ANNUAL REPORT
2022
CONTENTS
Summary Information
1
STRATEGY
Kingswood At A Glance
2
2022 Key Highlights
3
Chairman Statement
4
Chief Executive
6
Officer Statement
6
US Chief Executive
10
Officer Statement
10
Group Chief Financial Officer Statement
12
Principal Risks And Uncertainties
16
Corporate Social Responsibility
19
GOVERNANCE
Corporate Governance
22
Board Of Directors
28
Directors’ Report
30
Directors’ Remuneration Report
33
Directors' Responsibility Statement
34
FINANCE
Independent Auditor’s Report
35
Consolidated Statement Of Total
Comprehensive Income
42
Consolidated Statement Of Financial Position
43
Consolidated Statement Of Changes In Equity
44
Consolidated Statement Of Cash Flows
45
Notes To The Financial Statements
46
Advisers And Company Information
Inside back cover
CORE VALUES
Kingswood’s ethos and mission is to create
opportunities for people worldwide to experience
financial freedom. Critical to success is the continuous
investment in people, innovation and technology to
support our advisers and clients.
The Group is built around the core principles of:
INTEGRITY
Trust is of utmost importance when
it comes to advice. Kingswood’s people
are committed to acting with integrity,
being fair and acting in the best interest
of clients.
TEAMWORK
It is important to always apply
understanding to the situation.
Kingswood believes that by uniting
the expertise of our people we build
deeper relationships and better
serve our clients.
IMPACT
We strive to make a difference and
a positive impact with everything we do.
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 focused 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.
SUMMARY INFORMATION
HIGH GROWTH
MARKETS
Grow by acquisition
in globally
fragmented markets
VERTICAL
INTEGRATION
Holistic wealth
and investment
management drives
revenue growth
DISTRIBUTION
NETWORK
Focus on creating
regional ‘Hubs’ for
personal advice
SCALABLE
PLATFORM
Centralised
proposition to
support economies
of scale and sales
efficiency
MANAGEMENT
TEAM
Experienced and
incentivised at
every level
GLOBAL
AMBITION
Growth equity
enables execution
of international
growth plan
The Group is split into three core businesses: The US, Investment Management and Wealth Planning
WEALTH PLANNING
Our Wealth Planning business provides
holistic financial advice to both
Personal and Corporate clients. Our
wealth planners identify their clients
needs and by working closely with
them help meet their goals. We strive
to be a client centric business and are
consistently making improvements to
ensure we align with this goal. In we
2021 launched our new client portal
Kingswood Go which supports our
vision for multi channel journeys and
providing excellent experiences for
our clients.
INVESTMENT MANAGEMENT
Our Private Client Investment
Management team offers a
comprehensive discretionary
investment management service to
private individuals and families.
Our Institutional Investment
Management team provide Fixed
Income and similar investment
solutions to meet the needs
of Universities, Charities and
Foundations.
US
The US business comprises of our
independent broker dealer offers
clients a wide range of investment
opportunities. A registered investment
adviser offering holistic financial advice
and an investment banking arm with
a suite of customised solutions within
public and private investment banking,
middle and emerging growth markets.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
1
STRATEGY
GOVERNANCE
FINANCE
KINGSWOOD AT A GLANCE
AUM/A*
£10.5B
No. of UK Advisers
100
No. of US Authorised Representatives
232
2022
£10.5b
2021
£6.8b
2020
£5.9b
2022
100
2021
70
2020
64
2022
232
2021
211
2020
174
* The US AUM/A is based on actuals and proforma assets from registered representatives as at 31 December 2022.
UK GROWTH
1
Abingdon
2 Beverley
3 Buckinghamshire
4 Derby
5 East Malling
6 Essex
7
Glasgow
8 Grimsby
9 Harrogate
10 Hessle
11 Kent
12 Lincoln
13 London
14 Macclesfield
15 Newbury
16 Newcastle upon Tyne
17 Newton Aycliffe
18 Redcar
Sheffield (2)
19
20 Southampton
21 Surrey
22 York
CREATING A GLOBAL FOOTPRINT
UK
South Africa
US
15
20
21
22
16
12
18
19
17
9
2
14
3
5
4
13
7
6
10
1
11
8
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
2
2022 KEY HIGHLIGHTS
STRATEGIC HIGHLIGHTS
• Group Assets under Management and Advice (AuM/A)
increased by £3.7bn. Completion of Barry Fleming
Partners and Moloney Investments Ltd (MMPI) acquisitions
supported a further increase to £11.4bn
• Completed acquisition of a further 10 UK IFA businesses,
giving £11.8m additional revenue
• UK AuM/A increased by £3.2bn
• 4.8 out of 5 star rating on VouchedFor, home to the UK’s
most trusted advisers
• Secured a debt facility with a leading global financial
institution to accelerate our strategic growth plans
• Over 6,000 registered clients using our UK market-leading
‘Kingswood Go’ app
• Signed national distribution agreement with a UK law firm
to provide financial advice to Court of Protection clients
and launched a new AIM portfolio
• 40% of UK adviser hires in 2022 were female compared to
an adviser community average of c.19%
• Kingswood US added 21 new registered representatives,
further expanding our US footprint and growing our total
US AuM/A to $3bn (£2.4bn)
• Recruited two new US investment banking groups, focused
on mid-market equity capital markets
• Our US industry-leading automated alternative investment
platform has surpassed 1,200 subscriptions, representing
$129m in investments in three years
FINANCIAL HIGHLIGHTS
• Group Revenue was £145.9m, £3.7m or 2.5% lower than
2021 as macro-economic headwinds and market volatility
led to a slowdown in capital market activity in the US
Investment Banking business
• 88% of 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 means that recurring revenue
in the US was 15%. Combined, Group recurring revenue
was 32% compared to 19% in 2021
• Group Operating Profit of £8.7m was £2.3m higher
compared to 2021. The Kingswood Board believes
Operating Profit is the most appropriate indicator of
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)
Total Revenue
£145.9M
Group Recurring Revenue
32%
Operating Profit
£8,697k
Total Equity
£73.9M
£145.9m
2022
2021
£149.7m
2020
£25.5m
2020
61%
2022
32%
2021
19%
2022
£8,697k
2021
£6,327k
2020
£862k
2022
£73.9m
2021
£76.9m
2020
£50.2m
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
3
STRATEGY
GOVERNANCE
FINANCE
CHAIRMAN STATEMENT
I am pleased to report that 2022 has been
another year of outstanding performance by
the Kingswood Group. Despite challenging
market conditions, we have made good progress
against our UK inorganic growth strategy and
have generated organic growth across the
Group. The business delivered record levels
of Operating Profit and completed a further
10 acquisitions in the year under review. The
closing AuM/A figure for the year is £10.5bn
with assets acquired during the year contributing
an additional £3.2bn. Across the UK and US, net
inflows grew organically 12% year over year.
We are delivering our growth strategy set out in 2019
to create a leading 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.
We have established ourselves as an M&A counterparty
of choice and have a proven integration capability with
an ability to complete over 10 integrations per year. Since
2018, the Group has acquired 20 UK wealth management
businesses which are projected to deliver strong, sustainable
revenues and operating profit. We now have 120 financial
advisers and investment managers operating across 19
locations to support our retail and institutional client
base. IBOSS provides Kingswood with an award-winning
investment offering to our clients.
In the UK we reported record levels of revenue and
operating profit with significant growth across Wealth
Planning (WP) and Investment Management (IM). 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 delivered another year of growth and business
expansion, adding 21 new registered representatives and
growing total assets under management by $0.3bn to
$2.9bn. The registered investment advisor (RIA) and broker/
dealer business delivered organic revenue growth of 25%
year over year. The US Investment Banking business is
dependent on capital market activity to deliver revenues
which are transactional in nature. Due to fewer IPOs in
the Americas region in 2022 compared to 2021, the US
investment banking business saw a year over year reduction
in revenue of 23% to $110.1m.
We have a strong, well-capitalised balance sheet and have
benefited from our partnership with Pollen Street Capital
which has invested £77.4m to enable our acquisition and
growth strategies. We have also entered into a new debt
facility with a leading global financial institution to provide
funding to accelerate strategic growth as well as to fund
existing deferred consideration liabilities. As at 31 March
2023 we employ over 400 people across the globe and
manage £11.4bn of client assets.
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 2022 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 2022 in the UK, Kingswood Go, which has transformed
our client experience by providing a single client sign-on
and view across multiple platforms. We are also improving
operational efficiency and client experience through the
creation of a client facing digital fact find and automated
suitability reports. 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
4
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 Gemma
Godfrey and Jane Millar have been appointed to the board
of Kingswood Holdings Limited as independent Non-
Executive Directors. Gemma Godfrey is a Non-Executive
Director and advisor, having founded two digital businesses,
acquired by or built on behalf of publicly listed organisations.
Jane Millar has over 30 years’ financial services experience
in Non-Executive Director, Board and Chief Executive
Officer roles across the wealth management industry. These
are important appointments in supporting our growth and
ambitions and in enhancing the Board’s diversity.
Turning to 2023, the UK macroeconomic outlook in the
short term remains highly uncertain, with high inflation, a
cost of living crisis, increasing interest rates, and recessionary
risks. Nonetheless, the fundamental opportunity for
Kingswood remains strong, driven by the market
opportunity. We look to the future with confidence.
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
23 May 2023
We are committed to creating
a workplace and culture that is
welcoming and inclusive for everyone.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
5
STRATEGY
GOVERNANCE
FINANCE
CHIEF EXECUTIVE
OFFICER STATEMENT
INTRODUCTION
I am delighted to present our financial results for 2022
which was another transformative year for Kingswood
Group. As with previous years, I will limit my comments to
that of the UK business and am accordingly grateful to Mike
Nessim (US CEO) for his comments on our US business.
MARKET OVERVIEW
2022 saw huge turbulence in both the global economy and
financial markets. A confluence of deteriorating macro-
economic trends, not least increased energy prices, rising
inflation and then interest rates have had a material impact
on the lives of both clients and colleagues. If I then add
Putin’s invasion of Ukraine and political impacts resulting
from changes in leadership in Number 10 Downing Street,
saying that 2022 was a turbulent year is arguably an
understatement.
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 has never been truer than over the
last twelve months where we have increased our client
interaction, at times to provide reassurance and also to
revise our advice where necessary.
We have seen an increase in demand for financial advice in
some cases from clients who have previously self-served
some or all of their investment needs. On this point, our
diversified investment approach has provided some good
insulation for our clients from the more volatile movements
across global indices too.
Despite the macro-economic uncertainty and still
unpredictable markets, the UK wealth management sector
continues to exhibit strong, long-term growth characteristics
as supported by the recurring nature of its revenues and
demographic trends.
Complexity in laws and regulations continue to increase
and consolidation opportunities continue to be a strong
feature of the sector. These features are opportunities
that Kingswood is in a strong position to take competitive
advantage from and play to our strengths as a business.
BUSINESS OVERVIEW
Our strategic focus is single-mindedly on both Financial
Advice/Planning and Investment Management activity,
relying on leading market external expertise for other
aspects of the client value-chain.
We have a broad Financial Advice Proposition that is holistic
in its nature. This is predominantly delivered to clients face
to face. We have taken early steps during 2022 to create a
complementary low-cost digital advice channel for clients
with straightforward needs and we are excited about how
this can help more clients access financial advice. Led by
our Co-Heads of Wealth Planning, Hayley Burton and Jeff
Grantham, 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.
The acquisition of IBOSS Asset Management in December
2021 has allowed us to deepen our Investment
Management offering with an enhanced research capability,
ably led by our CIO Chris Metcalfe and Head of Investment
Management, Paul Surguy.
For Private Clients this now comprises:
• IBOSS Model Portfolio Service – in addition to a core
range of actively managed risk-rated portfolio’s, we
provide passive, income and ESG variants too. This is our
Central Investment Proposition (CIP) and is available on
most of the recognised third-party platforms
• Kingswood Personal – a more tailored investment
management service, often provided in parallel to a
financial adviser relationship but led by an Investment
Manager
• Kingswood AiM Portfolio – launched in December 2022
to help clients with their Inheritance Tax and similar needs
For Institutional Clients, particularly UK universities, we
continue to provide a long-standing Fixed Income and
Treasury offering led by Nigel Davies.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
6
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:
1 Acquisition
I am delighted that we were able to complete the purchase
of 10 businesses in 2022:
• Strategic Asset Managers Limited
• Employee Benefit Solutions Limited
• Vincent & Co. Financial Ltd
• D.J. Cooke (Life & Pensions) Limited
• AIM Independent Limited
• Joseph R Lamb Independent Financial Advisers Limited
• Allotts Financial Services Limited
• Eurosure Limited
• JCH Investment Management Limited
• JFP Holdings Limited
Collectively, these businesses have added £1.7bn AuA,
28 advisers and £6.1m Operating Profit to the Group. In Q1
2023, Kingswood purchased a further two businesses:
• Barry Fleming & Partners
• Moloney Investments Limited
These two businesses have added a further £0.7bn AuA;
21 advisers and £3.8m Operating Profit to the Group. The
acquisition of Moloney Investments Limited, based in Dublin,
creates for Kingswood an exciting entry point into the Irish
market which displays similar features to those seen in the
UK and some strong growth opportunities. We expect to
commence a programme of acquisition and organic led
growth in Ireland to complement that in the UK once this
acquisition is embedded. We continue to seek strategic
and tactical acquisition opportunities in the UK to further
support the growth seen to date.
2 Integration
Effective integration is critical to an acquiring 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.
Successfully 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
Organic growth has a number of strands to it and in
this regard, Kingswood is different to other businesses
undertaking similar activity to ourselves:
• Growth in Financial Advice activity – 7% organic growth
in adviser numbers, excluding acquisitions
We are actively hiring new financial advisers as well as
developing colleagues in other roles to become financial
advisers. This creates the capacity required for organic
growth.
In terms of client demand, Kingswood is typically purchasing
businesses where the principals remain committed and,
in many cases, have unfulfilled ambitions 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, we are able to foster an environment of
organic growth. In addition to this, other initiatives to
support organic growth range from strategic alliances with
professional firms to introduce clients to early digital lead
creation.
• Growth from vertical integration – £650m at
December 2022
Acquiring IBOSS gave Kingswood a Managed Portfolio
Service (MPS) solution and Centralised Investment
Proposition (CIP) that has a long-term track record of high
performance and low volatility, supported by an award-
winning service proposition. Advisers and firms are not
targeted in any way to move monies to our CIP, though from
the individual customer appraisal process we consider it will
be more suitable than their existing investment platform in a
large minority of cases.
• Onboarding of IFA firms into IBOSS – 9 new IFA firms
onboarded
IBOSS core activity is the provision of out-sourced DFM
services to IFA firms. 2022 has been challenging as existing
client IFA firms have needed greater re-assurance and
investment of time and new target IFA firms have had
increased reluctance to move whilst the markets remain
turbulent. However, the pipeline is strong, and we expect
2023 to deliver a healthy increase in IFA firms using IBOSS.
• Institutional Growth – £130m AuM net inflows in the
year, or 12% growth year-over-year
Kingswood’s excellent reputation with UK universities
and similar institutions enables the onboarding of new
clients each year and 2022 was no different. This part of
Kingswood demonstrates c.10% growth p.a.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
7
STRATEGY
GOVERNANCE
FINANCE
4 Building a Leading Business
a. Under the leadership of Rachel Bailey (CPO), we continue
to actively invest in our colleague proposition with a
clear aim to become a magnetic people business. We
have continued to invest in deepening our learning
and development for all colleagues, launching our
accelerator programme for advisers of the future, further
adviser academy graduations and the completion of
our first leadership development programme. Diversity
is a challenge in our sector. We are significantly more
effective for the diversity seen across our senior
leadership team and are actively working to address
imbalance elsewhere, especially in the adviser community
where we aspire that at least 25% of our financial
advisers will be female in the medium term, compared
to c.19% at 2022. We are publishing our gender pay gap
report for the first time with these results.
b. We continue to invest in our client experience through
technology and other means. We launched our client
portal – Kingswood Go in 2022 allowing clients to have
single sign-on and single client view across multiple
platforms which has transformed our client experience.
During the first half of 2023, we expect to deploy further
digitalise processes and open up new propositions for our
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 in the support
of our core and acquired businesses. During 2022, we
secured a facility with a leading global financial institution
to support our ongoing growth.
DIMENSIONS
As at December 2022, the UK business employed 335
people, of which 100 are client facing financial advisers/
investment managers operating from 17 locations across
the UK with £3.2bn asset under management and as further
£4.9bn asset under advice/influence.
As at 31 March 2023, this had increased to 396 employees
across the UK and Ireland of which 120 are client facing
financial advisers/investment managers operating from
19 locations with £5.2bn asset under management and as
further £5.7bn assets under advice/influence.
KPIs
Now
2022
2021
2020
Employees
396
335
203
185
Advisers
120
100
70
64
Locations
19
17
14
11
AUM (£bn)
3.3
3.2
1.7
1.4
AUA (£bn)
5.7
4.9
3.2
2.8
Total AUM/A (£bn)
9.0
8.1
4.9
4.2
CHIEF EXECUTIVE OFFICER STATEMENT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
8
OUTLOOK
Building on the 17 acquisitions completed under my
leadership to date and those that came before, we have four
transactions in exclusive due diligence comprising a total
of £3.5m operating profit. We expect to conclude these
transactions during 2023. 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 assets under advice, in addition to
which we expect to see a healthy migration of assets to
our CIP and an increase in IFA firms using IBOSS as their
outsourced DFM.
I believe that successful firms will not only truly put the
client at the heart of the relationship, but will also be highly
accessible, have clear propositions and most importantly
provide great value for money. Technology plays a key part in
this as do our colleagues hence the focus on these areas as
part of our strategy.
KEY PERFORMANCE INDICATORS
Jon Millam, Group CFO goes into more detail on financial
performance in his section but total revenue for the year
was £33.8m, a 54% increase on the prior year reflecting
the impact of recent acquisitions. 88% 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)
2022
2021
2020
Total Revenue
33,844
21,889
17,155
Recurring Revenue
88%
87%
84%
WP & IM
Operating Profit
11,488
6,144
4,273
AUM/A (£m)
8,073
4,883
4,378
To conclude, growing a sustainable business at the pace at
which we are doing it requires colleagues who are special
individuals. I am proud not only of our leadership team but
of what everyone in Kingswood does each and every day for
our clients and each other, without which the exciting story
outlined in this report would not be possible.
David Lawrence
Chief Executive Officer
23 May 2023
I believe that successful firms will
not only truly put the client at the
heart of the relationship, but will
also be highly accessible, have
clear propositions and most
importantly provide great
value for money.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
9
STRATEGY
GOVERNANCE
FINANCE
US CHIEF EXECUTIVE
OFFICER STATEMENT
INTRODUCTION
Kingswood US is a premier wealth management firm with
around $3bn in assets and offices throughout the United
States. The AUM/A values is based on actuals and proforma
assets managed by the representatives as at the year end.
With both an SEC-registered registered investment advisor
(RIA) and a FINRA-licensed broker/dealer in-house alongside
an institutional-quality product offering and a personal
approach to service, Kingswood US 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.
2022 was another year of growth and business expansion
for Kingswood US. We added 21 new registered
representatives, which further expanded our US footprint
and grew our total assets under management by $0.9bn.
Our newest members cited access to a larger universe of
services, solutions and technology for their clients as a
chief reason for their transition. We continue 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.
Our automated alternative investment platform surpassed
1,200 subscriptions representing $129m in investments in
three years. This automated subscription system streamlines
operations and enables straight-through processing,
reducing the time between initiation and completion of the
investment from weeks to days.
Lastly, we consolidated our two SEC-registered RIAs,
Benchmark Advisory Services, LLC and Kingswood Wealth
Advisors, LLC, under the Kingswood Wealth Advisors (KWA)
brand to streamline back-office processes and regulatory
oversight while delivering an improved experience to
advisors and their clients.
MARKET OVERVIEW
The US Wealth Management market is large and
fragmented, comprised of standard broker-dealers, RIAs, and
traditional, private wealth managers.
M&A activity in the US continued at record levels with
a total of 340 wealth management M&A transactions
completed, compared to 307 in 2021 and 205 in 2020.
The robust level of deal flow was primarily driven by the
continued prevalence of private-equity-backed consolidator
models in addition to several favourable tailwinds forcing
consolidation among small-to-mid sized wealth advisors.
Firm mix continues to shift from commission-oriented
businesses towards fee-based, independent financial
advisors as advisors adapt to the fast-evolving consumer
needs and behaviours, driven by demographic shifts.
Additionally, advisors are increasingly seeking complete
independence, primarily due to the ability to retain a
greater share of the economics associated with the
wealth management services they provide, leading to a
significant growth in advisors associated with hybrid and
independent RIAs.
As a hybrid independent BD/RIA, Kingswood is ideally
positioned to capitalize on these market trends, becoming
an attractive proposition for advisors who want greater
flexibility and ownership over their practices without
sacrificing support systems and centralized resources.
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 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 RIA, 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
10
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
2. Margin Expansion
a. Recognize 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 banking
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 modernization
and digitalisation
b. Drive scale through technology products
KEY PERFORMANCE INDICATORS
$000's (Unless
otherwise stated)
2022
2021
2020
Total Revenue
138,074
175,545
35,318
Gross Profit
13,209
13,347
6,878
Operating Profit
3,651
7,035
2,232
AUM/A ($m)
2,857
2,545
2,071
# of Authorised
Representatives
232
211
174
* The US AUM/A is based on actuals and proforma assets
from registered representatives as at 31 December 2022.
Mike Nessim
Kingswood US Chief Executive Officer
23 May 2023
We offer fast, smooth service
with access to many investment
products and sectors.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
11
STRATEGY
GOVERNANCE
FINANCE
GROUP CHIEF FINANCIAL
OFFICER STATEMENT
INTRODUCTION
The Group delivered another strong set of results in 2022
against the backdrop of market volatility following the
Russian invasion of Ukraine and the announcement of
the mini budget in late September. The 2 UK Divisions
reported a material improvement in financial performance
supported by the completion of 10 further acquisitions in
2022. The US Division reported a year over year reduction
in revenue due to lower transactional Investment Banking
revenues resulting from a slowdown in capital markets
activity. However, RIA/BD revenues, recurring in nature
and driven by AuM/A, grew by 25% compared to 2021.
All 3 segments have reported strong net inflows of assets
onto our platforms, delivered both organically and through
acquisitions, with pleasing improvements in the percentage
of recurring revenues.
We have maintained both cost and balance sheet discipline
in 2022. Excluding the impact of acquisitions, operating
expenditure is broadly flat year-over-year and our balance
sheet remains well capitalised with strong support from
Pollen Street Capital. We also continue to maintain a strong
discipline in how we think about the businesses we acquire,
ensuring that the multiples we pay are within our risk
appetite and funding profile.
In Wealth Management, we provide holistic financial advice
to our clients that generate both initial and ongoing fees. We
provide a tailored IM offering, across an MPS and Personal
Portfolio Service (PPS). This includes an open market
advisory and discretionary portfolio service to more than
100 IFA firms. The acquisition of IBOSS has driven increased
flows into Kingswood funds. Our Fixed Income business,
included within IM, is a leading provider of liquidity and
treasury services, to principally universities, that continues
to generate growth in AuM. UK business performance
is underpinned by organic growth in assets, greater than
85% of recurring revenues and a predictable cost base.
Our acquisitions complement our offering and provide the
opportunity to deliver both revenue and cost synergies.
Kingswood US operates across three core divisions;
Independent Broker Dealers (IBD), Registered Independent
Advisers (RIA), and Investment Banking (IB). IB serves mid-
market corporate clients and helps raise capital. Our IBD
business offers our clients investment opportunities across
Alternatives, Mutual Funds and Equities. Our RIA business
provides holistic financial advice to our clients, with similar
characteristics to our Wealth Management business in the
UK. Kingswood US has quickly produced significant amounts
of revenue and Operating Profit.
FINANCIAL PERFORMANCE
The Group’s financial performance for the year was resilient.
Group AuM/A of £10.5bn at December 2022 represents a
£3.7bn, or 55%, increase compared to the prior year with
6% driven by organic growth and 49% from acquisitions.
Group revenue was £145.9m, a 2.5% decrease compared
to 2021, reflecting lower US Investment Banking revenues
as macro-economic headwinds and market volatility led to a
slowdown in capital market activity partially offset by a 55%
increase in UK revenue achieved through a combination of
acquisitions and organic growth. Operating Profit of £8.6m is
37.5% higher than 2021 reflecting acquisitions and organic
growth in the UK partly offset by the drop through to profits
of lower IB revenues in the US. Operating Expenditure of
£33.4m was £10.5m higher than the prior year, supported
by the impact of UK acquisitions (£6.6m), higher costs in the
US (£3.2m) and higher Central Costs (£0.8m).
The result for the period to 31 December 2022 was a
Loss of £10.2m reflecting £1.9m of acquisition related
deferred consideration expense, £4.5m amortisation and
depreciation, £5.6m finance costs and £6.9m business re-
positioning and transaction costs.
The Group’s balance sheet reflects the growth of the
business. The Group had £19.6m of cash at December
2022, a decrease of £23.3m since 31 December 2021. This
decrease is largely driven by £43.9m of acquisition payments
and a £5.4m reduction due to the timing in settlement of
US Investment Banking commission payments. This is partly
offset by £23.9m debt funding and £1.3m positive cashflow
in the UK from operating activities. Net Assets were
£73.9m, a decrease of £3.0m compared to the prior year.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
12
SEGMENTAL ANALYSIS
The table below provides a breakdown of the annual financial performance of the 3 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 parent company.
2022 (£000)
Investment
Management
Wealth
Planning
US
Central
Costs
Group
Total
Revenue
7,183
26,662
112,153
–
145,998
Cost of sales
(1,277)
(1,183)
(101,425)
7
(103,878)
Gross profit
5,906
25,479
10,728
7
42,120
Operating profit
2,135
9,353
2,966
(5,757)
8,697
Recurring revenue
87.0%
88.7%
15.3%
n/a
32.2%
Operating profit margin
29.7%
35.1%
2.6%
n/a
6.0%
AUM/A (£m)
3,185
4,889
2,380
n/a
10,453
No. of Advisers/Authorised Representatives
9
91
232
n/a
332
2021 (£000)
Revenue
4,652
17,214
127,827
23
149,716
Cost of sales
(1,476)
(913)
(118,108)
–
(120,497)
Gross profit
3,176
16,301
9,719
23
29,219
Operating profit
365
5,779
5,123
(4,940)
6,327
Recurring revenue
81.1%
88.1%
7.4%
n/a
19.0%
Operating profit margin
7.8%
33.6%
4.0%
n/a
4.2%
AUM/A (£m)
1,639
3,244
1,889
n/a
6,772
No. of Advisers/Authorised Representatives
10
60
211
n/a
261
INVESTMENT MANAGEMENT
AuM increased to £3.2bn in the year supported by the acquisition of Metnor Holdings Limited on 31 December 2021 and
12% organic net inflows largely through growth in the Fixed Income business. Vertical Integration assets, where an existing
Wealth Planning client chooses a Kingswood investment product or service (MPS/PPS), increased to £650m (2021: £565m).
Revenue was £7.2m, an increase of 54.4% compared to prior year and Operating Profit was £2.1m compared to £365k
in 2021. Operating Expenditure of £3.8m increased by £1.0m as a result of the IBOSS acquisition, partly offset by cost
reductions delivered in the year. Recurring revenue increased to 87.0% in 2022 compared to 81.1% in 2021, due to the
higher recurring nature of IBOSS revenues.
WEALTH PLANNING
AuA of £4.9bn increased by 50.7% compared to prior year and included £1.6bn of acquisition related inflows and 6% growth
from organic net inflows. Revenue was £26.7m, an increase of 54.4% compared to 2021 and Operating Profit was £9.3m, an
increase of 60.6%. Recurring Revenue was 88.7% an increase of 0.6% year over year.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
13
STRATEGY
GOVERNANCE
FINANCE
US
AuM/A of £2.4bn increased by 46% in 2022 on a reported
currency basis and revenue of £112.1m represented a
decrease compared to the prior year (2021: £127.8m).
IB revenues were £77.3m in the period, impacted by a
slowdown in capital market activity, reducing by 31%
compared to 2021 and the BD/RIA business delivered
revenues of £32.8m, a 25% increase year-over-year. The
Kingswood US wealth management business increased
its advisor representatives to 232 by December 2022,
with $3.0bn of client assets. Due to Investment Banking
revenues being transactional in nature, recurring revenue
in the US (2022: 29.8%, 2021: 7.4%) is lower than the UK
but increased year over year due to the growth in RIA/BD
revenues.
Central Costs were £5.8m in 2022 (2021: £4.9m). The
Group continued to apply prudency to the management of
its cost base in 2022. However, costs increased year over
year as a result of the strengthening of the Executive Team
and central functions to support a larger business, 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 2022 with
comparatives is shown in the table below:
Group
2022
£000
2021
£000
Operating profit
8,696
6,327
Business re-positioning costs
(1,964)
(1,564)
Transaction costs
(4,924)
(1,836)
Finance costs
(6,398)
(4,927)
Other finance costs
(4,507)
(2,399)
Remuneration charge
(deferred consideration)
(1,852)
(7,009)
Other gains/(losses)
(23)
(3,056)
Profit/(loss) before tax
(10,972)
(14,464)
• 2022 Business Re-positioning Costs mainly comprise
restructuring costs, share based payment expenses, US
rep recruitment fees and technology investment costs.
• Transaction costs are acquisition related (legal fees, due
diligence, broker fees and project costs).
• Finance costs reflect £1.6m dividends that have accrued
on the Group’s preference shares in issue. The remaining
£3.9m of finance costs charged to the P&L in 2022
largely comprise of costs related to the cost of deferred
consideration and interest accrued from the debt facility.
• Amortisation and Depreciation charges represent £3m
from the amortisation of intangible assets and £1.5m
depreciation of Right of Use Assets, property, and IT/
office equipment.
• £1.9m Remuneration Charges 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
Net Assets at 31 December 2022 were £73.9m (2021:
£76.9m). Non-current assets were £132.3m for the
year-ended 2022 (2021: £83.9m), an increase of £48.4m
compared to the prior year reflecting increases to intangible
assets and goodwill from acquisitions completed in 2022.
Current assets were £28.9m (2021: £48.8m) reflecting
a £19.9m reduction in cash as a result of acquisition and
deferred consideration payments as well as timing of US
Investment Banking commission payments. This is partly
offset by a £3.5m increase in trade receivables and a £4.4m
deferred tax asset.
Current liabilities were £38.3m at 31 December 2022
(2021: £33.8m). The increase of £4.5m reflects a £13.1m
increase in deferred consideration partially offset by a
reduction in US IB commission accruals. Non-current
liabilities were £48.9m as at 31 December 2022 (2021:
£22.0m). The increase of £26.9m year over year reflects a
£24.3m new debt facility, an increase of £8.0m in acquisition
related deferred tax liabilities, partly offset by a £5.4m
reduction in deferred consideration payments.
GROUP CHIEF FINANCIAL OFFICER STATEMENT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
14
CASHFLOW
Cash at 31 December 2022 was £19.6m (2021: £42.9m). The £23.3m reduction year over year reflects £20.1m of
acquisition payments (initial and deferred consideration, transaction and deal fees, net of funds received from the debt
facility), a £5.4m reduction in US cash due to timing of Investment Banking commission payments, partly offset by a positive
£1.5m UK operating cashflow.
ACQUISITIONS
We are pleased with the progress made in expanding Kingswood in the UK and US, with ten regional businesses acquired
in the UK in 2022. We have strong private equity experience across the senior management and have developed a strong
internal capability to complete transactions quickly and efficiently, with a standardised documentation and process to simplify
due diligence, execution, and subsequent integration.
Our selection process is rigorous, and we look at many factors including cultural fit, client focus and dedication, key personnel
retention to preserve and grow those client relationships. Our model is to free up adviser time to focus on their clients, and
provide a centralised, efficient support infrastructure. We are committed to driving organic growth within every acquired
business and bring a ‘whole of wallet’ approach where Kingswood can bring considerable additional products and services to
the table for clients, generating revenue growth from the existing client base.
Financially, we assess businesses on strict performance parameters, with a focus not just on revenue and profit measures but
also Assets under Advice and Management (AUA/M) and Return on Investment (ROI). Post-acquisition, we create monthly
performance reports against these metrics and adjust strategy and implementation accordingly. The table below summarises
acquisitions completed in 2022. The average multiple paid is 8.0x EBITDA. The Group’s 2022 Weighted Average Cost of
Capital (WACC) is 13.7% and each acquisition targets an ROI that is greater than the WACC.
Date
Acquisition
AUM/A £m
No. of Advisers
Acquired Operating Profit £m
Feb-22
Allotts
140
3
Feb-22
Lamb
393
Feb-22
AIM
217
7
2
Jul-22
Vincent
25
5
1
Feb-22
DJ Cooke
70
–
Jul-22
Eurosure Ltd
70
–
Oct-22
Employee Benefit Solutions
135
2
0.3
Oct-22
JCH Investment
105
3
0.8
Dec-22
JFP Holdings Limited
360
3
0.4
Nov-22
Strategic Asset Managers
200
2
1.5
Total
1,715
3
0.5
28
6
OUTLOOK
2022’s resilient financial performance has demonstrated the fundamental strengths of the Kingswood growth strategy and
we continue to be well positioned for further growth in 2023. 2 further acquisitions have completed in 2023, Barry Fleming
& Partners and Moloney Investments Ltd. As outlined in the Chairman’s Statement, the UK macroeconomic outlook in the
short term remains highly uncertain, with high inflation, a cost of living crisis, increasing interest rates, and recessionary risks.
Despite these short-term headwinds, the Group is well placed to deliver on our strategy in the medium term. During 2023
we will continue to focus on integration, organic growth and to deliver against our acquisition strategy. Our near-term target
is to build our AuM/A to £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.
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
23 May 2023
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
15
STRATEGY
GOVERNANCE
FINANCE
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
INDUSTRY RISKS
Regulatory Risk
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
• 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
Market Risk
Macroeconomic pressures such as inflation
and geopolitical tensions such as the conflict in
Ukraine 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
• 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
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
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
16
RISK
DESCRIPTION
MITIGATION
OPERATIONAL RISKS continued
Integration Risk
Risk that we fail to deliver high–quality service to
advisers and clients as acquisitions are integrated
• 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
Suitability of Advice
There is a risk of providing unsuitable advice or a
failure to confirm ongoing suitability
• 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
Reliance on Third
Party Service
Providers
Kingswood partners with best–in–class
experts for certain key services– a financial or
operational failure of our strategic partners could
result in an adverse impact on our ability to
service clients
• 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
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
• Consumer Duty project team in place to
ensure the delivery of good outcomes for
clients
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
17
STRATEGY
GOVERNANCE
FINANCE
RISK
DESCRIPTION
MITIGATION
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
Financial Crime
Risk of Fraud, Money Laundering, Bribery &
Corruption, Sanctions, Terrorism Financing, Tax
Evasion, Market Abuse, Insider Dealing
• The Money Laundering Reporting Officer
(MLRO) oversees the implementation of
financial crime prevention policies and
procedures
• An MLRO report is reviewed annually by the
Risk & Compliance Committee. The number of
high–risk clients is low
• An electronic ID verification system is in place
for all new clients
• Awareness of Financial Crime policies &
procedures across the Group is maintained
through regular training
Investment
Restrictions
There is a risk of breaching regulatory, product or
client driven investment restrictions. This could
result in the need to compensate clients and/or
lead to regulatory censure
• Mandate restrictions are well understood by
experienced investment management team
• Pre & Post trade alerts in place
• Investment Committee structure monitors
ongoing adherence to portfolio strategies
• Independent compliance monitoring in place
PRINCIPAL RISKS AND UNCERTAINTIES continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
18
CORPORATE SOCIAL RESPONSIBILITY
Our commitment to Corporate Social
Responsibility (CSR) reflects our values and
our aspiration to create long–term value for all
stakeholders, including our clients, employees,
shareholders, suppliers, communities, and
the environment. By embedding Corporate
Responsibility in everything that we do, we
will ensure that every single touch point for
our clients adheres to consistent standards
and objectives.
Our Environmental, Social, and Governance (ESG)
framework helps us to identify and manage the material
risks and opportunities related to environmental, social, and
governance factors that can impact our long–term financial
performance. This combined approach to CSR and ESG is
integral to our strategy and our mission to be a sustainable
and responsible business.
This CSR and ESG statement outlines our approach, our
key priorities and our progress in the past year. As an
acquisitive–based organisation, we also use measurement
practices on our new acquisitions to ensure we have a clear
benchmark upon integration into the Group.
OUR APPROACH
Our approach to CSR and ESG is based on our commitment
to creating sustainable value for all our stakeholders. We
believe that our business operations should be conducted in
a responsible and ethical manner that promotes economic,
social, and environmental well–being. To achieve this, we
have developed an ESG framework that is integrated into
our business strategy, decision–making processes, and risk
management framework. Our approach is guided by our
values of impact, teamwork and integrity, and a respect for
human rights and the environment.
OUR KEY PRIORITIES
We are consciously focussing on where we can make the
largest positive impacts on the environment and have
identified the following ESG priorities as the most significant
for our business and stakeholders: climate change, labour
practices, data privacy, and stakeholder engagement.
We recognize the potential risks and opportunities
associated with these issues and have prioritized our
efforts accordingly. We have established targets and KPIs
to measure our performance and progress in these areas,
and we regularly review and update our strategy to reflect
changes in the external environment and stakeholder
expectations.
The ever–increasing uptake of the ‘Kingswood Go’ app by
clients and colleagues enables documents to be shared with
prospects and clients digitally, which eliminates the need
for printing and mailing of documents and enhances the
security of data for our stakeholders. This digital solution
not only saves costs and reduces paper waste, but also
enables our customers to access information more quickly
and conveniently. Moreover, the enhanced security features
of the software protect the privacy and confidentiality of our
stakeholders' information, which is of paramount importance
to us.
We believe that a flexible working policy is an important way
to reduce our carbon footprint and promote sustainability,
while also providing greater flexibility and work–life balance
for all our employees. Research shows that by 2025, 60%
of the UK wealth pool will belong to women – it is crucial
that we have appropriate female representation in our
organisation. We recognize the importance of diversity and
inclusion, and we are committed to fostering a culture that
values and promotes it at all levels of our organisation. As
part of this commitment, we will be focusing on increasing
diversity across the organization, with a particular emphasis
on recruitment, training, and development of our employees.
OUR PERFORMANCE
During 2022, we remained focused on becoming a more
responsible corporate citizen in the communities in which
we operate, taking the following actions across our ESG
framework:
The environment
• A 17.5% increase in DocuSign usage compared to the
prior year has helped to reduce our carbon emissions by
12.5k lbs of CO2 and reduce our water consumption by
15.7k gallons.
• Increased the number of client registrations on Kingswood
Go to over 6,000 since launching in March 2022.
• Introduced Ecologi, a climate solution which enabled us
to offset our entire carbon footprint through supporting
a broad range of carbon avoidance and reforestation
around the globe.
sheets of paper
trees
gallons of water
lbs of CO2
lbs of solid waste
c.150k
16
15,654
12,478
850
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
19
STRATEGY
GOVERNANCE
FINANCE
Social
• Increased the female population and representation in
our UK adviser community by 4% to 19%.
• Actively supported several initiatives, including ‘Black
History Month’, with diversity and inclusion remaining at
the forefront of our agenda.
• Continued to develop our people through the roll–out of
our Leadership Development Programme and extension
of our Career Development Program. Onboarded four of
our colleagues onto to the Kingswood Academy, which
provides a structured programme to nurture and build the
talent within our adviser population.
• Heightened the focus on awareness dates that would
affect a broad range of colleagues, such as Mental Health
Awareness and introduced our mental health first aiders
as a package of initiatives to colleagues when they need
them.
• Continued to deliver an outstanding service to our clients
across the globe. In the UK we continue to rate 4.8/5 on
VouchedFor and regularly survey our clients, achieving
a Net Promoter Score of +46 in December 2022 (2021:
+35). In the US we are proud to have been named as
one of the best Financial Advisory firms of 2023 by USA
today, recognising the hard work our colleagues put in
every day for our clients.
• In the UK we committed all fundraising activities to two
charities, which were chosen by our colleagues: Great
Ormond Street Hospital (GOSH) and SANDS. In the US,
our growing partnership with A Friend’s House enabled
the re–modelling of living and recreation spaces for
vulnerable children living in temporary living facilities.
We currently have 421 employees across our global
operations:
Governance
• Strengthened corporate governance structures and
decision–making processes through the appointment of
two independent Non–Executive Directors to our Board
in October 2022, bringing a broad range of skills and
expertise to the Board and providing additional oversight
and challenge to our management teams.
• Demonstrated our commitment to improving our diversity
and inclusion practices through increasing the female
representation of our Board from 14% to 33%. We
believe that this has brought us closer to achieving our
goal of having a board that reflects the diversity of our
stakeholders.
Our Governance
Our CSR and ESG governance structure is based on best
practices and ensures that we have clear accountability,
oversight, and transparency. 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. Our Chief Client Officer, Lucy Whitehead,
assumes responsibility for our ESG initiatives and reporting
to the Board.
We engage with our stakeholders regularly to ensure that
their views and concerns are taken into account. We also
disclose our ESG performance through various channels,
including in our Annual Report, and company website.
Future commitments
We are committed to continuous improvement in our CSR
and ESG performance and have outlined our commitments
for the coming years below. We believe that these
commitments will help us to create long–term value for
our stakeholders and contribute to a more sustainable and
responsible future.
• Reduce our Carbon Emissions Intensity year–over–year.
• Providing further educational based training for
colleagues to learn more about diversity and behavioural
issues in the workplace.
• Increase the female representation of our UK adviser
population to at least 25% in the medium term.
We welcome feedback and suggestions from our
stakeholders on how we can continue to improve our CSR
and ESG practices and outcomes.
CORPORATE SOCIAL RESPONSIBILITY continued
32.3%
26.4%
Female
Male
<30
30–50
Over 50
49.4% 50.6%
41.3%
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
20
Our approach is guided by our values
of impact, teamwork and integrity,
and a respect for human rights and
the environment.
STRATEGY
GOVERNANCE
FINANCE
21
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
CORPORATE GOVERNANCE
GOVERNANCE
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.
During 2022, the Board of Kingswood Holdings Limited
restructured its subsidiary companies to create the directly
owned KW US Holdings Limited, and KW UK Financial
Holdings Limited in order to reflect the distinction between
the US and UK businesses.
KW UK BidCo Limited (“BidCo”) was incorporated as 100%
owned subsidiary of KW UK Financial Holdings Limited.
BidCo in turn is 100% owner of the newly incorporated KW
UK Wealth Planning HoldCo Limited and KW UK Investment
Management Limited.
These holdings companies own the Group’s UK regulated
Wealth Planning and Investment Management firms.
The objective of this restructure was to allow for expert
oversight of each set of businesses by experienced Wealth
Planning and Investment Management professionals.
Kingswood Holdings Limited’s Board has the responsibility to
set strategy for the Group and to monitor the performance
of the 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 of the Group Board 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. During the year, two new independent
Non–Executive Directors, Gemma Godfrey and Jane Millar
joined the Group.
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 28 to 29.
During the year ended 31 December 2022, 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 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 video calls, monthly management
accounts, presentations and external consultant reports
and briefings.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
22
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 nine members, with
one Executive and eight Non–Executive Directors. David Hudd, Gemma Godfrey, Jane Millar and Jonathan Freeman are
considered ‘independent’. Jonathan Massing, Gary Wilder Howard Garland and Lindsey McMurray are not considered
independent due to the size of shareholding they are directly or indirectly associated with.
During the year under review, the Board comprised:
Jonathan Freeman
Non–Executive Director
Howard Garland
Non–Executive Director
David Hudd
Non–Executive Chairman
Jonathan Massing
Deputy Non–Executive Chairman
Lindsey McMurray
Non–Executive Director
Robert Suss*
Non–Executive Director
Gary Wilder**
Group Chief Executive Officer
David Lawrence**
Executive Director, Group Chief Executive Officer
Gemma Godfrey***
Independent Non–Executive Director
Jane Millar***
Independent Non–Executive Director
*
Robert Suss resigned from the board on 28 February 2022.
** 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.
*** In October 2022, Gemma Godfrey and Jane Millar joined the Board as independent Non–Executive Directors.
The Board has scheduled meetings at least quarterly with additional meetings taking place as required. The Board formally
met four times throughout the year. Meetings of the Board are held at the Group’s offices in London or via video call. In
person meetings of the Subsidiary Boards take place at least quarterly. The number of main Board meetings and committees
held in 2022 and individual attendance was as follows:
Director
Board
Audit
Committee
Nomination & Remuneration
Committee
Jonathan Freeman
4/4
4/4
1/1
Howard Garland
4/4
David Hudd
4/4
4/4
1/1
Jonathan Massing
4/4
4/4
Lindsey McMurray
4/4
Gary Wilder
3/4
David Lawrence
4/4
Gemma Godfrey
1/1
Jane Millar
1/1
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
23
STRATEGY
GOVERNANCE
FINANCE
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).
Matters requiring Board and Committee approval are
generally the subject of a written proposal by the Executive
Directors to the Board (or Committee) and circulated prior
to the relevant meeting. All Directors receive appropriate
information on the Group comprising a financial report and
other relevant paperwork from each of the responsible
executives and other members of senior management before
each scheduled Board meeting. The Executive Directors
and other invited members of senior management present
reports to each meeting on key issues including strategy, risk
& compliance, finance, operations, people, and legal matters.
The Board recognises the importance of on–going
professional development and education, particularly in
relation to new laws and regulations potentially impacting
the business of the Group. Such training may be obtained
by Directors individually or through the Group. Directors
also maintain knowledge and skills through their day–to–day
roles and may additionally obtain independent professional
advice at the Group’s expense. Third party Directors’ and
Officers’ liability insurance at a level considered appropriate
for the size and nature of the Group’s business is maintained.
The terms and conditions of each Director’s appointment are
available for inspection at the Group’s head office in London
during normal business hours. The letters of appointment
of each Non–Executive Director specifies the anticipated
level of time and commitment including, where relevant,
additional responsibilities in respect of the Audit 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
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 Audit & Risk
and Nomination & Remuneration, each with separate terms
of reference. These are available for viewing at Kingswood’s
London office.
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee is chaired by Jonathan
Freeman with David Hudd joining in January 2020 and
Jonathan Massing in January 2021. In January 2023,
Jonathan Massing resigned from the committee and Jane
Millar joined. 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 Group Chief Executive Officer,
Group Chief Financial Officer and Group Chief Risk Officer.
CORPORATE GOVERNANCE continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
24
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 and a
formal tender process was undertaken in the second half
of 2022 with the result being a change of auditor to PKF
Littlejohn. The Audit and Risk 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 6 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 and Risk 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 Director. The Group has
a defined organisational structure with delineated approval
limits. Controls are implemented and monitored by the
Executive Director.
The Board has a schedule of reserved matters expressly for
its consideration and this includes approval of acquisitions
and disposals, major capital projects, treasury and risk
management and approval of business plans and budgets.
The Group utilises a detailed budgeting and forecasting
system. Detailed budgets are prepared annually by the
Executive Directors and senior management and submitted
to the Board for approval. Forecasts are regularly updated
to reflect changes in the business including cash flow
projections and are monitored by the Board. Actual results
are monitored against budgets and variances reviewed by
the Board.
Financial risks are identified and evaluated for consideration
by the Board and senior management. 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 David Hudd, and Jonathan Freeman and Gemma
Godfrey are also members.
The Committee is also responsible for establishing a formal
and transparent procedure for executive remuneration policy
and for determining the remuneration packages of individual
Directors. This includes agreeing with the Board the
framework for remuneration of the Group Chief Executive
Officer, 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 meeting held during the financial year ended 31
December 2022.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
25
STRATEGY
GOVERNANCE
FINANCE
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.
POLICY ON NON–EXECUTIVE REMUNERATION
All Non–Executive Directors, except Pollen Street Capital’s
representatives to the Board, receive a fee for their services
as a Director which is approved by the Board, mindful of
their time commitment and responsibilities and current
market rates for comparable organisations and roles. Non–
Executive Directors are also reimbursed for travelling and
other incidental expenses incurred on Group business.
The Board encourages the ownership of shares in the
Company by Executive and Non–Executive Directors and in
normal circumstances does not allow Directors to undertake
dealings of a short–term nature.
Ownership of the Company’s shares by Non–Executive
Directors is considered a positive alignment of interest
with shareholders. The Board periodically reviews the
shareholdings of Non–Executive Directors and seeks
guidance from its advisors if, at any time, it is concerned that
the shareholding of any Non–Executive Director may, or
could appear to, conflict with their duties as an independent
Non–Executive Director of the Company. Directors’
remuneration, including Directors’ interests in share
options over the Company’s share capital, are set out in the
Directors’ Report (page 30) and the Directors’ Remuneration
Report (page 33).
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.
CORPORATE GOVERNANCE continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
26
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, 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 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
27
STRATEGY
GOVERNANCE
FINANCE
BOARD OF DIRECTORS
DAVID HUDD Non–Executive Chairman
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 Global 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 and subsequently became
Non–Executive Chairman in July 2021.
JONATHAN MASSING Non–Executive Deputy Chairman
Jonathan is Non–Executive Deputy Chairman. 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 Bayes 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 as Group CEO. 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 and Risk Committee and is 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
28
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.
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 Group Chief Executive Officer
David has over 30 years’ experience in financial services with Lloyds Banking Group latterly as Chief
Operating Officer and Commercial Director for Lloyds Private Banking. David played a lead role in
the establishment of Schroders Personal Wealth, becoming Chief Commercial Officer for Schroders
business in March 2019. David joined Kingswood in December 2020.
GEMMA GODFREY Non–Executive Director
Gemma is a Non–Executive Director and advisor, having founded two digital businesses. She specialises
in helping businesses digitise and de–risk the delivery of new services. She is on the boards of publicly
listed and private equity backed companies; for which she is a member of remuneration, risk and audit
committees focused on ESG. Gemma was the Head of Investment Strategy for Brooks Macdonald Plc
and, prior to this, chaired the investment committee for Credo Capital.
Gemma joined the board in October 2022.
JANE MILLAR Non–Executive Director
Jane has over 30 years financial services experience as Non–Executive Director, Board and Chief
Executive Officer roles across the wealth management industry. Jane is passionate about how the
power of digital enablement brings large benefits to clients and organisations. Jane led the integrations
of two major investment management businesses at Investec Wealth and Investment where she was
also a Board director.
Jane joined the board in October 2022.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
29
STRATEGY
GOVERNANCE
FINANCE
DIRECTORS’ REPORT
The directors present their report and the
consolidated financial statements for the year
ended 31 December 2022. The Corporate
Governance Statement is set out from page
22 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 ACTIVITY
The principal activity of the Group is the operation of a
wealth 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 on page
16 to 18.
RESULTS AND DIVIDENDS
The Group’s performance during the year is discussed in
the Strategy section on pages 1 to 20. The results for the
year are set out in the audited Consolidated Statement of
Comprehensive Income on page 42. The Directors do not
recommend the payment of a dividend for the year ended
31 December 2022 (31 December 2021: £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 24 and 25.
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 OF THE GROUP
The names and a short biography of the Directors of the
Company are set out on pages 28 to 29.
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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
30
DIRECTORS’ INTERESTS
Directors who held office during 2022 had the following beneficial interests in the ordinary shares of the Company as of
31 December 2022:
No. Ordinary shares held
Description
2022
2021
Jonathan Freeman
87,750
87,780
David Hudd
650,000
500,000
Gary Wilder
1,115,051
1,115,051
Gary Wilder and Jonathan Massing
144,125,262
143,720,906
145,978,063
145,423,737
** 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 January 2023:
Name of shareholder
Percentage of voting rights
and issues share capital
No. of ordinary shares
KPI (Nominees) Limited
66.44%
144,125,262
Monecor (ETX Capital)
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 2022.
The preference shares are convertible into Kingswood Holdings Limited ordinary shares at 16.5p per share on or before 31
December 2023.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
31
STRATEGY
GOVERNANCE
FINANCE
DIRECTORS’ LIABILITIES
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
1 to 20.
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
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 and signed on its behalf by:
David Hudd
Chairman
23 May 2023
DIRECTORS’ REPORT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
32
DIRECTORS’ REMUNERATION REPORT
Base salary
inc. NIC
Pension
and benefits
Option value
of LTIP
shares
2022
Total
£000
2021
Total
£000
EXECUTIVE
David Lawrence
208
–
204
412
–
NON–EXECUTIVE
Gary Wilder
63
–
–
63
100
Jonathan Freeman
53
–
–
53
61
David Hudd
75
–
–
75
73
Jonathan Massing
50
–
–
50
38
Jane Millar
11
–
–
11
–
Gemma Godfrey
11
–
–
11
–
Robert Suss (resigned 28/02/2022)
–
–
–
–
27
Aggregate emoluments
471
–
204
675
299
Approved by the board and signed on its behalf by:
David Hudd
Chairman
23 May 2023
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
33
STRATEGY
GOVERNANCE
FINANCE
DIRECTORS' 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.
Approved by the board and signed on its behalf by:
David Hudd
Chairman
23 May 2023
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
34
INDEPENDENT AUDITOR’S REPORT
to the Members of Kingswood Holdings Limited
OPINION
We have audited the financial statements of Kingswood
Holdings Limited (the 'Parent Company') and its subsidiaries
(the 'Group') for the year ended 31 December 2022,
which comprise the Consolidated Statement of Total
Comprehensive Income, Consolidated Statement of Financial
Position, Consolidated Statement of Changes in Equity,
Consolidated Statement of Cash Flows, and Notes to the
Financial Statements, including a summary of significant
accounting policies. The financial reporting framework that
has been applied in their preparation of the Group financial
statements is applicable law and UK adopted international
accounting standards.
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group's affairs
as at 31 December 2022 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 prepared in accordance with the requirements
of the Companies (Guernsey) Law 2008.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that
the director’s 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:
• Confirmation of our understanding of management’s
going concern assessment process. We also engaged with
management to ensure all key factors were considered in
their assessment.
• We obtained management’s going concern assessment,
including the cash forecast for a period exceeding twelve
months from the date the financial statements were
approved by the directors. The group has modelled
various scenarios in their cash forecasts to incorporate
unexpected changes to the forecast liquidity of the group.
• We reviewed the factors and assumptions included in
the cash forecast. We considered the appropriateness of
the assumptions and methods used to calculate the cash
flow forecasts and determined that the assumptions and
methods utilised were appropriate to be able to make an
assessment for the group.
• We reviewed the group’s going concern disclosures
included in the annual report in order to assess that the
disclosures were appropriate and in conformity with the
reporting standards.
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.
OUR APPLICATION OF MATERIALITY
The scope of our audit was influenced by our application
of materiality. We determined materiality for the
financial statements as a whole to be £1,460,000 for
the consolidated financial statements using 1% of Group
revenue based on the 31 December 2022 financial
statements. We consider Group revenue to be the most
stable benchmark and the most relevant determinant of the
Group’s performance used by shareholders.
We used a different level of materiality (‘performance
materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality
is based on the overall materiality as adjusted for the
judgements made as to the entity risk and our evaluation
of the specific risk of each audit area having regard to the
internal control environment. This was set at 70% of overall
materiality at £1,022,0000.
We agreed with the Audit Committee that we would report
to the Committee all audit differences in excess of
5% of overall materiality at £73,000 as well as differences
below that threshold that, in our view, warranted reporting
on qualitative grounds.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
35
STRATEGY
GOVERNANCE
FINANCE
Whilst materiality for the Group’s financial statements as a
whole was set at £1,460,000, each significant component
of the group was audited to an overall materiality ranging
between £97,700 and £900,650 with performance
materiality set at 70% of overall materiality. We applied the
concept of materiality both in planning and performing our
audit, and in evaluating the effect of misstatement.
We reassessed materiality at the end of the audit and did
not find it necessary to revise our planning materiality.
OUR APPROACH TO THE AUDIT
Our audit approach was developed by obtaining an
understanding of the Group’s activities, the key subjective
judgements made by the directors, for example in respect
of significant accounting estimates that involved making
assumptions, and considering future events that are
inherently uncertain, and the overall control environment,
such as impairment of goodwill, impairment of intangible
assets and provision for deferred consideration payments.
Based on this understanding we assessed those aspects
of the Group’s transactions and balances which were most
likely to give rise to a material misstatement and were
most susceptible to irregularities including fraud or error.
Specifically, we identified what we considered to be key
audit matters and planned our audit approach accordingly.
All the subsidiaries of the Group (components) are based
in the United Kingdom (“UK”) and the United States of
America (“US”). The Group audit team have responsibility
for the audit of all components included in the consolidated
financial statements. We performed an assessment to
determine which components were significant to the Group.
All components which contributed greater than 15% of the
Group’s net assets or Group’s revenue were identified as
financially significant and subject to a full scope audit of
their complete financial information. Two components were
financially significant to the Group, with one located in the
UK and one located in the US. All work was performed by
the Group audit team.
All components which included account balances that have
the same significant risk profile as the Group were identified
as risk significant. There were nine components which were
subject to the audit of the relevant account balances, classes
of transactions and disclosures.
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
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these key
audit matters.
INDEPENDENT AUDITOR’S REPORT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
36
Reason
How our scope addressed this matter
Revenue recognition
Refer to note 2 (accounting policy) and 4 (financial disclosures) of the Group financial statements.
Revenue is the most relevant
determinant of the Group’s
performance used by
shareholders. Inaccurate or
incomplete revenue could have
a material impact on group
performance.
The Group’s revenue amounting
to £145,998,000 which was
derived from the wealth planning
business, investment management
business and US operations from
the following activities:
• Investment management;
• Wealth planning;
– Initial fees;
– Ongoing fees;
– Commissions;
– Advisory Fees
For investment management
fees, there is a risk that the
fees have not been calculated
accurately and have not been
calculated in accordance with the
signed investment management
agreements.
For wealth planning income
(inc. initial fees, ongoing fee.s
and commissions), there is a risk
that such fees have not been
calculated accurately.
For advisory fees, there is a
risk over the accuracy and
completeness of these fees.
UK Business
Our approach for the wealth planning and investment management segments in the UK
included:
• Performing a walkthrough to understand the internal control environment in
operation for the significant income streams.
• Testing key manual controls in the KW Wealth Planning Limited and KW Investment
Management Limited revenue business cycle to ensure they were operating
effectively.
To address the accuracy assertion for investment management fee revenue, we used
data analytics to check the accounting entries for all income postings. Any entries that
did not follow the expectation were investigated and subject to substantive testing
to confirm why this was the case. We verified whether revenue was accounted for in
accordance with UK adopted international accounting standards.
For wealth planning revenue, we selected a sample of revenue transactions throughout
the year and traced to supporting documentation where possible, as well as vouching
to cash receipts/ deductions in the respective client accounts and verified whether
revenue was accounted for in accordance with UK adopted international accounting
standards.
To address the completeness assertion, we reconciled the revenue report to data
extracted from the systems to the general ledger in the accounting system to ensure
completeness of the balances.
For a sample of fees, we obtained invoices and rate confirmation letters/signed client
agreements to agree the fees charged to the clients.
US Business
Our approach for the broker dealers and investment banking revenue in the US
included:
• Performing walkthroughs of the different revenue streams to understand and
corroborate the controls in place.
• Performing procedures to ensure revenue balances have been corrected converted
from US GAAP to UK adopted international accounting standards.
• Reviewing support to ensure that the US entities had met their obligations under the
contracts and that there was a reasonable basis to believe that the obligation was in
fact satisfied and the revenue appropriately recognised.
• Reviewing respective bank movements as well as the postings to the general ledgers.
• Reviewing the accounting policies and related procedures relative to IFRS 15 and
reviewing the adequacy and completeness of the corresponding financial statement
note disclosures.
Key observations: Based on the procedures performed, we are satisfied that revenue is
appropriately recognised and classified.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
37
STRATEGY
GOVERNANCE
FINANCE
Reason
How our scope addressed this matter
Accounting for the business combinations of:
AIM Wealth Holdings Limited
Financial Services Limited
Joseph R Lamb Independent Financial Advisers Limited
Vincent & Co. Financial Limited
Employee Benefit Solutions Limited
Strategic Asset Managers Limited
JCH Investment Management Limited
JFP Financial Services Limited
Refer to notes 2 (accounting policy) and 29 (financial disclosures)
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 calculation of the final
consideration can be complex due
to the key terms and conditions
in the different purchase and
sale agreements.
Assumptions were used in the
fair value of identifiable assets
and liabilities and the final
consideration which includes any
contingent deferred consideration
(based on future revenue).
There is also a risk that business
combinations have not been
accounted for in accordance with
IFRS 3.
We obtained an understanding of and tested the design and implementation of the
group’s controls over the accounting of the business combinations process.
We evaluated the appropriateness of management’s basis for accounting for the
business combination.
We reviewed and performed the following work in respect of each acquisition:
• Reviewed the acquisition agreements to understand the key terms and conditions,
and confirmed our understanding of the transaction;
• Obtained management’s assessment as to whether control is established in
accordance with IFRS 10 and challenged management on assumptions used in that
assessment;
• Obtained management’s assessment as to whether the business combination has
been accounted for in accordance with IFRS 3 is appropriate Le. as an acquisition or
the purchase of a business;
• Obtained management’s calculation of any consideration due, including an
estimation of any contingent consideration by assessing the reasonableness of
management’s forecasts by reference to comparisons with historical data. We
reviewed and challenged management’s key assumptions around the probability of
the achievement of the earn-outs;
• Reviewed the purchase and sale agreements to determine if any elements of
deferred and contingent consideration would need to be treated as post-combination
remuneration and whether it has been calculated and accounted for correctly;
• Compared the assets and liabilities recognised on acquisition against the completion
accounts for the acquired businesses. Assessed intangible assets such as client lists to
ensure they Limited have been separated from the identifiable assets and liabilities;
• Evaluated the assumptions and methodology in management’s determination of
the fair value of assets and liabilities acquired and challenged management on the
assumptions used. Determined based on the above that any goodwill arising on the
business combination was not materially misstated.
Key observations: Based on the procedures performed, we are satisfied that business
combinations have been appropriately recognised and classified in the financial
statements.
INDEPENDENT AUDITOR’S REPORT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
38
Reason
How our scope addressed this matter
Impairment of goodwill and other intangible assets
Refer to notes 3 (accounting policy) and 15 {financial disclosures) of the Group financial statements.
Goodwill amounting to
£55,538,000 (2021:
£42,871,000) arose from
acquisitions in a business
combination.
Other intangible assets arise in
respect of acquired client lists
amounting to £67,931,000
(£37,384,000).
Impairment of goodwill and other
intangible assets is considered
a significant risk as significant
judgements and estimates are
required to be exercised by
management in assessing whether
any impairment provision is
required. Significant judgements
and estimates are involved
in the computation of the
recoverable amount of goodwill
such as fair value, less cost to
sell and value in use. In respect
of the other intangible assets,
significant judgement is involved
to determine whether the initial
recognition criteria have been met
and the estimated useful asset is
appropriate and supportable.
We obtained an understanding and tested the design and implementation of the
group’s controls over the impairment assessment process. For Goodwill we performed
the following:
• We evaluated the appropriateness of management’s identification of the Group’s
Cash Generating Units.
• We challenged management on the appropriateness of the impairment models and
reasonableness of the assumptions used through performing the following:
– Benchmarking the Group’s key market-related assumptions in the models,
including discount rates and long term growth rates;
– Assessing the reliability of any forecasts through a review of actual and past
performance and comparing to previous forecasts;
– Testing the mathematical accuracy and performing sensitivity analyses of the
models;
– Understanding the commercial prospects of the assets, and where possible
comparing the assumptions with external data sources;
– Assessing management’s sensitivity analysis showing the impact of a reasonably
possible change in the underlying assumptions; and
– Assessing the adequacy of the disclosures within the financial statements.
For other intangible assets (client lists), we performed the following:
• Verifying the amounts capitalised in the year against supporting agreements;
• Challenging management’s assessment that any additions met the required
capitalisation criteria;
• Performing an assessment of the appropriateness of the useful life applied to each
new client list acquisition and considered the continued appropriateness of the
existing useful lives for previously completed acquisitions;
• Reviewing management’s assessment of any impairment indicators. Considering both
internal and external sources of information; and
• Assessing the sufficiency of the sensitivity analyses performed by management,
focusing on what we considered to be reasonably possible changes in key
assumptions.
Key observations: Based on the procedures performed, we consider management’s
assessment of no impairment on goodwill and other intangible assets appropriate and
the carrying value of goodwill and other intangible assets are appropriately stated.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
39
STRATEGY
GOVERNANCE
FINANCE
OTHER INFORMATION
The other information comprises the information included
in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible
for the other information contained within the annual
report. Our opinion on the group financial statements does
not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility
is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
OTHER COMPANIES (GUERNSEY) LAW, 2008
REPORTING
Matters on which we are required to report by exception
We have nothing to report in respect of the following
matters in relation to which the Companies (Guernsey) Law,
2008 reporting requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• we have not received all the information and explanations
we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors' responsibility
statement (set out on page 34), the directors are responsible
for the preparation of the Group 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 Group 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 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.
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 obtained an understanding of the Group and the
sector in which they operate to identify laws and
regulations that could reasonably be expected to have
a direct effect on the financial statements. We obtained
our understanding in this regard through discussions with
management, industry research, application of cumulative
audit knowledge and experience of the investment
management and wealth management sectors.
• We determined the principal laws and regulations
relevant to the Group in this regard to be those arising
from the Companies (Guernsey) Law, 2008, AIM Rules
for Companies, those resulting from being authorised by
the Financial Conduct Authority to undertake regulated
activities in the UK, UK adopted international accounting
standards and rules from the Financial Industry
Regulatory Authority (FINRA) in respect of certain US
businesses.
INDEPENDENT AUDITOR’S REPORT continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
40
• We designed our audit procedures to ensure the audit
team considered whether there were any indications of
non–compliance by the group and parent company with
those laws and regulations. These procedures included
but were not limited to making enquiries of management
and those responsible for legal and compliance matters,
review of minutes of the Board and papers provided
to the audit committee to identify any indications
of non–compliance, and review of legal/regulatory
correspondence with the FCA and FINRA.
• We also identified the possible risks of material
misstatement of the financial statements due to fraud.
We considered, in addition to the non–rebuttable
presumption of a risk of fraud arising from management
override of controls, that there was a potential for
management bias in relation to the recognition of
revenue, the assessment of any impairment of goodwill
and other intangible assets and the assessment of the
provision for deferred consideration. We addressed this
by challenging the assumptions and judgements made by
management when auditing those significant accounting
estimates.
• As in all of our audits, we addressed the risk of fraud
arising from management override of controls by
performing audit procedures which included, but
were not limited to: the testing of journals; reviewing
accounting estimates for evidence of bias; and evaluating
the business rationale of any significant transactions that
are unusual or outside the normal course.
Because of the inherent limitations of an audit, there is
a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial
statements or non–compliance with regulation. This risk
increases the more that compliance with a law or regulation
is removed from the events and transactions reflected in
the financial statements, as we will be less likely to become
aware of instances of non–compliance. The risk is also
greater regarding irregularities occurring due to fraud
rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Parent Company’s
members, as a body, in accordance with 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.
PKF Littlejohn LLP Chartered Accountants
15 Westferry Circus
Canary Wharf
London E14 4HD
23 May 2023
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
41
STRATEGY
GOVERNANCE
FINANCE
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
for the year ended 31December 2022
Note
2022
£000
2021
£000
Revenue
4
145,998
149,716
Cost of sales
(103,878)
(120,497)
Gross profit
42,120
29,219
Administrative expenses
7
(23,720)
(15,157)
Other operating expenses
(9,704)
(7,735)
Operating profit
8,696
6,327
Non–operating costs:
Business re–positioning costs
4
(1,964)
(1,564)
Finance costs
8
(6,398)
(4,927)
Other finance costs
4
(4,507)
(2,399)
Acquisition–related items:
Transaction costs
4
(4,924)
(1,836)
Remuneration charge (deferred consideration)
22
(1,852)
(7,009)
Other gains or losses
9
(23)
(3,056)
Loss before tax
(10,972)
(14,464)
Income tax receipt/(expense)
10
4,480
(761)
Loss for the year
(6,492)
(15,225)
Loss for the year
(6,492)
(15,225)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation gains
–
367
Total comprehensive income for the year
(6,492)
(14,858)
Loss after tax is attributable to:
Owners of the company
(7,797)
(17,432)
Non–controlling interests
1,305
2,207
Total comprehensive income attributable to:
Owners of the parent company
(7,797)
(17,065)
Non–controlling interests
1,305
2,207
– Basic loss per share
12
(0.04)
(0.08)
– Diluted loss per share
12
(0.01)
(0.03)
The notes on pages 46 to 96 form an integral part of these financial statements.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
42
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31December 2022
Note
2022
£000
2021
£000
Assets
Non–current assets
Property, plant and equipment
13
832
941
Right of use assets
14
3,553
2,719
Intangible assets
15
123,469
80,255
Deferred tax assets
16
4,492
–
132,346
83,915
Current assets
Trade and other receivables
17
9,274
5,749
Short term investments
52
65
Cash and cash equivalents
19
19,624
42,933
28,950
48,747
Total assets
161,296
132,662
Equity and liabilities
Equity
Share capital
24
(10,846)
(10,846)
Share premium
24
(8,224)
(8,224)
Preference share capital
25
(70,150)
(70,150)
FX reserve
422
488
Other reserves
(14,373)
(11,041)
Retained earnings
31,595
23,800
Equity attributable to owners of the company
(71,576)
(75,973)
Non–controlling interests
(2,391)
(925)
Total equity
(73,967)
(76,898)
Non–current liabilities
Other non–current liabilities
23
(2,806)
(2,915)
Loans and borrowings
23
(24,343)
–
Deferred tax liabilities
16
(12,584)
(4,577)
Deferred consideration
22
(9,228)
(14,482)
(48,961)
(21,974)
Current liabilities
Trade and other payables
20
(17,597)
(26,084)
Deferred consideration
22
(20,771)
(7,706)
(38,368)
(33,790)
Total liabilities
(87,329)
(55,764)
Total equity and liabilities
(161,296)
(132,662)
The notes on pages 46 to 96 form an integral part of these financial statements.
Approved by the board and signed on its behalf by:
David Hudd
Chairman
23 May 2023
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
43
STRATEGY
GOVERNANCE
FINANCE
Share capital
and share
premium
£000
Preference
share capital
£000
Foreign
currency
reserve
£000
Other
reserves
£000
Retained
earnings
£000
Equity
attributable
to the
owners of
the parent
Company
£000
Non–
controlling
interests
£000
Total
equity
£000
At 1 January
2021
19,070
37,550
(855)
(519)
(6,159)
49,087
1,065
50,152
(Loss)/profit for
the year–
–
–
–
–
(17,432)
(17,432)
2,207
(15,225)
Dividends due to
non–controlling
interests
–
–
–
–
–
–
(2,402)
(2,402)
Issue of
preference share
capital
–
32,600
–
–
–
32,600
–
32,600
Other adjustment
–
–
–
–
(209)
(209)
–
(209)
Share based
remuneration
–
–
–
94
–
94
–
94
Preference share
capital reserve
–
–
–
11,466
–
11,466
–
11,466
Foreign exchange
gain
–
–
367
–
–
367
55
422
At 31 December
2021
19,070
70,150
(488)
11,041
(23,800)
75,973
925
76,898
(Loss)/profit for
the year
–
–
–
–
(7,797)
(7,797)
1,305
(6,492)
Other adjustment
–
–
–
–
–
–
21
21
Share based
remuneration
–
–
–
852
–
852
–
852
Preference share
capital reserve
–
–
–
2,480
–
2,480
–
2,480
Foreign exchange
gain
–
–
66
–
2
68
140
208
At 31 December
2022
19,070
70,150
(422)
14,373
(31,595)
71,576
2,391
73,967
Note 24 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 46 to 96 form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
44
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Note
2022
£ 000
2021
£ 000
Net cash from/(used in) operating activities
26
(2,704)
1,741
Investing activities
Property, plant and equipment purchased
(113)
(127)
Business Combinations
(32,272)
(12,720)
Deferred consideration
(10,774)
(738)
Net cash outflow from investing activities
(43,159)
(13,585)
Financing activities
Proceeds from issue of shares
–
52,600
Interest paid
(21)
(58)
Lease payments
(852)
(650)
Dividends paid to non–controlling interests
(811)
(1,272)
New loans received/loans repaid
23,784
18
Net cash generated from financing activities
22,100
50,638
Net (decrease)/increase in cash and cash equivalents
(23,763)
38,794
Cash and cash equivalents at 1 January
42,933
3,899
Effect of exchange rate fluctuations on cash held
454
240
Cash and cash equivalents at 31 December
19
19,624
42,933
The notes on pages 46 to 96 form an integral part of these financial statements.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
45
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2022
1 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 Directors 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 ICARA.
The US subsidiaries are required to be compliant under FINRA guidance.
These financial statements were authorised for issue by the board on 23 May 2023.
2 ACCOUNTING POLICIES
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 note 27 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.
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 18.
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.
A subsidiary is an entity controlled by the company. Control is achieved where the company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with those used by the group.
The purchase method of accounting is used to account for business combinations that result in the acquisition of subsidiaries
by the group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued
and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. Any excess of the cost of the business combination over the acquirer’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities recognised is recorded as goodwill.
Inter–company transactions, balances and unrealised gains on transactions between the company and its subsidiaries, which
are related parties, are eliminated in full.
Intra–group losses are also eliminated but may indicate an impairment that requires recognition in the consolidated financial
statements.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
46
2 ACCOUNTING POLICIES continued
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the group. Non–controlling interests in the net assets of consolidated subsidiaries are identified separately from the
group’s equity therein. Non–controlling interests consist of the amount of those interests at the date of the original business
combination and the non–controlling shareholder’s share of changes in equity since the date of the combination. Total
comprehensive income is attributed to non–controlling interests even if this results in the non–controlling interests having a
deficit balance.
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.
Foreign currency
Transactions in foreign currencies are translated to the Group's functional currency at the foreign exchange rate ruling at the
date of the transaction and recognized in the consolidated income statement. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are re translated to the functional currency at the foreign exchange rate
ruling at that date. Non–monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation of a
foreign entity are recognized in equity. Foreign entity income statements are translated to the Group's functional currency at
the twelve month average for the relevant fiscal year.
Revenue recognition
Performance obligations and timing of revenue recognition
The majority of the Group’s UK revenue, being investment management fees and ongoing wealth advisory, is derived from
the value of funds under management/advice, with revenue recognised over the period in which the related service is
rendered. This method reflects the ongoing portfolio servicing required to ensure the Group’s contractual obligations to its
clients are met. This also applies to the Group’s US Registered Investment Advisor (“RIA”) business.
For certain commission, fee–based and initial wealth advisory income, revenue is recognised at the point the service is
completed. This applies in particular to the Group’s US Independent Broker Dealer (“IBD”) services, and its execution–only UK
investment management. There is limited judgement needed in identifying the point such a service has been provided, owing
to the necessity of evidencing, typically via third–party support, a discharge of pre–agreed duties.
The US division also has significant Investment Banking operations, where commission is recognised on successful
completion of the underlying transaction.
Determining the transaction price
Most of the Group’s UK revenue is charged as a percentage of the total value of assets under management or advice. For
revenue earned on a commission basis, such as the US broker dealing business, a set percentage of the trade value will be
charged. In the case of one–off or ad hoc engagements, a fixed fee may be agreed.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
47
STRATEGY
GOVERNANCE
FINANCE
2 ACCOUNTING POLICIES continued
Allocating amounts to performance obligations
Owing to the way in which the Group earns its revenue, which is largely either percentage–based or fixed for discrete
services rendered, there is no judgement required in determining the allocation of amounts received. Where clients benefit
from the provision of both investment management and wealth advisory services, the Group is able to separately determine
the quantum of fees payable for each business stream.
Further details on revenue, including disaggregation by operating segment and the timing of transfer of service(s), are
provided in note 3 below.
Borrowings
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
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a change
attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other
comprehensive income.
Current tax
The tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income as it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. Tax is recognised in the Statement of Comprehensive Income, except
where a charge attributable to an item of income and expense is recognised as other comprehensive income, or where an
item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively. The
current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by
the reporting date in the countries where the Group operates and generates income.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the Statement of Financial Position liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
48
2 ACCOUNTING POLICIES continued
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
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:
Asset class
Office equipment, fixtures and fittings:
over 60 months on a straight–line basis
IT equipment and software:
over 36 months on a straight–line basis
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in income.
Depreciation periods for newly–acquired businesses may vary, however the Group aims to harmonise such accounting
estimates within 12 months.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
49
STRATEGY
GOVERNANCE
FINANCE
2 ACCOUNTING POLICIES continued
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.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
50
2 ACCOUNTING POLICIES continued
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on
goodwill are not reversed.
Financial assets and liabilities
Financial assets and liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes a party
to the contractual provisions of the instrument and are initially measured at fair value.
Classification and initial measurement of financial assets
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when
the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
As required under IFRS 9, financial assets are classified into the following categories:
• amortised cost;
• fair value through profit or loss (FVTPL); 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
51
STRATEGY
GOVERNANCE
FINANCE
2 ACCOUNTING POLICIES continued
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. The assessment of whether there has been a significant increase
in credit risk is based on an increase in the probability of a default occurring since initial recognition. For those for which
credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For
those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are
recognised.
The Group considers a broad range of information when assessing credit risk and measuring expected credit losses, including
past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash
flows of the instrument.
In applying this approach, IFRS 9 makes a distinction between:
• financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low
credit risk (Stage 1); and
• financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is
not low (Stage 2); 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.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
52
2 ACCOUNTING POLICIES continued
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 payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised
initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Client money
The Group holds money on behalf of clients in accordance with the client money rules of the Financial Conduct Authority and
other regulatory bodies. Such money and the corresponding liabilities to clients are not shown on the face of the Statement
of Financial Position, as the Group is not beneficially entitled thereto. The amounts held on behalf of clients at the Statement
of Financial Position date are stated in note 19.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
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FINANCE
2 ACCOUNTING POLICIES continued
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 27.
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.
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.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
54
2 ACCOUNTING POLICIES continued
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 office equipment.
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.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources
received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of
money is material, the initial measurement is on a present value basis.
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 2, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting
policies that had the most significant effect on the amounts recognised in the financial statements.
Assessment of control
Control is considered to exist where an investor has power over an investee, or else is exposed, and has rights, to variable
returns. The Group determines control to exist where its own direct and implicit voting rights relative to other investors
afford KHL – via its board and senior management – the practical ability to direct, or as the case may be veto, the actions of
its investees. KHL holds 50.1% of voting rights in Kingswood US, LLC 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 Manhattan Harbor Capital and its subsidiaries and has consolidated the
sub–group as subsidiaries with a 49.9% non–controlling interest.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
55
STRATEGY
GOVERNANCE
FINANCE
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY continued
Estimates and Assumptions – Intangible assets:
Expected duration of client relationships
The Group makes estimates as to the expected duration of client relationships to determine the period over which related
intangible assets are amortised. The amortisation period is estimated with reference to historical data on account closure
rates and expectations for the future. During the year, client relationships were amortised over a 10–20 year period as
detailed in note 15.
Goodwill
The amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the
purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the
fair value of the assets and liabilities is based, to a considerable extent, on management’s judgement. Goodwill is reviewed
annually for impairment by comparing the carrying amount of the CGUs to their expected recoverable amount, estimated on
a value–in–use basis.
Share–based remuneration
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 27.
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 16 to the financial statements.
Leases:
Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in leases where it is the lessee, therefore, it uses its incremental
borrowing rate to measure lease liabilities. This is the rate of interest that the Group would have to pay to borrow over a
similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right–of–use asset in
a similar economic environment.
The incremental borrowing rate therefore reflects what the Group ‘would have to pay’, which requires estimation when no
observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease (for example,
when leases are not in the subsidiary’s functional currency). The Group estimates the incremental borrowing rate using
observable inputs (such as market interest rates) when available and is required to make certain entity–specific estimates
(such as the subsidiary’s stand–alone credit rating).
Deferred consideration:
Deferred payments
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.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
56
4 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 data 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 2022.
The table below details a full year's worth of revenue and results for the principal business and geographical divisions, which
has then reconciled to the results included in the Statement of Comprehensive Income:
Continuing operations:
Investment
management
2022
£ 000
Wealth
planning
2022
£ 000
US
operations
2022
£ 000
Group
2022
£ 000
Total
2022
£’000
Revenue (disaggregated by timing):
Point in time
931
3,018
95,042
–
98,991
Over time
6,252
23,644
17,111
–
47,007
External sales
7,183
26,662
112,153
–
145,998
Direct expenses
(1,277)
(1,183)
(101,425)
7
(103,878)
Gross profit
5,906
25,479
10,728
7
42,120
Operating profit/(loss)
2,135
9,353
2,966
(5,758)
8,696
Business re–positioning costs
(282)
(378)
–
(1,304)
(1,964)
Finance costs
–
(130)
–
(6,268)
(6,398)
Amortisation and depreciation
(3)
(1,092)
(37)
(3,375)
(4,507)
Other gains/(losses)
–
–
(23)
–
(23)
Remuneration charge (deferred
consideration)
–
–
–
(1,852)
(1,852)
Transaction costs
191
(1,389)
(593)
(3,133)
(4,924)
Profit/(loss) before tax from continuing
operations
2,041
6,364
2,313
(21,690)
(10,972)
Tax
–
–
22
(4,502)
(4,480)
Profit/(loss) after tax from continuing operations
2,041
6,364
2,291
(17,188)
(6,492)
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
57
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
4 BUSINESS AND GEOGRAPHICAL SEGMENTS continued
Continuing operations:
Investment
management
2021
£ 000
Wealth
planning
2021
£ 000
US
operations
2021
£ 000
Group
2021
£ 000
Total
2021
£'000
Revenue (disaggregated by timing):
Point in time
881
2,045
118,396
–
121,322
Over time
3,771
15,169
9,431
23
28,394
External sales
4,652
17,214
127,827
23
149,716
Direct expenses
(1,476)
(913)
(118,108)
–
(120,497)
Gross profit
3,176
16,301
9,719
23
29,219
Operating profit/(loss)
365
5,779
5,123
(4,940)
6,327
Business re–positioning costs
(177)
(239)
(263)
(885)
(1,564)
Finance costs
–
(72)
2
(4,857)
(4,927)
Amortisation and depreciation
–
(1,197)
(212)
(990)
(2,399)
Other gains/(losses)
–
–
–
(3,056)
(3,056)
Deferred payments
–
(3,691)
–
(3,318)
(7,009)
Transaction costs
–
(4)
–
(1,832)
(1,836)
Profit/(loss) before tax from continuing
operations
188
576
4,650
(19,878)
(14,464)
Tax
–
16
317
428
761
Profit/(loss) after tax from continuing operations
188
560
4,333
(20,306)
(15,225)
Investment
management
2022
£ 000
Wealth
planning
2022
£ 000
US
operations
2022
£ 000
Group
2022
£ 000
Total
2022
£ 000
Additions to non–current assets
(153)
3,011
1,130
39,951
43,939
Reportable segment assets
5,375
24,533
24,492
102,403
156,803
Tax assets
4,492
Total Group assets
161,295
Reportable segment liabilities
562
5,530
8,132
73,105
87,329
Total Group liabilities
87,329
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
58
4 BUSINESS AND GEOGRAPHICAL SEGMENTS continued
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
5 LOSS AFTER TAX
Loss after tax for the year is stated after charging.
2022
£000
2021
£000
Depreciation of property, plant and equipment (incl right of use asset)
1,069
925
Amortisation of intangible assets
2,944
1,474
Staff costs
23,720
15,953
See Directors’ Remuneration Report on page 33 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.
6 AUDITORS’ REMUNERATION
The analysis of fees payable to the Group’s auditor is as follows:
2022
£000
2021
£000
Audit of Company
320
200
Audit of Subsidiaries
135
200
CASS audit
31
25
Total auditor’s remuneration
486
425
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
59
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
7 STAFF COSTS
The average monthly number of persons (including Executive Directors) is as follows:
2022
No.
2021
No.
Management
4
6
Client advisers
93
49
Operations
173
99
Finance
17
13
Risk and Compliance
8
10
Human resources
10
4
Average number of employees
305
181
Aggregate staff remuneration comprised:
2022
£000
2021
£000
Wages and salaries
18,567
13,199
Social security costs
2,160
1,400
Pension costs, defined contribution scheme
1,364
602
Other short–term employee benefits
664
658
Redundancy costs
113
–
– Share–based remuneration
852
94
Total staff costs
23,720
15,953
2022
£000
2021
£000
Operating staff costs
22,936
15,157
Business re–positioning costs
250
739
Acquisition team costs
534
57
Total staff costs
23,720
15,953
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
60
8 FINANCE COSTS
2022
£ 000
2021
£ 000
Interest cost on external borrowings
456
–
Finance cost in relation to lease liability (note 21)
147
108
Finance cost in relation to deferred consideration
3,109
672
Preference share dividends
2,481
4,101
Other finance costs
205
46
Total finance costs
6,398
4,927
9 OTHER GAINS AND LOSSES
2022
£ 000
2021
£ 000
Additional payments due on acquired businesses
–
(2,983)
Unrealised gain/(loss) on investment
(23)
(73)
(23)
(3,056
10 TAXATION
Tax charged/(credited) in the income statement
2022
£ 000
2021
£ 000
Current taxation
Current year tax expense
–
317
Write off of historical corporation tax balance
–
(17)
–
300
Foreign tax adjustment to prior periods
22
–
Total current income tax
22
300
Deferred taxation
Movement in deferred tax (note 16)
(4,502)
461
Tax (receipt)/expense in the income statement
(4,480)
761
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
61
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
10 TAXATION continued
Factors affecting tax charge for the year
The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK of 19%(2021 – 19%).
The differences are reconciled below:
2022
£ 000
2021
£ 000
Loss before tax
(10,972)
(14,464)
Corporation tax at standard rate
(2,085)
(2,748)
Expenses not deductible for tax purposes
2,823
3,531
Adjustments for Statement of Financial Position items
210
133
Benefit of superdeduction
(6)
(2)
Prior year true-up
22
(17)
Adjustment for revenue ineligible for tax purposes
(48)
(250)
Unrelieved tax losses carried forward
(417)
202
Movement in deferred tax
(4,502)
461
Different tax rates applied in overseas jurisdictions
(477)
(549)
Total tax (credit)/charge
(4,480)
761
Factors that may affect future tax changes
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase
to 25% (rather than remaining at 19%, as previously enacted). This new law was substantively enacted 24 May 2021.
Deferred taxes at the Statement of Financial Position date have been measured using these enacted tax rates and reflected in
these financial statements.
11 DIVIDENDS
The Directors are not proposing to pay a dividend to ordinary shareholders in respect of the year ended 31 December 2022
(year ended 31 December 2021: £nil).
12 EARNINGS PER SHARE
2022
£ 000
2021
£ 000
Loss from continuing operations for the purposes of basic loss per share, being net loss
attributable to owners of the Group
(7,797)
(17,432)
Number of shares
Weighted average number of ordinary shares assuming above conversion events
216,920,724
216,920,724
Convertible preference shares in issue
512,407,029
271,986,413
Share options
5,897,018
5,702,567
Weighted average number of ordinary shares assuming conversion
735,224,771
494,609,704
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
62
12 EARNINGS PER SHARE continued
Owing to the Group being in a loss-making position for the years ending 31 December 2021 and 2022, 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 £0.04 (2021: loss per share £0.08).
13 PROPERTY, PLANT AND EQUIPMENT
Furniture,
fittings and
equipment
£000
Total
£000
Cost or valuation
At 1 January 2021
1,380
1,380
Additions
275
275
At 31 December 2021
1,655
1,655
At 1 January 2022
1,655
1,655
Additions
113
113
Reclassifications
1,438
1,438
Acquisitions NBV
80
80
Foreign exchange movements
17
17
At 31 December 2022
3,303
3,303
Depreciation
At 1 January 2021
453
453
Charge for year
261
261
At 31 December 2021
714
714
At 1 January 2022
714
714
Charge for the year
310
310
Reclassifications
1,438
1,438
Foreign exchange movements
9
9
At 31 December 2022
2,471
2,471
Carrying amount
At 31 December 2022
832
832
At 31 December 2021
941
941
Current year reclassification is due to the disclosing of cost and deprecation for acquisitions.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
63
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
14 RIGHT OF USE ASSETS
Property
£000
Total
£000
Cost or valuation
At 1 January 2021
3,534
3,534
Additions
555
555
At 31 December 2021
4,089
4,089
At 1 January 2022
4,089
4,089
Current year adjustment
(137)
(137)
Additions
1,705
1,705
At 31 December 2022
5,657
5,657
Depreciation
At 1 January 2021
706
706
Charge for year
664
664
At 31 December 2021
1,370
1,370
At 1 January 2022
1,370
1,370
Current year adjustment
(25)
(25)
Charge for the year
759
759
At 31 December 2022
2,104
2,104
Carrying amount
At 31 December 2022
3,553
3,553
At 31 December 2021
2,719
2,719
Current year adjustment is in relation to a lease held within the Metnor Holdings Limited group of companies.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
64
15 GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
£000
Other
intangible
assets
£000
Total
£000
Cost or valuation
At 1 January 2021
25,684
27,968
53,652
Additions
19,439
14,647
34,086
Revaluation of acquisition
(40)
–
(40)
Exchange adjustments
67
–
67
At 31 December 2021
45,150
42,615
87,765
At 1 January 2022
45,150
42,615
87,765
Additions
18,402
33,491
51,893
Revaluation of acquisition (see below)
(6,364)
–
(6,364)
Exchange adjustments
629
–629
At 31 December 2022
57,817
76,106
133,923
Amortisation
At 1 January 2021
2,279
3,757
6,036
Charge for year
–
1,474
1,474
At 31 December 2021
2,279
5,231
7,510
At 1 January 2022
2,279
5,231
7,510
Charge for year
–
2,944
2,944
At 31 December 2022
2,279
8,175
10,454
Carrying amount
At 31 December 2022
55,538
67,931
123,469
At 31 December 2021
42,871
37,384
80,255
Following the acquisition of Metnor Holdings Limited on the 31st December 2021 new information has been obtained
related to reduction in earn-out by this company. As such there has been an adjustment in the provisional amount by means
of a decrease in goodwill.
Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from that
business combination.
The Group has identified four CGUs at 31 December 2022 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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
65
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
15 GOODWILL AND OTHER INTANGIBLE ASSETS continued
This is the ninth 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 2022 is allocated as follows:
Investment
Management
£000
Wealth
Planning
£000
US
Operations
£000
Total
£000
Goodwill
16,338
33,291
5,909
55,538
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 business plan, 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 13.6% for the investment management and
wealth planning CGUs and 15.1% for the 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 £19.6m. The value of the investment management and the wealth
planning CGUs exceeded their carrying value by £13.0m and £12.8m respectively.
The projected cashflows prepared by management are considered to be prudent with natural sensitivities already built into
the model. Further sensitivity analysis has been performed with clear headroom in the recoverable amount over the goodwill
balance.
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 £67.2m of intangible
assets being amortised over 20 years and £0.7m over 15 years.
The addition in 2022 and 2021 to intangible assets represents the value of assets under management and associated client
lists acquired from business combinations in each of the two years.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
66
16 DEFERRED TAX
Group
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the
current and prior year:
At
1 January
2022
£000
Movement
in year
£000
Intangibles
– customer
relationships
and brand
recognised
upon
acquisition
of subsidiaries
£000
At
31 December
2022
£000
Assets
–
4,492
–
4,492
Liabilities
(4,577)
10
(8,018)
(12,584)
(4,577)
4,502
(8,018)
(8,092)
At
1 January
2021
£000
Movement
in year
£000
Intangibles
– customer
relationships
and brand
recognised
upon
acquisition
of subsidiaries
£000
At
31 December
2021
£000
Assets
392
(392)
–
–
Liabilities
(1,889)
(69)
(2,619)
(4,577)
(1,497)
(461)
(2,619)
(4,577)
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 £17.9m in the UK (2021: £19.3m) available
for offset against future profits. A deferred tax asset has been recognised in respect of tax losses for the year ended
31 December 2022 (2021: £nil was recognised) as there is no longer uncertainty as to the timing of future expected profits.
17 TRADE AND OTHER RECEIVABLES
2022
£000
2021
£000
Current
Trade receivables
7,440
1,844
Prepayments
1,834
1,307
Other receivables
-
2,598
9,274
5,749
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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
67
STRATEGY
GOVERNANCE
FINANCE
18 SUBSIDIARIES
Details of the subsidiaries as at 31 December 2022 are as follows:
Name of subsidiary
Activity
Ownership
2022
KW US Holdings Limited (Guernsey) *
Holding Company
100%
KW Wealth Group Ltd (England) *
Management Services
100%
KW UK Financial Holdings Limited (Guernsey) *
Holding Company
100%
KW UK Bidco Limited (Guernsey)
Holding Company
100%
KW UK Wealth Planning HoldCo Limited (Guernsey)
Holding Company
100%
KW UK Investment Management HoldCo Limited (Guernsey)
Holding Company
100%
KW Wealth Planning Limited (England)
Wealth Planning
100%
Admiral Wealth Management Limited (England)
Wealth Planning
100%
Regency Investment Services Limited (England)
Wealth Planning
100%
Money Matters (North East) Limited (England)
Wealth Planning
100%
Allotts Financial Services Limited (England)
Wealth Planning
100%
Vincent & Co Financial Ltd (England)
Wealth Planning
100%
Eurosure Limited (England)
Wealth Planning
100%
AIM Wealth Holdings (England)
Holding Company
100%
AIM Independent Limited (England)
Wealth Planning
100%
Casson Beckman Wealth Management (England)
Wealth Planning
100%
Sterling Trust Financial Consulting Limited (England)
Holding Company
100%
STP Wealth Management Limited (England)
Wealth Planning
100%
Sterling Trust Professional Limited (England)
Wealth Planning
100%
Sterling Trust Professional (North East) Limited (England)
Wealth Planning
100%
Sterling Trust Professional (Sheffield) Limited (England)
Wealth Planning
100%
NHA Financial Services Limited (England)
Holding Company
100%
Sterling Trust Professional (York) Limited (England)
Wealth Planning
100%
Strategic Asset Managers Limited (England)
Wealth Planning
100%
Employee Benefit Solutions Limited (England)
Wealth Planning
100%
JCH Investment Management Limited (England)
Wealth Planning
100%
JFP Holdings Limited (England)
Holding Company
100%
JFP Financial Services Limited (England)
Wealth Planning
100%
KW Investment Management Limited (England)
Investment Management
100%
EIM Nominees Limited (England)
Nominee Company
100%
XCAP Nominees Limited (England)
Nominee Company
100%
* Direct investment
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
68
18 SUBSIDIARIES continued
Profits attributable to non-controlling interests in KW US (formerly MHC) and its subsidiaries as at 31 December 2022 were
£1,304,652 (US$1,606,157) (2021: £2,206,889 (US$3,030,793)). Dividends paid to non-controlling interest in the year were
£810,646 (US$998,000) (period post-acquisition to 31 December 2021 were £1,271,724 (US$1,746,459).
Accumulated non-controlling interest of KW US and its subsidiaries as at 31 December 2022 were £2,390,686
(US$2,878,386). (as at 31 December 2021: £924,858 (US$1,246,431)).
Summarised financial information (material subsidiaries with non-controlling interests) before intra-group adjustments:
2022
$000
2022
£000
2021
$000
2021
£000
As at 31 December:
Current assets
15,400
12,792
21,318
15,818
Non-current assets
158
132
204
151
Current liabilities
(9,731)
(8,083)
(19,049)
(14,135)
Non-current liabilities
(59)
(49)
(59)
(44)
2022
$000
2022
£000
2021
$000
2021
£000
12 months ended 31 December:
Revenue
138,074
112,154
174,367
126,967
Profit after tax
3,104
2,521
5,740
4,180
Other comprehensive income
–
–
–
–
Total comprehensive income
3,104
2,521
5,740
4,180
19 CASH AND CASH EQUIVALENTS
2022
£000
2021
£000
Cash at bank and in hand
19,624
42,933
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 2022 (31
December 2021: £nil).
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
69
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
20 TRADE AND OTHER PAYABLES
2022
£ 000
2021
£ 000
Trade payables
2,976
789
Accrued expenses
11,812
22,967
Social security and other taxes
1,283
1,581
Lease liability and dilapidations provision
1,467
677
Other borrowings
59
70
17,597
26,084
The Directors consider that the carrying amount of trade payables approximates their fair value.
The group’s exposure to market and liquidity risks, including maturity analysis, relating to trade and other payables is
disclosed in note “Financial risk review”.
21 LEASES LIABILITIES
The lease liabilities are included in trade and other payables and other non-current liabilities in the statement of financial
position.
Land and
buildings
2022
£000
Land and
Buildings
2021
£000
At 1 Jan
3,274
3,234
Additions
1,705
582
Interest expense
147
108
Lease payments
(852)
(650)
4,274
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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
70
21 LEASES LIABILITIES continued
A maturity analysis of lease liabilities based on undiscounted gross cash flow is reported in the table below:
2022
£ 000
2021
£ 000
Due within one year
1,467
677
Due after more than one year
2,806
2,597
At 31 December
4,273
3,274
Dilapidations provisions relating to lease liabilities
2022
£ 000
2021
£ 000
Due within one year
7
28
Due after more than one year
559
538
At 31 December
566
566
Total cash outflows related to leases
Total cash outflows related to leases are presented in the table below:
2022
£ 000
2021
£ 000
Low value lease expense
99
96
Short term lease expense
14
10
22 DEFERRED CONSIDERATION PAYABLE
2022
£ 000
2021
£ 000
- falling due within one year
20,771
7,706
- due after more than one year
9,228
14,482
Deferred consideration payable on acquisitions:
29,999
22,188
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.
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 £1,852,225 (2021: £7,008,600.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
71
STRATEGY
GOVERNANCE
FINANCE
23 OTHER NON-CURRENT LIABILITIES
2022
£ 000
2021
£ 000
Lease liability and dilapidations provision
2,806
2,597
Other borrowings
24,343
318
27,149
2,915
24 SHARE CAPITAL
Allotted, called up and fully paid shares
2022
2021
No
000
£000
No.
000
£000
Fully paid of £0.05 each
216,921
10,846
216,921
10,846
Number of
ordinary
shares
‘000
Par value
£000
Share
premium
000
Total
£000
Share capital and share premium
At 1 January 2021
216,921
10,846
8,224
19,070
At 31 December 2021
216,921
10,846
8,224
19,070
At 1 January 2022
216,921
10,846
8,224
19,070
At 31 December 2022
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 2022, KPI (Nominees) Limited held 144,125,262 Ordinary Shares, representing 66.4 per cent of ordinary
shares in issue at year end.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
72
25 PREFERENCE SHARE CAPITAL
Irredeemable convertible preference shares
2022
Shares
2021
Shares
2022
£000
2021
£000
Fully paid
77,428,443
77,428,443
70,150
70,150
77,428,443
77,428,443
70,150
70,150
Preference share capital movements are as follows:
Number of
shares
Par value
£000
At 1 January 2021
45,000,000
45
Issued during year
32,000,000
32
At 31 December 2021
77,000,000
77
Issued during year
–
–
At 31 December 2022
77,000,000
77
2022
£000
2021
£000
Equity component
70,150
70,150
Liability component
–
–
70,150
70,150
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 5% pa from the
date of issue. They do not hold any voting rights. Effective 17 December 2021 onwards, these will be settled via the issue of
additional ordinary shares, thereby extinguishing the liability component.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
73
STRATEGY
GOVERNANCE
FINANCE
26 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 19.
2022
£ 000
2021
£ 000
Loss before tax
(10,972)
(14,464)
Adjustments for:
Depreciation and amortisation
4,507
2,399
Finance costs
6,398
4,927
Remuneration charge (deferred consideration)
1,852
234
Acquisition of investments
586
–
Share-based payment expense
878
94
Other losses/(gains)
23
1,281
Foreign exchange gain
–
(6)
Tax paid
(22)
(318)
Operating cash flows before movements in working capital
3,250
(5,853)
(Increase)/decrease in receivables
1,821
(449)
Increase/(decrease) in payables
(7,775)
8,043
Net cash inflow/(outflow) from operating activities
(2,704)
1,741
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
74
27 SHARE-BASED REMUNERATION
Employee Option Plan
Scheme details and movements
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.
• The 2022 Kingswood Group LTIP scheme under which options are granted over ordinary shares of the Group to
employees and Directors. 6,700,000 options were issued with an exercise price of 16.5p. The vesting date of these share
options is 31 December 2024. 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. .
The movements in the number of share options during the year were as follows:
2022
Number
2021
Number
Outstanding, start of period
16,799,167
19,949,167
Granted during the period
6,700,000
15,708,333
Forfeited during the period
(5,342,778)
(18,858,333)
Outstanding, end of period
18,156,389
16,799,167
Exercisable, end of period
1,090,833
1,090,833
No share options were exercised during the year.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
75
STRATEGY
GOVERNANCE
FINANCE
27 SHARE-BASED REMUNERATION continued
2022
pence
2021
pence
Outstanding, start of period
16.78
5.87
Granted during the period
16.50
16.50
Forfeited during the period
16.50
5.50
Outstanding, end of period
16.76
16.78
Exercisable, end of period
20.85
20.85
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Grant date
Expiry date
Exercise
price
Pence
Share
options
2022
Share
options
2021
04 August 2014
03 August 2024
100.00
105,000
105,000
01 August 2016
31 July 2026
53.00
152,500
152,500
15 February 2019
14 February 2029
5.00
833,334
833,334
12 April 2021
11 April 2031
16.50
3,076,667
4,775,000
25 June 2021
24 June 2031
16.50
3,333,333
5,000,000
05 July 2021
04 July 2031
16.50
3,288,889
4,933,333
06 September 2021
05 September 2031
16.50
666,667
1,000,000
16 March 2022
15 March 2032
16.50
1,500,000
–
12 April 2022
11 April 2032
16.50
75,000
–
03 May 2022
02 May 2032
16.50
1,000,000
–
06 May 2022
05 May 2032
16.50
1,050,000
–
28 June 2022
27 June 2032
16.50
3,000,000
–
11 July 2022
12 July 2032
16.50
75,000
–
Total
18,156,389
16,799,167
Weighted average contractual life of options outstanding at end of period
8.59 years
3.22 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.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
76
27 SHARE-BASED REMUNERATION continued
2022
Option pricing model used
Monte Carlo
Weighted average share price at grant date (p)
25.85
Exercise price (p)
16.50
Weighted average contractual life (in days)
3,134
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 volatility (16 Mar 2022 tranche)
60%
Expected volatility (12 Apr 2022 tranche)
60%
Expected volatility (3 May 2022 tranche)
60%
Expected volatility (6 May 2022 tranche)
60%
Expected volatility (28 Jun 2022 tranche)
60%
Expected volatility (1 Jul 2022 tranche)
60%
Expected volatility (11 Jul 2022 tranche)
60%
Expected dividend growth rate
N/A
Risk-free interest rate
1.50% – 2.71%
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.
Total (expense)/gain arising from share-based transactions recognised during the period as part of employee benefit expense
is as follows:
2022
£000
2021
£000
Options issued under employee option plan
852
(94)
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
77
STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
28 FINANCIAL INSTRUMENTS
The following table states the classification of financial instruments and is reconciled to the Statement of Financial Position:
2022
Carrying
amount
£000
2021
Carrying
amount
£ 000
Financial assets measured at amortised cost
Trade and other receivables
9,273
4,308
Cash and cash equivalents
19,624
42,933
Financial liabilities measured at amortised cost
Trade and other payables
(16,130)
(23,826)
Other non-current liabilities
(2,806)
(318)
Lease liability
(1,467)
(3,274)
Financial liabilities measured at fair value through profit and loss
Deferred consideration payable
(29,999)
(22,188)
(21,505)
(2,365)
Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and
other payables, and other non-current liabilities.
Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and
other payables approximates fair value.
Item
Fair value £’000
Valuation technique
Fair value hierarchy level
Deferred consideration payable
29,999
Fair value of deferred consideration
payable is estimated by discounting the
future cash flows using the IRR inherent
in the company’s acquisition price.
Level 3
There have been no transfers between levels during the period.
The potential profit or loss impact in relation to deferred consideration payable of a reasonably possible change to the
discount rate is as follows:
Assumption
Reasonably
possible
Profit or (loss)
Increase
£'000
Impact
Decrease
£'000
Discount rate change
(+/- 5%)
(133)
155
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.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
78
28 FINANCIAL INSTRUMENTS continued
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:
Total
£000
Total
prior year
£000
Cash
19,624
42,933
Trade and other receivables
9,274
5,749
28,898
48,682
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 19 for further detail on cash and cash equivalents.
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 2022.
2022 Non-derivative liabilities
Repayable
between
0-12 months
£000
Repayable
after more
than
12 months
£000
Trade payables
2,976
–
Other payables
13,154
24,343
Deferred consideration payable
20,771
9,228
Lease liabilities
1,467
2,806
38,368
36,377
2021 Non-derivative liabilities
3 months -
1 year
£000
1-5 years
£000
Trade payables
789
–
Other payables
23,037
318
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).
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
79
STRATEGY
GOVERNANCE
FINANCE
28 FINANCIAL INSTRUMENTS continued
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 2022 figures, would have increased the US
division’s overall profit as recognised in the Statement of Comprehensive Income by £126,057. A 5% weakening of the US
dollar, conversely, would have decreased the profit contribution by £120,054.
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.
29 BUSINESS COMBINATIONS
29.1 Acquisition of AIM Independent Ltd
On 16 February 2022, the Company completed the acquisition of AIM Independent Ltd, an independent financial advice
business based in Eastleigh serving clients throughout Hampshire.
AIM has 5 advisers providing financial advice to over 750 clients holding around £217m AuA/M. In the year ending 31 July
2021, AIM generated revenue of £1.2m and profit before tax of £479k.
The business was acquired for a total cash consideration of up to £3.6m, payable over a 2-year period. £1.8m was paid at
closing and the balance will be paid on a deferred basis subject to the achievement of pre-agreed performance targets. The
fair value of this final cash consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen
Street.
From the acquisition date to 31 December 2022, the AIM group contributed £0.456 million to Group revenues and £0.042
million to Group profit before tax.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
80
29 BUSINESS COMBINATIONS continued
Details of the fair value of identifiable assets and liabilities acquired the purchase consideration and goodwill are as follows:
Book value
£000
Adjustment
£000
Fair value
£000
Property, plant and equipment
13
–
13
Goodwill & Intangibles
1
2,278
2,279
Investments in subsidiaries
1
–
1
Receivables
83
–
83
Cash
88
–
88
Payables
(147)
–
(147)
Deferred tax liability
–
(570)
(570)
Total identifiable net assets
39
1,708
1,747
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:
2022
£ 000
Initial cash paid
1,711
Deferred consideration
1,318
Total purchase consideration
3,029
Goodwill recognised on acquisition
1,281
The main factors leading to the recognition of goodwill are:
• the strategic foothold the AIM team and business gives the Group in the Hampshire market.
• the ability to leverage the AIM platform and achieve economies of scale.
Consideration
Cash
outflows
£000
Net cash outflow arising on acquisition:
Total purchase consideration
3,029
Less: Deferred consideration
(1,318)
Cash paid to acquire AIM Independent Ltd
1,711
Less: cash held by AIM Independent Ltd
(88)
Net cash outflow
1,623
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
81
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GOVERNANCE
FINANCE
29 BUSINESS COMBINATIONS continued
29.2 Acquisition of Allotts Financial Services Ltd
On 4 February 2022, the Company completed the acquisition of Allotts Business Services Ltd, a high-quality long established
financial advisory firm based in Rotherham and serves clients covering primarily in South Yorkshire.
Allots provides independent financial advice to over 400 active clients and currently employs 3 advisers 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
The business was acquired for total cash consideration of up to £2.5m, payable over a two-year period. £1.25m was paid
at closing and the balance will be paid on a deferred basis, some of which is subject to the achievement of pre-agreed
performance targets. The fair value of this final cash consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible preference shares, under the terms of its Convertible Preference Share
subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Allotts Financial Services Limited contributed £0.276 million to Group
revenues and £0.066 million loss to Group profit before tax.
Details of the fair value of identifiable assets and liabilities acquired the purchase consideration and goodwill are as follows:
Book value
£000
Adjustment
£000
Fair value
£000
Goodwill and intangibles
–
1,294
1,294
Receivables
78
–
78
Cash
149
–
149
Payables
(67)
–
(67)
Taxation
(67)
–
(67)
Deferred tax liability
–
(324)
(324)
Total identifiable net assets
93
970
1,063
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:
2022
£000
Initial cash paid
1,287
Deferred cash consideration
879
Total purchase consideration
2,166
Goodwill recognised on acquisition
1,103
Acquisition costs have been recognised as transaction costs under acquisition-related adjustments in the Consolidated
Statement of Comprehensive Income.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
82
29 BUSINESS COMBINATIONS continued
The main factors leading to the recognition of goodwill are:
• the strategic foothold the Allots team and business gives the Group in the South Yorkshire market; and
• the ability to leverage Allots platform and achieve economies of scale.
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
2,166
Less: Deferred consideration
(879)
Initial cash paid to acquire Allotts Financial Services Ltd
1,287
Less: cash held by Allotts Financial Services Ltd
(149)
Net cash outflow
` 1,138
29.3 Acquisition of Joseph R Lamb Independent Financial Advisors Ltd
On 7 February 2022, the Company completed the acquisition of Joseph R Lamb Independent Financial Advisors Ltd ‘’Joseph
Lamb’’, a long established advisory business based in Rayleigh, Essex.
Established in 1970, Joseph Lamb provides financial advice to over 1930 active clients and currently employs 7 advisors
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 £1.5m.
The business was acquired for total cash consideration of up to £17.5m, payable over a 2 year period, £10.7m was paid
at closing and the balance will be paid on a deferred basis, some of which is subject to the achievement of pre-agreed
performance targets. The fair value of this final cash consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible preference shares, under the terms of its Convertible Preference Share
subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Joseph R Lamb Independent Financial Advisers Limited contributed
£2.82 million to Group revenues and £0.199 million to Group profits before tax.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book value
£’000
Adjustment
£’000
Fair value
£’000
Property, plant and equipment
47
-
47
Goodwill & Intangibles
350
9,834
10,183
Receivables
2,062
-
2,062
Cash
1,670
-
1,670
Payables
(976)
-
(976)
Deferred tax liability
(2,458)
(2,458)
Total identifiable net assets
3,153
7,376
10,528
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GOVERNANCE
FINANCE
29 BUSINESS COMBINATIONS continued
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:
2022
£000
Initial cash consideration
10,715
Deferred cash consideration
5,641
Total purchase consideration
16,356
Goodwill recognised on acquisition
5,828
The main factors leading to the recognition of goodwill are:
• the strategic foothold the Joseph Lamb team and business gives the Group in the Essex market.
• the ability to leverage the Joseph Lamb platform and achieve economies of scale.
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
16,356
Less: Deferred cash consideration
(5,641)
Initial cash paid to acquire Joseph R Lamb
10,715
Less: cash held by Joseph R Lamb
(1,670)
Net cash outflow
9,045
29.4 Acquisition of Eurosure Ltd
On 29 July 2022, the Company completed the acquisition of Eurosure Ltd, an independent financial advice company based in
Hampshire.
Established for over 30 years, Eurosure Ltd have been offering a tailored and bespoke approach to enabling their clients to
achieve their financial goals. The company looks after 240 clients with around £70m in AuA. In the year ending 30th April
2021, Eurosure Ltd generated revenue of £514k.
Eurosure was acquired for total cash consideration of up to £1.7m, payable over a 2 year period, £1.02m will be paid at
closing and the balance on a deferred basis, some of which is subject to the achievement of pre-agreed performance targets.
The fair value of this final cash consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible preference shares, under the terms of its Convertible Preference Share
subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, Eurosure Limited contributed £0.165 million to Group revenues and
£0.019 million loss to Group profit before tax.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
84
29 BUSINESS COMBINATIONS continued
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Intangibles
–
1,029
1,029
Receivables
22
–
22
Cash
165
–
165
Payables
(49)
–
(49)
Taxation
(67)
–
(67)
Deferred tax liability
–
(257)
(257)
Total identifiable net assets
71
772
843
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:
2022
£000
Initial cash consideration
1,036
Deferred cash consideration
323
Total purchase consideration
1,359
Goodwill recognised on acquisition
517
The main factors leading to the recognition of goodwill are:
• the strategic foothold the Eurosure team and business gives the Group in the Hampshire market.
• the ability to leverage the Eurosure platform and achieve economies of scale.
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
1,359
Less: Deferred cash consideration
(323)
Initial cash paid to acquire Eurosure Ltd
1,036
Less: cash held by Eurosure Ltd
(165)
Net cash outflow
871
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
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STRATEGY
GOVERNANCE
FINANCE
NOTES TO THE FINANCIAL STATEMENTS continued
29 BUSINESS COMBINATIONS continued
29.5 Acquisition of Vincent & Co Financial Ltd
On 15 June 2022, the Company completed the acquisition of Vincent & Co Financial Ltd, a privately owned independent
financial adviser based in Lincolnshire.
Established for over 20 years, Vincent & Co Ltd provide 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 a profit before tax of £83k.
Vincent & Co was acquired for total cash consideration of up to £421k, payable over a 2 year period, £211k was paid upon
completion of the transaction and the balance will be paid on a deferred basis, some of which is subject to the achievement
of pre-agreed performance targets. The fair value of this final cash consideration is detailed further in the below tables.
The acquisition was funded by the issue of convertible preference shares, under the terms of its Convertible Preference
Share subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen
Street.
From the acquisition date to 31 December 2022, Vincent & Co Financial Limited contributed £0.117 million to Group
revenues and £0.004 million loss to Group profit before tax.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Intangibles
467
467
Cash
71
71
Payables
(31)
(31)
Taxation
(12)
(12)
Deferred tax liability
(117)
(117)
Total identifiable net assets
28
350
378
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:
2022
£000
Initial cash consideration
211
Deferred cash consideration
174
Total purchase consideration
385
Goodwill recognised on acquisition
7
The main factors leading to the recognition of goodwill are:
• the strategic foothold the Vincent & Co team and business gives the Group in the Lincolnshire market; and
• the ability to leverage the Vincent & Co platform and achieve economies of scale.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
86
29 BUSINESS COMBINATIONS continued
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
385
Less: Deferred cash consideration
(174)
Initial cash paid to acquire Vincent & Co
211
Less: cash held by Vincent & Co
(71)
Net cash outflow
140
29.6 Acquisition of Employee Benefit Solutions (EBS) Ltd
On 2 November 2022, the Company completed the acquisition of Employee Benefit Solutions Ltd, a financial planning firm
based in Buckinghamshire.
Established for over 30 years, EBS offer a wide range of financial planning services including: retirement planning, savings and
investment advice, protection and inheritance tax planning. With three lead advisers and seven colleagues in total, EBS hold
over £135m AuA. In the year ending March 2022 EBS generated revenue of £1.56m and profit before tax of £806k.
EBS was acquired for total cash consideration of up to £5.08m, payable over a 5 year period, £2.75m will be paid at closing
and the balance paid on a deferred basis, some of which is subject to the achievement of pre-agreed performance targets.
The fair value of this final cash consideration is detailed further in the below tables.
Kingswood satisfied the consideration through the utilisation of its new funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, Employee Benefit Solutions Limited contributed £0.277 million to Group
revenues and £0.230 million to Group profit before tax.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Property, plant and equipment
3
3
Intangibles
3,640
3,640
Receivables
71
71
Cash
1,114
1,114
Payables
(148)
(148)
Taxation
(18)
(18)
Deferred tax liability
(910)
(910)
Total identifiable net assets
1,022
2,730
3,752
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
87
STRATEGY
GOVERNANCE
FINANCE
29 BUSINESS COMBINATIONS continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase consideration are as follows:
2022
£000
Initial cash consideration
3,556
Deferred cash consideration
1,226
Other
500
Total purchase consideration
5,282
Goodwill recognised on acquisition
1,530
The main factors leading to the recognition of goodwill are:
• the strategic foothold the (EBS) team and business gives the Group in the Buckinghamshire market.
• the ability to leverage the (EBS) platform and achieve economies of scale.
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
5,282
Less: Deferred cash consideration
(1,226)
Less: Other
(500)
Initial cash paid to acquire EBS
3,556
Less: cash held by EBS
(1,114)
Net cash outflow
2,442
29.7 Acquisition of Strategic Asset Managers (SAM) Ltd
On 11 November 2022, the Company completed the acquisition of Strategic Asset Managers Ltd (‘SAM’), a leading financial
advice firm based in Glasgow. SAM works with families, businesses, and professional partners. The company consists of 3
advisers managing over 400 clients, with over £200m of AUA. In the year ending 31 March 2022 SAM generated revenue of
£1.2m and profit before tax of £517k.
SAM was acquired for total cash consideration of up to £5.1m, payable over a 2 year period, £3.1m paid on completion and
the balance paid on a deferred basis, which is subject to the achievement of pre-agreed performance targets. The fair value
of this final cash consideration is detailed further in the below tables.
Kingswood satisfied the consideration through the utilisation of its new funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, Strategic Asset Managers Limited contributed £0.144 million to Group
revenues and £0.083 million loss to Group profit before tax.
NOTES TO THE FINANCIAL STATEMENTS continued
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29 BUSINESS COMBINATIONS continued
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Property, plant and equipment
3
3
Intangibles
3,349
3,349
Receivables
15
15
Cash
455
455
Payables
(8)
(8)
Taxation & Social security
(154)
(154)
Deferred tax liability
(837)
(837)
Total identifiable net assets
311
2,512
2,823
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:
2022
£000
Initial cash consideration
3,210
Deferred cash consideration
1,696
Total purchase consideration
4,906
Goodwill recognised on acquisition
2,084
The main factors leading to the recognition of goodwill are:
• the strategic foothold the (SAM) team and business gives the Group in the Scottish market.
• the ability to leverage the (SAM) platform and achieve economies of scale.
Consideration
Net cash outflow arising on acquisition:
2022
£000
Total purchase consideration
4,906
Less: Deferred cash consideration
(1,696)
Initial cash paid to acquire SAM
3,210
Less: cash held by SAM
(455)
Net cash outflow
2,755
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
89
STRATEGY
GOVERNANCE
FINANCE
29 BUSINESS COMBINATIONS continued
29.8 Acquisition of JCH Investment Management Ltd
On 30 November 2022, the Company completed the acquisition of JCH Investment Management Ltd (‘JCH’), a leading
financial advice firm based in Lincoln. The company has 3 advisers managing over £105m of AuA with over 240 clients. In the
year ending 31 July 2022 JCH generated revenue of £901k and profit before tax of £406k.
JCH will be acquired for Total Cash consideration of up to £3.5m, payable over a 2 year period, £2.1m of which will be paid
upon receipt of regulatory approval and the balance paid on a deferred basis which is subject to the achievement of pre-
agreed performance targets. The fair value of this final cash consideration is detailed further in the below tables.
Kingswood will satisfy the consideration due to the shareholders of JCH through the utilisation of its new funding facility, as
announced on 17 October 2022.
From the acquisition date to 31 December 2022, JCH Investment Management Limited contributed £0.076 million to Group
revenues and £0.048 million to Group profit before tax.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Property, plant and equipment
4
4
Intangibles
2,341
2,341
Receivables
414
414
Cash
350
350
Payables
(299)
(299)
Deferred tax liability
(585)
(585)
Total identifiable net assets
469
1,756
2,225
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:
2022
£000
Initial cash consideration
2,100
Deferred cash consideration
1,158
Total purchase consideration
3,258
Goodwill recognised on acquisition
1,033
The main factors leading to the recognition of goodwill are:
• the strategic foothold the (JCH) team and business gives the Group in Lincolnshire market
• the ability to leverage the (JCH) platform and achieve economies of scale.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
90
29 BUSINESS COMBINATIONS continued
Consideration
2022
£000
Net cash outflow arising on acquisition:
Total purchase consideration
3,258
Less: Deferred cash consideration
(1,158)
Initial cash paid to acquire JCH
2,100
Less: cash held by JCH
(350)
Net cash outflow
1,750
29.9 Acquisition of JFP Financial Services Ltd
On 30 November 2022, the Company completed the acquisition of JFP Holdings Ltd (‘JFP’), a leading financial advisory firm
based in Macclesfield, Cheshire. Established over 40 years ago, JFP manages £360m AuA across 1,295 clients. In the year
ending 31 March 2022, JFP generated revenue of £2.5m and profit before tax of £1.5m.
JFP was acquired for total cash consideration of up to £12.4m, payable over a 2 year period, £7.44m of which will be paid
upon receipt of regulatory approval and the balance paid on a deferred basis which is subject to the achievement of pre-
agreed performance targets. The fair value of this final cash consideration is detailed further in the below tables.
Kingswood satisfied the consideration through the utilisation of its funding facility, as announced on 17 October 2022.
From the acquisition date to 31 December 2022, JFP Financial Services Limited contributed £0.183 million to Group
revenues and £0.107 million to Group profit before tax.
Details of the fair value of identifiable assets and liabilities acquired, the purchase consideration and goodwill are as follows:
Book Value
£ 000
Adjustment
£ 000
Fair value
£ 000
Property, plant and equipment
10
10
Intangibles
7,892
7,892
Receivables
2,828
2,828
Cash
570
570
Payables
(77)
(77)
Taxation
(457)
(457)
Deferred tax liability
(1,973)
(1,973)
Total identifiable net assets
2,874
5,919
8,793
The trade and other receivables were recognised at fair value, being the gross contractual amounts.
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STRATEGY
GOVERNANCE
FINANCE
29 BUSINESS COMBINATIONS continued
Fair value of consideration paid
The acquisition has been accounted for using the acquisition method and details of the purchase consideration are as follows:
2022
£ 000
Initial cash consideration
10,153
Deferred cash consideration
3,766
Total purchase consideration
13,919
Goodwill recognised on acquisition
5,126
The main factors leading to the recognition of goodwill are:
• the strategic foothold the (JFP) team and business gives the Group in the Cheshire market
• the ability to leverage the (JFP) platform and achieve economies of scale.
Consideration
2022
£ 000
Net cash outflow arising on acquisition:
Total purchase consideration
13,919
Less: Deferred cash consideration
(3,766)
Initial cash paid to acquire JFP
10,153
Less: cash held by JFP
(570)
Net cash outflow
9,583
29.10 Purchase of trade and assets of D.J.Cooke Ltd
On 21 February 2022, the Company completed the purchase of the trade carried on by and business assets of D.J.Cooke
(Life & Pensions) Ltd, an independent financial planning business servicing clients across South Yorkshire.
D J Cooke looks 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, DJ Cooke Ltd 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 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 fair value of this final
cash consideration is detailed further in the below tables.
The purchase was funded by the issue of convertible preference shares, under the terms of its Convertible Preference Share
subscription agreement with HSQ Investment Limited, a wholly owned indirect subsidiary of funds managed by Pollen Street.
From the acquisition date to 31 December 2022, DJ Cooke contributed £0.330 million to Group revenues and £0.275
million to Group profit before tax.
NOTES TO THE FINANCIAL STATEMENTS continued
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29 BUSINESS COMBINATIONS continued
Fair value of consideration paid
The purchase has been accounted for using the acquisition method and details of the purchase consideration are as follows:
2022
£ 000
Initial cash consideration
749
Deferred cash consideration
619
Total consideration
1,368
The main factors leading to the recognition of goodwill are:
• the strategic foothold the (D.J.Cooke) team and business gives the company in the South Yorkshire market
• the ability to leverage the (D.J.Cooke) platform and achieve economies of scale.
Consideration
2022
£ 000
Net cash outflow arising on acquisition:
Total purchase consideration
1,368
Less: Deferred cash consideration
(619)
Initial cash paid to acquire D.J Cooke
749
Net cash outflow
749
30 RELATED PARTY TRANSACTIONS
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for
each of the categories specified in IAS 24 Related Party Disclosures.
2022
£ 000
2021
£ 000
Salaries and other short term employee benefits
678
340
Other related parties
KHL incurred fees of £116,000 (2021: £137,500) from KPI (Nominees) Limited in relation to Non-Executive Director
remuneration. At 31 December 2022, £nil of these fees remained unpaid (2021: £nil).
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 £23,708
for the year ended 31 December 2022 (2021: £23,090), of which £nil (2021:£nil) was outstanding at 31 December 2022.
Fees paid for financial and due diligence services to Kingswood LLP and Kingswood Corporate Finance Limited, in which
Jonathan Massing holds a beneficial interest as LLP members, totalled £479,955 for the year to 31 December 2022 (2021:
£384,750).
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
93
STRATEGY
GOVERNANCE
FINANCE
31 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
FCA Investment Firm
KW Investment Management Limited
FSCA South Africa: Financial Services Provider
KW Wealth Planning Limited
FCA Personal Investment Firm
Sterling Trust Professional Limited
FCA Personal Investment Firm
Regency Investment Services Limited
FCA Personal Investment Firm
Admiral Wealth Management Limited
FCA Personal Investment Firm
Money Matters (North East) Limited
FCA Personal Investment Firm
IBOSS Asset Management Limited
FCA Investment Firm
Novus Financial Services Limited
FCA Personal Investment Firm (De-registered on 8 March 2022)
Strategic Asset Managers Limited
FCA Personal Investment Firm
Employee Benefit Solutions
FCA Personal Investment Firm
JCH Investment Management Limited
FCA Personal Investment Firm
Allots Financial Services Limited
FCA Personal Investment Firm
Vincent & Co Financial Ltd
FCA Personal Investment Firm
Eurosure Limited
FCA Personal Investment Firm
Joseph R Lamb Financial Advisers Limited
FCA Investment Firm
AIM Independent Limited
FCA Personal Investment Firm
JFP Financial Services Limited
FCA Personal Investment Firm
Benchmark Investments, Inc
FINRA-regulated brokerage firm (USA)
Kingswood Capital Partners, LLC
FINRA-regulated brokerage firm (USA)
Benchmark Advisory Services, LLC
SEC-regulated advisory firm (USA)
Kingswood Wealth Advisors, LLC
SEC-regulated advisory firm (USA)
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
94
31 CAPITAL MANAGEMENT continued
The regulatory capital requirements of companies within the Group, and the associated solvency of the Group, are
assessed and monitored by the Board of Directors. Ultimate responsibility for an individual company’s regulatory capital
lies with the relevant subsidiary Board. There has been no material change in the level of capital requirements of individual
companies during the year, nor in the Group’s management of capital. All regulated entities exceeded the minimum solvency
requirements at the reporting date and during the year.
The debt-to-equity ratios at 31 December 2022 and 31 December 2021 were as follows:
2022
£’000
2021
£’000
Loans and borrowings
24,402
388
Lease liabilities
4,273
3,274
Less: cash and cash equivalents
(19,624)
(42,933)
Net debt
–
–
Total equity
73,966
76,898
Debt to equity ratio (%)
0%
0%
32 FINANCIAL COMMITMENTS
Subject to conditions being met, Kingswood Holdings Limited had committed to contributing £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. Following further review throughout this fiscal year it was confirmed this
commitment was no longer required and as such no commitment was noted for 31st December 2022
2022
£’000
2021
£’000
Commitments
-
5,936
33 ULTIMATE CONTROLLING PARTY
As at the date of approving the financial statements, the ultimate controlling party of the Group was KPI (Nominees) Limited.
KPI (Nominees) Limited, which holds 66.44% of the voting rights and issued share capital of the Group, is owned and
controlled by Gary Wilder and Jonathan Massing.
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
95
STRATEGY
GOVERNANCE
FINANCE
34 EVENTS AFTER THE REPORTING DATE
Acquisition of Barry Fleming & Partners
On the 15th December 2022, Kingswood Holdings Ltd agreed to acquire, the business assets of Barry Fleming & Partners.
The acquisition completed on the 6th January 2023.
Barry Fleming & Partners advises individuals, companies, trustees and charities. This capability allows Barry Fleming &
Partners to use its strength in tax advice to take a 360-degree-view of a financial situation to give much broader, more
comprehensive advice. The team have three advisers and a total of six employees.
Founded in 1975, Barry Fleming & Partners looks after over 415 clients with over c.£140m AUA. In the year ending
28 February 2022, Barry Fleming & Partners generated revenue of £1.4m and profit before tax of £190k. The business will
be acquired for total cash consideration of up to £6.2m, payable over a two-year period, £3.1m paid on completion and the
balance paid on a deferred basis which is subject to the achievement of pre-agreed performance targets
Kingswood satisfied the consideration through the utilisation of its funding facility, as announced on 17 October 2022.
Acquisition of Moloney Investments Ltd (MMPI)
On the 3rd March 2023, Kingswood Holdings Ltd agreed upon, and completed, the acquisition of the business assets of
Moloney Investments Ltd (MMPI).
Established in 1993, MMPI is a leading financial advisory group based in Dublin, Ireland providing financial planning, general
and protection insurance, as well as investments, pensions, and mortgage advice to principally mass affluent and high net
worth individuals. MMPI currently employs 54 people, including 18 advisors.
On a pro forma basis, for the 12 months to 30 April 2022, MMPI had EBITDA of EUR 4.0m and in excess of EUR 700m
assets under advice. Following receipt of regulatory approval, Kingswood will acquire 70% of MMPI for a total cash
consideration of EUR 25.8m, with the existing shareholders retaining the remaining 30% and benefiting from the growth in
the business as both management teams work together to grow MMPI and the wider Kingswood group both organically and
through further acquisitions. Post-Acquisition, MMPI will continue to operate from its existing premises and be led by the
same experienced team that have served its clients since inception in 1993.
Kingswood satisfied the consideration due to the shareholders of MMPI through a new debt facility it completed prior to the
closing of the Acquisition.
NOTES TO THE FINANCIAL STATEMENTS continued
KINGSWOOD HOLDINGS LIMITED Annual Report for the year ended 31 December 2022
96
AUDITOR
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
NOMINATED ADVISER AND BROKER
FinnCapp
1 Bartholomew Close
London EC1A 7BL
REGISTRARS
Link Asset Services
Corporate Actions
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
REGISTERED OFFICE
Oak House
Hirzel Street
St Peter Port
Guernsey GY1 3RH
REGISTERED NUMBER
42316
ADVISERS AND COMPANY INFORMATION
Kingswood Holdings Limited
10-11 Austin Friars
London EC2N 2HG
Company Registration No. 42316 (Guernsey)
info@kingswood-group.com
020 7293 0730
kingswood-group.com