COMPANY REGISTRATION NO. 42316 (GUERNSEY)
KINGSWOOD HOLDINGS LIMITED
ANNUAL REPORT AND
AUDITED FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2021
Company Registration No. 42316 (Guernsey)
KINGSWOOD HOLDINGS LIMITED
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
KINGSWOOD AT A GLANCE
• Kingswood Holdings Limited 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 range 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 Group today comprises:
Regional hubs
Satellite offices
Hull:
c.26
advisers
Sheffield:
c.18
advisers
OSJ
Operational hubs
New York, NY:
c.96 Registered Reps
London:
c.19
advisers
San Diego, CA:
c.100 Registered
Reps
Atlanta, GA:
Operational Hub
2
2021 HIGHLIGHTS
Strategic Highlights
• Several key UK acquisitions were completed in 2021, including Admiral Wealth Management Ltd, Smythe and Walter
Ltd, Money Matters (North-East) Ltd, contributing to an increase in Kingswood’s reported Assets under Management
and Advice (AUM/A) balance to £6.8bn at 31 December 2021. Metnor Holdings Limited was acquired on 31 December
2021 with AUM of £1.5bn, increasing the Group AUM/A to £8.3bn.
• A further five UK acquisitions have completed in 2022, as outlined in note 33 of the Notes to the Financial Statements,
contributing to an increase in Group AUM/A to c.£9.0bn.
•
•
In March 2022, we launched the ‘Kingswood Go’ app to provide clients with easier access to their investments. The
app consolidates available financial data into one place to present a clear view of a client’s finances, provides safe
storage of key documents and a secure messaging system that allows clients to contact their investment manager
and Kingswood adviser directly.
2021 was a year of growth for the Kingswood US Registered Investment Adviser (RIA) and Independent Broker
Dealer (IBD) business. We increased the number of registered representatives by 37 to 211 and grew our total assets
under management by $0.5bn to $2.5bn.
• The Kingswood US Investment Banking business completed over 100 transactions with over $9.0bn capital raised
for clients.
•
In January 2022, Kingswood Capital Partners and Skyway Capital Markets LLC announced an exclusive partnership
in which the Skyway investment banking team will work closely with Kingswood advisors and their clients to execute
M&A transactions.
2021 Financial Highlights
• Group revenue was £149.7m, a 488% increase on prior year (2020: £25.5m), reflecting growth in the US and the
impact of 2020 and 2021 in-year acquisitions in the UK.
•
•
87% of the UK's revenue is recurring in nature, providing a strong, annuity-style fee stream. Investment Banking
Fees are a larger portion of Kingswood US revenues, and transactional in nature, which mean that recurring revenue
in the US was 7.4%. Combined, Group recurring revenue was 19.0%.
Operating Profit of £6.3m was £5.5m higher compared to 2020. The Kingswood Board believes Operating Profit is
the most appropriate indicator to explain the underlying performance of the Group. The definition of Operating Profit
is profit before finance costs, amortisation and depreciation, gains and losses, and exceptional costs (business re-
positioning and transaction costs).
£000's (Unless otherwise stated)
Total Revenue
Recurring Revenue %
Operating Profit
Total Equity
AUM/A (£m)
# of Advisers - UK
# of Authorised Representatives - US
2021*
149,716
19.0%
6,327
76,898
6,772
70
211
2020
25,477
61.0%
862
50,152
5,912
64
174
2019
10,053
83.0%
211
28,201
2,471
40
-
*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor
2021 AUM/A increases to £8.3bn
3
CHAIRMAN’S STATEMENT
In my first year as Chair of Kingswood I have been impressed by the strong progress we are making in achieving our long-
term strategy to become a leading international fully integrated wealth and investment management business. I am immensely
proud of our dedicated team who have navigated the continued challenges of the pandemic in 2021, while delivering
outstanding service to our clients both in the UK and US.
2021 has been a transformational year for Kingswood. Despite the challenges faced, I am pleased to report record levels of
revenue and operating profit with significant growth across Wealth Planning (WP), Investment Management (IM), and the US.
We have a strong, well-capitalised balance sheet and have benefited from our partnership with Pollen Street Capital which
has now invested £77.4m to enable our acquisition and growth strategies. Through investment and growth, at the time of
writing this report we employ 292 people across the globe and manage c.£9.0bn of client assets.
In the UK, Kingswood has completely transformed itself within the space of a few years creating a highly successful, fast
growing, vertically integrated wealth and investment management business. The UK wealth management sector continues to
exhibit strong, long-term growth characteristics supported by demographic trends, a complex regulatory environment, and
ongoing consolidation within a fragmented industry. Our acquisition strategy takes advantage of this by providing a seamless
transition process with a centralised support service and investment proposition that allows advisers to spend more of their
time with their clients. Since 2018, the Group has acquired 14 UK wealth management businesses which are projected to
deliver strong, sustainable revenues and operating profit. We now have over 85 financial advisers and investment managers
operating across 18 regional offices to support our retail and institutional client base. Under the leadership of David Lawrence,
growth is supported by a strong and unrelenting focus on our client experience, supported by a progressive investment in
technology and an equal investment in our colleagues, all of which is underpinned by strong integration and operational
excellence.
Under the leadership of Mike Nessim, our US CEO, the US business has delivered exceptional levels of growth in 2021
through three core divisions: Independent Broker Dealers, Registered Investment Advisers, and Investment Banking. The
Investment Banking business completed over 100 transactions, raising c.$9.0bn capital for clients. The RIA and IBD business
increased its advisor representatives to 211 by December 2021, managing c.$2.5bn of client assets. With a strong business
model and an exceptional leadership team playing in the largest global wealth management market, the Kingswood US
business is well set for further growth in the coming years.
The Board places great importance on building a business with strong governance and a culture that supports sustainable
long-term success. With that in mind we focus on where we can make the largest positive impact on the environment, both in
measuring and reducing our carbon footprint and offering clients a suite of ESG portfolios which consider environmental social
and governance issues. We are committed to creating a workplace and culture that is welcoming and inclusive for everyone
and have taken steps to enhance this in 2021 through the creation of an employee-led Diversity and Inclusion Forum. We will
continue to make a significant investment in Learning and Development for all colleagues by launching career paths and
supporting colleagues with their professional and career development.
We are investing in our client experience through technology and other means. We launched our client portal in 2021 in the
UK, Kingswood Go, which allows clients to have single sign-on single client view across multiple platforms which has
transformed our client experience. In the US we have invested in technology infrastructure to provide advisors with a superior
integrated wealth management platform offering products such as Annuities, Equities, Alternatives, and Mutual Funds. In
addition, Kingswood US has integrated a new fully automated alternative platform, a fully automated CRM and a leading back-
office processing system.
The Board continues to operate a robust risk management framework so that we can maintain compliance with our regulatory
responsibilities and ensure both customers and suppliers are always treated fairly. Jonathan Freeman, in his capacity as an
independent Non-Executive Director, continues to assume responsibility for ensuring that the Group has appropriate corporate
governance standards in place and that these standards are applied within the Group as a whole.
We were delighted to have recently announced that David Lawrence has been appointed to the Board as Chief Executive
Officer. The Board is confident David will take the business to another level over the coming years to fully realise its potential.
I would like to express huge thanks to Gary Wilder for stepping into the Group CEO role over three years ago and having the
vision for what Kingswood can become both domestically and internationally. The Board will continue to benefit from this as
Gary steps back into a non-executive role. Jon Millam was appointed to the role of Group Chief Financial Officer in August
2021, joining us with the credentials to lead our finance function through the next stage of our journey. I am also pleased to
welcome Richard Avery-Wright to the Boards of our UK regulated subsidiaries, KW Wealth Planning Limited and KW
Investment Management Limited. Richard will be a strong addition to the Group's governance and brings a deep and highly
successful track record of building and creating value.
4
CHAIRMAN’S STATEMENT
Turning to 2022, the terrible events unfolding in Ukraine, the re-emergence of significant geopolitical risk and inflationary
pressure have created a great deal of uncertainty in the outlook for the year. Despite these macro-economic pressures,
however, I expect 2022 to be another transformational year for the Group. We have already completed five UK acquisitions
this year and have a strong pipeline for future acquisitions. The US has successfully recruited seven financial advisers who
collectively oversee $295m in client assets. The progress that David and Mike and their respective teams have made in the
last two years will ensure we continue to deliver on our strategic priorities and remain well placed for growth as we move
forwards.
Finally, on behalf of the Board, I would like to thank our management team and all our colleagues for their effort, focus and
commitment to achieving our goals in what has continued to be a challenging operating environment.
David Hudd
Chairman
Date: June 2022
5
GROUP CHIEF EXECUTIVE OFFICER STATEMENT
Introduction
I am delighted to present our financial results for 2021, my first full financial year as UK Chief Executive Officer. 2021 was a
year which saw significant progress in the growth of both our UK and US businesses. Whilst I joined the board of Kingswood
Holdings Limited as Chief Executive Officer in April 2022, for the purpose of these results I have focused my commentary on
the progress of the UK business, and am grateful to Mike Nessim, whose exceptional leadership is delivering a great
performance in the US, for his separate commentary on the US.
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 highly fragmented sector in financial services.
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 what I believe to be 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
most 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.
The resilience of the sector during Covid-19, the speed and scale of regulatory change and higher sale multiples continues to
drive high levels of consolidation. Multiple numbers of acquirers are now also operating in the sector making for a highly
competitive environment. Despite this, Kingswood continues to demonstrate a strong track record in sourcing and securing
acquisitions and in doing so is quickly building scale. The opportunity remains strong with over 2,750 firms across UK with 2-
50 advisers representing potential targets.
Business overview
We have a single-minded focus on both Financial Advice / Planning and Investment management activity, relying on leading
market external expertise for other aspects of the client value-chain.
Our Financial Advisers 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 investment managers and research teams have deep capability in both the manufacture and distribution of investment
solutions, where we can exhibit a strong long-term track record of high performance and low volatility and a great level of client
support and service.
For our Kingswood advisers, we operate a Central Investment Proposition (CIP) which is Discretionary in nature and comprises
a set of active risk rated core Model Portfolios. Complementary models are also available such as Passive, ESG and / or
Income variants. These solutions are available on most of the recognised third-party platforms. For some clients with more
complex needs, we also offer a more personalised, tailored approach, including the introduction of an investment manager
into the client relationship where appropriate.
Following the acquisition of IBOSS Asset Management (IBOSS AM) in December 2021, our new client CIP is now the IBOSS
range of model portfolios. Work is underway to align the Kingswood MPS to this during 2022. Through IBOSS, the business
now also distributes discretionary and advisory solutions to IFA firms across the UK that complement our internal distribution.
For the institutional market, our long-standing Fixed Income business provides a treasury service to institutional clients,
typically UK Universities.
Delivering Business Growth
The UK strategy is focussed on building a leading business in the sector. Our delivery of this is through the optimising of a
series of value drivers:
6
GROUP CHIEF EXECUTIVE OFFICER STATEMENT
1. Acquisition
I am delighted that we were able to purchase the businesses of Admiral Wealth Management, Smythe and Walters,
Money Matters (North East), and Metnor Holdings (compromising Novus Financial Services and IBOSS AM) in 2021.
Collectively these acquisitions add £2.4m of annual operating profit and c.£1.8bn AUM/A. The acquisition of Metnor
Holdings completed on 31 December 2021, which included c.£1.5bn of AUM/A.
In 2022, Kingswood has purchased a further five businesses - Allots Financial Services, Joseph R Lamb Financial
Advisers, DJ Cooke Life and Pensions, AiM Independent Financial advisers and Vincent & Co Ltd. Collectively these
acquisitions have added £2.7m of annual operating profit and c.£0.8bn AUA.
2.
Integration
Effective integration is critical to an acquisitive business. We have built a highly effective, collaborative and repeatable
process for integration which is both client and colleague centric and respectful of the business being purchased. Ably
led by our COO Harriet Griffin, we are now able to substantially integrate a business within three months of purchase
where so desired.
3. Organic Growth
Kingswood is typically purchasing businesses where the principals remain committed and, in many cases, have
unfulfilled ambition but welcome a freeing up of some of the bureaucracy that has crept in to allow them to get back
to advising clients. By creating the right environment for this and supporting the business where needed, all
Kingswood purchased businesses are showing healthy organic growth. I was delighted to hire Hayley Burton to lead
our Midlands and South teams earlier this year and she will work alongside Jeff Grantham in the North who both
provide strong and purposeful leadership.
4.
Investment Management
Kingswood’s purchase of IBOSS AM has transformed its CIP by introducing an investment solution that has a long-
term track record of high performance and low volatility, supported by an award-winning service proposition. Capably
led by our CIO Chris Metcalfe and Head of Investment Management, Paul Surguy, the IBOSS proposition, alongside
the Kingswood Personal Portfolio Service creates a strong investment solution for our clients and enables high levels
of asset migration, where suitable, for the client.
The purchase of IBOSS also created an open market distribution for the Kingswood Group to UK IFA’s. We hope to
build on this during 2022 and support some of these firms with exit strategies as and when appropriate. The
combination of stronger asset flows originating from vertical integration and a growth in the number of firms served
by IBOSS will fuel this driver of growth.
Nigel Davies continues to ably lead our Fixed Income business, serving the treasury needs of some leading UK
Universities, a business that each year generates continued and sustainable growth.
5. Building a leading business
a. Under the capable leadership of Rachel Bailey (CPO), we are actively investing in our colleague proposition with
a clear aim to become a magnetic people business. This includes a significant investment in Learning and
Development for all colleagues, the launch of career paths and supporting colleagues with their professional and
career development. We were delighted to appoint Ellie Pilkington to lead this area in the latter part of 2021. We
have had two colleagues successfully graduate from our adviser academy and have launched a new academy
programme in 2022.
Diversity is a challenge in our sector. We are a significantly more effective organisation for the diversity that exists
across my leadership team and are actively working to address imbalance elsewhere, not least in the adviser
community where currently only 15% of our advisers are female.
b. We are investing in our client experience through technology and other means. We have been delighted to make
two senior hires in this area over the past twelve months - Lucy Whitehead as Chief Client Officer and Christopher
Calvocoressi as Head of Technology Transformation. We launched our client portal ‘Kingswood Go’ in 2021 to
transform our client experience by enabling a single client investment view across multiple platforms. We have
an ambitious technology programme to deliver over the next 12-18 months which will digitise the client journey
and open up new propositions for existing and target clients.
c. We have invested in our Finance and Compliance functions under the leadership of Jon Millam and Richard
Bernstein to create centres of excellence to support our core and acquired businesses.
7
GROUP CHIEF EXECUTIVE OFFICER STATEMENT
Dimensions
As at 31 December 2021, the UK business had 203 employees of which 70 were client facing financial advisers and investment
managers operating from 14 sites across the UK with £1.7bn Assets under Management (AUM) and a further £3.2bn Asset
under Advice (AUA). At time of writing this has increased to c.270 employees of which 85 are client facing financial advisers
and investment managers operating from 18 sites across the UK with £3.0bn AUM and £4.0bn AUA.
UK KPIs
Employees
Advisers
Locations
AUM (£bn)
AUA (£bn)
Total AUM/A (£bn)
Now
272
85
18
3.0
4.0
7.0
2021*
203
70
14
1.7
3.2
4.9
2020
185
64
11
1.4
2.8
4.2
2019
121
40
7
1.0
1.5
2.5
*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor
2021 AUM/A increases to £8.3bn
Outlook
Building on the 9 acquisitions completed under my leadership to date and those that came before, we have a further 8 purchase
transactions in exclusive due diligence comprising a total annual operating profit of £7.7m. We expect to conclude these
transactions in the third quarter of 2022. In addition, we have a healthy pipeline of future opportunities at various stage of study
and negotiation.
Organic growth is a core focus post integration where we can confidently expect year on year growth in initial and ongoing
fees from accretive assets under influence.
The purchase of IBOSS is a game changer for Kingswood - it offers a stronger central investment proposition, provides an
independent open market distribution channel to a growing number of IFA’s across the UK and creates exit strategies for
wealth management businesses. All three business development opportunities are gaining traction in 2022.
I believe to be a truly successful firm we must put the client at the heart of the relationship, be highly accessible, have a clear
proposition and most importantly provide great value for money. Our staff and technology are key enablers to deliver this
success and will therefore be critical pillars of our strategy today and moving forwards.
Key Performance Indicators
Jon Millam, Group CFO, presents the financial performance of the Group in his section but total revenue for the UK was
£21.9m in 2021, a £4.7m increase on the prior year reflecting the impact of recent acquisitions. 87% 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.
£000's (Unless otherwise stated)
Total Revenue
Recurring Revenue %
WP & IM Operating Profit
AUM/A (£m)
# of Advisers - UK
2021
21,889
87%
6,144
4,883
70
2020
17,155
84%
4,273
4,378
64
2019
10,053
83%
1,995
2,471
40
*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021
AUM/A increases to £8.3bn
To end, growing a sustainable business at the pace at which we are doing it requires colleagues who are special individuals.
I am proud, not only my leadership team, but of what everyone at Kingswood does each and every day for our clients and
each other, without which the exciting story as outlined in this report is not possible.
David Lawrence
Chief Executive Officer
June 2022
8
US CHIEF EXECUTIVE OFFICER STATEMENT
Introduction
Kingswood US is a premier wealth management firm with over $2.5bn AUM and offices throughout the United States. With
both an SEC-registered RIAs and a FINRA-licensed broker/dealer in-house alongside an institutional-quality product offering
and a personal approach to service, Kingswood is an ideal partner for independent financial advisors looking for a new place
to call home. The business also includes Kingwood Capital Markets, a national investment banking platform that leverages
our expanding distribution channels and drives growth across equity and debt advisory, capital raising and M&A.
2021 was another year of growth and business expansion for Kingswood US. We added 37 new registered representatives,
which further expanded our US footprint and grew our AUM by $0.5bn. We continued to grow the team, seek out strategic
relationships to help these advisors expand their infrastructure and technology ecosystem, and work with innovative
investment providers to help meet the needs of our financial advisors and their clients.
In June 2021, the banking division of Benchmark Investments changed their name to EF Hutton. Over the course of 2021, EF
Hutton completed over 100 deals – including IPOs, SPACS, follow-on offerings, preferred stock offerings and debt placements
– raising over $9 billion for their clients across both debt and equity markets.
Market Overview
The US retail wealth market is large and remains fragmented. The distribution channels vary substantially in terms of business
models and approaches to client service. The market can be broken down into the broker-dealer channel (commission-based)
and the RIA channel (fee-based).
The total market size is estimated at over $26 trillion with close to 315,000 advisors, representing a 12% 5-year CAGR, with
independent market channels such as IBDs and RIAs experiencing the fastest growth relative to typical wire-house channels.
The shift to independence by the financial advisor community has been supported by a number of factors such as greater
control of their books and increased compensation. The overall retail wealth management sector is experiencing substantial
growth due to an aging population with excess disposable income, overall wealth accumulation, and an increased demand for
financial advisors. Robo-advice is increasingly displacing advisors with smaller productions at wire-houses, expanding the
appeal of independent platforms where they can continue to service their clients, and creating a universe of advisors willing
and able to move to independent platforms.
The changes in this and other protocols at wire-houses are driving Registered Representatives to move to independent
platforms like Kingswood US, who can replicate most of the services whilst providing greater flexibility and independence.
Mergers & acquisitions in the independent channels continued at a record pace due to ever-increasing regulatory costs,
competitive pressures and economies of scale.
Firms continue to look for ways to transition brokerage-based business to fee-based advisory business (charging a fee based
upon assets under management) as means of generating higher levels of recurring revenue and accessing greater valuation
multiples than that placed on transaction-based commissions.
Our Core Propositions
Our FINRA-supervised 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-
registered 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 programs.
Our strategy for growth can be broken down into four key pillars:
1. Revenue growth
a. Enhanced advisor recruitment efforts supported by the continued build-out of our in-house recruitment team
and relationships with third party recruiters.
b. Expansion of product offering for advisors with a particular focus on alternative investments, which can deliver
yield and diversification benefits to investors.
c. Continued build-out of advisory services and the transition existing commission-based assets to fee-based
assets.
9
US CHIEF EXECUTIVE OFFICER STATEMENT
2. Margin Expansion
a. Recognise synergies across broker-dealers to drive down costs.
b. Expand upon shared services to enhance efficiency and provide more product offerings to advisers.
c. Transition away from low margin investment banking and capital markets revenue towards higher margin
commission and fee-based revenue streams.
3. Lift-outs & Acquisitions
a. Expand advisor network via pipeline of potential lift-outs.
b. Continue to add scale through vertical and horizontal consolidation, with a particular focus on the IBD and RIA
channels where valuation multiples are more attractive and where justification for consolidation is more
pressing.
4. Technology
a. Continue to build upon tech stack through modernisation and digitisation.
b. Drive scale through technology products.
Key performance indicators
$000's (Unless otherwise stated)
Total Revenue
Gross Profit
Operating Profit
AUM/A ($m)
# of Authorised Representatives
2021
175,545
13,347
7,035
2,545
211
2020
35,318
6,878
2,232
2,071
174
Var. $
140,227
6,469
4,803
474
37
Var. %
397%
94%
215%
23%
21%
*A full year operating performance is presented for 2020 to provide a like-for-like comparison
Responsible Business Practices
In the Autumn of 2021, Kingswood US announced a partnership with A Friend’s House, a non-profit organization based in
Stockbridge, Georgia that serves as both a shelter and home to youth in crisis in the Atlanta area. A Friend’s House works
with the Department of Family and Children Services to create a permanency plan for each child, which may include
reunification with family or continued foster care services. Kingswood US is proud to raise money for improvements to their
facility, including new washing machines, a lounge area and an outdoor courtyard, hosted celebratory events to lift the
children’s spirits and provided mentorships for residents seeking them.
Outlook
We remain optimistic about growth in 2022 despite recent turmoil in the US markets and rising interest rates because we
believe it will be driven by a number of factors, including the recruitment of independent financial advisors dislocated 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.
Mike Nessim
Kingswood US Chief Executive Officer
June 2022
10
GROUP CHIEF FINANCIAL OFFICER
Introduction
Despite the continued uncertainty resulting from periods of lockdown and economic volatility, the Kingswood Group delivered
record levels of Revenue and Operating Profit in 2021. We have seen material improvements in financial performance across
our operating segments, Investment Management, Wealth Planning and Kingswood US, which has been supported by strong
asset inflows, both organically and through acquisitions.
Recurring revenues as a percentage of total revenue increased during the year and operating profit margins improved across
both Investment Management and Wealth Planning. We are now seeing the benefits of our buy, build and grow strategy
following the acquisitions of Sterling Trust and Regency Investment Services in 2020 and have since completed a further 9
acquisitions in the UK which will continue the growth trajectory into 2022 and beyond. The US business exceeded all
expectations in 2021, delivering significant amounts of revenue and operating profit for the Group as a whole.
We continued to maintain cost discipline in 2021 as operating expenditure was broadly flat year over year, excluding the
impact of acquisitions. Our Balance Sheet remains well capitalised, with strong support from Pollen Street Capital. We
continue to maintain an effective discipline in how we think about the businesses we acquire, ensuring that the multiples we
pay are within our risk appetite and funding profile.
The UK business is a well-diversified proposition with an effective business model, underpinned by organic growth in assets
that generate recurring revenues in excess of 85% and a predictable cost base. Our acquisitions complement this and provide
the opportunity to deliver both revenue and cost synergies. Wealth Planning provides holistic financial advice to clients,
generating both initial and ongoing fees. Our tailored Investment Management offering across a Managed Portfolio Service
(MPS) and Personal Portfolio Service (PPS) includes an open market advisory and discretionary portfolio service to individuals
and more than 100 IFA firms. The acquisition of IBOSS at the end of 2021 will drive increased flows into Kingswood and
further scale the open market opportunity. Our Fixed Income business, included within Investment Management, is a leading
provider of liquidity and treasury services to local councils and universities that continues to generate growth in AUM.
Kingswood US operates across three core divisions; Investment Banking, RIA and IBD. Investment Banking serves mid-
market corporate clients and helped 100 public and private clients raise $9bn of capital in 2021. The IBD business offers our
clients investment opportunities across Alternatives, Mutual Funds and Equities and our RIA business provides holistic
financial advice to our clients, with similar characteristics to our Wealth Management business in the UK.
In our June 2021, “Positioned for Growth” investor presentation Kingswood outlined its ambition to deliver £20m of Operating
Profit over the medium-term. Whilst we still have a way to go to get there, our 2021 financial results and trajectory demonstrate
that the business has a strong base and the right credentials to deliver.
Financial Performance
The Group’s financial performance for the year was strong. AUM/A of £6.8bn was 15% higher than 2020, 10% driven from
organic growth and 5% through acquisitions. Revenue was £149.7m, a 488% increase year over year, reflecting growth in the
US and the impact of 2020 in-year acquisitions in the UK. Operating Profit increased by £5.5m, or 634%, to £6.3m in the year.
The UK business benefited from a full 12 months of trading following the acquisitions of Sterling Trust and Regency Investment
Services, being consolidated into the Group’s financial results for 6 months and 2 months respectively in 2020, and the
acquisitions of Admiral, Money Matters and Smythe and Walters in 2021. In the US, having acquired 50.1% of Manhattan
Harbor Capital in November 2020, now rebranded Kingswood US, the US was consolidated into Group results for 12 months
in 2021 compared to 2 months in 2020.
Operating expenditure of £22.9m was £6.7m higher than the prior year largely driven by acquisitions, with the existing cost
base remaining broadly flat compared to the prior year reflecting careful cost management.
Profit before Tax for the period to 31 December 2021 was a Loss of £14.5m reflecting £7.0m of acquisition related deferred
consideration expense, £2.4m amortisation and depreciation, other losses of £3.0m, £4.9m finance costs and £3.4m business
re-positioning and transaction costs.
The Group’s balance sheet reflects the growth of the business. The Group had £42.9m of cash as at December 2021, an
increase of £39.0m compared to 31 December 2020. This is largely driven by further investment from our private equity
partners at Pollen Street Capital, £27.9m net of acquisition related payments, and £2.7m of cash acquired from acquisitions.
Net cashflow generated from operating activities of £1.7m was largely driven by the timing of the settlement of Investment
Banking commission payments, partially offset by £8.5m of acquisition related contingent remuneration payments. Net Assets
were £76.9m, an increase of £26.7m compared to the prior year.
11
GROUP CHIEF FINANCIAL OFFICER
Segmental Analysis
The table below provides a breakdown of the annual financial performance of the operating segments within the Kingswood
Group: Investment Management, Wealth Planning and Kingswood US. The Group separately reports on Central Costs
incurred to support the running of the Operating Segments and the PLC.
2021 (£k)
Revenue
Cost of Sales
Gross Profit
Operating Costs
Operating Profit
Recurring Revenue %
Operating Profit Margin %
AUM/A (£m)*
# Advisers / Authorised Representatives*
2020 (£k)
Revenue
Cost of Sales
Gross Profit
Operating Costs & Other**
Operating Profit
Recurring Revenue %
Operating Profit Margin %
AUM/A (£m)
# Advisers / Authorised Representatives
Investment
Management
Wealth
Planning
US
Central
Costs
Group
Total
4,652
(1,476)
3,176
(2,811)
365
81.1%
7.8%
1,639
10
17,214
(913)
16,301
(10,522)
5,779
88.1%
33.6%
3,244
60
Investment
Management
4,240
Wealth
Planning
12,915
(1,158)
3,082
(3,189)
(107)
74.7%
-2.5%
1,419
11
(643)
12,272
(7,892)
4,380
87.7%
33.9%
2,959
53
127,827
(118,108)
9,719
(4,596)
5,123
7.4%
4.0%
1,889
211
US
8,322
(6,670)
1,652
(1,109)
543
12.3%
6.5%
1,534
174
23
0
23
(4,963)
(4,940)
n/a
n/a
n/a
n/a
Central
Costs
-
-
-
(3,954)
(3,954)
n/a
n/a
n/a
n/a
149,716
(120,497)
29,219
(22,892)
6,327
19.0%
4.2%
6,772
281
Group
Total
25,477
(8,471)
17,006
(16,144)
862
60.9%
3.4%
5,912
238
*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including
Metnor 2021 AUM/A increases to £8.3bn
** 2021 ‘Other’ includes £56k share of post-tax profits of equity accounted associates
Investment Management
Revenue of £4.7m was £412k, or 9.7%, higher compared to 2020 largely reflecting a £220m increase in AUM due to the
migration of assets into the Kingswood MPS product and further growth within the Fixed Income business, with recurring
revenue increasing to 81.1% (2020: 74.7%). Operating expenditure of £2.8m decreased by 11.9% reflecting actions taken to
improve the profitability of the business, and Operating Profit was £365k compared to an Operating Loss of £(107)k in the
prior year.
Wealth Planning
Revenue of £17.2m was £4.3m, or 33.3%, higher year over year as in-year acquisitions contributed to a £285m increase in
AUA and we benefitted from a full 12 months trading following the 2020 acquisitions of Sterling and Regency. Recurring
revenue increased to 88.1% (2020: 87.7%) and Operating Profit of £5.8m was 31.9% higher compared to prior year.
US
Revenue of £127.8m increased by £119.5m compared to 2020 and whilst the Group benefited from consolidating the US for
a full 12 months, the segment performed exceptionally well. Investment Banking revenues were £103.9m in the period and
benefitted from strong capital market activity – the business completed over 100 transactions with a total of over $9.0bn capital
raised for clients. The RIA and IBD business delivered revenues of £23.9m, reporting healthy double-digit growth year over
year on a like for like basis. AUM of £1.9bn at December 2021 was 23.1% higher than 2020, supported by an increase in the
number of advisor representatives from 174 to 211.
12
GROUP CHIEF FINANCIAL OFFICER
Due to Investment Banking revenues being transactional in nature, recurring revenues in the US (2021: 7.4%, 2020: 12.3%)
are lower than the UK which result in overall Group recurring revenues being 19.0% in 2021.
Group Central Costs were £4.9m in 2021 compared to £4.0m in 2020. The Group continued to apply prudency to the
management of its cost base in 2021, however, costs increased year over year as a result of the strengthening of the Executive
Team and central functions to support a larger business and continuing M&A activity, as well as higher audit fees.
Reconciliation between Operating Profits and Statutory Profits
Operating Profit is considered by the Board to be an accurate reflection of the Group’s performance when compared to the
statutory results, as this excludes income and expense categories which are deemed of a non-recurring nature or a non-cash
operating item. A reconciliation between operating and statutory profit before tax for the year ended 31 December 2021 with
comparatives is shown in the table below:
£k
Operating Profit
Business Re-positioning Costs
Transaction Costs
Finance Costs
Amortisation and Depreciation
2021
6,327
2020
862
(1,564)
(1,801)
(1,836)
(1,855)
(4,927)
(554)
(2,399)
(1,822)
Remuneration Charge (Deferred Consideration)
(7,009)
(7,254)
Other Gains / (Losses)
Profit / (Loss) before Tax
(3,056)
1,744
(14,464)
(10,680)
•
2021 £1.6m Business Re-positioning costs comprise of restructuring costs related to organisational change to Central
Function departments and Investment Management. £1.8m Transaction costs are acquisition related and include legal
fees, due diligence, broker fees.
• Finance costs reflect a £3.9m cost related to dividends that accrue on the Group’s preference shares in issue. In 2021, it
was agreed that dividends earned on preference shares would be settled through the issue of Kingswood shares rather
than cash which has led to the extinguishing of the £7.3m liability that was reported on the Balance Sheet as at 31
December 2020. As a result, and per accounting standard IFRS 9, £3.4m has been re-classified as equity and £3.9m
charged to finance costs. The remaining £1.0m of finance costs charged to the profit and loss in 2021 comprise of costs
related to the cost of deferred consideration.
• Amortisation and Depreciation charges represent £1.5m from the amortisation of intangible assets and £0.9m depreciation
of Right of Use Assets, property, and IT/office equipment.
•
£10.1m Remuneration Charges and Other Gains / (Losses) reflect deferred consideration payments resulting from
acquisitions completed in 2019 and 2020. Under the treatment of deferred consideration per IFRS 3, 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 treated as remuneration and accounted for
as a charge against profits.
Balance Sheet Strength
As at 31 December 2021, Kingswood has issued 77.4m preference shares to Pollen Street Capital in return for £77.4m of
capital to provide funding for acquisitions. £25.7m of this funding is included within cash at the balance sheet date. The
preference shares are convertible into ordinary shares at 16.5p in December 2023, or earlier under certain conditions. The
Pollen Street Capital board members bring significant experience and expertise to the execution of our strategy.
Non-current assets of £83.9m were £32.2m higher than the prior year reflecting higher intangible assets and goodwill following
the acquisitions completed in 2021. Current assets increased by £20.6m to £48.8m in the year as a £39.0m increase in cash
was partially offset by a £18.5m reduction in trade and other receivables, mainly reflecting the £20m of cash paid across to
Kingwood during Q1 2021 in relation to the preference shares issued to Pollen Street Capital in Q4 2020.
Current liabilities increased by £20.0m in the year to £33.8m largely reflecting £9.5m of outstanding commissions payable to
US Investment Bankers at 2021 year-end, £1.9m outstanding distributions to partners in the US and a £6.9m increase in
deferred consideration payments due in 2022. Non-current liabilities were £22.0m as at 31 December 2021 (2020: £15.9m).
The increase of £6.1m year over year largely reflects an increase of £11.3m in deferred consideration payments due after
2023 and a £2.7m increase in deferred tax liabilities partly offset by the £7.3m re-classification of preference share dividends
from a liability to equity (£3.4m re-classified to equity and £3.9m expensed through the profit and loss).
13
GROUP CHIEF FINANCIAL OFFICER
Acquisitions
We are pleased with the progress made in expanding Kingswood in the UK and US, with five regional businesses acquired in
the UK between 2019 and 2021 and a further 9 acquisitions between August 2021 and May 2022. In addition, during this
period, Kingswood acquired 50.1% of Manhattan Harbor Capital which has now been re-branded Kingswood US. We have
strong purchase transaction 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 AUM/A and Return on Investment (ROI). Post-acquisition, we create monthly performance reports against these metrics
and adjust strategy and implementation accordingly. The table below confirms the price paid for the 9 acquisitions acquired
between August 2021 and May 2022.
Date
Acquisition
Aug-21 Admiral Wealth Management
Nov-21 Money Matters (North East) Ltd
Dec-21 Metnor Holdings (IBOSS) Ltd
Feb-22 Allotts Financial Services Ltd
Feb-22
Joseph R Lamb Independent Financial Advisers
Ltd
Feb-22 Aim Independent Ltd
Other
Total
AUM/A
£m
No. of
Advisers
100
115
1,520
140
393
217
135
2
3
9
3
7
5
3
2,620
32
Finncap
In October 2021 Kingswood announced the appointment of finnCap Ltd as its Nominated Adviser and Broker.
Outlook
2021’s financial performance has demonstrated the fundamental strengths of the Kingswood business model and we continue
to be well positioned for further growth in 2022. As outlined in the Chairman’s Statement, the terrible events unfolding in
Ukraine, the re-emergence of significant geopolitical risk and inflationary pressure has created a great deal of uncertainty in
the outlook for the year and as a result we have seen negative market movements impact AUM/A and revenues in the first
half of 2022. Despite this, at time of writing, AUM/A is now c.£9.0bn and we are seeing organic revenue growth in the business
which is complimented by inorganic growth from recent acquisitions.
We continue to focus on integration, organic growth and to deliver against our acquisition strategy. With a strong pipeline of
activity, including 8 potential acquisitions in exclusive due diligence, our near-term target is to build our UK AUM/A in excess
of £10bn in the UK and £12.5bn globally.
Our medium-term target remains £20m Operating Profit and we believe that with our current acquisition pipeline and organic
growth trajectory this is achievable. This medium-term target includes delivering Operating Profit margins for the UK of c.30%
and ongoing margin improvement in the US. With the expected reduction in Restructuring, Remuneration and Finance
Charges, Kingswood forecasts to make a Profit before Tax in 2022. Kingswood’s financial strategy is to maintain a robust and
disciplined balance sheet to ensure no deferred liability remains uncovered from a funding perspective, and we will continue
to have a disciplined approach to expense management.
Jon Millam
Group Chief Financial Officer
June 2022
14
PRINCIPAL RISKS AND UNCERTAINTIES
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.
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
Market Risk
• Professionally staffed compliance
department monitoring, interpreting and
with business leaders implementing the
latest FCA developments.
• A Risk & Compliance Committee takes
place on a monthly basis which is attended
by all Executive Committee members.
• Board level Audit & Risk Committee
providers oversight and challenge.
• 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 governance
structure 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
There remains a
significant 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
Emergence from the
COVID-19 global
pandemic,
macroeconomic
pressures such as
inflation and
ecopolitical tensions
are impacting
economic and
financial markets and
volatility. This 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
15
PRINCIPAL RISKS AND UNCERTAINTIES
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)
• Kingswood has benefited from robust cloud
based operating systems allowing staff to
seamlessly transition to remote working
• Core systems are cloud based allowing 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
• Senior management oversight and
governance mechanisms in place
• Project management team in place to
oversee integration
• Clear and transparent client communication
ahead of any material changes
• Continue to embed and enhance the
processes required to successfully
integrate acquisitions into the Group’s
procedures and corporate governance,
including the acquisition of 50.1% of
Kingswood US during 2020.
• 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
• Additional assurance is provided through
specialist third party review
• 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
Integration Risk
Risk that we fail to
deliver high-quality
service to advisers and
clients as acquisitions
are integrated
Suitability of
Advice
There is a risk of
providing unsuitable
advice or a failure to
confirm ongoing
suitability
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
Reliance on
Third Party
Service
Providers
Business
Conduct
The risk of poor business
conduct resulting in
client outcomes that do
not meet their needs
and circumstances
• 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
PRINCIPAL RISKS AND UNCERTAINTIES
Risk
Description
Mitigation
Outlook
Operational
Risks
(continued)
Data Protection
& Cyber
Security
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
• 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
People Risk
Increasing workloads, key
person risk or inability to
adequately staff key roles
could result in adverse
business impact
• 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
Investment in learning and development
programmes for all staff including training
on culture and conduct
•
Mitigation
Outlook
Financial Crime
Risk of Fraud, Money
Laundering, Bribery &
Corruption, Sanctions,
Terrorism Financing, Tax
Evasion, Market Abuse,
Insider Dealing
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
• 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
• Mandate restrictions are well understood by
experienced investment management team
• Pre & Post trade alerts in place
•
Investment Committee structure monitors
ongoing adherence to portfolio strategies
Independent compliance monitoring in
place
•
17
CORPORATE SOCIAL RESPONSIBILITY
Introduction
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, people, suppliers and
chosen charity partners.
ESG and CSR is a Board level agenda item, and we continue to progress our annual group level audit of our ESG practices
and our carbon footprint, where we are able to build further action plans and measure progress to our ESG/ CSR
responsibilities. As an acquisitive and growing company, we use measurement practices on our new acquisitions to ensure
we have a clear benchmark upon integration into the Group.
During the year we remained focused on becoming a more responsible corporate citizen in the communities in which we
operate, taking the following actions across our different stakeholder groups:
• Enhanced our commitment to developing our people through dedicated Learning and Development programmes that
are available for all colleagues at the varying stages of their careers.
•
•
In January 2021 launched Kingswood Academy, providing a structured programme to nurture and build the talent
within our adviser population.
Initiated a work-life integration framework that promotes flexible working across the business to make sure we support
our people as much as we can and developed a strong benefits package for all of our colleagues.
• Continued investment in adviser frameworks and technology across the organisation to better support the organic
and inorganic growth goals, enabling us to surpass our client’s expectations.
• Created a robust client feedback mechanism to ensure that the customer remains at the centre of our thinking,
decision making and future strategy. We regularly survey our clients and achieved a Net Promoter Score of +35 in
December 2021.
We were proud to increase the female representation in our UK leadership team to over 40% during the year, however, our
sector remains underserved in respect of female advisors and this is a key focus are for us as we build a business more
representative of our society.
The business remains focussed on diversity and inclusion, actively supporting a number of initiatives in 2021 including ‘10,000
Black Interns’, an organisation centred around transforming the horizons and prospects of young black people in the
community.
The environment
We are consciously focussing on where we can make the largest positive impacts on the environment. We have a fully flexible
working policy in place allowing a mix of home, remote and office working, which has created a positive impact on the reduction
of travel, linking to our carbon footprint.
Through technology we have also bolstered our environmental principles through enhanced use of video conferencing and
collaboration communication tools for colleagues to enable true cross geography collaboration, further reducing our travel.
Our new client portal, Kingswood Go, enables clients to view their portfolios online and to hold documentation digitally, sign
documents through DocuSign (to replace a physical wet signature) and securely communicate to our adviser teams. This is
in turn is reducing reliance on our physical paper resources.
We have recycling facilities in all offices and are continuing to push forward with our responsible business agenda as well as
reducing further our carbon footprint. We are pleased to have further improved our environment impact, saving over 293k
sheets of paper, 32 trees, 117k litres of water, 11.2 tonnes of CO2 and 777kg waste between July 2019 and May 2022.
18
CORPORATE SOCIAL RESPONSIBILITY
ESG
Within our client proposition we offer clients a suite of ESG portfolios which consider environmental social and governance
issues.
Our objective is not only to produce financial returns, but also to generate a positive impact on the environment and society.
We believe strong corporate governance is of key importance to meeting these objectives.
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. We have also begun to integrate ESG into our
core portfolios with the environment being one of our core themes.
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.
Charities and communities
We started a partnership with Matchable volunteering in 2021 where colleagues can choose where they can best match their
skills and passions within the charity sector. We provide colleagues with 2 days per year additional leave to be able to do this.
Kingswood US partnered with A Friend’s House serving both as a shelter and home to youth in crisis in the Atlanta area.
We are also increasingly looking at ways to enhance the levels of financial education amongst communities and demographics.
We are regularly sharing financial education pieces through our social media channels and our colleagues take time to visit
their communities to aid discussions on financial education. We will continue to do more of this on a structured basis through
2022.
Workplace
We are committed to creating a workplace and culture that is welcoming and inclusive for everyone, taking steps to enhance
this over 2021. Diversity and inclusion are a cornerstone of our philosophy and culture, and an employee-led Diversity and
Inclusion Forum is in place 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. We are also proud to be
participating in the 10,000 black interns’ scheme for the second year. Both our UK and US business strongly operate around
core behavioural principles for colleagues ensuring there is a high level of integrity, transparency, respect and trust.
Colleagues
We currently have 292 employees:
• Females – 137 (46.9%)
• Males – 155 (53.1%)
Ages:
• Under 30 – 59 (20.2%)
•
30-50 – 131 (44.9%)
• Over 50 – 102 (34.9%)
19
GOVERNANCE
20
BOARD OF DIRECTORS
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 and Risk Committee and the Nomination and Remuneration Committee.
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 David Hudd. The Board considers that the Non-Executive Directors provide a
strong and consistent independence to the Executive members. None of the Non-Executive Directors are 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 26 to 27.
During the year ended 31 December 2021, 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 (CEO), UK CEO and US CEO were 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.
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 of 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. At year-end, the Board had six members, with one Executive
and five Non-Executive Directors. David Hudd and Jonathan Freeman 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.
21
BOARD OF DIRECTORS
During the year under review, the Board comprised:
Jonathan Freeman (Non-Executive Director)
•
• Howard Garland (Non-Executive Director)
• David Hudd (Non-Executive Chairman, Legal Consultant)*
Jonathan Massing (Deputy Non-Executive Chairman)
•
•
Lindsey McMurray (Non-Executive Director)
• Robert Suss (Non-Executive Director)*
• Kenneth ‘Buzz’ West (Non-Executive Chairman)*
• Gary Wilder (Group Chief Executive Officer)**
*Robert Suss resigned from the board 28 February 2022 and Kenneth ‘Buzz’ West resigned as Non-Executive Chairman 26
July 2021. David Hudd became Chairman in July 2021.
**In April 2022, Gary Wilder stepped back into a Non-Executive director role and David Lawrence was appointed to
the Board as Chief Executive Officer.
The Board has scheduled meetings on a quarterly basis. The Board formally met four 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 2021 and individual attendance was as follows:
Director
Board
Audit
Committee
Nomination &
Remuneration
Committee
Risk & Compliance
Committee
Jonathan Freeman
Howard Garland
David Hudd
Jonathan Massing
Lindsey McMurray
Robert Suss
Buzz West
Gary Wilder
4/4
4/4
4/4
4/4
3/4
2/4
2/4
4/4
5/5
2/2
3/3
3/3
1/1
1/1
6/6
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
Committee).
• 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.
• 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.
22
BOARD OF DIRECTORS
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 and Risk, and the Nomination
and Remuneration 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, Group Chief
Risk officer and Howard Garland (Non-Executive Director) sit on each of the operating subsidiary boards, with Howard Garland
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. In addition, key KHL Board members sit on the US division’s advisory
board.
Board committees
The Board has established committees including the Audit and Risk, and the Nomination and Remuneration and, each with
separate terms of reference. These are available for viewing at Kingswood’s London office.
Audit and Risk committee
The Audit Committee is chaired by Jonathan Freeman with David Hudd joining in January 2020 and Jonathan Massing in
January 2021. The Audit and Risk 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 meeting is attended by the Chief Executive Officer, Chief Finance Officer and Chief Risk
Officer.
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.
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 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.
23
BOARD OF DIRECTORS
• 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
• Standard financial control procedures are operated throughout the Group to ensure assets are safeguarded and
proper accounting records maintained.
Nomination and Remuneration 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. It is chaired by Jonathan Freeman
as an independent Non-Executive Director and David Hudd, Group Chairman is also a member.
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 recommending to the Board 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 was one Nomination and Remuneration Committee meetings held during the
financial year ended 31 December 2021.
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.
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.
24
BOARD OF DIRECTORS
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 29) and the Directors’
Remuneration Report (page 31).
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.
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.
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.
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.
25
BOARD OF DIRECTORS
DAVID HUDD
Non-Executive Chairman and, Legal Consultant
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.
David joined the Board in June 2018 as a non-executive director, became an executive director on 1 July 2020 and
subsequently became Chairman in July 2021.
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.
Jonathan joined the Board in October 2017.
GARY WILDER
Non-Executive Director
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.
Gary joined the Board in October 2017. In April 2022, Gary stepped back into a Non-Executive director role.
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 was
also the senior independent non-executive director of Futura Medical plc during the year under review.
Jonathan 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 Punkta.
Howard joined the Board in December 2019.
26
BOARD OF DIRECTORS
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 2013 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.
Lindsey joined the Board in December 2019.
DAVID LAWRENCE
Chief Executive Officer
David was appointed as UK CEO of Kingswood in December 2020 and has over 30 years' experience in financial services,
predominantly with Lloyds Banking Group where he held numerous executive leadership roles in distribution and functional
areas across its Retail, Commercial and Insurance divisions. In 2014, David became the Commercial Director and then Chief
Operating Officer for Lloyds' Private Banking and Wealth businesses with additional responsibility for its Mass Affluent
proposition and strategy. He played a lead role in the establishment of Schroders Personal Wealth, a joint venture wealth
management business between Lloyds Banking Group and Schroders, becoming Chief Commercial Officer for this business
in March 2019.
David joined the Board in April 2022 as Chief Executive Officer.
27
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 2021. 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 UK adopted international
accounting standards.
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 41. The Directors do not recommend the
payment of a dividend for the year ended 31 December 2021 (31 December 2020: £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 23 and 24.
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.
All of the regulated entities within the Group 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 26 to 27.
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.
28
DIRECTORS’ REPORT
Directors' interests
Directors who held office during 2021 had the following beneficial interests in the ordinary shares of the Company as of 31
December 2021:
Director
Jonathan Freeman
Howard Garland
Patrick Goulding
David Hudd
Lindsey McMurray
Robert Suss
Buzz West
Gary Wilder
Gary Wilder and Jonathan Massing**
No. Ordinary shares held
2021
2020
87,750
-
-
500,000
-
-
4,536,076
1,115,051
143,720,906
87,780
-
-
500,000
-
-
4,536,076
-
143,220,906
** 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.
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 2022:
Name of Shareholder
KPI (Nominees) Limited
Monecor (ETX Capital)
Percentage of voting rights
and issues share capital
No. of ordinary
shares
66.44%
144,125,262
4.83%
10,476,969
All Shareholdings stated are beneficial. KPI (Nominees) Limited is owned and controlled by Gary Wilder and Jonathan Massing
The Company had issued 77,428,443 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 at 31 December 2021.
The preference shares are convertible into Kingswood Holdings Limited ordinary shares at 16.5p per share on or before 31
December 2023.
29
DIRECTORS’ REPORT
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. As part of the Directors’ consideration of the appropriateness of
adopting the going concern basis in preparing the Annual Report, a range of scenarios have been considered, including a
central scenario and a severe downside scenario, based on a number of macroeconomic assumptions. The Company and
Group continue to operate with sufficient levels of liquidity and capital for the next 12 months in all modelled scenarios. 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.
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.
David Hudd
Chairman
Date: 29 June 2022
30
DIRECTORS’ REMUNERATION REPORT
Base
salary
incl. NIC
Pension
and
benefits
Termination
£’000
£’000
£’000
Option
value of
LTIP
shares
£’000
2021
2020
Total
Total
£’000
£’000
-
-
100
61
73
38
27
41
340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
61
73
38
27
41
151
435
112
79
40
37
33
79
340
966
Executive
*Graydon Butler (resigned 31/12/2020)
*Patrick Goulding (resigned 31/12/2020)
Gary Wilder
Non-Executive
Jonathan Freeman
David Hudd
Jonathan Massing
Robert Suss (resigned 28/02/2022)
Kenneth ‘Buzz’ West (resigned
26/07/2021)
Aggregate emoluments
Signed on behalf of the Board:
David Hudd
Chairman
Date: 29 June 2022
31
DIRECTORS’ RESPONSIBILITY STATEMENT
Responsibility 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 UK adopted
international accounting standards. 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
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 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 UK adopted international accounting
standards, 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:
David Hudd
Chairman
Date: 29 June 2022
32
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
Opinion on the financial statements
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of the Group’s loss for
the year then ended;
have been properly prepared in accordance with UK adopted international accounting standards; 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 2021 which comprise the Consolidated statement of comprehensive
income, the Consolidated statement of financial position, the Consolidated statement of changes in equity, the
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
UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We 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:
• Assessing and challenging the inputs and assumptions within the forecast that forms the basis of the
Directors’ assessment of the going concern by agreeing to supporting documentation, historical results and
our knowledge of the Group and the industry;
• Performing sensitivity analysis and stress testing considering downside scenarios and assessing the impact
on the Company’s liquidity position;
• Reviewing the future commitments of the Group and checking they have been appropriately incorporated
into the forecast; and
• Reviewing the amount of headroom in the forecasts of both base case and downside scenarios.
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.
33
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
Overview
Coverage
These are the key areas which
have been subject to a full scope
audit.
85% of Group loss before tax (calculated on an absolute basis)
90% of Group revenue
86% of Group total assets
Key audit matters
Revenue recognition
Accounting for business combinations
Carrying value of intangible assets and goodwill
2021
2020
Materiality
Group financial statements as a whole
£2,230,000 (2020: £1,577,000) based on 1.5% of revenue (2020: 2.5% of net
assets)
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 our 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 and UK’s revenue were identified as significant and subject to
a full scope of their complete financial information.
Five components were considered to be financially significant to the Group, with four being located in the United
Kingdom and one 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.
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.
34
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
Key audit matter
Revenue recognition
As disclosed in Note 3,
the Group recognised
revenue of £149.7m for
the year ended 31
December 2021.
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 the existence of
revenue, therefore requiring a
significant amount of auditor’s
attention
Due to the quantum and growth
of US Operations revenue
during the year including the
introduction of various material
sub-streams, there is a
significant risk over the
existence of revenue.
How the scope of our audit addressed the key
audit matter
Our audit strategy for the US Operations
segment was solely reliant on substantive testing.
For the UK revenue streams, wealth planning
and investment management, we took a blended
audit strategy using test of controls and
substantive testing.
Our procedures for all revenue streams, amongst
others, included:
• Considering whether the revenue
recognition policies are in accordance
with UK adopted international accounting
standards;
• Reconciling revenue recorded per the
general ledger to underlying reports from
systems;
• Selecting a sample of revenue
transactions throughout the year and
tracing to supporting documentation
such as /reports/agreements with third
parties and performing recalculation
where possible, as well as vouching to
cash receipts and verifying whether
revenue was accounted for
appropriately; and
Based on our assessment of the relevant control
environment of the UK wealth planning and
investment management segments, we adopted
a different audit strategy which included the
following procedures:
• 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,
performed 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 with
clients.
Key observations:
Based on procedures performed, revenue is
appropriately stated and classified.
35
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
The accounting and disclosure
for these acquisitions is a key
audit matter due to the
significant judgement and
complexity involved in assessing
whether the control has passed,
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 and
contingent consideration would
need to be treated as post-
combination remuneration has a
significant impact to the financial
statements.
Key audit matter
Accounting for the
business combinations
of:
• Admiral Wealth
Management
Limited
• Money Matters
(North East)
Limited
• Metnor
Holdings
As disclosed in Note 28
of the financial report, on
18 August 2021,
Kingswood Holdings
Limited acquired 100% of
the membership interests
in Admiral Wealth
Management Limited.
As disclosed in Note 28
of the financial report, on
30 November 2021,
Kingswood Holdings
Limited acquired 100% of
the membership interests
in Money Matters (North
East) Limited.
As disclosed in Note 28
of the financial report, on
31 December 2021,
Kingswood Holdings
Limited acquired 100% of
the membership interests
in Metnor Holdings Ltd.
Refer to Note 1 for
related accounting policy.
How the scope of our audit addressed the key
audit matter
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.
• Assessing whether a business
combination has been accounted forin
accordance with IFRS 3.
• Assessing the various elements of
consideration due, together with
estimation of the contingent
consideration by assessing the
reasonableness of management’s
forecasts by comparison to historical
results and reviewing key assumptions
around probability of achievement of
earn-outs;
• Assessing the acquisition agreements to
determine if any elements of deferred
and contingent 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:
o 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 assets and liabilities
associated with the acquisitions.
Key observations:
Based on procedures performed, acquisition
accounting for the above listed transactions is
appropriately stated and classified.
36
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
Key audit matter
Carrying value of
intangible assets and
goodwill
At 31 December 2021,
the carrying value of
intangible assets and
goodwill was £80.3m, as
disclosed in Note 14.
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.
Refer to Note 1 and 2 for
detailed disclosures,
which include the related
accounting policies and
critical accounting
judgements and
estimates.
Upon acquisition, goodwill has
been allocated to a cash
generating unit. Management
has determined that four 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.
The carrying value of intangible
assets and goodwill is a key
audit matter due to the
significant accounting
judgements and estimates
applied in supporting the
carrying values.
How the scope of our audit addressed the key
audit matter
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 and requirements of the
accounting standards
• Analysing management’s key
assumptions used in the value in use
models to determine their
reasonableness including:
o Challenging the appropriateness
of management’s discount rates
used in the value in use models
with the assistance of internal
valuations experts;
o Challenging assumptions
around timing of future cash
flows by comparison to post-
year end management
information and Directors’
cashflow forecasts;
o 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, valuation of
goodwill and intangibles is appropriately stated.
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.
37
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Materiality
Basis for determining materiality
Rationale for the benchmark applied
Group financial statements
2021
£
2020
£
2,230,000
1.5% of Revenue
The expansion of
the Group
towards the end of 2020 has
resulted in a shift of user focus to
revenue, with users considered to
be most interested in a return to
positive EBITDA, aimed to be
driven by increased revenues.
1,577,000
2.5% of Net assets
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
1,450,000 (65% of Materiality)
Basis
materiality
for determining performance
We considered the risk and control
environment and the history of
misstatements of the Group.
Component materiality
of
(70%
1,103,000
Materiality)
We considered the risk and
control environment of the
Group
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 £85,000 to
£2,084,000 (2020: £84,000 to £1,261,000). In the audit of each component, we further applied performance materiality
levels of 65% or 70% of the component materiality to our testing to ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £44,000
(2020: £31,000). 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 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.
38
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
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 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 Responsibility statement, 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.
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 Group and considered
the risk of acts by the 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 UK adopted international accounting standards.
• 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:
o Agreement of the financial statement disclosures to underlying supporting documentation;
o Enquiries of management;
o Sample testing of journal postings made during the year and post year end to identify potential
management override of controls;
o Review of meeting minutes throughout the period; and
o 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.
39
KINGSWOOD HOLDINGS LIMITED
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS
LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2021
• 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:
https://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
29 June 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
40
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
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
Amortisation and depreciation
Acquisition-related items:
Other (losses) / gains
Remuneration charge (deferred consideration)
Transaction costs
Loss before tax
Tax
Loss after tax
Other comprehensive income / (loss)
Items that may not be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Total comprehensive loss
Notes
3
6
4
7
4
8
21
4
9
41
2021
£'000
149,716
(120,497)
2020
£'000
25,477
(8,471)
29,219
17,006
(15,157)
(7,735)
(11,148)
(5,052)
(22,892)
(16,200)
-
6,327
(1,564)
(4,927)
(2,399)
(3,056)
(7,009)
(1,836)
56
862
(1,801)
(554)
(1,822)
1,744
(7,254)
(1,855)
(14,464)
(10,680)
(761)
(60)
(15,225)
(10,740)
367
(855)
(14,858)
(11,595)
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
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
(17,432)
2,207
(11,000)
260
(17,065)
2,207
(11,855)
260
11
11
£ (0.08)
£ (0.08)
£ (0.05)
£ (0.05)
The notes on pages 48 to 93 form an integral part of the financial statements
42
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Notes
12
13
14
15
16
18
19
21
21
22
15
23
23
24
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill and other intangible assets
Deferred tax asset
Current assets
Short term investments
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
Other reserves
Foreign exchange reserve
Retained (loss)
Equity attributable to the owners of the Parent Company
Non-controlling interests
Total equity
43
2021
£'000
941
2,719
80,255
-
2020
£'000
927
2,828
47,616
392
83,915
51,763
65
5,749
42,933
-
24,204
3,899
48,747
28,103
132,662
79,866
26,084
7,706
12,955
836
33,790
13,791
14,482
2,915
4,577
3,232
10,802
1,889
55,764
29,714
76,898
50,152
10,846
8,224
70,150
11,041
(488)
(23,800)
10,846
8,224
37,550
(519)
(855)
(6,159)
75,973
49,087
925
1,065
76,898
50,152
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
The notes on pages 48 to 93 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:
David Hudd
Chairman
Date: 29 June 2022
44
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share
capital and
share
premium
Preference
share
capital
Other
reserves
Foreign
exchange
reserve
Retained
earnings
£'000
£'000
£'000
£'000
£'000
Equity
attributable
to the
owners of
the parent
Company
£'000
Non-
controlling
interests
Total
£'000
£'000
Balance at 1 January 2020
19,070
4,586
Loss for the year
Amounts attributable to non-controlling interests
Issue of preference share capital
Share based remuneration
Foreign exchange loss
-
-
-
-
-
-
-
32,964
-
-
(296)
-
-
-
(223)
-
-
4,841
28,201
-
28,201
-
-
-
-
(855)
(11,000)
-
-
-
-
(11,000)
-
32,964
(223)
(855)
260
805
-
-
-
(10,740)
805
32,964
(223)
(855)
Balance at 31 December 2020
Loss for the year
Dividends due to non-controlling interests
Other adjustment
Issue of share capital
Issue of preference share capital
Share based remuneration
Preference share capital reserve
Foreign exchange gain
19,070
37,550
(519)
(855)
(6,159)
49,087
1,065
50,152
-
-
-
-
-
-
-
-
-
-
-
-
32,600
-
-
-
-
-
-
-
-
94
11,466
-
-
-
-
-
-
-
-
367
(17,432)
-
(209)
-
-
-
-
-
(17,432)
-
(209)
-
32,600
94
11,466
367
2,207
(2,402)
-
-
-
-
-
55
(15,225)
(2,402)
(209)
-
32,600
94
11,466
422
Balance at 31 December 2021
19,070
70,150
11,041
(488)
(23,800)
75,973
925
76,898
45
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
Note 23 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 93 form an integral part of the financial statements
46
KINGSWOOD HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Notes
25
Net cash from/(used in) operating activities
Investing activities
Property, plant and equipment purchased
Business Combinations
Deferred consideration
Net cash used in investing activities
Financing activities
Proceeds from issue of shares
Interest paid
Lease payments
Dividends paid to non-controlling interests
New loans received / loans repaid
Net cash generated from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
Cash and cash equivalents at end of year
18
2021
£'000
1,741
(127)
(12,720)
(738)
(13,585)
52,600
(58)
(650)
(1,272)
18
50,638
38,794
3,899
240
42,933
2020
(restated)
£'000
(6,728)
(796)
(10,579)
-
(11,375)
20,243
(17)
(421)
-
255
20,060
1,957
2,006
(64)
3,899
Prior period financials have been restated to correctly recognise contingent deferred consideration payments, linked
to the continued employment of the acquiree’s employees, as an operating cash outflow in the Consolidated
Statement of Cash Flows. Previously all deferred consideration payments related to acquisitions were included in the
deferred consideration line within net cash used in investing activities.
In 2020, the cash outflow reclassified from investing activities to operating activities was £5,153,000.
The notes on pages 48 to 93 form an integral part of the financial statements
47
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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 UK adopted international
accounting standards and in line with the 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 1.3 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 17.
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.
1.3 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.
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.
48
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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.
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.
49
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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.
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 basis:
•
•
Office equipment, fixtures and fittings:
IT equipment and software:
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.
50
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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. Where a full assessment of fair values is not practicable at the signing of
these financial statements, provisional accounting has been adopted. 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.
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. For more detail refer to note 14.
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.
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.
51
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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); and
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; and
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.
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.
52
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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); and
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.
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 the 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.
53
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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 18.
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.
Remuneration payable on business combinations
Payments due in relation to share or business purchase agreements, but which remain linked to the continued
employment of the acquiree’s employees, are recognised as a remuneration expense through the Consolidated
Statement of Comprehensive Income. These costs are excluded from Operating Profit on the basis these costs
relate to acquisitions and do not reflect the ongoing underlying business performance, and will cease when the
earnout period on a given deal concludes.
Non-operating costs and other acquisition-related items
In addition to the above, certain other costs have been excluded from Operating Profit, on the basis these costs
primarily relate to acquisitions or other non-recurring expenditure. The retained Operating Profit figure
represents the Directors’ assessment of the ongoing underlying performance of the core business.
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 26.
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
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
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 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.
2
Critical accounting judgements and key sources of estimation uncertainty
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.
55
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
2
Critical accounting judgements and key sources of estimation uncertainty
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 having representation on the US division’s advisory board by key KHL Board members. 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.
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.
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 14.
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.
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 26.
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 15 to the financial statements.
56
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
2
Critical accounting judgements and key sources of estimation uncertainty
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.
57
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021. 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:
Investment
management
2021
Wealth
planning
2021
US operations
2021
Group
2021
Continuing operations:
£'000
£'000
£'000
£'000
Revenue (disaggregated by timing):
Point in time
Over time
External sales
Direct expenses
Gross profit
881
3,771
2,045
15,169
118,396
9,431
4,652
17,214
127,827
(1,476)
(913)
(118,108)
3,176
16,301
9,719
-
23
23
-
23
Total
2021
£'000
121,322
28,394
149,716
(120,497)
29,219
Operating profit / (loss)
365
5,779
5,123
(4,940)
6,327
Business re-positioning costs
Finance costs
Amortisation and depreciation
Other gains / (losses)
Remuneration charge (deferred
consideration)
Transaction costs
Profit / (loss) before tax from
continuing operations
Tax
Profit / (loss) after tax from
continuing operations
(177)
-
-
-
-
188
-
(239)
(72)
(1,197)
-
(3,691)
(4)
576
(16)
(263)
2
(212)
-
-
(885)
(4,857)
(990)
(3,056)
(3,318)
(1,832)
(1,564)
(4,927)
(2,399)
(3,056)
(7,009)
(1,836)
4,650
(19,878)
(14,464)
(317)
(428)
(761)
188
560
4,333
(20,306)
(15,225)
58
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
3
Business and geographical segments
Continuing operations:
Investment
management
2020
£'000
US operations
Wealth
planning
2020
£'000
2020
£'000
7,299
1,023
Revenue (disaggregated by timing):
Point in time
Over time
1,071
3,169
1,595
11,320
External sales
Direct expenses
Gross profit
4,240
12,915
8,322
(1,158)
(643)
(6,670)
3,082
12,272
1,652
Group
2020
£'000
-
-
-
-
Total
2020
£'000
9,965
15,512
25,477
(8,471)
17,006
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
Share of profit from associates
(Loss) / profit before tax from
continuing operations
-
(3)
(10)
-
-
-
-
-
(48)
(835)
-
-
-
-
-
(3)
(3)
-
-
-
-
(1,801)
(500)
(974)
1,744
(7,254)
(1,855)
-
(1,801)
(554)
(1,822)
1,744
(7,254)
(1,855)
-
(120)
3,497
537
(14,594)
(10,680)
Tax
-
(2)
(101)
43
(60)
(Loss) / profit after tax from
continuing operations
(120)
3,495
436
(14,551)
(10,740)
59
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
3
Business and geographical segments
Investment
management
2021
£'000
Wealth
planning
2021
£'000
US operations
2021
£'000
Group
2021
£'000
Total
2021
£'000
Additions to non-current assets
2,113
839
3,995
27,994
34,941
Reportable segment assets
6,581
41,819
26,653
57,609
132,662
Tax assets
Total Group assets
-
132,662
Reportable segment liabilities
2,560
13,694
19,516
19,994
55,764
Total Group liabilities
55,764
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
2,665
46,793
11,497
18,519
79,474
Tax assets
Total Group assets
392
79,866
Reportable segment liabilities
1,483
13,125
7,761
7,345
29,714
Total Group liabilities
29,714
60
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
4
Loss after tax
Loss after tax for the year is stated after charging
Depreciation of property, plant and equipment (incl right of use asset)
Amortisation of intangible assets
Staff costs
2021
£'000
925
1,474
15,953
2020
£'000
617
1,205
12,081
See Directors’ Remuneration Report on page 31 for details of Directors’ remuneration during the year.
Included in the loss after tax are business re-positioning and transaction costs. Business re-positioning costs
include restructuring costs in relation to staff and third-party suppliers. Transaction costs are primarily deal-
related and driven by the acquisitions entered into by the Group.
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
The average monthly number of persons (including Executive Directors) is as follows:
Management
Client advisers
Operations
Finance
Human Resources
Risk and Compliance
2021
£'000
2020
£'000
200
200
25
425
211
56
20
287
2021
2020
6
49
99
13
4
10
8
50
79
7
4
9
Average number of employees
181
157
61
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
6
Staff costs
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
Other (losses) / gains
Net unrealised (loss) / gain on investments
Additional payments due on acquired businesses
Unrealised gain/(loss) on stock
2021
£'000
13,199
1,400
602
658
94
2020
£'000
10,442
1,198
454
210
(223)
15,953
12,081
15,157
739
57
11,148
592
341
15,953
12,081
2021
£'000
4,927
2021
£'000
-
(2,983)
(73)
(3,056)
2020
£'000
554
2020
£'000
1,744
-
-
1,744
62
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
9
Taxation
Current year tax expense
Write off of historical corporation tax balance
Movement in deferred tax (note 15)
2021
£'000
317
(17)
461
761
2020
£'000
(101)
-
41
(60)
UK corporation tax is calculated at 19.00% (2020: 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 taxation
Tax at the UK corporation tax rate of 19.00% (2020:19.00%)
Expenses not deductible for tax purposes
Adjustments for Statement of Financial Position items
Benefit of superdeduction
Prior year true-up
Adjustment for revenue ineligible for tax purposes
Unrelieved tax losses carried forward
Movement in deferred tax
Different tax rates applied in overseas jurisdictions
(14,464)
(10,680)
(14,464)
(10,680)
(2,748)
3,531
133
(2)
(17)
(250)
202
461
(549)
(2,029)
1,687
400
-
-
(329)
376
(41)
(4)
Taxation charge in the financial statements
761
60
10 Dividends
The Directors are not proposing to pay a dividend to ordinary shareholders in respect of the year ended 31
December 2021 (year ended 31 December 2020: £nil).
63
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
11 Earnings per share
2021
£'000
2020
£'000
Loss from continuing operations for the purposes of basic loss per share, being
net loss attributable to owners of the Group
(17,432)
(11,000)
Number of shares
Weighted average number of ordinary shares assuming above conversion
events
216,920,724
216,920,724
2021
2020
Effect of potential ordinary conversion:
Convertible preference shares in issue
Share options
271,986,413
5,702,567
70,965,175
14,178,963
Weighted average number of ordinary shares assuming conversion
494,609,704
302,064,862
Owing to the Group being in a loss-making position for the years ending 31 December 2020 and 2021, the
effect of any conversion events would be antidilutive to the loss per share. Therefore the diluted loss per share
has not been restated from the basic loss per share of £0.08 (2020: loss per share £(0.05)).
12 Property, plant and equipment
Fixtures and
equipment
£'000
1,380
275
1,655
453
261
714
941
Cost
At 1 January 2021
Additions
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Depreciation charged in the year
At 31 December 2021
Net book value
At 31 December 2021
64
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
12 Property, plant and equipment
Cost
At 1 January 2020
Additions
At 31 December 2020
Accumulated depreciation
At 1 January 2020
Depreciation charged in the year
At 31 December 2020
Net book value
At 31 December 2020
Fixtures and
equipment
£'000
564
816
1,380
343
110
453
927
65
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
13 Right-of-use assets
Cost
At 1 January 2021
Prior year reclassification
Additions
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Prior year reclassification
Depreciation charged in the year
At 31 December 2021
Net book value
At 31 December 2021
Cost
At 1 January 2020
Additions
At 31 December 2020
Accumulated depreciation
At 1 January 2020
Depreciation charged in the year
At 31 December 2020
Net book value
At 31 December 2020
66
Land and
buildings
£'000
3,569
(35)
555
4,089
741
(35)
664
1,370
2,719
Land and
buildings
£'000
1,335
2,234
3,569
234
507
741
2,828
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
14 Goodwill and other intangible assets
Cost
At 1 January 2021
Additions
Disposals
Exchange adjustments
At 31 December 2021
Accumulated amortisation
At 1 January 2021
Amortisation charged for the year
At 31 December 2021
Net book value
At 31 December 2021
Cost
At 1 January 2020
Additions
At 31 December 2020
Accumulated amortisation
At 1 January 2020
Amortisation charged for the year
At 31 December 2020
Net book value
At 31 December 2020
Goodwill
Goodwill
£'000
25,684
19,439
(40)
67
Other
intangible
assets
£'000
27,968
14,647
-
-
Total
£'000
53,652
34,086
(40)
67
45,150
42,615
87,765
2,279
-
3,757
1,474
2,279
5,231
6,036
1,474
7,510
42,871
37,384
80,255
Goodwill
£'000
16,384
9,300
Other
intangible
assets
£'000
17,655
10,313
Total
£'000
34,039
19,613
25,684
27,968
53,652
2,202
77
2,629
1,128
2,279
3,757
4,831
1,205
6,036
23,405
24,211
47,616
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 four CGUs at 31 December 2021 analysed between Investment Management, Wealth
Planning and its US operations split between RIA and IBD operations and the Investment Banking business. 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. Key management information is prepared
and reviewed across the Group’s operating segments, and proposed acquisitions are analysed in one of those
segments.
67
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
14 Goodwill and other intangible assets
This is the eighth year in which the investment management and wealth planning CGUs have been analysed in
this format. As the goodwill recognised on US acquisitions is not considered to be allocable on a non-arbitrary
basis to individual CGUs, the carrying value of goodwill recognised on US acquisitions in 2020 is attributed to
the combined US operating segment, made up of the RIA/IBD and Investment Banking CGUs. 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 carrying value of goodwill at 31 December 2021 is allocated as follows:
Goodwill
Investment
Management
£'000
20,404
Wealth
Planning
£'000
17,187
US operations
£'000
5,280
Total
£'000
42,871
The Group tests each CGU, or groups of CGUs, 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. 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%, which is considered prudent in the context of the long-term average growth rate
for the investment management and financial planning industries in which the CGUs operate. The discount
rates used were 14.7% for the investment management and wealth planning CGUs and 14.6% for the two US
CGUs, reflecting the risk-free rate of interest and specific risks relating to each of the CGUs. The value of the
CGU related to Level 3 fair value measurements.
The US group of CGUs exceeded its carrying amount by £32.5m and sensitivity analysis has not been
performed given the vast headroom the recoverable amount provides over the goodwill balance. The value of
the investment management and the wealth planning CGUs exceeded their carrying value by £145,000 and
£1.3m respectively. The projected cashflows prepared by management are considered to be prudent with
natural sensitivities already built into the model, as such no further sensitivity analysis has been performed.
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 £36.2m of intangible assets being amortised over 20 years, £1.1m over 15 years and £0.1m over 10
years.
The addition in 2021 to intangible assets represents the value of assets under management and associated
client lists acquired from Admiral, Money Matters and Metnor.
The addition in 2020 to intangible assets represents the value of assets under management and associated
client lists acquired from Sterling Trust and Regency.
68
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
15 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:
Liabilities
2021
£'000
Liabilities
2020
£'000
Assets
2021
£'000
Assets
2020
£'000
At 1 January
Reductions due to acquisitions
Intangibles - customer relationships and brand
recognised upon acquisition of subsidiaries
Movement in year
(1,889)
-
-
-
(2,619)
(69)
(1,932)
43
392
-
-
(392)
428
(38)
-
2
At 31 December
(4,577)
(1,889)
-
392
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 £19.3m (2020: £15.2m)
available for offset against future profits. No deferred tax asset has been recognised in respect of tax losses
for the year ended 31st Dec 2021 (2020: £392,000 was recognised) as there is some uncertainty as to the
timing of future expected profit.
The UK Government announced in its budget on 3 March 2021, a rise in the rate of Corporation Tax from 19%
to 25% from 1 April 2023, which was substantially enacted during the year. The increase is reflected within
deferred tax in the accounts, the impact recognised being £42k.
16 Trade and other receivables
Trade receivables
Prepayments
Other debtors
2021
£'000
1,844
1,307
2,598
2020
£'000
837
1,060
22,307
5,749
24,204
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 2020 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.
69
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
17 Subsidiaries
Kingswood Holdings Limited, the parent company incorporated in Guernsey, has the following
subsidiaries as at 31 December 2021:
Name of subsidiary
Ownership
Activity
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)
100% owned by KHL
Management services
100% owned by KHL
Investment management
100% owned by KHL
Wealth planning
100% owned by KHL
Holding company
STP Wealth Management Limited (“STPWM”)
(UK company)
100% owned by STFC
– non trading company
Wealth planning
NHA Financial Services Limited (“NHA”)
(UK company)
Sterling Trust Professional (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)
Money Matters (North East) Limited (UK
company)
100% owned by STFC
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
Regency
(“Regency”) (UK company)
Investment Services
Limited
100% owned by KHL
Wealth planning
Admiral Wealth Management Limited (UK
company)
100% owned by KHL
Wealth planning
Metnor Holdings Limited (UK company)
100% owned by KHL
Holding company
IPN Partners Limited (UK company)
100% owned by
Metnor Holdings
Management services
IBOSS Asset Management Limited
company)
(UK
100% owned by
Metnor Holdings
Investment management
Novus Financial Services Limited
company)
(UK
100% owned by
IPN Partners
Wealth planning
IBOSS Limited (UK company)
100% owned by
IPN Partners
70
Investment management
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
17 Subsidiaries
Name of subsidiary
Ownership
Activity
EIM Nominees Limited (UK company)
XCAP Nominees Limited (UK company)
Kingswood US Holdings Inc (“KUSH”)
(US company)
Kingswood Investments, LLC (“KINV”)
(US company)
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
Nominee company
Nominee company
Holding company
Holding company
Kingswood U.S., LLC
(US
company) Formally Manhattan Harbor Capital
("KW US")
50.1% owned by KUSH
Holding 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)
100% owned by MHC
Independent broker dealer
100% owned by MHC
Independent broker dealer
100% owned by MHC
Registered investment adviser
100% owned by MHC
Management services
100% owned by MHC
Investment banking
100% owned by MHC
Registered investment adviser
Marchant McKechnie Independent Financial
Advisers Limited ("MMK") (UK company)
Dissolved on 16 March 2021 Wealth planning
Profits attributable to non-controlling interests in KW US (formally MHC) and its subsidiaries as at 31 December 2021
were £2,206,889 (US$3,030,793) and between 23 November 2020, when Kingswood acquired control, and the 31
December 2020 year-end were £435,740 (US$559,359). Dividends paid to non-controlling interest in the year were
£1,271,724 (US$1,746,459) (period post-acquisition to 31 December 2020 were £160,106 (US$216,608))
Accumulated non-controlling interest of KW US and its subsidiaries as at 31 December 2021 were £924,858
(US$1,246,431). (as at 31 December 2020: £1,063,924 (US$1,452,150)).
71
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
17 Subsidiaries
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
18 Cash and cash equivalents
Cash at bank and in hand
2021
$'000
21,318
204
(19,049)
(59)
2021
$'000
174,367
5,740
-
5,740
2021
£'000
15,818
151
(14,135)
(44)
2021
£'000
126,967
4,180
-
4,180
2020
$'000
2020
£'000
6,278
153
(3,019)
(24)
4,600
112
(2,212)
(17)
2020
$'000
2020
£'000
24,487
2,132
-
2,132
19,076
1,661
-
1,661
2021
£'000
42,933
2020
£'000
3,899
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, no client money was held in segregated bank
accounts at 31 December 2021 (31 December 2020: £20,000).
19 Trade and other payables
Trade payables
Accruals and other creditors
Lease liability and dilapidations provision
Other taxation and social security
Other borrowings
2021
£'000
789
22,967
677
1,581
70
2020
£'000
1,094
9,348
590
1,882
41
26,084
12,955
The Directors consider that the carrying amount of trade payables approximates their fair value.
72
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
20 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
Additions
Interest expense
Lease payments
At 31 December 2021
Land and
buildings
£'000
1,151
2,394
110
(421)
3,234
582
108
(650)
3,274
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and
impairment losses and adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the Group’s incremental borrowing rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease
payment made.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee
that includes renewal options. The assessment of whether the Group is reasonably certain to exercise such
options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets
recognised.
Carrying amount of lease liabilities:
At 1 January 2021
At 31 December 2021
Due within one year
Due after more than one year
Short-term lease expense
Low value lease expense
73
£'000
3,234
3,274
677
2,597
2020
£'000
16
92
2021
£'000
10
96
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
20 Lease liabilities
Dilapidations provisions relating to lease liabilities
2021
£'000
2020
£'000
Carrying amount:
At 1 January 2021
At 31 December 2021
Due within one year
Due after more than one year
21 Deferred consideration payable
Deferred consideration payable on acquisitions:
- falling due within one year
- due after more than one year
508
566
28
538
2021
£'000
22,188
7,706
14,482
-
508
12
496
2020
£'000
4,068
836
3,232
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 Share or 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 there were additional payments for Sterling and
Regency due to the Sellers achieving these contractual requirements (part of Note 8).
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 £7,008,600 (2020:
£7,253,510).
74
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
22 Other non-current liabilities
Lease liability and dilapidations provision
Preference share liability
Other taxation and social security
Other borrowings
23 Share capital
Ordinary shares issued:
2021
£'000
2,597
-
-
318
2020
£'000
2,644
7,365
579
214
2,915
10,802
2021
Shares
2020
Shares
2021
£'000
2020
£'000
Fully paid
216,920,719 216,920,719
10,846
10,846
216,920,719 216,920,719
10,846
10,846
Share capital and share premium
At 1 January 2020
Issued during year
At 31 December 2020
Issued during year
At 31 December 2021
Number of
ordinary
shares
'000
216,921
-
216,921
-
Par value
Share
premium
Total
£'000
£'000
£'000
10,846
-
10,846
-
8,224
-
8,224
-
19,070
-
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.
As at 31 December 2021, KPI (Nominees) Limited held 143,720,906 Ordinary Shares, representing 66.3 per
cent of ordinary shares in issue at year end.
75
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
24 Preference share capital
2021
Shares
2020
Shares
2021
£'000
2020
£'000
Convertible preference shares issued:
Fully paid
77,428,443
44,828,443
70,150
37,550
77,428,443
44,828,443
70,150
37,550
Preference share capital movements are as follows:
At 1 January 2020
Issued during year
At 31 December 2020
Issued during year
At 31 December 2021
Equity component
Liability component
Number of
shares
'000
5,728
39,100
44,828
32,600
Par value
£'000
5,728
39,100
44,828
32,600
77,428
77,428
2021
£'000
70,150
-
2020
£'000
37,550
7,278
70,150
44,828
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 £3.2 billion gross AUM across private equity and credit strategies, focused
on the financial and business services sectors, with significant experience in speciality 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. Effective 17 December 2021 onwards, these
will be settled via the issue of additional ordinary shares, thereby extinguishing the liability component.
76
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
25 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 18.
Loss before tax
Adjustments for:
Depreciation and amortisation
Finance costs
Remuneration charge (deferred consideration)
Share-based payment expense
Other losses / (gains)
Foreign exchange gain
Tax paid
Share of post-tax profits of equity accounted associates
Operating cash flows before movements in working
capital
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash inflow / (outflow) from operating activities
2021
£'000
2020
£'000
(14,464)
(10,680)
2,399
4,927
234
94
1,281
(6)
(318)
-
1,822
554
2,101
(223)
(1,744)
(22)
(103)
(56)
(5,853)
(8,351)
(449)
8,043
(1,893)
3,516
1,741
(6,728)
77
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
26 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.
The 2021 Kingswood Group LTIP scheme under which options are granted over ordinary shares of the
Group to employees and Directors. 15,708,333 options were issued with an exercise price of 16.5p.
The vesting date of these share options is 31 December 2023. 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
Number of
options
Average exercise
price per share option
Number of
options
Outstanding at 1 January
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 31
December
Vested and exercisable at
31 December
2021
Pence
2021
5.87
16.50
-
5.50
19,949,167
15,708,333
-
(18,858,333)
2020
Pence
2020
5.50
-
-
5.00
34,607,500
-
-
(14,658,333)
16.78
16,799,167
5.87
19,949,167
20.85
1,090,833
72.17
257,500
78
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
26 Share based remuneration
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Grant date
Expiry date
Exercise price
4 August 2014
1 August 2016
15 February 2019
9 May 2019
28 June 2019
1 July 2019
12 April 2021
25 June 2021
5 July 2021
6 September 2021
Total
3 August 2024
31 July 2026
31 December 2029
31 December 2029
31 December 2029
1 July 2029
31 December 2024
31 December 2024
31 December 2024
31 December 2024
Pence
100.00
53.00
5.00
5.00
5.00
5.00
16.50
16.50
16.50
16.50
Share
options
2021
Share
options
2020
105,000
152,500
833,334
-
-
-
4,775,000
5,000,000
4,933,333
1,000,000
105,000
152,500
5,466,667
12,125,000
2,000,000
100,000
-
-
-
-
16,799,167
19,949,167
Weighted average contractual life of options outstanding at end of
period
3.22 years
8.26 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 volatility (12 April 2021 tranche)
Expected volatility (25 June 2021 tranche)
Expected volatility (5 July 2021 tranche)
Expected volatility (6 September 2021 tranche)
Expected dividend growth rate
Risk-free interest rate
2021
Monte Carlo
25
16.5
1,174
-
-
-
-
75.96%
75.96%
71.40%
75.96%
N/A
0.87%
The 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.
79
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
26 Share based remuneration
Total (expense) / gain arising from share-based transactions recognised during the period as part of employee
benefit expense is as follows:
Options issued under employee option plan
27 Financial instruments
2021
£'000
2020
£'000
(94)
223
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 cash equivalents
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
2021
Carrying
amount
£'000
2020
Carrying
amount
£'000
4,308
42,933
23,048
3,899
(23,826)
(318)
(3,274)
-
(10,483)
(794)
(3,234)
(7,365)
(22,188)
(4,068)
(2,365)
1,003
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.
80
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
27 Financial instruments
Item
Deferred
consideration
payable
Fair value
£'000
22,188
Valuation technique
Fair value hierarchy level
of
payable
deferred
Fair
value
consideration
is
estimated by discounting the
future cash flows using the
IRR
the
company's acquisition price.
inherent
in
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
Discount rate change
Reasonably
possible
(+ / - 5%)
Profit or (loss) impact
Increase
Decrease
£'000
(138)
£'000
167
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
2021
£'000
42,933
4,308
2020
£'000
3,899
23,048
47,241
26,947
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. The majority of funds are held with A rated (S&P)
institutions, with a minimum rating of BBB+. See note 18 for further detail on cash and cash equivalents.
81
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
27 Financial instruments
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 2021.
At 31 December 2021
Trade payables
Other payables
Deferred consideration payable
Lease liabilities
At 31 December 2020
Trade payables
Other payables
Deferred consideration payable
Lease liabilities
-
-
-
-
-
-
-
-
-
-
Repayable on
demand
£'000
Repayable
between 0-12
months
£'000
Repayable after
more than 12
months
£'000
Total
£'000
789
23,355
27,896
2,973
789
23,037
8,466
725
-
318
19,430
2,248
33,017
21,996
55,013
1,094
9,388
873
779
-
8,158
4,545
3,366
1,094
17,546
5,418
4,145
12,134
16,069
28,203
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).
82
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
27 Financial instruments
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 dollar, 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 5% strengthening of the US dollar against Sterling, based on 2021 figures, would have
increased the US division’s overall profit as recognised in the Statement of Comprehensive Income by
£208,987. A 5% weakening of the US dollar, conversely, would have decreased the profit contribution by
£199,035.
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.
28 Business combinations
1. Acquisition of Metnor Holdings Ltd
On 31 December 2021, the Company completed the acquisition of Metnor Holdings Ltd and its subsidiaries
(IBOSS Asset Management Limited and Novus Financial Services Limited, a high quality Investment
Management business which operates from headquarters in Harrogate, Yorkshire. IBOSS is a leading provider
of Managed Portfolio Services (MPS) and other investment solutions on both an advisory and discretionary
basis to UK independent financial advisers. IBOSS has developed a leading service proposition, as recognised
by a five-star rating in the FT Adviser service awards and an enviable, long term track record of high
performance with low volatility. Novus is a reputable regional IFA meeting the needs of clients based largely in
the North of England.
83
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
The business was acquired for a cash consideration of £16.0 million. plus any excess cash held by the business
on completion, payable over a 2-year period. £9.6m was paid at closing and the £6.4 million will be paid on a
deferred basis - £3.2m of which is contingent, subject to IBOSS meeting pre-agreed EBITDA hurdles over a 2-
year year period. The final deferred payments are due in Q1 2024. An additional growth earn-out deferred
consideration exists (£12.8 million), payable over the 3-year period subject to achievement of an excess
EBITDA target over that period.
On an underlying basis to the twelve months to 31 October 2021 the IBOSS Group delivered EBITDA of £1.331
million through strong and consistent revenue growth and a keen focus on driving high levels of recurring
revenue. IBOSS had total assets of £1.4 billion at 31 December 2021.
Initial consideration of £9.6 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. Provisional accounting has been adopted, subject to finalising completion accounts in 2022:
Property, plant and equipment
Goodwill & Intangibles
Investments in subsidiaries
Receivables
Cash
Payables
Taxation
Deferred tax liability
Total identifiable net assets
Book value Adjustment
£'000
-
9,044
(1,948)
-
-
-
-
(1,718)
£'000
13
-
1,948
1,179
1,532
(1,570)
-
-
Fair value
£'000
13
9,044
-
1,179
1,532
(1,570)
-
(1,718)
3,102
5,378
8,480
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
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
Growth Earn-Out
Total purchase consideration
Goodwill recognised on acquisition
84
£'000
10,598
5,288
9,490
25,376
16,896
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
The main factors leading to the recognition of goodwill are:
•
•
the strategic foothold the Metnor team and business gives the Company in the Yorkshire market; and
the ability to leverage the Metnor platform and achieve economies of scale.
Revenue and profit contribution
From the acquisition date to 30 April 2022, the IBOSS Group has contributed £1.156 million to Group revenues
and £0.422 million to Group profit before tax.
Net cash outflow arising on acquisition:
Cash outflows
Total purchase consideration
Less:
Deferred consideration
Cash paid to acquire Metnor Holdings
Less: cash held by Metnor Holdings
Net cash outflow
2. Acquisition of Money Matters
£'000
25,376
(14,778)
10,598
(1,532)
9,066
On 30 November 2021, the Company completed the acquisition of Money Matters (North East) Ltd, a high-
quality IFA business which operates from Redcar, North Yorkshire.
MMNE Limited is an independent financial adviser firm and they advise on all aspects of personal financial
planning with clients that range from private individuals to small/medium sized businesses. MMNE employs 13
people, including three financial advisers, managing c.£115m AUA on behalf of c.600 active clients. In the year
to 31 March 2021, MMNE generated profit before tax of £425k and had net assets of £499k as at that date.
The business will be acquired for total cash consideration of up to £3.4m, plus any excess cash held by the
business on completion, payable over a two year period. £1.7m was 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 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.
85
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows. Provisional accounting has been adopted, subject to finalising completion accounts in 2022:
Property, plant and equipment
Goodwill and intangibles
Investment
Receivables
Cash
Payables
Taxation
Deferred tax liability
Total identifiable net assets
Book value Adjustment
£'000
-
2,478
-
-
-
-
-
(471)
£'000
116
-
10
139
693
(89)
(87)
-
Fair value
£'000
116
2,478
10
139
693
(89)
(87)
(471)
782
2,007
2,789
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
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 cash consideration
Total purchase consideration
Goodwill recognised on acquisition
£'000
2,299
1,410
3,709
920
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 strategic foothold Money Matters team and business gives the Company in the Yorkshire market;
and
the ability to leverage Money Matters platform and achieve economies of scale.
Revenue and profit contribution
From the acquisition date to 30 April 2022, Money Matters has contributed £579,200 to Group revenues and
£284,500 to Group profit before tax.
86
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
Net cash outflow arising on acquisition:
Total purchase consideration
Less:
Deferred consideration
Initial cash paid to acquire Money Matters
Less: cash held by Money Matters
Net cash outflow
3. Acquisition of Admiral
£'000
3,709
(1,410)
2,299
(693)
1,606
On 18 August 2021, the Company completed the acquisition of Admiral Wealth Management, a North
Lincolnshire based Chartered Financial Planning firm, consolidating, and adding scale to its existing presence
across North Lincolnshire and Yorkshire.
Admiral provides independent financial advice to individuals and corporates primarily in Lincolnshire and
Yorkshire. It currently employs 7 people, including 2 advisers managing c.£100 million AuA on behalf of c.600
active clients.
Admiral will be acquired for a cash consideration of £4.0 million, plus any excess cash held by the business on
completion, payable over a 2-year period. £2.0 million was paid at completion and the balance will be paid on
a deferred basis. Admiral have the option to request the deferred consideration be paid in either cash or in
ordinary shares of Kingswood Holdings Ltd.
In the twelve months to 31 January 2021 it delivered EBITDA of £0.66 million through strong and consistent
revenue delivery and a keen focus on driving high levels of recurring revenue. As of 31 January 2021 it had
total assets of £103k and net assets of £41k.
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.
87
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill
are as follows. Provisional accounting has been adopted, subject to finalising completion accounts in 2022:
Property, plant and equipment
Goodwill and intangibles
Receivables
Cash
Payables
Deferred tax liability
Total identifiable net assets
Book value Adjustment
£'000
-
2,364
-
-
-
(449)
£'000
18
-
56
478
(175)
-
Fair value
£'000
18
2,364
56
478
(175)
(449)
377
1,915
2,292
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
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
The main factors leading to the recognition of goodwill are:
£'000
2,244
1,653
3,897
1,605
•
•
the strategic foothold the Admiral team and business gives the Company in the Lincolnshire and
Yorkshire market; and
the ability to leverage the Admiral platform and achieve economies of scale.
Revenue and profit contribution
From the acquisition date to 30 April 2022, Admiral has contributed £874,000 to Group revenues and £586,600
to Group profit before tax.
88
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
28 Business combinations
Net cash outflow arising on acquisition:
Total purchase consideration
Less:
Deferred consideration
Cash paid to acquire Admiral
Less: cash held by Admiral
Net cash outflow
29 Related party transactions
Remuneration of key management personnel
£'000
3,896
(1,652)
2,244
(478)
1,766
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.
Short-term employee benefits
Share based payments
Other related parties
2021
£'000
340
-
340
2020
£'000
898
68
966
KHL incurred fees of £137,500 (2020: £125,000) from KPI (Nominees) Limited in relation to Non-Executive
Director remuneration. At 31 December 2021, £nil of these fees remained unpaid (2020: £125,000).
Fees received from Moor Park Capital Partners LLP, in which Gary Wilder and Jonathan Massing hold a
beneficial interest through one of the members, KPI (Nominees) Limited, relating to property related services
provided by KHL totalled £23,090 for the year ended 31 December 2021 (2020: £20,000), of which £nil (2020:
£nil) was outstanding at 31 December 2021.
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 as LLP members, totalled £384,750 for
the year to 31 December 2021 (2020: £184,426).
89
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
30 Capital management
The Group considers all of its equity to be capital, and 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.
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
KW Investment Management Limited
KW Wealth Planning Limited
STP Wealth Management Limited
Sterling Trust (York) Limited
Sterling Trust Professional Limited
Sterling Trust Professional (North East) Limited
Sterling Trust Professional (Sheffield) Limited
Regency Investment Services Limited
Admiral Wealth Management Limited
Money Matters (North East) Limited
IBOSS Asset Management
Novus Financial Services Limited
Benchmark Investments, Inc
Kingswood Capital Partners, LLC
Benchmark Advisory Services, LLC
Kingswood Wealth Advisors, LLC
FCA Investment Firm
FSCA South Africa: Financial Services
Provider
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Personal Investment Firm
FCA Investment Firm
FCA Personal Investment Firm
(De-registered on 8 March 2022)
FINRA-regulated brokerage firm (USA)
FINRA-regulated brokerage firm (USA)
SEC-regulated advisory firm (USA)
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.
90
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
30 Capital management
The debt-to-equity ratios at 31 December 2021 and 31 December 2020 were as follows:
Loans and borrowings
Lease liabilities
Less: cash and cash equivalents
Net debt
Total equity
Debt to equity ratio (%)
31 Financial commitments
2021
£'000
388
3,274
(42,933)
-
76,898
2020
£'000
255
3,234
(3,899)
-
50,512
0%
0%
Subject to conditions being met, Kingswood Holdings Limited has committed to contribute £5.9m (US$8.0m)
of additional growth equity to the Kingswood US Holdings Inc group before 31 December 2022 to further build
US distribution channels through active adviser recruitment and acquisitions.
Commitments
32 Ultimate controlling party
2021
£'000
5,936
2020
£'000
5,861
As at the date of approving the financial statements, the ultimate controlling party of the Group was KPI
(Nominees) Limited.
91
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
33 Events after the reporting date
Several acquisitions have taken place since the 2021 year end. At the date of authorising these financial
statements the initial accounting for the business combinations listed below was incomplete. It has not been
possible therefore to finalise the value of the assets acquired and liabilities – contingent or otherwise –
assumed, nor, therefore, the value and composition of goodwill.
Acquisition of D.J. Cooke (Life & Pensions) Limited
On 26th January 2022, Kingswood Holdings Limited agreed to acquire, the business assets of DJ Cooke
Financial Planning Limited, an independent financial planning business, servicing clients across South
Yorkshire.
DJ Cooke Limited was a long-established independent financial advice firm specialising in retirement and
investment planning. David Cooke, CEO, was the sole adviser looking after c.340 client households with around
£70m AuA. On an underlying basis for the 12 month period up to the end of December 2021, D J Cooke Limited
generated unaudited revenue of approximately £474k and unaudited EBITDA of approximately £227k.
Following Completion, around £1.5m is payable over a 2 year period. £749k 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.
Acquisition of Allotts Financial Services Limited
On 1st February 2022, Kingswood Holdings Limited agreed to acquire, the business assets of Allotts Financial
Services Limited ("AFS"). AFS was a high quality, long established financial advisory firm based in Rotherham
and serves clients covering primarily in South Yorkshire. Set up in 1998, AFS provided independent financial
advice to over 400 active clients and employs three advisers, with five support staff covering clients primarily in
South Yorkshire with approximately £140m AUA.
In the year ended 31 March 2021, AFS generated revenue of £791k and profit before tax of £355k. Following
regulatory approval, the business was acquired for total cash consideration of up to £2.5m, payable over a two
year period, £1.25m 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.
Acquisition of Joseph R Lamb Independent Financial Advisers Ltd
On 7th February 2022, Kingswood Holdings Limited exchanged and completed on an acquisition of Joseph R
Lamb Independent Financial Advisers Ltd (“Joseph Lamb”). Established in 1970, Joseph Lamb provided
financial advice to over 1930 active clients and employs seven advisers, with eighteen support staff covering
clients primarily in Essex with approximately £393m AUA.
On an underlying basis for the 12 month period to 30 June 2021, Joseph Lamb generated revenue of £3.8m
and EBITDA of £1.545m. Following regulatory approval, the business was acquired for total cash consideration
of up to £15.3m, payable over a two year period, £7.65m 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.
Acquisition of Aim Independent Limited
On 16th February 2022, Kingswood Holdings Limited exchanged and completed on an acquisition of Aim
Independent Limited (”Aim”) an independent financial advice business based in Eastleigh serving clients
throughout Hampshire. Aim provide financial advice to over 750 clients. Alongside Phil Watson and Andy
Davies, they have three other advisers and six support colleagues looking after clients mainly based in
Hampshire, holding around £217m AUM/A.
92
KINGSWOOD HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
33 Events after the reporting date
In the year ending 31 July 2021, Aim generated revenue of £1.2m and profit before tax of £479k. Following
regulatory approval, the business was acquired for total cash consideration of up to £3.6m, payable over a two-
year period, £1.8m will be paid at closing and the balance paid on a deferred basis.
Acquisition of Vincent & Co Ltd
On 12th May 2022, Kingswood Holdings Limited exchanged on the acquisition of Vincent & Co Ltd, a privately
owned independent financial adviser firm based near Market Rasen in Lincolnshire.
The acquisition is subject to regulatory approval. Vincent & Co, ran by Mark Vincent, provides financial advice
to over 130 clients in the Lincolnshire area. They hold £25m AuA and in the year ending 31 October 2021
generated revenue of £135k, and profit before tax of £83k.
Following regulatory approval, the business will be acquired for total cash consideration of up to £421k, payable
over a two-year period, £211k will be paid upon completion of the transaction and the balance paid on a deferred
basis.
Evolution of geopolitical situation
As a result of recent events in Ukraine we have decided not to take on any further business from Russian
clients. The Wealth and Asset Management and Investment Banking businesses will not accept any new
Russian clients. We will continue to comply fully with the expanding list of sanctions arising from this conflict.
Overall, the direct impact of this geopolitical situation on the Group is very limited as there is limited exposure
in terms of number of clients, assets under management, or revenue.
Deferred Consideration
As at 31st December 2021 Kingswood reported a £7.7m Deferred Consideration Payable current liability on the
Balance Sheet. This contains amounts due to businesses acquired in 2021 and prior to 2021. At time of writing,
Kingswood and the Principals of a business acquired prior to 2021 continue an ongoing dialogue to agree a
final Year 3 Contractual EBITDA (for the period ended 31 December 2021) to determine the amount of the Year
3 deferred consideration payment due in 2022.
93
13 AUSTIN FRIARS, LONDON, EC2N 2HE