated statement
of financial position, the Consolidated statement
of changes in equity, Consolidated statement
of cash flows and notes to the financial
statements, including a summary of significant
accounting policies. The financial reporting
framework that has been applied in their
preparation is applicable law and IFRSs as
adopted by the European Union.
BASIS FOR OPINION
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the Auditor’s responsibilities for the audit of the
36
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
OVERVIEW
Coverage
These are the key
areas which have
been subject to a full
scope audit.
Key audit matters
83% of Group loss before tax (calculated on an absolute basis)
99% of Group revenue
88% of Group total assets
Revenue recognition
Accounting for business combinations
Carrying value of intangible assets and goodwill
2020
2019
Revenue recognition is a key audit matter in current year due to the
significant increase compared to prior year, primarily due to revenue earned
from the four new businesses.
Acquisition accounting has been included as a key audit matter as
there were four business combinations in current year and no business
combinations in prior year.
Materiality
Group financial statements as a whole
£1,577,000 (2019: £931,000) based on 2.5% (2019: 3%) of net assets
Specific materiality
£396,000 (2019: £346,000) based on 1.5% of revenue
(2019: 7.5% of loss before tax)
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement in
the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a
risk of material misstatement.
As part of designing out audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the Directors made
subjective judgements.
We performed an assessment to determine which components were significant to the Group. All
components which financially contributed greater than 15% of the Group’s revenue were identified as
significant and subject to a full scope of their complete financial information.
Six components were considered to be financially significant to the Group, with four being located in
the United Kingdom and two located in the United States of America. All audit work was performed by
the Group audit team.
For components that we considered to be non-significant, these components were principally subject
to analytical review procedures performed by the Group audit team, together with additional testing
over audit risk areas.
3737
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT CONTINUED
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit,
and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
KEY AUDIT MATTER
HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Revenue recognition
As disclosed in Note 3, the Group recognised revenue of £25.477m for the year ended
31 December 2020.
Refer to Note 1 for related accounting policy.
Revenue was identified as a
key audit matter as it is a key
performance indicator to the
users of the financial statements
and because of the fraud risk
surrounding revenue recognition,
therefore requiring a significant
amount of auditor’s attention.
Our procedures for all revenue streams, amongst others,
included:
• Considering whether the revenue recognition policies are in
accordance with IFRSs as adopted by the European Union;
• Reconciling revenue recorded per the general ledger to
underlying reports from systems;
• Selecting a sample of revenue transactions throughout the
year and traced to supporting documentation such as third
party invoices/ reports and performed recalculation where
possible, vouched to cash receipts and verified whether
revenue was accounted for appropriately; and
• Assessing whether cut-off of revenue was applied
appropriately via selecting a sample of revenue transactions
before and after year end and acquisition dates for newly
acquired entities.
Additional procedures performed over certain revenue streams
included:
• For wealth planning and investment management revenue,
selecting a sample of revenue transactions throughout the
year and testing the design, implementation and operating
effectiveness of controls in place; and
• For investment management revenue, performing a
substantive analytical review based on underlying off-
balance sheet assets under management/ advice and
fee percentage rates, a sample of which were agreed to
supporting documentation such as contracts.
Key observations:
Based on procedures performed, revenue is appropriately
stated and classified
38
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 KEY AUDIT MATTER
HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Accounting for the business combinations of:
• Chalice Capital Partners LLC and Chalice Wealth Advisors LLC (together ‘Chalice’)
• Sterling Trust Financial Consulting Limited and its subsidiaries
• Regency Investment Services Limited
• Manhattan Harbor Capital LLC and its subsidiaries
As disclosed in Note 30 of the financial report, on 30 April 2020, Kingswood US Holdings, Inc,
acquired 100% of the membership interests in Chalice Capital Partners and Chalice Wealth
Advisors (together ‘Chalice’).
As disclosed in Note 30 of the financial report, on 23 June 2020, Kingswood Holdings Limited
acquired 100% of the shares in Sterling Trust Financial Consulting Limited and its subsidiaries.
As disclosed in Note 30 of the financial report, on 17 November 2020, Kingswood Holdings
Limited acquired 100% of the shares in Regency Investment Services Limited.
As disclosed in Note 30 of the financial report, on 23 November 2020, Kingswood US Holdings,
Inc acquired a controlling stake in Manhattan Harbor Capital LLC through a step acquisition,
bringing the total equity ownership at 31 December 2020 to 50.1%.
Refer to Note 1 for related accounting policy.
The accounting and disclosure
for these acquisitions is a
key audit matter due to the
significant judgement and
complexity involved in assessing
the fair value of identifiable
assets and liabilities and the
final consideration which
included contingent deferred
consideration (based on earn-
outs). In addition, the assessment
of whether any elements of
deferred consideration would
need to be treated as post-
combination remuneration has a
significant impact to the financial
statements.
Our procedures, amongst others, included:
• Reviewing the acquisition agreements to understand the key
terms and conditions, and confirming our understanding of
the transaction with management;
• Assessing whether control is established per IFRS 10
Consolidated Financial Statements, where the Group holds
less than 100% interest in the acquiree, by reviewing the
investor’s relationship with the investee.
• Assessing the estimation of the contingent consideration
by challenging management’s forecasts including key
assumptions around probability of achievement of earn-outs;
• Assessing the acquisition agreements to determine if any
elements of deferred consideration would need to be treated
as post-combination remuneration;
• Comparing the assets and liabilities recognised on acquisition
against the completion accounts of the acquired businesses;
• Evaluating the assumptions and methodology in
management’s determination of the fair value of assets and
liabilities acquired which included:
- Obtaining a copy of the management’s expert’s external
valuation report and engaging of internal valuations
expert to critically assess the determination of fair values
of identifiable intangible assets associated with the
acquisitions.
• Assessing the adequacy of the disclosures of the
acquisitions.
Key observations:
Based on procedures performed, acquisition accounting for the
above listed transactions is appropriately stated and classified.
3939
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT CONTINUED
KEY AUDIT MATTER
HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Carrying value of intangible assets and goodwill
At 31 December 2020, the carrying value of intangible assets and goodwill was £47.616m, as
disclosed in Note 15.
Refer to Note 1 and 2 for detailed disclosures, which include the related accounting policies and
critical accounting judgements and estimates.
The assessment of the carrying
value of intangible assets and
goodwill requires management
to make significant accounting
judgements and estimates in
producing the value in use
models used to determine
whether the assets are
appropriately recognised.
Upon acquisition, goodwill
has been allocated to a cash
generating unit. Management
has determined that three cash
generating units exist, being
investment management, wealth
planning and US operations.
An annual impairment test for
intangible assets is required
for indefinite life assets or
where there are indications
of impairment under IAS 36
Impairment of Assets.
Our procedures, amongst others, included:
• Reviewing the reasonableness of management’s assessment
in establishing cash generating units by comparison to
management information and our understanding of the
Group’s operations;
• Analysing management’s key assumptions used in the value
in use models to determine their reasonableness including:
- Challenging the appropriateness of management’s
discount rates used in the value in use models with the
assistance of internal valuations experts;
- Challenging assumptions around timing of future cash
flows by comparison to post-year end management
information;
- Checking the mathematical accuracy of the value in use
models;
• Performing sensitivity analysis on key assumptions to
determine if there would be significant change to the
carrying value of the asset; and
• Considering any additional impairment indicators and the
impact on management’s assumptions.
Key observations:
Based on procedures performed, the carrying value of
intangible assets and goodwill is appropriately stated.
40
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating
the effect of misstatements. We consider materiality to be the magnitude by which misstatements,
including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed
materiality, we use a lower materiality level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial
as we also take account of the nature of identified misstatements, and the particular circumstances of
their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a
whole and performance materiality as follows.
GROUP FINANCIAL STATEMENTS
2020
GROUP FINANCIAL STATEMENTS
2019
Materiality
£1,577,000
£931,000
Basis for determining materiality 2.5% of Net assets
3% of Net assets
Rationale for the benchmark
applied
Net assets is of particular
interest to the users of the
financial statements. We do
not consider profit to be an
appropriate benchmark as the
Group is loss-making.
Net assets is of particular
interest to the users of the
financial statements. We do
not consider profit to be an
appropriate benchmark as the
Group is loss-making.
Performance materiality
£1,103,000 (70% of Materiality) £698,000 (75% of Materiality)
Basis for determining
performance materiality
We considered the risk and
control environment of the
Group
We considered the risk and
control environment of the
Group
Specific materiality
We also determined that for profit or loss figures, a misstatement of less than materiality for the
financial statements as a whole, could influence the economic decisions of users. As a result,
we determined materiality for these items based on revenue. We further applied a performance
materiality level of 70% of specific materiality to ensure that the risk of errors exceeding specific
materiality was appropriately mitigated. Specific materiality was set as £396,000 (2019: £346,000)
which was determined by reference to a benchmark of 1.5% (2019: 7.5% of loss before tax) of
consolidated revenue. This lower level of materiality is applied in performance of the audit when
determining the nature and extent of testing applied to individual balances and classes of transactions.
In setting performance materiality, we had regard to the financial statement materiality and the risk
and control environment.
Component materiality
We set materiality for each component of the Group at a lower level of materiality, dependent on
the size and our assessment of the risk of material misstatement of that component. Component
materiality ranged from £84,000 to £1,261,000 (2019: £24,000 to £609,000). In the audit of each
component, we further applied performance materiality levels of 70% of the component materiality
to our testing to ensure that the risk of errors exceeding component materiality was appropriately
mitigated.
4141
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
INDEPENDENT AUDITOR’S REPORT CONTINUED
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in
excess of £31,000 (2019: £18,620). We also agreed to report differences below this threshold that, in
our view, warranted reporting on qualitative grounds.
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the
information included in the annual report and financial statements, other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
OTHER COMPANIES (GUERNSEY) LAW, 2008 REPORTING
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
• proper accounting records have not been kept by the Parent Company; or
• the Parent Company financial statements are not in agreement with the
accounting records; or
• we have failed to obtain all the information and explanations which, to the
best of our knowledge and belief, are necessary for the purposes of our
audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement set out on page 35, the Directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
42
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We gained an understanding of the legal and regulatory framework applicable to the Parent
Company and Group and considered the risk of acts by the Parent Company and Group which were
contrary to applicable laws and regulations, including fraud. These laws and regulations included
but were not limited to compliance with the Companies (Guernsey) Law, 2008, AIM Rules for
Companies, those resulting from being authorised by the Financial Conduct Authority to undertake
regulated activities and IFRSs as adopted by the European Union.
• We considered compliance with laws and regulations that could give rise to a material misstatement
in the Group’s financial statements. Our tests included, but were not limited to:
- Agreement of the financial statement disclosures to underlying supporting documentation;
- Review of correspondence with the regulator;
- Enquiries of management;
- Sample testing of journal postings made during the year to identify potential management
override of controls;
- Review of meeting minutes throughout the period; and
- Assessment of the susceptibility of the financial statements to material misstatement, including
how fraud might occur. This includes areas that are subject to a high degree of management’s
estimates and judgements as covered by the key audit matters above.
• We communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members and discussed how and where these might occur and remained alert to
any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the
audit procedures performed and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the less likely we are to become
aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent Company’s members, as a body, in accordance with Section
262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might
state to the Parent Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
BDO LLP, Chartered Accountants, London, UK
16 June 2021
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127),
4343
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue
Direct expenses
Gross profit
Operating staff costs
Other operating costs
Total operating costs
Share of post-tax profits of equity accounted associates
Operating profit
Non-operating costs:
Business re-positioning costs
Finance costs
Acquisition-related adjustments:
Amortisation and depreciation
Other gains / (losses)
Remuneration charge (deferred consideration)
Transaction costs
Loss before tax
Tax
Loss after tax from continuing operations
Loss from discontinued operations
Loss after tax
Other comprehensive loss
Total comprehensive loss
Loss after tax is attributable to:
- Owners of the parent company
- Non-controlling interests
Total comprehensive loss is attributable to:
- Owners of the parent company
- Non-controlling interests
Loss per share:
- Basic loss per share
- Diluted loss per share
NOTE
3
6
7
8
23
9
10
2020
£’000
25,477
(8,471)
2019
RESTATED
£’000
10,053
(868)
17,006
9,185
(11,148)
(5,052)
(16,200)
56
862
(7,208)
(1,766)
(8,974)
-
211
(1,801)
(554)
(1,963)
(211)
(1,822)
1,744
(7,254)
(1,855)
(10,680)
(60)
(10,740)
-
(10,740)
(855)
(1,241)
(381)
(3,765)
(1,618)
(8,968)
-
(8,968)
(155)
(9,123)
-
(11,595)
(9,123)
(11,000)
(9,123)
260
-
(11,855)
(9,123)
260
-
12
12
£ (0.05)
£ (0.05)
£ (0.05)
£ (0.05)
The notes on pages 48 to 92 form an integral part of the financial statements.
44
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill and other intangible assets
Investments
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Deferred consideration payable
Non-current liabilities
Deferred consideration payable
Other non-current liabilities
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Share premium
Preference share capital
Deferred share capital
Other reserves
Foreign exchange reserve
Retained (loss) / earnings
Equity attributable to the owners
of the Parent Company
Non-controlling interests
Total equity
NOTE
13
14
15 / 35
16
17
18
20
21 / 35
23 / 35
23 / 35
24 / 35
17
25
25
26 / 35
35
2020
£’000
2019
RESTATED
£’000
2018
RESTATED
£’000
927
2,828
47,616
-
392
51,763
24,204
3,899
28,103
79,866
12,955
836
13,791
3,232
10,802
1,889
29,714
50,152
10,846
8,224
37,550
-
(519)
(855)
(6,159)
49,087
1,065
50,152
221
1,101
29,208
416
428
31,374
2,274
2,006
4,280
148
-
25,536
-
428
26,112
1,156
2,410
3,566
35,654
29,678
5,393
-
5,393
-
2,060
-
7,453
2,431
-
2,431
-
4
-
2,435
28,201
27,243
10,846
8,224
4,586
-
(296)
-
4,841
28,201
7,743
6,274
-
106
(738)
-
13,858
27,243
-
-
28,201
27,243
The notes on pages 48 to 92 form an integral part of the financial statements.
The financial statements of Kingswood Holdings Limited (registered number 42316) were approved
and authorised for issue by the Board of Directors, and signed on its behalf by:
Kenneth ‘Buzz’ West
Non-Executive Chairman
16 June 2021
4545
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
SHARE CAPITAL
& SHARE
PREMIUM
£’000
DEFERRED
SHARE
CAPITAL
£’000
PREFERENCE
SHARE
CAPITAL
£’000
Balance at 1 January 2019
14,017
106
Effect of prior year adjustments
-
-
14,017
106
Restated balance at
1 January 2019
Loss for the year
Issue of share capital
Issue of preference share capital
Write back of deferred
share capital
Share-based remuneration
Restated balance at
31 December 2019
Loss for the year
Amounts attributable to non-
controlling interests
Issue of preference share capital
Share-based remuneration
Foreign exchange loss
-
5,053
-
-
-
19,070
-
-
-
-
-
EQUITY
ATTRIBUTABLE
TO THE
OWNERS OF
THE PARENT
COMPANY
£’000
NON-
CONTROLLING
INTERESTS
£’000
TOTAL
£’000
FOREIGN
EXCHANGE
RESERVE
£’000
RETAINED
EARNINGS
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
11,758
25,143
2,100
2,100
- 25,143
-
2,100
13,858
27,243
- 27,243
(9,123)
(9,123)
-
-
106
5,053
4,586
-
-
442
-
-
-
-
-
(9,123)
5,053
4,586
-
442
4,841
28,201
- 28,201
(11,000)
(11,000)
260 (10,740)
-
-
-
-
-
805
805
32,964
- 32,964
(223)
(855)
-
-
(223)
(855)
OTHER
RESERVES
£’000
(738)
-
(738)
-
-
-
-
442
-
-
-
(223)
-
(855)
-
-
-
-
-
4,586
-
-
-
-
32,964
-
-
-
-
-
(106)
-
-
-
-
-
-
-
-
4,586
(296)
Balance at 31 December 2020
19,070
37,550
(519)
(855)
(6,159)
49,087
1,065 50,152
Note 25 provides further details of, and the split between, Share Capital and Share Premium.
Additional reserves consist of foreign exchange translation, other reserves including share-based remuneration and expenses
charged against reserves.
The notes on pages 48 to 92 form an integral part of the financial statements.
46
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Net cash used in operating activities
Investing activities
Property, plant and equipment purchased
Acquisition of investments
Remuneration charge (deferred consideration)
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Interest paid
Lease payments
New loans received / loans repaid
NOTE
27
2020
£’000
2019
£’000
(1,575)
(1,359)
(796)
(10,579)
(5,153)
(16,528)
(132)
(5,416)
(3,765)
(9,313)
20,243
10,780
(17)
(421)
255
(169)
(343)
-
Net cash generated from financing activities
20,060
10,268
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
1,957
2,006
(64)
(404)
2,410
-
Cash and cash equivalents at end of year
20
3,899
2,006
The notes on pages 48 to 92 form an integral part of the financial statements.
47
4747
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
General Information
Kingswood Holdings Limited is a company incorporated in Guernsey under The Companies (Guernsey)
Law, 2008. The shares of the Company are traded on the AIM market of the London Stock Exchange (ticker
symbol: KWG). The nature of the Group’s operations and its principal activities are set out in the Strategic
Report. Certain subsidiaries in the Group are subject to the FCA’s regulatory capital requirements and
therefore required to monitor their compliance with credit, market and operational risk requirements, in
addition to performing their own assessment of capital requirements as part of the ICAAP.
1.1 Basis of accounting
The financial statements of the Group have been prepared in accordance with International Financial
Reporting Standards (IFRS) adopted by the European Union and in line with Guernsey Company Law.
The financial statements have been prepared on the historical cost basis; except for the revaluation of
financial instruments (please refer to significant accounting policies note 1 for details). Historical cost
is generally based on the fair value of the consideration given in exchange for the assets. The principal
accounting policies adopted are set out below.
1.2 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Group made up to
31 December each year.
The subsidiaries of the Group are detailed in note 19.
All businesses are consolidated from the date of acquisition.
For the purpose of the consolidated financial statements, the results and financial position of each subsidiary
are expressed in pounds sterling, which is the functional and presentation currency for the consolidated
financial statements.
Sterling Trust Group has been consolidated into the consolidated statement of comprehensive income as of
24 June 2020.
Regency has been consolidated into the consolidated statement of comprehensive income as of
18 November 2020.
Chalice Capital Partners and Chalice Wealth Advisers (together “Chalice”) have been consolidated into the
consolidated statement of comprehensive income as of 1 May 2020.
Manhattan Harbor Capital ("MHC") and its subsidiaries have been consolidated into the consolidated
statement of comprehensive income as of 23 November 2020. At this time the Chalice entities were
contributed into MHC.
1.3 Adoption of new and revised standards
New accounting standards, amendments and interpretations adopted in the period
In the year ended 31 December 2020, the Group adopted the following new standards or amendments
issued by the IASB or interpretations issued by the IFRS Interpretations Committee (IFRS IC):
• Definition of a Business (Amendments to IFRS 3)
• Definition of Material (Amendments to IAS 1 and IAS 8)
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
• COVID-19-related Rent Concessions (Amendment to IFRS 16)
The above standards have not had a significant impact on the Group in the current year.
48
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 New accounting standards, amendments and interpretations adopted in the period
There are a number of standards, amendments to standards, and interpretations which have been issued by
the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The
following amendments are effective for the financial years beginning 1 January 2022:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and
IAS 41); and
• References to Conceptual Framework (Amendments to IFRS 3).
Except for references to Conceptual Framework, the above standards, amendments and interpretations
have not had a significant impact on the Group in the current year and are not expected to have a significant
impact on the Group’s financial statements in future accounting periods when the standards become
effective.
Prior period restatements
Prior period financials have been restated to correctly recognise deferred consideration treated as
an expense through the Consolidated Statement of Comprehensive Income. Previously all deferred
consideration payable on acquisitions was recorded as a deferred liability and included in the fair value of
assets acquired. However, in circumstances where the payment of deferred consideration is contingent on
the seller remaining within the employment of the Group during the deferred period, the contingent portion
of deferred consideration should not have been included in the fair value of consideration paid, rather is
treated as remuneration and accounted for as a charge against profits over the deferred period.
Prior period financials have also been restated to correctly recognise preference share capital as compound
financial instruments rather than solely equity and are now split between their equity and liability
components. Further information is given in note 35.
1.4 Significant accounting policies
Going concern
The Directors review the going concern position of the Group on a regular basis as part of the monthly
reporting process which includes consolidated management accounts and cash flow projections and have,
at the time of approving the financial statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. Accordingly the Directors continue
to adopt the going concern basis of accounting in preparing the financial statements. Further detail in
relation to how the Group arrived at the going concern assumption given the ongoing COVID-19 pandemic
is contained in the Directors’ Report on page 30.
Revenue recognition
Performance obligations and timing of revenue recognition
The majority of the Group’s UK revenue, being investment management fees and ongoing wealth advisory,
is derived from the value of funds under management / advice, with revenue recognised over the period in
which the related service is rendered. This method reflects the ongoing portfolio servicing required to ensure
the Group’s contractual obligations to its clients are met. This also applies to the Group’s US Registered
Investment Advisor (“RIA”) business.
For certain commission, fee-based and initial wealth advisory income, revenue is recognised at the point
the service is completed. This applies in particular to the Group’s US Independent Broker Dealer (“IBD”)
services, and its execution-only UK investment management. There is limited judgement needed in
identifying the point such a service has been provided, owing to the necessity of evidencing, typically via
third-party support, a discharge of pre-agreed duties. The US division also has significant Investment Banking
operations, where commission is recognised on successful completion of the underlying transaction.
Determining the transaction price
Most of the Group’s UK revenue is charged as a percentage of the total value of assets under management
or advice. For revenue earned on a commission basis, such as the US broker dealing business, a set
percentage of the trade value will be charged. In the case of one-off or ad hoc engagements, a fixed fee may
be agreed.
4949
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 Accounting policies continued
Allocating amounts to performance obligations
Owing to the way in which the Group earns its revenue, which is largely either percentage-based or fixed
for discrete services rendered, there is no judgement required in determining the allocation of amounts
received. Where clients benefit from the provision of both investment management and wealth advisory
services, the Group is able to separately determine the quantum of fees payable for each business stream.
Further details on revenue, including disaggregation by operating segment and the timing of transfer of
service(s), are provided in note 3 below.
Borrowing costs
All borrowing costs are measured at the present value of the contractual payments due to the lender over
the loan term, with the discount rate determined by reference to the interest rate inherent in the loan.
Retirement benefit costs
The Group contributes to defined contribution pension schemes, held in separately administered funds.
Contributions to the schemes are charged as per employee contracts through the profit or loss as they
fall due.
Taxation
Current tax
The tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the Statement of Comprehensive Income as it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. Tax is recognised
in the Statement of Comprehensive Income, except where a charge attributable to an item of income and
expense is recognised as other comprehensive income, or where an item recognised directly in equity is also
recognised in other comprehensive income or directly in equity respectively. The current income tax charge
is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the
reporting date in the countries where the Group operates and generates income.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the Statement of Financial Position liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
and associates, and interests in joint ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each Statement of Financial Position date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered. Detailed financial forecasts are in place to support the carrying value of
the deferred asset.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled
or the asset is realised. Deferred tax is recognised in the Statement of Comprehensive Income, except where
a charge attributable to an item of income and expense is recognised as other comprehensive income, or
where an item recognised directly in equity is also recognised in other comprehensive income or directly in
equity respectively
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
50
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss. Depreciation is recognised so as to write off the cost or valuation of assets less their
residual values over their useful lives, using the straight-line method, on the following bases:
Office equipment, fixtures and fittings:
IT equipment and software:
over 60 months on a straight-line basis
over 36 months on a straight-line basis.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in income.
Depreciation periods for newly-acquired businesses may vary, however the Group aims to harmonise such
accounting estimates within 12 months.
Business combinations
All business combinations are accounted for by applying the acquisition method. The acquisition method
involves recognition, at fair value, of all identifiable assets and liabilities, including contingent liabilities,
of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. The cost of business combinations is measured based on
the fair value of the equity or debt instruments issued and cash or other consideration paid, plus any directly
attributable costs. The consideration liability is contingent on performance requirements during the deferred
consideration period. The value of the contingent consideration is determined by EBITDA and/or revenue
targets agreed on the acquisition of each asset, as defined under the respective Purchase Agreements.
As at the reporting date, the Group is expecting to pay the full value of its deferred consideration as all
acquisitions are on target to meet the requirements. During the year, a gain arose on the release on the final
deferred consideration payment due under the Chalice purchase agreement, due to a performance target
not being met.
Where the payment of deferred consideration is contingent on the continued employment of the seller(s)
of a business post-acquisition during the deferred payment period, such contingent consideration is treated
as remuneration in accordance with IFRS 3, and accounted for as a charge against profits as incurred. No
deferred liability is created for this portion of consideration at the time of acquisition.
Goodwill arising on a business combination represents the excess of cost over the fair value of the Group’s
share of the identifiable net assets acquired and is stated at cost less any accumulated impairment losses.
Goodwill is tested annually for impairment. Any impairment is recognised immediately through the profit and
loss. Negative goodwill arising on an acquisition is recognised immediately through the profit and loss.
Impairment
Goodwill and other intangible assets with an indefinite life are tested annually for impairment. For the
purposes of impairment testing, goodwill acquired in a business combination is allocated to each of the
Group’s CGUs that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquisition are assigned to those units. The carrying amount of each CGU is compared to its
recoverable amount, which is determined using an industry revenue multiple and percentage of assets under
management.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation disposed of and the portion of the CGU retained.
5151
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 Accounting policies continued
Intangible assets
Client relationships
Client relationships acquired in a business combination are recognised at fair value at the acquisition date.
Relationships acquired outside of a business combination are initially recognised at cost. In assessing the fair
value of these relationships, the Group has estimated their finite life based on information about the typical
length of existing client relationships. Amortisation is calculated using the straight line method over their
useful lives, ranging from 10 to 20 years.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the
net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost
less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Financial assets and liabilities
Financial assets and liabilities are recognised in the Group’s Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument and are initially measured at fair value.
Classification and initial measurement of financial assets
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expires.
As required under IFRS 9, financial assets are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
In the periods presented the Group did not have any financial assets categorised as FVOCI.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its
contractual cash flows
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial.
Classification and measurement of financial liabilities
Financial liabilities are initially measured at amortised cost or at fair value, and, where applicable, adjusted
for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
52
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 Impairment of financial assets
Impairment provisions for current and non-current trade receivables are recognised based on the simplified
approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit
losses. During this process the probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being recognised within cost of sales in
the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the associated provision.
Impairment provisions for receivables from related parties and loans to related parties are recognised based
on a forward looking expected credit loss model. The methodology used to determine the amount of the
provision is based on whether there has been a significant increase in credit risk since initial recognition of
the financial asset, twelve month expected credit losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit
losses along with interest income on a net basis are recognised.
The Group considers a broad range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the
expected collectability of the future cash flows of the instrument.
In applying this approach, IFRS 9 makes a distinction between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or
that have low credit risk (Stage 1) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and
whose credit risk is not low (Stage 2).
• financial assets that have objective evidence of impairment at the reporting date (Stage 3).
'12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’
are recognised for the second category.
Under the ECL model, a dual measurement approach applies whereby a financial asset will attract an ECL
allowance equal to either:
• 12 month expected credit losses (losses resulting from possible defaults within the next 12 months); or
• lifetime expected credit losses (losses resulting from possible defaults over the remaining life of the
financial asset).
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses
over the expected life of the financial instrument.
5353
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 Accounting policies continued
Equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued are recognised at the proceeds received, net of direct
issue costs.
Effective interest rates
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Reclassification of equity
Under Guernsey Company law, Kingswood Holdings Limited reserves the right to set movement from share
premium into another reserve.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade
and other payables are presented as current liabilities unless payment is not due within 12 months after the
reporting period. They are recognised initially at their fair value and subsequently measured at amortised
cost using the effective interest method.
Client money
The Group holds money on behalf of clients in accordance with the client money rules of the Financial
Conduct Authority and other regulatory bodies. Such money and the corresponding liabilities to clients
are not shown on the face of the Statement of Financial Position, as the Group is not beneficially entitled
thereto. The amounts held on behalf of clients at the Statement of Financial Position date are stated in
note 20.
Deferred consideration
Deferred consideration, which is included within liabilities or equity depending on the form it takes, relates
to the Directors’ best estimate of amounts payable in the future in respect of certain client relationships and
subsidiary undertakings that were acquired by the Group. Deferred consideration is measured at its fair value
based on the discounted expected future cash flows.
The amount recognised as deferred consideration is dependent on the acquisition structure, specifically the
employment terms of the seller(s) post acquisition. If payment of deferred consideration is contingent on
the continued employment of the seller(s) during the deferred payment period, such contingent payment
is treated as remuneration, not deferred consideration, and accounted for as a charge against profits as
incurred over the deferred period.
Share based remuneration
Equity-settled share-based remuneration to employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-
based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based
transactions are set out in note 28.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will
eventually vest. At each Statement of Financial Position date, the Group revises its estimate of the number
of equity instruments expected to vest as a result of the effect of non-market based vesting conditions. The
impact of the revision of the original estimates, if any, is recognised in the Statement of Comprehensive
Income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the equity-settled share-based payments reserve.
54
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents include cash in hand, deposits held
at call with banks, and other short-term highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of change in value. Such investments are
normally those with original maturities of three months or less. Cash and cash equivalents are stated net of
bank overdrafts, if any.
Leases
Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an
identified asset for a period of time in exchange for consideration.
The Group applied IFRS 16 - Leases to its financial statements from 1 January 2019 using the modified
retrospective approach, under which the cumulative effect of initial application is recognised in retained
earnings at 1 January 2019.
The Group leases a number of assets, including properties and printers.
The Group initially records a lease liability reflecting the present value of the future contractual cash flows
to be made over the lease term, discounted using the Group’s incremental borrowing rate. This is the rate
payable by the Group on a loan of a similar term, and with similar security to obtain an asset of similar value.
A right-of-use asset is also recorded at the value of the lease liability plus any directly related costs and
estimated dilapidation expenses.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate
on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on
a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if,
rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the
probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the
lease liability to reflect the payments to make over the revised term, which are discounted using a revised
discount rate. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of
the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low
value assets and leases with a duration of 12 months or less. The Group recognises the lease payments
associated with such leases as an expense on a straight-line basis over the lease term.
5555
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 5, the Directors are In the
application of the Group’s accounting policies, which are described in note 1, the Directors are required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements that the Directors have made in the process of applying the
Group’s accounting policies that had the most significant effect on the amounts recognised in the financial
statements.
Assessment of control
Control is considered to exist where an investor has power over an investee, or else is exposed, and has
rights, to variable returns. The Group determines control to exist where its own direct and implicit voting
rights relative to other investors afford KHL – via its board and senior management – the practical ability to
direct, or as the case may be veto, the actions of its investees. KHL holds 50.1% of voting rights in MHC and
its subsidiaries, as well as a majority stake in the US division’s advisory board when grouped with affiliated
entities. The Group has thus determined that the Company has the practical ability to direct the relevant
activities of MHC and its subsidiaries, and has consolidated the sub-group as subsidiaries with a 49.9%
non-controlling interest.
Full details of the acquisition of MHC are set out in note 30.
Assessment of equity accounting of associates
Where the Group has the power to participate in, but not control, the financial and operating policy
decisions of another entity, it is classified as an associate. Associates are initially recognised in the
consolidated statement of financial position at cost. Subsequently associates are accounted for using the
equity method. On 12 August, the Group increased its interest in MHC and its subsidiaries to 24%, and
announced plans to increase its interest to 50.1%. From this point until obtaining a controlling stake on 23
November 2020, the Group consider significant influence was held.
Full details of the acquisition of MHC are set out in note 30.
Estimates and assumptions
Intangible assets:
Expected duration of client relationships
The Group makes estimates as to the expected duration of client relationships to determine the period
over which related intangible assets are amortised. The amortisation period is estimated with reference to
historical data on account closure rates and expectations for the future. During the year, client relationships
were amortised over a 10-20 year period as detailed in note 15.
Goodwill
The amount of goodwill initially recognised as a result of a business combination is dependent on the
allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities
assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent,
on management’s judgement. Goodwill is reviewed annually for impairment by comparing the carrying
amount of the CGUs to their expected recoverable amount, estimated on a value-in-use basis.
56
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 Share-based remuneration:
Share-based payments
The calculation of the fair value of share-based payments requires assumptions to be made regarding market
conditions and future events. These assumptions are based on historic knowledge and industry standards.
Changes to the assumptions used would materially impact the charge to the Statement of Comprehensive
Income. Details of the assumptions are set out in note 28.
Deferred tax:
Recoverability of deferred tax assets
The amount of deferred tax assets recognised requires assumptions to be made to the financial forecasts
that probable sufficient taxable profits will be available to allow all or part of the asset to be recovered. More
information is disclosed in note 17 to the financial statements.
Leases:
Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in leases where it is the lessee, therefore, it
uses its incremental borrowing rate to measure lease liabilities. This is the rate of interest that the Group
would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain
an asset of a similar value to the right-of-use asset in a similar economic environment.
The incremental borrowing rate therefore reflects what the Group ‘would have to pay’, which requires
estimation when no observable rates are available or when they need to be adjusted to reflect the terms and
conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group
estimates the incremental borrowing rate using observable inputs (such as market interest rates) when
available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone
credit rating).
Deferred consideration:
Payment of deferred consideration
The Group structures acquisitions such that consideration is split between initial cash or equity settlements
and deferred payments. The initial value of the contingent consideration is determined by EBITDA and/
or revenue targets agreed on the acquisition of each asset. It is subsequently remeasured at its fair value
through the Statement of Comprehensive Income, based on the Directors’ best estimate of amounts payable
at a future point in time, as determined with reference to expected future performance. Forecasts are used
to assist in the assumed settlement amount.
5757
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3 BUSINESS AND GEOGRAPHICAL SEGMENTS
Information reported to the Group’s Non-Executive Chairman for the purposes of resource allocation and
assessment of segment performance is focused on the category of customer for each type of activity.
The Group’s reportable segments under IFRS 8 are as follows: investment management, wealth planning and
US operations.
The Group has disaggregated revenue into various categories in the following table which is intended to
depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic
date and enable users to understand the relationship with revenue segment information provided below.
The following is an analysis of the Group’s revenue and results by reportable segment for the year to
31 December 2020. The table below details a full year’s worth of revenue and results for the principal
business and geographical divisions, which has then reconciled to the results included in the Statement of
Comprehensive Income:
CONTINUING OPERATIONS
Revenue (disaggregated by timing):
Point in time
Over time
External sales
INVESTMENT
MANAGEMENT
2020
£’000
WEALTH
PLANNING
2020
£’000
US
OPERATIONS
2020
£’000
GROUP
2020
£’000
TOTAL
2020
£’000
1,071
3,169
1,595
11,320
7,299
1,023
4,240
12,915
8,322
-
-
9,965
15,512
25,477
Operating (loss) / profit
(107)
4,380
543
(3,954)
862
Business re-positioning costs
Finance costs
Amortisation and depreciation
Other gains
Remuneration charge (deferred consideration)
Transaction costs
(Loss) / profit before tax from continuing
operations
Tax
(Loss) / profit after tax from continuing
operations
DISCONTINUED OPERATIONS
-
(3)
(10)
-
-
-
-
(48)
(835)
-
-
-
-
(3)
(3)
-
-
-
(1,801)
(1,801)
(500)
(974)
(554)
(1,822)
1,744
1,744
(7,254)
(7,254)
(1,855)
(1,855)
(120)
3,497
537
(14,594)
(10,680)
-
(2)
(101)
43
(60)
(120)
3,495
436
(14,551)
(10,740)
Loss from discontinued operations
-
-
-
-
-
(Loss) / profit after tax
(120)
3,495
436
(14,551)
(10,740)
58
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 INVESTMENT
MANAGEMENT
2019
£’000
WEALTH
PLANNING
2019
RESTATED
£’000
US
OPERATIONS
2019
£’000
GROUP
2019
RESTATED
£’000
TOTAL
2019
RESTATED
£’000
CONTINUING OPERATIONS
Revenue (disaggregated by timing):
Point in time
Over time
External sales
870
661
3,318
5,193
4,188
5,854
Operating (loss) / profit
90
1,905
Business re-positioning costs
Finance costs
Amortisation and depreciation
Other losses
Remuneration charge (deferred consideration)
Transaction costs
Profit / (loss) before tax from continuing
operations
Tax
Profit / (loss) after tax from continuing
operations
DISCONTINUED OPERATIONS
Loss from discontinued operations
(Loss) / profit after tax
-
(2)
-
-
-
-
88
-
88
-
(8)
(328)
(381)
-
-
1,188
-
1,188
(155)
(67)
-
1,188
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11
-
11
1,542
8,511
10,053
(1,784)
211
(1,963)
(1,963)
(201)
(913)
-
(211)
(1,241)
(381)
(3,765)
(3,765)
(1,618)
(1,618)
(10,244)
(8,968)
-
-
(10,244)
(8,968)
-
(155)
(10,244)
(9,123)
5959
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3 Business and geographical segments continued
Excerpts for the statement of financial position, by business division, as at 31 December 2020:
INVESTMENT
MANAGEMENT
2020
£’000
WEALTH
PLANNING
2020
£’000
US
OPERATIONS
2020
£’000
GROUP
2020
£’000
TOTAL
2020
£’000
Additions to non-current assets
-
15,653
5,324
1,654
22,631
Reportable segment assets
Investment in associates
Tax assets
Total Group assets
2,665
46,793
11,497
18,519
79,474
-
392
79,866
Reportable segment liabilities
1,483
13,125
7,761
7,345
29,714
Total Group liabilities
29,714
INVESTMENT
MANAGEMENT
2019
£’000
WEALTH
PLANNING
2019
RESTATED
£’000
US
OPERATIONS
2019
£’000
Additions to non-current assets
21
5,931
Reportable segment assets
Investment in associates
Tax assets
Total Group assets
2,685
20,872
Reportable segment liabilities
808
5,105
Total Group liabilities
-
-
-
4 LOSS AFTER TAX
Loss after tax for the year is stated after charging
Depreciation of property, plant and equipment
Amortisation of intangible assets
Staff costs
GROUP
2019
RESTATED
£’000
TOTAL
2019
RESTATED
£’000
932
6,884
11,253
34,810
416
1,540
416
428
35,654
7,453
7,453
2020
£’000
617
1,205
12,081
2019
£’000
294
947
7,947
See Directors’ Remuneration Report on page 34 for details of Directors’ remuneration during the year.
60
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 5 AUDITOR’S REMUNERATION
The analysis of fees payable to the Group's auditor is as follows:
Audit of Company
Audit of Subsidiaries
CASS audit
Total auditor's remuneration
6 STAFF COSTS
2020
£’000
211
56
20
287
2019
£’000
53
61
31
145
The average monthly number of persons (including Executive Directors, and self-employed advisers) is as
follows:
2020
2019
Management
Client advisers
Operations
Finance
Human Resources
Risk and Compliance
Average number of employees
Aggregate staff remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Other benefits
Share-based remuneration
Total staff costs
Operating staff costs
Business re-positioning costs
Acquisition team costs
Total staff costs
7. FINANCE COSTS
Bank and other finance charges
8
50
79
7
4
9
157
2020
£’000
10,113
1,527
454
210
(223)
12,081
11,148
592
341
10
30
43
6
2
8
99
2019
£’000
6,602
460
226
217
442
7,947
7,208
485
254
12,081
7,947
2020
£’000
554
2019
RESTATED
£’000
211
6161
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8 OTHER GAINS / (LOSSES)
Net unrealised gains on investments
Impairment of intangibles
2020
£’000
1,744
-
1,744
2019
£’000
-
(381)
(381)
Unrealised gains on investments in the year ended 31 December 2020 relates to the US acquisitions. For
more details see note 30.
The impairment of intangibles for the year ended 31 December 2019 relates to the write-off of goodwill on
the wealth planning CGU.
9 TAXATION
Current year tax expense
Movement in deferred tax (note 17)
2020
£’000
(101)
41
(60)
2019
RESTATED
£’000
-
-
-
UK corporation tax is calculated at 19.00% (2019: 19.00%) of the estimated assessable profits for the
year. The reasons for the difference between the actual tax charge for the year and the standard rate of
corporation tax applied to profits for the year are as follows:
Loss before tax on continuing operations
Loss before tax on discontinued operations
Loss before taxation
Tax at the UK corporation tax rate of 19.00% (2019:19.00%)
Expenses not deductible for tax purposes
Adjustments for Statement of Financial Position items
Adjustment for revenue ineligible for tax purposes
Unrelieved tax losses carried forward
Movement in deferred tax
Different tax rates applied in overseas jurisdictions
Taxation charge in the financial statements
(10,680)
-
(10,680)
(2,029)
1,687
400
(329)
376
(41)
(4)
60
(8,968)
(155)
(9,123)
(1,733)
967
185
(3)
584
-
-
-
The Group is subject to income tax in several jurisdictions and significant judgement is required in
determining the provision for income taxes. During the ordinary course of business, there are transactions
and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax
liabilities based on estimates of whether additional taxes and interest will be due.
No material uncertain tax positions exist as at 31 December 2020. This assessment relies on estimates and
assumptions and may involve a series of complex judgments about future events. To the extent that the final
tax outcome of these matters is different than the amounts recorded, such differences will impact income tax
expense in the period in which such determination is made.
62
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
10 DISCONTINUED OPERATIONS
Kingswood Trading Services Limited ceased trading in 2019. The loss from discontinued operations is
disclosed separately in the Consolidated Statement of Comprehensive Income.
Loss from discontinued operations
2020
£’000
-
The results of discontinued operations for the period prior to the disposal date are shown below:
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Loss before tax
Loss from discontinued operations for the year
2020
£’000
-
-
-
-
-
-
-
2019
£’000
(155)
2019
£’000
279
(134)
145
(300)
155
155
155
Earnings per share from discontinued operations
The basic and diluted loss per share from discontinued operations for 2020 were £nil (2019: loss per share
£(0.008)).
Cash flows from discontinued operations
The net operating cash used attributable to discontinued operations for 2020 was £nil (2019: net cash used
£155k). There were no cash flows from investing and financing activities.
11 DIVIDENDS
The Directors are not proposing to pay a dividend in respect of the year ended 31 December 2020 (year
ended 31 December 2019: £nil).
12 EARNINGS PER SHARE
Loss from continuing operations for the purposes of basic loss
per share, being net loss attributable to owners of the Group
Number of shares
2020
£’000
2019
£’000
(11,000)
(9,123)
Weighted average number of ordinary shares for the purposes
of basic loss per share
216,920,719 178,875,353
Effect of dilutive potential ordinary shares:
Share options
Convertible loan notes in issue
-
-
-
-
Weighted average number of ordinary shares for the purposes
of diluted loss per share
216,920,719 178,875,353
The basic loss per share is £(0.05) (2019: loss per share £(0.05)). The diluted loss per share is £(0.05)
(2019: loss per share £(0.05)).
6363
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 PROPERTY, PLANT & EQUIPMENT
Cost
At 1 January
Additions
At 31 December
Accumulated depreciation
At 1 January
Depreciation charged in the year
At 31 December
Net book value at 31 December
14 RIGHT-OF-USE ASSETS
Cost
At 1 January
Additions
At 31 December
Accumulated depreciation
At 1 January
Depreciation charged in the year
At 31 December
Net book value at 31 December
FIXTURES AND
EQUIPMENT
2020
£’000
FIXTURES AND
EQUIPMENT
2019
£’000
564
816
1,380
343
110
453
927
431
133
564
283
60
343
221
LAND AND
BUILDINGS
2020
£’000
LAND AND
BUILDINGS
2019
£’000
1,335
2,234
3,569
234
507
741
-
1,335
1,335
-
234
234
2,828
1,101
64
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 15 GOODWILL AND OTHER INTANGIBLE ASSETS
Cost
At 1 January 2020 (restated)
Additions
At 31 December 2020
Accumulated amortisation
At 1 January 2020 (restated)
Amortisation charged for the year
At 31 December 2020
OTHER
INTANGIBLE
ASSETS
£’000
17,655
10,313
27,968
2,629
1,128
3,757
GOODWILL
£’000
16,384
9,300
25,684
2,202
77
2,279
TOTAL
£’000
34,039
19,613
53,652
4,831
1,205
6,036
Net book value at 31 December 2020
23,405
24,211
47,616
Cost
At 1 January 2019
Additions (restated)
Impairment losses
16,765
-
(381)
12,655
5,000
-
29,420
5,000
(381)
At 31 December 2019 (restated)
16,384
17,655
34,039
Accumulated amortisation
At 1 January 2019
Amortisation charged for the year (restated)
At 31 December 2019 (restated)
2,017
185
2,202
1,867
762
2,629
3,884
947
4,831
Net book value at 31 December 2019 (restated)
14,182
15,026
29,208
Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to
benefit from that business combination. The Group has identified three CGUs: investment management,
wealth planning and US operations.
INVESTMENT
MANAGEMENT
£’000
WEALTH
PLANNING
£’000
US
OPERATIONS
£'000
TOTAL
£’000
Goodwill
8,965
9,228
5,212
23,405
6565
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15 Goodwill and other intangible assets continued
A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of asset. The smallest identifiable group of
assets in the Group as at 31 December 2020 are its three divisions, investment management, wealth
planning and its US operations, the latter comprising goodwill arising separately on the acquisitions of
Chalice and MHC during the year. All key management information is prepared and reviewed across these
three divisions, and proposed acquisitions are analysed in one of those divisions. The different groups
of assets within those divisions do not generate independent cash flows enabling them to be classed as
separate CGUs. This is the seventh year in which the investment management and wealth planning CGUs
have been analysed in this format and the first year the US operations CGU has been analysed in this
format. Goodwill recognised on US acquisitions in 2020 has been fully attributed to one US CGU, being the
smallest identifiable group of assets.
KHL acquired KW Wealth Group Limited (KWWG) in 2014. KWWG has been split between investment
management and wealth planning CGUs depending on which CGU the relevant assets are allocated to.
The Group tests each CGU at least annually for goodwill impairment. The recoverable amount of a CGU is
determined as the higher of fair value less costs to sell and the value in use. For the investment management
and wealth planning CGUs, fair value less costs to sell is greater than the carrying value. No further
assessment of value in use has been performed. The value of the investment management and the wealth
planning CGUs exceeded their carrying value by £2.3m and £7.1m respectively. The impairment charge
in 2019 relates to Bradley Stewart goodwill in KW Wealth Planning’s financial statements, and relates to
a decline in ongoing revenues year-on-year, which reflects the gradual diminution of clients acquired on
acquisition.
Goodwill from the acquisition of Chalice, as allocated to the US operations CGU, was subject to an initial
impairment test in the year ended 31 December 2020. Chalice’s goodwill was reviewed as at 23 November
2020, when this entity was contributed into MHC, with no impairment deemed necessary. The US CGU was
subsequently reviewed for impairment as at 31 December 2020, with no impairment required.
Valuations are based on the discounted cash flow method. Projected cash flows are based on the most
recent budget, with a terminal growth rate of 2%. The discount rates used were 20% for the investment
management CGU and 18% for the wealth planning CGU. The US discount rate applied was 36%. The value
of the CGU related to Level 2 fair value measurements.
The impact to the value of the CGUs of a reasonably possible change to assumptions is presented in the
table below:
REASONABLY
POSSIBLE
CGU VALUATION
INCREASE
£’000
DECREASE
£’000
Investment Management
Discounted debt-free future cashflows ("DCF") method
(- / + 5% )
1,135
(1,177)
Wealth planning
Discounted debt-free future cashflows ("DCF") method
(- / + 5% )
2,002
(4,198)
US operations
Discounted debt-free future cashflows ("DCF") method
(- / + 5% )
532
(1,456)
Intangible assets
Intangible assets are valued based on underlying assets under management (i.e. the client lists). The assets
are assessed for their useful life on a client by client basis in order to determine amortisation rates. There are
currently £23.23m of intangible assets being amortised over 20 years, £0.85m over 15 years and £0.13m
over 10 years.
The addition in 2020 to intangible assets represents the value of assets under management and associated
client lists acquired from Sterling Trust and Regency.
The addition in 2019 to intangible assets represents the value of assets under management and associated
client lists acquired from Thomas and Co and WFI Financial.
66
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 16 INVESTMENTS
Cost
At 1 January 2019
Additions
As at 31 December 2019
Additions
Net movement on equity accounting of associate
Investment de-recognised on gain of control
As at 31 December 2020
£’000
-
416
416
1,101
(16)
(1,501)
-
On 25 May 2019, Kingswood acquired a 7% interest in US-based Manhattan Harbor Capital, LLC
("MHC") for an initial consideration of £416,435 (US$525,000), comprising a cash payment of £263,742
(US$332,500) and a share component of £152,693 (US$192,500) which was satisfied through the issuance
of 1,654,787 new ordinary shares in the Company.
On 12 August 2020, Kingswood acquired an additional 17% interest in MHC for total cash consideration of
£1,101,362 (US$1,438,158).
In the period during which Kingswood held 24% interest in MHC, equity accounting was applied and
Kingswood's net movement on investment during this period equalled £16,265 (US$21,431).
On 23 November 2020, Kingswood acquired a controlling 50.1% share in MHC and its subsidiaries for
consideration of £3,841,268 (US$5,106,582), comprising a cash payment of £832,392 (US$1,106,582),
a deferred cash payment of £752,219 (US$1,000,000) and the contribution of a 49.9% non-controlling
interest in Kingswood Capital Partners, LLC and Kingswood Wealth Advisors, LLC, together valued at
£99,210 (US$131,890).
The carrying value of Kingswood's 24% share of MHC immediately prior to acquiring control, from which
was MHC and its subsidiaries was consolidated, was £2,334,365 (US$3,103,304). This investment is
no longer recognised in the consolidated financial statements at year-end, with Kingswood instead fully
consolidating MHC and its subsidiaries.
See note 30 for additional details on business combinations.
6767
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17 DEFERRED TAX
The following are the major deferred tax assets and liabilities recognised by the Group and movements
thereon during the current and prior year:
Balances:
At 1 January
Reductions due to acquisitions
Business combinations
Movement in year
At 31 December
LIABILITIES
2020
£'000
LIABILITIES
2019
£'000
ASSETS
2020
£'000
-
-
(1,932)
43
(1,889)
-
-
-
-
-
428
(38)
-
2
392
ASSETS
2019
£'000
428
-
-
-
428
Deferred tax assets and liabilities may only be offset where the Group has a legally enforceable right to
do so.
At the Statement of Financial Position date, the Group has unused tax losses of £15.2m (2019: £13.2m)
available for offset against future profits. A deferred tax asset of £392,000 (2019: £428,000) has been
recognised as the Group expects to be in a position to restructure to utilise these losses. No deferred tax
asset has been recognised in respect of the remaining £12.9m tax losses as there is some uncertainty as to
the timing of future expected profit.
The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from
1 April 2023. This rate has not been substantively enacted at the balance sheet date, as result deferred tax
balances as at 31 December 2020 continue to be measured at 19%. If closing deferred taxation had been
calculated based on a rate of 25%, the deferred tax liability as at 31 December 2020 would have been
£596,650 higher.
18 TRADE AND OTHER RECEIVABLES
Trade receivables
Prepayments
Other debtors
Promissory note
2020
£’000
837
1,060
22,307
-
2019
£’000
462
274
784
754
24,204
2,274
The Directors consider that the carrying amount of trade and other receivables is approximately equal
to their fair value. All trade and other receivables represent current receivables which are due within
12 months.
Included within other debtors at 31 December is £20 million due from HSQ INVESTMENT LIMITED, a
wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital Limited (Pollen
Street) in consideration for the issue of 20 million convertible preference shares on 31 December 2020. This
debtor was settled in full on 19 March 2021.
68
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 19 SUBSIDIARIES
Kingswood Holdings Limited, the parent company incorporated in Guernsey, has the following subsidiaries
as at 31 December 2020:
NAME OF SUBSIDIARY
OWNERSHIP
HOLDING COMPANY
KW Wealth Group Limited (“KWWG”)
(UK company)
KW Investment Management Limited (“KWIM”)
(UK company)
KW Wealth Planning Limited (“KWWP”)
(UK company)
Sterling Trust Financial Consulting Limited (“STFC”)
(UK company)
STP Wealth Management Limited (“STPWM”) (UK
company)
NHA Financial Services Limited (“NHA”)
(UK company)
Sterling Trust (York) Limited (“STY”)
(UK company)
Sterling Trust Professional Limited (“STP”)
(UK company)
Sterling Trust Professional (North East) Limited
(“STPNE”) (UK company)
Sterling Trust Professional (Sheffield) Limited
(“STPS”) (UK company)
Regency Investment Services Limited (“Regency”)
(UK company)
EIM Nominees Limited (UK company)
XCAP Nominees Limited (UK company)
Kingswood US Holdings Inc (“KUSH”)
(US company)
Kingswood Investments, LLC (“KINV”)
(US company)
Manhattan Harbor Capital, LLC (“MHC”) (US
company)
Kingswood Capital Partners, LLC (“KCP”)
(US company)
Benchmark Investments, Inc (“BINV”)
(US company)
Benchmark Advisory Services, LLC (“BAS”)
(US company)
S.A.G. Marketing Group, LLC (“SAG”)
(US company)
Kingswood Capital Markets, LLC (“KCM”)
(US company)
Kingswood Wealth Advisors, LLC (“KWA”)
(US company)
Marchant McKechnie Independent Financial
Advisers Limited ("MMK") (UK company)
KW Trading Services Limited ("KWTS")
(UK company)
100% owned by KHL
Management services
100% owned by KHL
Investment management
100% owned by KHL
Wealth planning
100% owned by KHL
Holding company
100% owned by STFC –
non trading company
100% owned by STFC
Wealth planning
Holding company
100% owned by NHA
Wealth planning
100% owned by STFC
Wealth planning
100% owned by STFC
Wealth planning
100% owned by STFC
Wealth planning
100% owned by KHL
Wealth planning
100% owned by KWIM
– non trading company
100% owned by KWIM
– non trading company
100% owned by KWWG
– non trading company
100% owned by KUSH
– non trading company
50.1% owned by KUSH
Nominee company
Nominee company
Holding company
Holding company
Holding company
100% owned by MHC
Independent broker dealer
100% owned by MHC
Independent broker dealer
100% owned by MHC
100% owned by MHC
Registered investment
adviser
Management services
100% owned by MHC
Investment banking
100% owned by MHC
Registered investment
adviser
Dissolved on 16 March 2021 Wealth planning
Dissolved on 3 March 2020 Trading and broking
services
6969
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19 Subsidiaries continued
Profits attributable to non-controlling interests in MHC and its subsidiaries for the period 23 November
2020, when Kingswood acquired control, and the year-end were £435,740 (US$559,359). Dividends paid to
non-controlling interest in the period post-acquisition to 31 December 2020 were £160,106 (US$216,608).
Accumulated non-controlling interest of MHC and its subsidiaries as at 31 December 2020 were
£1,063,924 (US$1,452,150).
Summarised financial information (material subsidiaries with non-controlling interests) before intra-group
adjustments:
As at 31 December:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
12 months ended 31 December:
Revenue
Profit after tax
Other comprehensive income
Total comprehensive income
2020
$'000
6,278
153
2020
£'000
4,600
112
(3,019)
(2,212)
(24)
(17)
2020
$'000
2020
£'000
24,487
2,132
-
19,076
1,661
-
2,132
1,661
Above figures represent annualised results for MHC and its subsidiaries, including Chalice numbers from 23
November 2020, the date of contribution onwards. Figures pre-dating 23 November 2020 are unaudited.
20 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
2020
£’000
2019
£’000
3,899
2,006
Client money
In November 2020, the Group’s subsidiary KWIM moved to a Model B structure and transferred its CASS
obligations to a third-party service provider. Consequently, minimal client money was held in segregated
bank accounts at 31 December 2020 of £20,000 (31 December 2019: £16 million).
70
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 21 TRADE AND OTHER PAYABLES
Trade payables
Accruals and other creditors
Lease liability
Other taxation and social security
Other borrowings
2020
£’000
1,094
9,348
590
1,882
41
2019
RESTATED
£’000
863
4,030
237
263
-
12,955
5,393
The Directors consider that the carrying amount of trade payables approximates their fair value.
During the year, in response to the COVID-19 pandemic, the Group availed of certain government relief
schemes, specifically the option to defer PAYE and VAT due to HMRC. Post year-end, the Group entered
into an agreement with HMRC to pay deferred outstanding PAYE, over an 18-month period. See also
note 24.
22 LEASE LIABILITIES
The lease liabilities are included in trade and other payables and other non-current liabilities in the statement
of financial position.
At 1 January 2020
Additions
Interest expense
Lease payments
At 31 December 2020
Carrying amount of lease liabilities:
At 1 January 2020
At 31 December 2020
- Due within one year
- Due after more than one year
Short-term lease expense
Low value lease expense
LAND AND
BUILDINGS
£’000
1,151
2,394
110
(421)
3,234
£’000
1,151
3,234
590
2,644
2019
£’000
-
33
2020
£’000
16
92
7171
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 DEFERRED CONSIDERATION PAYABLE
Deferred consideration payable on acquisitions
- falling due within one year
- due after more than one year
2020
£’000
4,068
836
3,232
2019
RESTATED
£’000
-
-
-
The deferred consideration payable on acquisitions is due to be paid in cash.
The deferred consideration liability is contingent on performance requirements during the deferred
consideration period. The value of the contingent consideration is determined by EBITDA and/or
revenue targets agreed on the acquisition of each asset, as defined under the respective Business
Purchase Agreement. As at the reporting date, the Group is expecting to pay the full value of its deferred
consideration as all acquisitions are on target to meet the requirements, and therefore no gains or losses
have arisen from this during the year.
The Group has restated its accounting treatment to conform with the required treatment of deferred
consideration under IFRS 3.
Previously all deferred consideration payable on acquisitions was recorded as a deferred liability and included
in the fair value of assets. However, in circumstances where the payment of deferred consideration is
contingent on the seller remaining within the employment of the Group during the deferred period, the
contingent portion of deferred consideration is not included in the fair value of consideration paid, rather is
treated as remuneration and accounted for as a charge against profits over the deferred period.
During the year, deferred consideration expensed as remuneration through profit or loss was £7,253,510
(2019: £3,765,436).
24 OTHER NON-CURRENT LIABILITIES
Lease liability
Preference share liability
Other taxation and social security
Other borrowings
2020
£’000
2,644
7,365
579
214
2019
RESTATED
£’000
914
1,146
-
-
10,802
2,060
72
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 25 SHARE CAPITAL
Ordinary shares issued:
Fully paid
Share capital and share premium:
At 1 January 2019
Issued during year
At 31 December 2019
Issued during year
At 31 December 2020
2020
SHARES
2019
SHARES
2020
£’000
2019
£’000
216,920,719 216,920,719
10,846
10,846
NUMBER OF
ORDINARY SHARES
‘000
154,871
62,050
216,921
-
PAR VALUE
£’000
7,743
3,103
10,846
-
SHARE
PREMIUM
£’000
6,274
1,950
8,224
-
TOTAL
£’000
14,017
5,053
19,070
-
216,921
10,846
8,224
19,070
Ordinary shares have a par value of £0.05 per share. They entitle the holder to participate in dividends, and
to share in the proceeds of winding up the company in proportion to the number of, and amounts paid on,
shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy,
is entitled to one vote and upon a poll each share is entitled to one vote.
Kingswood Holdings Limited does not have a limit on the amount of authorised capital.
Movements in ordinary shares can be summarised as follows:
On 8 May 2019 KPI (Nominees) Limited converted £500,000 under the Convertible Facilities Agreement
into 5,823,230 ordinary shares of 8.5863p each.
On 30 May 2019 KHL issued 1,654,787 ordinary shares at 9.227p per share as part of an investment in
Manhattan Harbor raising £152,687.
On 23 July 2019 KPI (Nominees) Limited converted £500,000 under the Convertible Facilities Agreement
into 6,369,426 ordinary shares of 7.85p each.
On 23 July 2019 KPI (Nominees) Limited converted £500,000 under the Convertible Facilities Agreement
into 6,369,426 ordinary shares of 7.85p each.
On 25 July 2019 KPI (Nominees) Limited converted £750,000 under the Convertible Facilities Agreement
into 9,560,229 ordinary shares of 7.845p each.
On 30 August 2019 KPI (Nominees) Limited converted £1,725,000 under the Convertible Facilities
Agreement into 21,131,936 ordinary shares of 8.163p each.
On 3 September 2019 KPI (Nominees) Limited converted £1,425,000 under the Convertible Facilities
Agreement into 17,510,444 ordinary shares of 8.138p each.
On 4 September 2019 KPI (Nominees) Limited purchased Astoria Investments (UK) Limited’s entire holding
of 28,059,272 ordinary shares of 5 pence each in the Company at a price of 7.5 pence.
KPI (Nominees) Limited currently holds 143,720,906 Ordinary Shares, representing 66.3 per cent of ordinary
shares in issue at 31 December 2020.
7373
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 PREFERENCE SHARE CAPITAL
2020
2019
SHARES
SHARES
2020
£'000
2019
RESTATED
£’000
Convertible preference shares issued:
Fully paid
44,828,443
5,727,655
37,550
4,586
Preference share capital movements are as follows:
At 1 January 2019
Issued during year
At 31 December 2019
Issued during year
At 31 December 2020
Equity component
Liability component
NUMBER OF
SHARES
‘000
-
5,728
5,728
39,100
44,828
2020
£‘000
37,550
7,278
44,828
PAR VALUE
£’000
-
5,728
5,728
39,100
44,828
2019
£’000
4,586
1,142
5,728
On 12 September 2019, Kingswood Holdings Limited entered into a subscription agreement with HSQ
INVESTMENT LIMITED, a wholly owned indirect subsidiary of funds managed and/or advised by Pollen
Street, to subscribe for up to 80 million irredeemable convertible preference shares, at a subscription
price of £1 each (the Subscription). Pollen Street is a global, independent alternative asset investment
management company, established in 2013 with currently over £2.6 billion gross AUM across private equity
and credit strategies, focused on the financial and business services sectors, with significant experience in
specialty finance.
All irredeemable convertible preference shares convert into new ordinary shares at Pollen Street Capital’s
option at any time from the earlier of an early conversion trigger or a fundraising, or automatically on 31
December 2023. Preferential dividends on the irredeemable convertible preference shares accrue daily at a
fixed rate of five per cent per annum from the date of issue.
74
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 27 NOTES TO THE CASH FLOW STATEMENT
Cash and cash equivalents comprise cash and cash equivalents with an original maturity of three months
or less. The carrying amount of these assets is approximately equal to their fair value. Cash and cash
equivalents are detailed in note 20.
Loss before tax
Adjustments for:
Depreciation and amortisation
Finance costs
Remuneration charge (deferred consideration)
Share-based payment expense
Other (gains) / losses
Foreign exchange gain
Tax paid
Share of post-tax profits of equity accounted associates
Loss from discontinued operations
Operating cash flows before movements in working capital
Increase in receivables
Increase in payables
2020
£’000
2019
RESTATED
£’000
(10,680)
(8,968)
1,822
554
7,254
(223)
(1,744)
(22)
(103)
(56)
-
(3,198)
(1,893)
3,516
1,241
211
3,765
442
381
-
-
-
(155)
(3,083)
(1,117)
2,841
Net cash outflow from operating activities
(1,575)
(1,359)
Changes in non-current liabilities, including both changes arising from cash flows and non-cash changes are
shown below:
As at 1 January 2020 (restated)
Cash flows:
Lease liability
Non-cash flows:
Deferred consideration
Preference share liability
Other taxation and social security
Other borrowings
Lease liability
As at 31 December 2020
NON-CURRENT
LIABILITIES
£’000
2,060
(428)
3,232
6,219
680
214
1,725
13,702
7575
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28 SHARE BASED REMUNERATION
Employee Option Plan
The Group has the following share option schemes established for employees and Directors:
• The European Wealth Group Limited EMI Scheme 2014, an HMRC approved scheme under Schedule
4 of the Income Tax (Earnings and Pensions) Act 2003 pursuant to which options over ordinary shares
of the Group may be granted to individuals (as selected by and in amounts determined by the Group’s
Remuneration Committee) who are employees of the Group.
• The 2019 Kingswood Group LTIP scheme under which options are granted over ordinary shares of
the Group to employees and Directors. 39,750,000 options were issued with an exercise price of 5p.
The vesting date of these share options is 31 December 2021. Vesting conditions include a mixture of
performance and market-based conditions, tailored to the employee or director.
If options granted under any of the schemes remain unexercised for a period of 10 years from the date of
grant then the options expire. In certain circumstances, options may be exercised earlier than the vesting
date if the option holder ceases to be an employee of the relevant Group company. In particular, options
may be exercised for a period of six months after the option holder ceases to be employed within the Group
by reason of injury, ill health or disability (evidenced to the satisfaction of the Remuneration Committee),
redundancy or retirement on or after reaching the age of 55 or upon the sale or transfer out of the Group of
the relevant Group member or undertaking employing or contracting with him/her.
In the event of cessation of employment or engagement of the option holder by reason of his/her death,
his/her personal representatives will be entitled to exercise the option within twelve months following the
date of his/her death. Where an option holder ceases to be employed within the Group for any other reason,
options may also become exercisable for a limited period at the discretion of the Remuneration Committee.
There are no additional performance conditions attached to the share options presently issued.
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
2020
PENCE
NUMBER OF
OPTIONS
2020
AVERAGE
EXERCISE PRICE
PER SHARE
OPTION
2019
PENCE
NUMBER OF
OPTIONS
2019
RESTATED
Outstanding as at 1 January
5.50
34,607,500
77.21
314,500
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding as at 31 December
-
-
-
-
5.00
(14,658,333)
5.87
19,949,167
5.00
39,750,000
-
5.99
5.50
-
(5,457,000)
34,607,500
Vested and exercisable at 31 December
72.17
257,500
72.17
257,500
76
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 Share options outstanding at the end of the year have the following expiry date and exercise prices:
GRANT DATE
EXPIRY DATE
4 August 2014
1 August 2016
3 August 2024
31 July 2026
15 February 2019
31 December 2029
9 May 2019
28 June 2019
1 July 2019
Total
31 December 2029
31 December 2029
1 July 2029
EXERCISE
PRICE
PENCE
SHARE OPTIONS
2020
SHARE OPTIONS
2019
RESTATED
100.00
105,000
105,000
53.00
152,500
152,500
5.00
5.00
5.00
5.00
5,466,667
9,950,000
12,125,000
21,250,000
2,000,000
3,000,000
100,000
150,000
19,949,167
34,457,500
Weighted average contractual life of
options outstanding at end of period
8.26 years
9.28 years
The following information is relevant to the determination of the fair value of options granted during the
year under equity settled share based remuneration schemes operated by the Group.
Option pricing model used
Weighted average share price at grant date (p)
Exercise price (p)
Weighted average contractual life (in days)
Expected volatility (15 February 2019 tranche)
Expected volatility (9 May 2019 tranche)
Expected volatility (28 June 2019 tranche)
Expected volatility (1 July 2019 tranche)
Expected dividend growth rate
Risk-free interest rate
2019
Monte Carlo
10.03
5.00
3,653
50.19%
55.04%
57.47%
57.52%
N/A
0.6-0.7%
TThe volatility assumption, measured at the standard deviation of expected share price returns, is based on a
statistical analysis of daily share prices over the last three years.
The dividend growth rate has been assumed to be 0% as no dividends have been paid.
Total gain / (expense) arising from share-based transactions recognised during the period as part of
employee benefit expense is as follows:
Options issued under employee option plan
2020
£’000
223
2019
£’000
(442)
7777
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29 FINANCIAL INSTRUMENTS
The following table states the classification of financial instruments and is reconciled to the Statement of
Financial Position:
Financial assets measured at amortised cost
Trade and other receivables
Cash and bank balances
Financial liabilities measured at amortised cost
Trade and other payables
Other non-current liabilities
Lease liability
Preference share liability
Financial liabilities measured at fair value through profit and loss
Deferred consideration payable
2020
CARRYING
AMOUNT
£’000
23,048
3,899
2019
CARRYING
AMOUNT
RESTATED
£’000
2,274
2,006
(10,483)
(5,156)
(794)
(3,234)
(7,365)
(4,068)
1,003
-
(1,151)
(1,146)
-
(3,173)
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other
receivables, trade and other payables, and other non-current liabilities.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables,
and trade and other payables approximates fair value.
ITEM
Deferred
consideration
payable
FAIR VALUE
£’000
4,068
VALUATION TECHNIQUE
FAIR VALUE HIERARCHY LEVEL
Fair value of deferred consideration
payable is estimated by discounting the
future cash flows using the IRR inherent in
the company's acquisition price.
Level 3
There have been no transfers between levels during the period.
The potential profit or loss impact in relation to deferred consideration payable of a reasonably possible
change to the discount rate is as follows:
ASSUMPTION
REASONABLY
POSSIBLE
PROFIT OR (LOSS) IMPACT
INCREASE
£’000
DECREASE
£’000
Discount rate change
(+ / - 5%)
(64)
66
78
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 Credit risk
Credit risk represents the potential that a counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the Group. Credit risk is monitored on a regular basis
by the finance team along with support from back-office functions with the respective business divisions.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the Statement
of Financial Position date.
At the reporting date, the Group’s financial assets exposed to credit risk were as follows:
Cash
Trade and other receivables
2020
£’000
3,899
24,204
28,103
2019
£’000
2,006
2,274
4,280
The Group’s exposure to credit risk on cash and cash equivalents is considered by the Directors to be low as
the Group holds accounts at banks with strong credit ratings. See note 20 for further detail on cash and cash
equivalents.
Trade and other receivables were neither impaired nor past due on the reporting dates. Due to the nature of
trade and other receivables balances the Group is not subject to any expected credit losses. See note 18 for
further detail on trade and other receivables.
Liquidity risk
Liquidity risk represents the potential that the Group will be unable to meet its financial obligations as they
fall due. The controls and limits surrounding the Group’s credit risk together with cash monitoring processes
ensure that liquidity risk is minimised. The table below illustrates the maturity profile of all financial liabilities
outstanding at 31 December 2020.
REPAYABLE ON
DEMAND
£'000
REPAYABLE
BETWEEN
0-12 MONTHS
£'000
REPAYABLE
AFTER MORE
THAN 12 MONTHS
£'000
TOTAL
£'000
1,094
19,428
5,418
4,145
1,094
11,270
873
779
-
8,158
4,545
3,366
At 31 December 2020
Trade payables
Other payables
Deferred consideration payable
Lease liabilities
At 31 December 2019
Trade payables
Other payables
Deferred consideration payable
Lease liabilities
-
-
-
-
-
-
-
-
-
-
14,016
16,069
30,085
863
3,090
-
329
4,282
1,203
-
-
957
2,160
2,066
3,090
-
1,286
6,442
7979
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 29 Financial instruments continued
Market risk
Market risk arises from the Group's use of interest bearing, tradable and foreign currency financial
instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market
factors (other price risk).
Price risk
As with other firms in our sector, the Group is vulnerable to adverse movements in the value of financial
instruments. The Group’s business will be partially dependent on market conditions and adverse movements
may have a significant negative effect on the Group’s operations through reducing off-Balance Sheet assets
under management, given its fees are largely calculated at a percentage of these client assets.
It is not practicable to quantify the price risk to our business, owing to variability in how fees are charged.
Interest rate risk
Interest rate risk is the risk of financial loss as a result of an increase in interest rates on borrowings.
Sensitivity analysis has not been performed on the Group as the Group’s only interest-bearing instrument
is at a fixed rate until maturity. As such, a 10% movement in interest rates would have no impact on the
financial statements.
Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash flows of financial instruments will fluctuate
because of changes in foreign exchange rates. The Group has minimal exposure to foreign exchange risk,
operating as it does in stable currencies – namely sterling, US dollars, and the euro.
The Group aims to fund expenses and investments in the respective currency and to manage foreign
exchange risk at a local level by matching the currency in which revenue is generated and expenses are
incurred.
The effect of a 20% strengthening of the US dollar against sterling, based on 2020 figures, would have
increased the US division’s overall profit as recognised in the Statement of Comprehensive Income by
£90,657. A 20% weakening of the US dollar, conversely, would have decreased the profit contribution
by £75,547.
Assessment of exposure to foreign exchange risk
Individual Group companies infrequently enter into transactions denominated in a currency other than
their functional currencies, and these are typically immaterial in value. The primary risk is foreign currency
rates will move adversely, reducing on consolidation the carrying value of financial assets or increasing the
financial liabilities recognised by the US division. The Group does not consider this risk to be material.
80
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 30 BUSINESS COMBINATIONS
30.1 Acquisition of Chalice
On 30 April 2020, the Company completed the acquisition of a 100% interest in Chalice Capital Partners,
LLC and Chalice Wealth Advisors, LLC (together "Chalice").
Chalice Capital Partners, LLC is an Independent Broker Dealer and Chalice Wealth Advisors, LLC is a
Registered Investment Advisor, both located in San Diego, California and provide full-service securities
brokerage, advisory and investment banking services to a broad-based group of individuals and corporate
clients.
Shortly after acquisition the names of the Chalice entities were changed – Chalice Capital Partners, LLC
became Kingswood Capital Partners, LLC and Chalice Wealth Advisors, LLC was renamed Kingswood Wealth
Advisors, LLC.
The maximum consideration for the acquisition of a 100% interest in Chalice was US$4.0m (£3.2m) and
initial consideration of US$1.0m (£0.8m) was paid on exchange in December 2019. Following regulatory
approval and closing, the second tranche of US$1.0m (£0.8m) less adjustments for completion cash and
working capital was paid on 5 May 2020. The third tranche of US$1.0m (£0.8m) was paid on 21 August
2020 on Chalice meeting pre-agreed asset migration and revenue hurdles. The fourth and final tranche of
US$1.0 million (£0.8m) was not paid as Chalice failed to meet the pre-agreed EBITDA hurdle for year ending
31 October 2020.
Payments were made through the issue of new convertible preference shares under the terms the Group's
share subscription agreement with HSQ INVESTMENT LIMITED, a wholly owned indirect subsidiary of
funds managed and/or advised by Pollen Street.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows:
Receivables
Cash
Payables
Total identifiable net assets
BOOK VALUE
£'000
ADJUSTMENT
£'000
FAIR VALUE
£'000
329
113
(238)
204
-
-
-
-
329
113
(238)
204
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
8181
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
30 Business combinations continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase
consideration are as follows:
Initial cash paid
Deferred consideration
Total purchase consideration
$'000
1,901
2,000
3,901
£'000
1,507
1,586
3,093
Goodwill recognised on acquisition
3,644
2,889
Acquisition costs have been recognised as transaction costs under acquisition-related adjustments in the
Consolidated Statement of Comprehensive Income.
The main factors leading to the recognition of goodwill are:
• the presence of certain intangible assets, primarily underlying client relationships within the acquired
businesses, which do not qualify for separate recognition;
• the strategic foothold the Chalice team and business gives the Company in the US market; and
• the ability to leverage the Chalice platform and achieve economies of scale.
The goodwill recognised will not be deductible for tax purposes.
Revenue and profit contribution
Since the acquisition date, Chalice has contributed £4,287,264 to Group revenues and a loss of £47,483 to
Group profit before tax.
If the acquisition had occurred on 1 January 2020, the contribution to Group revenue would have been
£9,211,291 and to Group profit before tax would have been £273,613.
Total purchase consideration
Less:
Deferred consideration
Initial cash paid to sellers
Less: cash held by Chalice
Net cash outflow
$'000
3,901
£'000
3,093
(2,000)
(1,586)
1,901
(143)
1,758
1,507
(113)
1,394
82
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
30.2 Acquisition of Sterling Trust
On 23 June 2020, the Company completed the acquisition of a 100% interest in Sterling Trust Financial
Consulting Limited (Sterling Trust) and its subsidiaries, a high-quality IFA business which operates from
headquarters in Hull, Yorkshire and four satellite offices in Darlington, Newcastle, Sheffield & York. Sterling
Trust provides independent financial advice to individuals and corporates across the UK and at acquisition
employed 48 people including 22 IFAs advising/managing £1.2 billion AUA/AUM on behalf of
circa 5,000 clients.
The business was acquired for a cash consideration of £17.75 million, payable over a 3-year period. £7.25
million was paid at closing and the balance will be paid on a deferred basis subject to Sterling Trust meeting
pre-agreed asset migration, recurring revenue, and EBITDA hurdles over a 3-year year period, with the final
deferred payment due in June 2023. An additional deferred payment of maximum £1.775 million is payable
over the 3-year period subject to achievement of an excess EBITDA target over that period.
Under the terms of the acquisition, payment of deferred consideration is contingent on the seller
remaining within the employment of the Group for the first two years of the deferred consideration period.
Consequently, a portion of the deferred consideration is not included in the fair value of consideration paid,
rather is treated as remuneration and accounted for as a charge against profits over the deferred period.
In the twelve months to 31 December 2019 Sterling Trust delivered EBITDA of £2.5 million through strong
and consistent revenue growth and a keen focus on driving high levels of recurring revenue. Sterling Trust
had total assets of £6.1 million at 31 December 2019.
Initial consideration of £7.25 million was funded by the issue of new convertible preference shares, under
the terms of the Company’s convertible preference Share subscription agreement with HSQ INVESTMENT
Limited, a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows:
Property, plant and equipment
Goodwill and intangibles
Receivables
Cash
Payables
Taxation
Deferred tax liability
Total identifiable net assets
BOOK VALUE
£'000
ADJUSTMENT
£'000
FAIR VALUE
£'000
247
3,262
2,078
949
(415)
(569)
-
5,552
-
5,025
(1,916)
-
(83)
-
(1,575)
1,451
247
8,287
162
949
(498)
(569)
(1,575)
7,003
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
8383
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 30 Business combinations continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase
consideration are as follows:
Initial cash paid
Deferred consideration
Total purchase consideration
Goodwill recognised on acquisition
£'000
7,591
3,274
10,865
3,862
Acquisition costs have been recognised as transaction costs under acquisition-related adjustments in the
Consolidated Statement of Comprehensive Income.
The main factors leading to the recognition of goodwill are:
• the presence of certain intangible assets, primarily underlying client relationships within the acquired
businesses, which do not qualify for separate recognition;
• the strategic foothold the Sterling Trust team and business gives the Company in the North East market;
and
• the ability to leverage the Sterling Trust platform and achieve economies of scale.
The goodwill recognised will not be deductible for tax purposes.
Revenue and profit contribution
Since the acquisition date, Sterling Trust has contributed £3,753,303 to Group revenues and £1,306,593 to
Group loss before tax.
If the acquisition had occurred on 1 January 2020, the contribution to Group revenue would have been
£7,230,047 and to Group loss before tax would have been £2,516,911.
Net cash outflow arising on acquisition:
Total purchase consideration
Less:
Deferred consideration
Initial cash paid to sellers
Less: cash held by Sterling Trust
Net cash outflow
£'000
10,865
(3,274)
7,591
(949)
6,642
84
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020
30.3 Acquisition of Regency Investment Services
On 17 November 2020, the Company completed the acquisition of a 100% interest in Regency Investment
Services (Regency), a high-quality IFA business which operates from Egham, Surrey. The transaction boosted
Kingswood's client facing advisory team to 67 people and at completion increased assets under advice/
management to circa £5.0 billion from over 16,000 active clients.
Regency provides independent financial advice to individuals and corporates primarily in the Greater London
area and currently employs 12 people including six IFAs advising on and managing £320 million AUA/AUM
on behalf of circa 1,000 clients.
The business was acquired for cash consideration of £3.45 million, payable over a 3-year period. £1.38m
was paid at closing and the balance will be paid on a deferred basis subject to Regency meeting pre-agreed
recurring revenue and EBITDA hurdles over a 3-year year period. An additional deferred payment of
maximum £1.2 million is potentially payable at the end of the 3-year period subject to achievement of an
excess EBITDA target over that period.
Under the terms of the acquisition, payment of deferred consideration is contingent on one of the sellers
remaining within the employment of the Group for the deferred consideration period. Consequently, a
portion of the deferred consideration is not included in the fair value of consideration paid, rather is treated
as remuneration and accounted for as a charge against profits over the deferred period.
The company has a highly qualified and experienced team of financial advisers supported by a dedicated
support team. Regency's continued success is built around developing and maintaining long-term client
relationships, making the Regency team a perfect fit for Kingswood.
In the twelve months to 31 January 2020 it delivered EBITDA of £0.5 million through strong and consistent
revenue delivery and a keen focus on driving high levels of recurring revenue. As of 31 January 2020
Regency had total assets of £2.6m and net assets of £2.1m.
The acquisition was funded by the issue of new convertible preference shares, under the terms of the
Company’s convertible preference Share subscription agreement with HSQ INVESTMENT LIMITED, a
wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows:
Property, plant and equipment
Goodwill and intangibles
Receivables
Cash
Payables
Taxation
Deferred tax liability
BOOK VALUE
£'000
ADJUSTMENT
£'000
FAIR VALUE
£'000
10
1,925
83
488
(75)
(138)
-
2,293
-
(43)
-
-
-
-
(358)
(401)
10
1,882
83
488
(75)
(138)
(358)
1,892
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
8585
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 30 Business combinations continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase
consideration are as follows:
Initial cash paid
Deferred consideration
Total purchase consideration
Goodwill recognised on acquisition
£'000
1,738
381
2,119
227
Acquisition costs have been recognised as transaction costs under acquisition-related adjustments in the
Consolidated Statement of Comprehensive Income.
The main factors leading to the recognition of goodwill are:
• the presence of certain intangible assets, primarily underlying client relationships within the acquired
businesses, which do not qualify for separate recognition;
• the strategic foothold the Regency team and business gives the Company in the Greater London market;
and
• the ability to leverage the Regency platform and achieve economies of scale.
The goodwill recognised will not be deductible for tax purposes.
Revenue and profit contribution
Since the acquisition date, Regency has contributed £171,960 to Group revenues and £(5,495) to Group
loss before tax.
If the acquisition had occurred on 1 January 2020, the contribution to Group revenue would have been
£1,608,373 and to Group loss before tax would have been £491,122.
Net cash outflow arising on acquisition:
Total purchase consideration
Less:
Deferred consideration
Initial cash paid to sellers
Less: cash held by Regency
Net cash outflow
£'000
2,119
(381)
1,738
(488)
1,250
86
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 30.4 Acquisition of Manhattan Harbor Capital (re-named Kingswood US)
Over the period May 2019 to August 2020 the Company progressively acquired a 24% interest in Manhattan
Harbor Capital ("MHC"), a US based financial services business.
On 23 November 2020, the Company contributed 100% of its Chalice business into MHC at a value of
US$4m (£3.1m) for additional equity in MHC, in addition to a further cash equity investment of US$1.1m
(£0.9m) which combined to increase the Company’s interest in MHC to a majority and controlling 50.1%
position.
MHC has been rebranded Kingswood US and provides the Kingswood Group with a strong, robust and well-
capitalised foundation to accelerate its growth strategy in the US.
The Company intends to contribute up to US$8.0m (£5.7m) of additional growth equity to Kingswood US
before 31 December 2022 to further build US distribution channels through active adviser recruitment. If all
capital is approved and fully deployed, the Kingswood Group is projected to own approximately 68% of the
integrated Kingswood US financial services platform.
Kingswood US now comprises strong Independent Broker Dealer ("IBD") and Registered Investment Adviser
("RIA") businesses across the US with key hubs in Atlanta, New York, and San Diego. In addition it incorporates
Kingwood Capital Markets, a national Investment Banking platform now supported by significant regulatory
capital to leverage expansion of distribution channels and drive growth across equity and debt advisory, capital
raising and M&A.
Kingswood US has a team of 203 Authorised Representatives managing US$2.1 billion of client assets from
key offices in New York, Atlanta, and San Diego.
On a pro-forma, unaudited basis, in the twelve months to 31 December 2020 a combined Kingswood US
delivered revenue of US$36.1m (£28.1m) and EBITDA of US$2.3m (£1.8m) on a fully consolidated basis.
Payments to acquire MHC were made by the Company issuing new convertible preference shares under the
terms of its convertible preference share subscription agreement with HSQ INVESTMENT LIMITED, a wholly
owned indirect subsidiary of funds managed and/or advised by Pollen Street.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows:
PPE & Investments
Receivables
Cash
Payables
Total identifiable net assets
BOOK VALUE
£'000
ADJUSTMENT
£'000
FAIR VALUE
£'000
874
2,379
2,922
(3,364)
2,811
-
-
-
-
-
874
2,379
2,922
(3,364)
2,811
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
8787
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 30 Business combinations continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase
consideration are as follows:
Initial cash paid
Additional capital contribution payable
Fair value of Chalice non-controlling interest contributed
Fair value of previously held equity interest
Total purchase consideration
Fair value re-measurement of MHC equity interest
Non-controlling interest at acquisition
Goodwill
$'000
1,107
1,000
132
3,103
5,342
1,162
1,865
3,470
£'000
832
752
99
2,334
4,017
874
1,403
2,610
Acquisition costs have been recognised as transaction costs under acquisitions-related adjustments in the
Consolidated Statement of Comprehensive Income.
The main factors leading to the recognition of goodwill are:
• the presence of certain intangible assets, primarily underlying client relationships within the acquired
businesses, which do not qualify for separate recognition; and
• the strategic foothold the Kingswood US team and business gives the Company in the US market; and
• the ability to leverage the Kingswood US platform and achieve economies of scale.
The goodwill recognised will not be deductible for tax purposes.
Revenue and profit contribution
Since achieving a 50.1% interest, MHC and its subsidiaries (excluding Chalice) has contributed £4,045,223 to
Group revenues and £601,544 to Group profit before tax.
If the acquisition had occurred on 1 January 2020, the contribution to Group revenue would have been
£18,373,741 and to Group profit before tax would have been £1,765,852.
Net cash outflow arising on acquisition:
Total purchase consideration
Less:
Fair value of previous holdings / entity contributions
Initial cash paid to sellers
Less: cash held by MHC
Net cash outflow
Post 50.1% share
Combined Kingswood US revenue
Combined Kingswood US profit after tax
$'000
5,342
£'000
4,018
(3,235)
2,107
(2,434)
1,584
(3,884)
(2,922)
(1,777)
(1,338)
2020
$'000
10,696
582
2020
£'000
8,332
453
88
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 31 RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information
about the remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration
Report on page 34.
Short-term employee benefits
Termination benefits
Share-based payments
2020
£’000
898
-
68
966
2019
RESTATED
£’000
885
272
62
1,219
Other related parties
During the year, KHL paid £nil interest (2019: £141,113) to KPI (Nominees) Limited, its major shareholder.
KHL incurred fees of £125,000 (2019: £125,000) from KPI (Nominees) Limited in relation to Non-Executive
Director remuneration. At 31 December 2020, £112,500 of these fees and interest remained unpaid
(2019: £75,000).
Fees received from Moor Park Capital Partners LLP, in which Gary Wilder holds a beneficial interest, relating
to property related services provided by KHL totalled £20,000 for the year ended 31 December 2020
(2019: £20,000), of which £nil (2019: £20,000) was outstanding at 31 December 2020.
Fees paid for financial and due diligence services to Kingswood LLP and Kingswood Corporate Finance
Limited, in which Gary Wilder and Jonathan Massing hold a beneficial interest, totalled £184,426 for
the year to 31 December 2020 (2019: £90,894), of which £29,280 (2019: £22,849) was outstanding at
31 December 2020.
32 CAPITAL MANAGEMENT
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital
structure and makes adjustments in light of changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount
of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce
debt, if any exists.
The primary objective of the Group’s capital management plan is to ensure that it maintains a strong capital
structure in order to protect clients’ interests, meet regulatory requirements, protect creditors’ interests,
support the development of its business and maximise shareholder value. Each subsidiary manages its own
capital, to maintain regulatory solvency. Details of the management of this risk can be found in the
Strategic Report.
The Group’s capital management policy is, for each subsidiary, to hold the higher of:
• the capital required by any relevant supervisory body; or
• the capital required based on each subsidiary’s internal assessment.
8989
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 32 Capital management continued
The following entities are subject to regulatory supervision and must comply with capital adequacy rules and
regulations:
ENTITY
REGULATORY BODY AND JURISDICTION
KW Investment Management Limited
FCA Investment Firm
KW Investment Management Limited
FSCA South Africa: Financial Services Provider
KW Wealth Planning Limited
FCA Personal Investment Firm
STP Wealth Management Limited
FCA Personal Investment Firm
Sterling Trust (York) Limited
FCA Personal Investment Firm
Sterling Trust Professional Limited
FCA Personal Investment Firm
Sterling Trust Professional (North East) Limited
FCA Personal Investment Firm
Sterling Trust Professional (Sheffield) Limited
FCA Personal Investment Firm
Regency Investment Services Limited
FCA Personal Investment Firm
Benchmark Investments, Inc
FINRA-regulated brokerage firm (USA)
Kingswood Capital Partners, LLC
FINRA-regulated brokerage firm (USA)
Benchmark Advisory Services, LLC
SEC-regulated advisory firm (USA)
Kingswood Wealth Advisors, LLC
SEC-regulated advisory firm (USA)
The regulatory capital requirements of companies within the Group, and the associated solvency of the
Group, are assessed and monitored by the Board of Directors. Ultimate responsibility for an individual
company’s regulatory capital lies with the relevant subsidiary Board. There has been no material change in
the level of capital requirements of individual companies during the year, nor in the Group’s management of
capital. All regulated entities exceeded the minimum solvency requirements at the reporting date and during
the year.
The debt-to-equity ratios at 31 December 2020 and 31 December 2019 were as follows:
Loans and borrowings
Lease liabilities
Less: cash and cash equivalents
Net debt
Total equity
Debt to capital ratio (%)
33 FINANCIAL COMMITMENTS
2020
£’000
255
3,234
(3,899)
-
2019
RESTATED
£’000
-
1,151
(2,006)
-
50,152
28,201
0%
0%
Subject to conditions being met, the Group has committed to contribute £5.9m (US$8.0m) of additional
growth equity before 31 December 2022 to further build US distribution channels through active adviser
recruitment and acquisitions.
Commitments
2020
$'000
5,861
2020
£'000
-
90
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 34 ULTIMATE CONTROLLING PARTY
As at the date of approving the financial statements, the ultimate controlling party of the Group was KPI
(Nominees) Limited.
35 RESTATEMENT OF PRIOR YEARS
Deferred consideration
The Group has restated its accounting treatment regarding business combinations and deferred
consideration to conform with the required treatment of deferred consideration under IFRS 3. Previously
all deferred consideration payable on acquisitions was recorded as a deferred liability and included in the
fair value of the consideration of the business acquired. However, in circumstances where the payment of
deferred consideration is contingent on the seller remaining within the employment of the Group during the
deferred period, the contingent portion of deferred consideration should not have been included in the fair
value of consideration paid, rather is treated as remuneration and accounted for as a charge against profits
over the deferred period.
This has therefore required the restatement of prior years and the reclassification of certain deferred
payments as remuneration. The following restatement covers the share purchase acquisition of Marchant
McKechnie in 2018 and the asset purchases of WFI and Thomas & Co in 2019.
Preference share capital
Prior period financials have also been restated to correctly recognise preference share capital as compound
financial instruments rather than solely equity and are now split between their equity and liability
components. £1,141,785 of preference share capital was restated as other non-current liabilities. The
preference share liability was increased in 2019 to £1,146,073, with £4,288 being expensed to the profit
and loss as a finance charge.
All other prior year movements summarised below relate to the IFRS 3 restatement.
(a) Statement of Comprehensive Income (extract)
Finance charge
Amortisation charge
2019
£'000
384
1,132
INCREASE /
(DECREASE)
£'000
(173)
(185)
2019
RESTATED
£'000
211
947
Remuneration charge (previously deferred consideration)
-
(3,735)
(3,735)
Total comprehensive loss
(5,716)
(3,407)
(9,123)
Earnings per share - basic and diluted
£ (0.03)
£ (0.02)
£ (0.05)
Remuneration charge (previously deferred consideration)
Gain on bargain purchase
2018
£'000
-
-
INCREASE /
(DECREASE)
£'000
(300)
2,400
2018
RESTATED
£'000
(300)
2,400
Total comprehensive (loss) / income
(4,718)
(2,100)
2,618
Earnings per share - basic and diluted
£ (0.03)
£ 0.01
£ (0.02)
9191
STRATEGYGOVERNANCEFINANCEKINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 35 Restatement of prior years continued
(b) Statement of Financial Position (extract)
Intangible assets and goodwill
40,191
(10,983)
29,208
2019
£'000
INCREASE /
(DECREASE)
£'000
2019
RESTATED
£'000
Total non-current assets
Trade and other payables
Deferred consideration payable in less than 1 year
Total current liabilities
Deferred consideration payable in more than 1 year
Other non-current liabilities
Total liabilities
Net assets
Retained earnings
Preference share capital
Total equity
Trade and other payables
Deferred consideration payable in less than 1 year
Total current liabilities
Deferred consideration payable in more than 1 year
Total liabilities
Net assets
Retained earnings
Total equity
36 SUBSEQUENT EVENTS
42,357
(10,983)
2,566
5,168
7,734
7,377
914
16,025
30,612
6,110
5,728
2,827
(5,168)
(2,341)
(7,377)
1,146
(8,572)
(2,411)
(1,269)
(1,142)
31,374
5,393
-
5,393
-
2,060
7,453
28,201
4,841
4,586
30,612
(2,411)
28,201
2018
£'000
2,131
1,200
3,331
1,200
4,535
25,143
11,758
25,143
INCREASE /
(DECREASE)
£'000
300
(1,200)
(900)
(1,200)
(2,100)
2,100
2,100
2,100
2018
RESTATED
£'000
2,431
-
2,431
-
2,435
27,243
13,858
27,243
On 16 June 2021, Kingswood signed definitive agreements to acquire 100% of the shares in Admiral Wealth
Management, an independent financial advisory firm with a client base primarily in Lincolnshire and Yorkshire.
Following regulatory approval, the business will be acquired for cash consideration of £4.0 million, payable
over a 2-year period. £2.0 million will be paid at closing and the balance paid on a deferred basis, some of
which is subject to the achievement of pre-agreed performance targets.
The potential future tax impact of the March 2021 Budget is disclosed in note 17.
92
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2020 ADVISERS AND
COMPANY INFORMATION
Auditor
BDO LLP
Statutory Auditor
55 Baker Street
London W1U 7EU
Nominated Adviser and Broker
(effective 20 April 2020):
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Registrars
Link Asset Services
Corporate Actions
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Registered Office
Oak House
Hirzel Street
St Peter Port
Guernsey GY1 3RH
Registered Number
42316
Kingswood Holdings Limited
13 Austin Friars
London
EC2N 2HE
info@kingswood-group.com
020 7293 0730
kingswood-group.com